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Google, Skype Argue for Net Neutrality

SAN JOSE, Calif. -- Spring VON 2007 -- Former Clinton staffer Mike McCurry and a Verizon Communications Inc. (NYSE: VZ) lobbyist took on lawyers from Google (Nasdaq: GOOG) and Skype Ltd. in a one-round cage match over the network neutrality issue here Tuesday afternoon.

McCurry is now co-chair of a group called "Hands off the Internet," which opposes network neutrality legislation. McCurry was added to Tuesday's bill after blasting Voice On the Net (VON) Coalition founder Jeff Pulver in a blog exchange about network neutrality some months ago, as VON general counsel Jonathan Askin said by way of introduction.

Panel moderator and former Federal Communications Commission (FCC) chief of staff Blair Levin kept the discussion civil, so there wasn't as much name-calling as you tend to see in online discussion groups. Still the session provided a concise refresher on a media policy issue that won't go away. (See AT&T's Whitacre: 'Nobody Gets a Free Ride'.)

Verizon VP of Internet and Technology, Link Hoewing, got things going by explaining that the telcos have always serviced a two-sided market, selling Internet access to consumers on one side and "onramp" services to businesses (like Google and Skype) on the other.

Hoewing says Verizon sells consumers Internet access in a number of sizes and shapes and speeds, and does the same for its business customers. "Now we are saying we'd like to be able to offer that in a little broader form," Hoewing says. Operators like Verizon, Hoewing suggests, should have the "flexibility" to sell wider and faster lanes on the onramp to the Internet as well. (See Report: QOS Fees Could Net Billions.)

Network neutrality backers fear that if broadband operators sell rich business customers an inside track on the Internet onramp, smaller companies won't be able to compete. "If you and I both started a VOIP business, and I had the money to pay for the extra bandwidth and you didn't, whose site do you think consumers would go to?" asks Skype senior director of government and regulatory affairs, Chris Libertelli.

Coming up with a set of laws about Internet control that both sides like is a tough sell in Washington. Numerous attempts at it failed during the last Congressional session. (See Senate Commerce Committee Holds Hearing on Telecom Reform Bill.)

Mike McCurry, like many others in the anti-net neutrality camp, believe a net neutrality law would have harmful unintended consequences. He asks: "What about the QOS agreements carriers already have with enterprises? How do you make net neutrality legislation that will not harm agreements like that?"

Skype's Libertelli countered: "Nothing about net neutrality legislation would declare those QOS agreements illegal."

McCurry broke in again, questioning the idea that writing a net neutrality law that does more good than harm is even possible. "What kind of law do you want?" he asked.

Google's Washington telecom and media counsel Rick Whitt replied, saying that the net neutrality concessions offered up by AT&T last December provide a pretty good start. (See AT&T Embraces (Some) Net Neutrality.)

Google's message on the issue has been a little confusing. Whitt is calling for laws to be passed, while his teammate, Google senior policy counsel Andrew McLaughlin, suggested the market would take care of itself during a policy summit in late February:

"Net neutrality will ultimately be solved by competition in the long-run,” McLaughlin said at the time. "Cutting the FCC out of the picture would probably be a smart move.”

So what do the net neutrality proponents want in a law? They want binding legislation on the books that the FCC can use on a case-by-case basis as complaints are brought to it, Skype's Libertelli explained to Light Reading later at ringside. Libertelli says the Bells are strongly against such a rule.

Indeed the Bells see such a law as a remedy for harm that has yet to happen. Such "prescriptive" legislation, they say, could have "unintended consequences" sooner or later. "What do you do then, Rick [Google's Whitt], make a long list of things that could happen?" Verizon's Hoewing asked. "It looks like what you would get ultimately is something regulated by the FCC."

The issue is by no means dead in the Capital. The Democrats now control Congress, and have voiced their sympathy for the net neutrality forces. A net neutrality bill introduced by Maine Republican Senator Olympia Snowe (R-Maine) last year was recently re-introduced by the bill's co-sponsor Senator Byron Dorgan (D-North Dakota). The House, so far, doesn't seem close to introducing a bill of its own.

