Google and the Problem With ‘Net Neutrality’

October 5, 2009; Page A19

On Sept. 25, AT&T accused Google of violating the very "net neutrality" principles the world's dominant search company has righteously sought for others. Net neutrality conjures the benign notion of an open and fair Web, where all applications and data packets are treated equally. Net reality is much more complicated. Google says it doesn't have to abide by rules meant for telecom companies. But with the Internet obliterating such distinctions, this defense exposes net neutrality's inherent flaws. The controversy involves Google Voice, a new service that rings all of a user's phone lines simultaneously and provides other conferencecalling and voice-mail features. Like myriad digital applications, the service is possible because the Web and phone lines have in many ways converged. Google can thus offer "free" services over the world's vast, expensive broadband networks. Google thinks net neutrality should regulate only traditional phone and cable companies. Phone carriers have long been ordered to connect all calls. And open Internet principles agreed to by all sides in 2005 offer similar guidance for the Web: no blocking of Web sites or applications. But Google Voice does not connect all calls. It blocks access, for example, to some rural areas and conferencing services that would impose heavier interconnection fees on Google. AT&T thus charged Google with cherry-picking. Why, AT&T asks, can Google exploit expensive communications networks when it's profitable but refuse neutral service to all customers when it's not? This row unmasks something far more important than Google's hypocrisy: the deep structural flaws of net neutrality itself. Last week, Federal Communications Commission (FCC) Chairman Julius Genachowski outlined a more

expansive and legally binding regime. He would not only codify existing nonblocking principles but would also add a highly controversial "nondiscrimination" rule. This regulation could expand bureaucratic oversight to every bit, switch and business plan on the Internet. Basic technologies, like packet prioritization (voice calls first, spam second), could be banned. So could many business plans based on robust and differentiated services. This regime could send all routing algorithms and network services into courtrooms for the next decade. Despite the brutal economic downturn, Internet-sector growth has been solid. From the Amazon Kindle and 85,000 iPhone "apps" to Hulu video and broadband health care, Web innovation flourishes. Mr. Genachowski heartily acknowledges these happy industry facts but then pivots to assert the Web is at a "crossroads" and only the FCC can choose the right path. The events of the last half-decade prove otherwise. Since 2004, bandwidth per capita in the U.S. grew to three megabits per second from just 262 kilobits per second, and monthly Internet traffic increased to two billion gigabytes from 170 million gigabytes—both tenfold leaps.

Broadband has been a rare bright spot in the economy. Why discourage new investment?
No sector has boomed more than wireless. Yet Mr. Genachowski wants to extend his new regulations to the most technically complicated and bandwidth-constrained realm—mobile networks and devices. In 2004, Wi-Fi was embryonic, the Motorola Razr was the hot phone, the BlackBerry was a CEO's email device, and Apple's most recognizable product was an orange-sicle laptop. But then the industry turned upside-down in a

flurry of dynamism. Both Motorola and Palm plummeted in popularity and only now are attempting real comebacks. BlackBerry and Apple vaulted to smart-phone supremacy from out of nowhere, Nokia became the world's largest camera company, and a new wireless reading device rekindled Amazon's fortunes. Wireless carriers invested $100 billion in just the past three years, and the U.S. vaulted past Europe in fast 3G mobile networks. Americans enjoy mobile voice prices 60% cheaper than foreign peers. And the once closed mobile ecosystem is more open, modular and dynamic than ever. All this occurred without net neutrality regulation. My research suggests that U.S. Internet traffic will continue to rise 50% annually through 2015. Cisco estimates wireless data traffic will rise 131% per year through 2013. Hundreds of billions of dollars in fiber optics, data centers, and fourthgeneration mobile networks will be needed. But if network service providers can't design their own networks, offer creative services, or make fair business transactions with vendors, will they invest these massive sums to meet (and drive) demand? Some question the network companies' expensive and risky plans, asking if the customers will come. But one thing's for sure: If you don't build it, they can't come. If net neutrality applies neutrally to all players in the Web ecosystem, then it would regulate every component and entrepreneur in a vast and unknowable future. If neutrality applies selectively (oxymoron alert) to only one sliver of the network, then it is merely a political tool of one set of companies to cripple its competitors. At a time of continued national economic peril, the last thing we need is a new heavy hand weighing down our most promising high-growth sector. Better to maintain the existing open-Web principles and let the Internet evolve. Mr. Swanson is president of the technology research and strategy firm Entropy Economics LLC.

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