Do you prefer to search for information online with Google or Yahoo?
What about bargain shopping — do you go to Amazon or eBay? Many of us
make these kinds of decisions several times a day, based on who knows
what — maybe you don’t like bidding, or maybe Google’s clean white
search page suits you better than Yahoo’s colorful clutter.
But the nation’s largest telephone companies have a new business plan,
and if it comes to pass you may one day discover that Yahoo suddenly
responds much faster to your inquiries, overriding your affinity for
Google. Or that Amazon’s Web site seems sluggish compared with eBay’s.
The changes may sound
subtle, but make no mistake: The telecommunications companies’
proposals have the potential, within just a few years, to alter the
flow of commerce and information — and your personal experience — on
the Internet. For the first time, the companies that own the equipment
that delivers the Internet to your office, cubicle, den and dorm room
could, for a price, give one company priority on their networks over
This represents a break with the commercial meritocracy
that has ruled the Internet until now. We’ve come to expect that the
people who own the phone and cable lines remain "neutral," doing
nothing to influence the content on your computer screen. And may the
best Web site win.
For more than a year, public interest groups,
including the Consumer Federation and Consumers Union, have been
lobbying Congress and the Federal Communications Commission to write
the concept called "network neutrality" into law and regulation. Google
and Yahoo have joined their lobbying efforts. And online retailers,
Internet travel services, news media and hundreds of other companies
that do business on the Web also have a lot at stake.
on the other side, companies like AT&T, Verizon and BellSouth are
lobbying just as hard, saying that they need to find new ways to pay
for the expense of building faster, better communication networks. And,
they add, because these new networks will compete with those belonging
to Comcast, Time Warner and oth er cable companies — which currently
55 percent of the residential broadband market — this
will eventually bring down the price of your high-speed Internet
service and television access.
Would these new fees imposed by
carriers alter the basic nature of the Internet by putting bumps and
detours on the much ballyhooed information superhighway? No, say the
telephone companies. Giving priority to a company that pays more, they
say, is just offering another tier of service — like an airline
offering business as well as economy class. Network neutrality, they
say, is a solution in search of a problem.
Maybe you’ve never
heard of this issue — and if so, you’re far from alone. In my job as a
media analyst, I’ve been talking in recent weeks to lobbyists for some
of Hollywood’s major entertainment conglomerates. These are people who
know that consumers’ ability to download their studios’ movies and
television shows as easily and cheaply as anyone else’s will be key to
the studios’ future profits. Yet hardly any of them were more than
vaguely concerned about the potential ramifications of network
But lately the issue, a matter of heated debate on
obscure blogs and among analysts like me, has begun to attract the
attention of the mainstream press. There are a couple of reasons.
is that Congress is taking first steps toward updating and rewriting
the Telecommunications Act of 1996, a key legal underpinning for media,
telecommunications and Internet activity. This process, required by
technological advances, will probably take a year to complete.
dramatically, executives at AT&T and BellSouth got into the
headlines recently with a series of audacious statements. In a November
Business Week story, AT&T Chairman Edward E. Whitacre Jr.
complained that Internet content providers were getting a free ride:
"They don’t have any fiber out there. They don’t have any wires. . . .
They use my lines for free — and that’s bull," he said. "For a Google
or a Yahoo or a Vonage or anybody to expect to use these pipes for free
It was a stunner. Whitacre had apparently declared that AT&T planned to unilaterally abandon its role as a neutral carrier.
or not you agree with Whitacre, you can understand his frustration.
Companies like Google and Yahoo pay some fees to connect to their
servers to the Internet, but AT&T will collect little if any
additional revenue when Yahoo starts offering new features that take up
lots of bandwidth on the Internet. When Yahoo’s millions of customers
download huge blocks of video or play complex video games, AT&T
ends up carrying that increased digital traffic without additional
But for public interest advocates, Whitacre’s outburst was a Clint
Eastwood moment. "Make my day," said Gigi Sohn of Public Knowledge,
which focuses on defending consumer rights in the digital world.
the group had been having trouble convincing members of Congress that
there was a network neutrality problem. Legislators and staffers
repeatedly had noted to Sohn that no major telephone company had ever
used its network to discriminate against other companies. "Whitacre
just made the case for regulation," said Sohn. "This was as good as it
Other AT&T executives and spokesmen later said that Whitacre had only been talking about access to a new
high-speed broadband network. Industry executives also assured critics
that despite Whitacre’s bluster, AT&T would never block any Web
site, or even degrade the service of a company doing business on the
Internet — even if that service was a voice-over-Internet company such
as Vonage, which competes directly with AT&T’s core telephone
But the blog storm over Whitacre’s comments had hardly
died down when an executive with BellSouth was quoted saying that the
company would consider charging Apple five or 10 cents extra each time
a customer downloaded a song using iTunes. Bloggers erupted again,
saying that this would certainly drive up the cost of the hugely
popular music downloading service.
Google and others say that the
prospect of telephone companies imposing new fees on innovative and
successful ventures is exactly the kind of thing that deters online
commerce. "If carriers are able to control what consumers do on the
Internet, that threatens the model of Internet communications that has
been wildly successful," said Alan Davidson, Washington policy counsel
Cable companies abhor the idea of enforced network
neutrality just as much as the telephone companies. But so far their
executives have remained silent, and stayed out of the crossfire.
Republican-led Congress is struggling with the issue. On one hand, it
has taken a deregulatory approach to the Internet, but on the other, it
can’t ignore the concerns of Google, Yahoo and eBay, some of the most
successful companies of the last 10 years. These companies alone have
built up businesses worth hundreds of billions of dollars on an
unfettered Internet. Moreover, unfettered Internet access has come to
be seen by Americans in general as not just a privilege or a product,
but a right akin to free speech and free association.
coming months, the Telecommunications Act will take shape as several
different legislative proposals are combined to create a final law.
Some of the proposed bills include language on network neutrality,
The conventional wisdom is that the recent
statements by Bell company executives have given network neutrality
some momentum. But the bill is not expected to be completed until 2007,
leaving lots of time for lobbyists to battle over the strength of the
The FCC, spurred by Commissioner Michael Copps,
acknowledged the importance of the issue last October, when it approved
two mammoth mergers in the telecommunications industry — Verizon’s
$8.5 billion purchase of MCI and SBC Communications’ $16 billion
purchase of AT&T (SBC quickly assumed the more widely known brand
name of AT&T).
One of the few conditions that the FCC put on
the merged companies was that they abide by the concept of network
neutrality for at least two years. But it’s not clear if companies
would even be in violation of the relatively vague FCC language if
BellSouth or AT&T proceeded with their plan to give one company
"priority" over others on the Internet. Last week I asked several
telecommunications lawyers, including some FCC staffers, if AT&T
would be in violation of its merger agreement if it granted "priority"
status to some companies for a fee. The consistent response I got was,
"That’s a really good question."
At the end of the day, Google’s
Davidson says that his biggest worry is not for Google but for the
prospect of bringing fresh innovation to the Internet. After all, if
worse comes to worst, Google can pay AT&T or BellSouth to maintain
its role as the Internet’s dominant search engine. But the bright young
start-up with the next big innovative idea won’t have that option.
Author’s e-mail: [email protected]
Christopher Stern is a media policy analyst with Medley Global Advisors.