— Mark Sullivan, Reporter, Light Reading

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American Indian 12/5/2012 | 3:11:43 PM
re: Google, Skype Argue for Net Neutrality
... we need search neutraility.

Yes, Google can price discriminate by search type or access or placement ... let all comers using search be treated equal. Why should one party paying an ad premium search be ranked ahead of another.

What is good for the goose is good for the Google.
Mark Seery 12/5/2012 | 3:11:41 PM
re: Google, Skype Argue for Net Neutrality hi RJ,

Google has doubled its R&D spending each year for the last 3 years in a row, now up to over 1.2B a year. For sure they have a diverse investment appetite, but to suggest that it is trivial to compete against them deserves some debate, IMO. It is not even known yet whether MSFT and Yahoo with all the money they are spending on search will be able to compete over the long term in that category.

But even if we are to buy in to the notion that it is trivial to compete against Google, it could equally be argued that an entrepeneur could build a small access network in one town, interconnect with other ISPs, and build the business from there. Should Earthlink not have built its first wireless access network, because it could not cover the entire country at once (let's not go down the fraudband path here, the same argument goes for building a fiber access network - at least with respect to residential services, business is a little different, but still even there you can start off smaller than the incumbents and grow).

I agree that it is the perception of competitiion that frames the concern about differentiated services, but if you examine the issue, IMO, then you see it is the same issues for any large and dominant provider of anything.

The compelling issue. IMO, is not whether differentiated services are provided, but the manner in which they are provided, for example are there standard and consistent units of exchange; is the carriage transparent and unobtrusive; and whether the compelling conditions of the service are made clear to the buyer and often they have not been :-(
rjmcmahon 12/5/2012 | 3:11:41 PM
re: Google, Skype Argue for Net Neutrality What is good for the goose is good for the Google.

With the caveat that I'm not exactly sure what net neutrality is I think the argument is that search is a competitive market but access networks are not. For example there are basically no switching costs to point your browser to another search provider.

http://en.wikipedia.org/wiki/S...

"Switching barriers or switching costs are terms used in microeconomics, strategic management, and marketing to describe any impediment to a customer's changing of suppliers.

In many markets, consumers are forced to incur costs when switching from one supplier to another. These costs are called switching costs and can come in many different shapes."

Also the sunk costs associated with access networks is magnitudes greater than the costs associated with building a data center capable of search. A new search company can start small and grow. A new access company has to get large because networks primary value is vast connectivity. A two person network isn't very valuable.

So the phone companies are attempting to use their monopoly position, which used to be regulated and adhere to policies like common carriage, to extend and extract rent into other markets. They have been milking the american consumer for decades and have only been making paltry investmenets into wired infrastructures. Also, without the government enforcing common carriage we never would have had the open internet. Think Burma though via private unregulated (though FCC protected) monopoly instead of govt dictators.
Mark Seery 12/5/2012 | 3:11:40 PM
re: Google, Skype Argue for Net Neutrality rj,

the issue at hand here is the double standard. it is not trivial to compete in the search business. you have chosen to emphasize all the difficulties in competing in the transmission/transport business and ignore all the difficulties in competing in the search business as a basis for a discrimatory policy against one type of business.

that is not a sound consumer oriented view point that provides a good long term foundation for policy. you only have to examine the mess created by the intricate web of carrots and sticks used in the existing regulation paradigm.

technology and business neutral policy is the appropriate path to go down, imo.
rjmcmahon 12/5/2012 | 3:11:40 PM
re: Google, Skype Argue for Net Neutrality It could equally be argued that an entrepeneur could build a small access network in one town, interconnect with other ISPs, and build the business from there.

Sprint/Nextel is losing to Ma Bell because they have to connect their towers via Ma Bell's access networks. Sprint is large and still can't compete. The activist FCC has decided that 30,000 cities and towns don't have the right to regulate their own rights of ways. They did this on behest of Ma Bell. So while hypothetically possible (as is cold fusion) I don't think we'll see many entrepreneurs building access networks in this generation. Not until the backlash from the poor policies of the day occur will the pendulum swing back from a less federalist and facist society towards one of local rule.

