Appeared in the Toronto Star on December 19, 2005 as Dangers in ISPs’ Bid For New Tolls
Appeared in the Ottawa Citizen on December 22, 2005 as Keep Networks Neutral
Appeared in the BBC on December 22, 2005 as Towards a Two-Tier Internet
The Search, a popular new book by John Battelle about Google and the search engine industry, provides a revealing look at how in its early years Google’s founders were unsure of how to channel their enviable position as intermediaries between Internet users and the search for Internet content into a viable business model. The answer ultimately emerged as advertisers’ willingness to pay for visibility in search results became the basis for the multi-billion dollar paid search market.
Analysis of the Internet service provider business suggests that it has engaged in a similar decade-long search. Although providing Internet connectivity is certainly a profitable enterprise, ISPs have understandably sought to identify how they can leverage their role as intermediaries to generate additional revenues.
In the 1990s, many ISPs focused on providing both connectivity and content. Large ISPs such as America Online developed a wide range of exclusive content, though they ultimately failed to match the breadth of what developed freely online.
Meanwhile, companies such as BCE pursued convergence strategies, buying up television networks (CTV) and publishers (the Globe and Mail) with the view of combining connectivity and content. More recently, the industry has relied on bundling, de-emphasizing the content and connectivity combination for the opportunity to cross-sell Internet services with cable or satellite television as well as with conventional phone and wireless services.
While some consumers resent the bundling approach, there is the far more troubling strategy unfolding that involves the creation of a two-tiered Internet. This strategy, threatens to upend the longstanding principle of network neutrality under which ISPs treat all data equally, would enable ISPs to prioritize their own network traffic over that of their competitors.
The network neutrality principle has served ISPs, Internet companies, and Internet users well. It has enabled ISPs to plausibly argue that they function much like common carriers and that they should therefore be exempt from liability for the content that passes through their systems.
Websites, e-commerce companies, and other innovators have also relied on network neutrality, secure in the knowledge that the network treats all companies, whether big or small, equally. That approach enables those with the best products and services, not the deepest pockets, to emerge as the market winners.
Internet users have similarly benefited from the network neutrality principle. They enjoy access to greater choice in goods, services, and content regardless of which ISP they use. While ISPs may compete based on price, service, or speed, they have not significantly differentiated their services based on availability of Internet content or applications, which remains the same for all.
In short, network neutrality has enabled ISPs to invest heavily in new infrastructure, fostered greater competition and innovation, and provided all Canadians with equal access to a dizzying array of content.
Notwithstanding its benefits, in recent months ISPs have begun to chip away at the principle.
Internet telephony (often referred to as Voice-over-IP or VoIP) provides a classic illustration of this trend. As each major ISP races to offer their own Internet telephony services, some have begun to use their network position to unfairly disadvantage the competition.
For example, Canadian cable provider Shaw now offers a premium VoIP service that promises to prioritize Internet telephony traffic for a monthly fee. The potential implications of such a service are obvious – the use of competing services will require a supplemental fee, while Shaw will be free to waive the charge for its own service.
Other ISPs have gone even further. Quebec-based Videotron has expressed great hostility toward third party Internet telephony providers such as Skype, labeling them "parasitic" and foreshadowing the potential for future action. In the U.S., at least one ISP briefly blocked competing Internet telephony traffic until the Federal Communications Commission ordered it to cease the practice.
While ISPs once avoided content intervention, earlier this summer, Telus blocked access to Voices For Change, a pro-union website. The company has since indicated that it was a one-time event, though in the process it also blocked more than 600 additional websites hosted at the same IP address and cut off entire communities from the controversial content.
Most recently, customers of Rogers, Canada’s largest cable ISP, have speculated that the company has begun to block access to peer-to-peer services such as BitTorrent as well as the downloading of podcasts from services such as iTunes.
While Rogers initially denied the charges, it now acknowledges that it uses "traffic shaping" to prioritize certain online activity. As a result, applications that Rogers deems to be a lower priority may cease to function effectively.
Moreover, blocking services, websites, and certain applications may not be the end game. Some ISPs see the potential for greater revenue by charging websites or services for priority access to their customers.
In the U.S., BellSouth Chief Technology Officer executive William L. Smith, recently mused about the potential to charge a premium to websites for prioritization downloading, noting that Yahoo could pay to load faster than Google. In fact, reports last week indicated that BellSouth and AT&T are now lobbying the U.S. Congress for the right to create a two-tiered Internet, where their own Internet services would be transmitted faster and more efficiently than those of their competitors.
These developments should send alarm bells to Internet companies, users, and regulators. While prioritizing websites or applications may hold some economic promise, the lack of broadband competition and insufficient transparency surrounding these actions will rightly lead to growing calls for regulatory reform that grants legal protection for the principle of network neutrality.
Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at email@example.com or online at www.michaelgeist.ca.