Should Earthlink not have built its first wireless access network, because it could not cover the entire country at once?

Earthlink is desperate and doesn't have a choice but to build a wireless access network. They are a dying company. Should we force Google, Yahoo, et. al. into the same sinking ship?
Mark Seery 12/5/2012 | 3:11:39 PM
re: Google, Skype Argue for Net Neutrality rj,

when you have built your competitive data center, next to the power station of your choice, in the state of your choice, and you have raised the money to cover the operational expenses as well, come back and lecture us about the low barriers of entry to search.

interesting how quickly you resort to slapping labels on people when you get a perspective you don't agree with. so when you criticize net neutrality proponents for unconstructive arguments, please throw yourself in the same bucket.

fyi, if you stopped throwing unconstructive labels on people for 5 seconds, you might actually be surprised to find some network neutrality proponents in places you did not expect.
rjmcmahon 12/5/2012 | 3:11:39 PM
re: Google, Skype Argue for Net Neutrality the issue at hand here is the double standard. it is not trivial to compete in the search business.

No that's not the issue. That's a made up issue. There isn't a double standard because one market is competitive and the other is protected. You may be having a hard time seeing this because of your ideology for free markets biases things.

VZ grosses $88B a year and has little w/respect to barriers to entry towards building a data center capable of search. MSFT and Yahoo's response to GOOG shows it can be done. There are others (try askjolene for porn.)

VZ has chosen not to enter probably because it's truly a competitive market with no switching costs and they are a culture and business which relies on protected markets. The best GOOG can do w/respect to access networks is put up a very small and insignificant network in Mountainview and promise to do the same thing in SF.

So there is no double standard unless one lives in hypothetical and idealized world of "free markets" or is a mouthpiece for the incumbents. Sorry to be so blunt but that's how I see it.

PS. Doesn't mean I believe net neutrality advocates are helping anything either.
milliman 12/5/2012 | 3:11:39 PM
re: Google, Skype Argue for Net Neutrality I hear much emotion and several analogies when it comes to Net Neutrality from both sides, but what is missing is always specifics. In panels such as the one at VON, the exact implementation of Net Neutrality is never discussed. What are the details of this special on-ramp, tube, or pipe as they are referred to? I cannot find any implementation discussed by AT&T, Verizon, cableco, or any of the net neutrality web sites other than mine (http://blog.inphotonicsresearc...). Likewise, I do not hear the proponents of Net Neutrality providing specifics other than equal access for all packets. What does that mean?

How can we have an intelligent discussion on net neutrality without any definition what these vague terms like net neutrality, on-ramp, walled gardens, and tiered Internet mean? Without a common understanding of the technical issues, our discussions are pointless and legislation futile. We will end up with something we don't want or expect.

Mark
milliman 12/5/2012 | 3:11:38 PM
re: Google, Skype Argue for Net Neutrality You guys are getting off topic here. Google and Verizon are in different businesses and why should they get into each other's business? Google is an advertising company utilizing technology and communications services provided by many different service providers. RJ, are you advocating that Wal-Mart build their own Internet?

Mark
rjmcmahon 12/5/2012 | 3:11:38 PM
re: Google, Skype Argue for Net Neutrality when you have built your competitive data center, next to the power station of your choice, in the state of your choice, and you have raised the money to cover the operational expenses as well, come back and lecture us about the low barriers of entry to search.

Mark, this is a poor argument. So if I don't build a supermarket, flower shop, or retail bike store that means the market isn't competitive?

Did you remember the mania during the bubble where capital flowed easily? Lots towards portals, search, etc. but little towards modern access networks (unless one counts HFC). I've talked to a few captains of industry overseeing billions in investment capital and their answer was that they won't invest in access because the duopoly doesn't want competition. They are no dummies.

Sorry to slap a label but that's how I percieve it when you say anybody can build a viable access network. I'd be glad to be proved wrong. Find me one group investing the $1B required for a viable set of fiber access networks.
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