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By David Isenberg

of . . .

Network Neutrality Reality or

What’s Driving the Next Telecom Act

Two Different Questions

Citizens: How do we change network service provisioning so the Internet survives?

Telcos and Cablecos: How do we change the Internet so we survive?

Summary

Telcos are in crisis.

The Stupid Network begs “what do telcos sell?

Telcos want to:

(a) Enter video

(b) “Participate” in application revenue

Common Carriage, Net Neutrality and the COPE Bill

March2007

Nov2010

Source: FCC December 2005 Universal Service Monitoring Report, Chart 6.1http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-262986A1.pdf

(80% intercept)

Telcos in Crisis

Telcos in crisis, cont’d

Source: FCC December 2005 Universal Service Monitoring Report, Chart 8.1http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-262986A1.pdf

Telcos in crisis, cont’d

Source: FCC Trends in Telephone Service, Chart 5.1http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/trend605.pdf

Telco Solution, Part I: Provide Cable TVnetwork technology makes it possible

US CATV Revenues Growing at 4 to 9% CAGR

Problem for Telcos: 10,000 Franchising Authorities(Verizon gets 15 new video franchises a year)

Solution for Telcos: Law establishes National FranchiseProblem for Citizens: Zero Sum Game

The Stupid Network

A stupid network supplies simple connections, but no “services.” Instead, “services” are created by smart, network-enabled productsdesigned for any networked application.

Bring them home and plug them in.

“. . . our engineers started with the assumption that we should find technical ways of prioritizing certain kinds of bits . . . we seriously explored various “quality of service” schemes. . .all of our research and practical experience supported the conclusion that it was far more cost effective to simply provide more bandwidth. With enough bandwidth in the network, there is no congestion and video bits do not need preferential treatment.”

Internet2 Discovers the Stupid Network

Source: Gary Bachula at US Senate Commerce Hearing, 2/7/06http://commerce.senate.gov/pdf/bachula-020706.pdf

“Today our Abilene network does not give preferential treatment[it does] streaming HDTV, hold[s] thousands of high quality two-way video conferences simultaneously, and transfer[s]huge files of scientific data around the globe without loss of packets.. . .rather than introduce additional complexity into the network fabric, and additional costs to implement these prioritizing techniques, the telecom providers should focus on providingAmericans with an abundance of bandwidth – and the quality problems will take care of themselves.”

Internet2, cont’d

Source: Gary Bachula at US Senate Commerce Hearing, 2/7/06http://commerce.senate.gov/pdf/bachula-020706.pdf

“ . . . a gigabit Ethernet connection [would need] only a $15 card. If the provider insists on dividing up that bandwidth into various separate pipes for telephone and video and internet, the resulting set top box might cost as much as $150.Simple is cheaper. Complex is costly.”

Internet2, cont’d

Source: Gary Bachula at US Senate Commerce Hearing, 2/7/06http://commerce.senate.gov/pdf/bachula-020706.pdf

“. . . open, inexpensive, and simple is better than costly, complex, and closed.”

Internet2, contd

Source: Gary Bachula at US Senate Commerce Hearing, 2/7/06http://commerce.senate.gov/pdf/bachula-020706.pdf

•email,•e-commerce,•Web browsing,•audio-on-demand, •instant messaging,•blogging•Internet telephony•massively multiplayer games•et cetera . . .

Why we should care

. . . were created at the edgeof the Stupid Network

When the middle of the network is empty, and bandwidth is plentiful, what do network service providers sell?

Ref: Paradox of the Best Network, Isenberg & Weinbergerhttp://netparadox.com

“Participation” in Apps Revenues

Expense(Subsidized byApplication)

Expense(Subsidized by Application)

MonthlyIncome

Physical Layer: Designed for App

Network Layer: Designed for App

Application: Specific to Network

Telco, Cellco, Cableco Model

Network Layer: Internet Protocol

Big Question:What’s the(Business?)(Operating?)Model

Commons

Product &ServiceIncome

Inter-Networking Model

Application: Nonspecific -- Voice, Video, Maps, Games, Anything!

Physical Layer:Non-specificEnd-to-EndConnectivity

The Rise of Common Carriage

“Public Calling” in common law since Roman EmpireDefinition: open to all comers, skilled in the art, just pricee.g., millers, blacksmiths, ferrymen, cabbies . . .

US Supreme Court, re: telegraph, 1901Duty of non-discrimination, even without statute!

Communications Act of 1934, Title II“offering communications service to the public for hire”

The Fall of Common Carriage

Computer Inquiry 2 (CI-2), 1980Basic services ARE subject to Common CarriageEnhanced services are NOT subject to Common Carriage(1996 Telecom Act: Telecom and Info Svcs)

The content-conduit split that made the Internet possible

FCC since 2000, FTTx is not subject to Common CarriageBrand X (2005) Cable Modem is Information ServiceFCC Order (2005) DSL is Information ServiceFCC inaction: Exempts Verizon from Title II and CI-2

i.e. the Internet’s success is because it is•Content and service agnostic.•Source and destination agnostic.•Device and application agnostic.

Network Neutrality is Common Carriage

Non-discrimination w/r/t•What is carried•Where it came from•Where it is going

Two Views of Discrimination

Citizen’s View Telco’s View

Technology of Discrimination is here!

Old days: net couldn’t discriminate if it wanted toToday’s discrimination tools include:

•contingent routing, •port blocking, •application detection•deep packet inspection

Technology Adds MeansEconomics adds MotiveWeakening of CC adds Opportunity

COPE Bill of 2006Communications Opportunity Promotion and Enhancement

Barton-Rush Bill

Title I. Franchise ReformTitle II. Enforcement of Broadband Policy StatementTitle III. 911 for VOIPTitle IV. Municipal ServicesTitle V. Stand-alone Broadband Services

FCC Broadband Policy Statement

Powell FCC

Freedom to Access Legal ContentFreedom to Run ApplicationsFreedom to Attach Devices (re SP)Freedom to Get SP Information

Source, Powell, 2/8/04

Martin FCC4

Entitlement to Access Legal ContentEntitlement to Run Applications1

Entitlement to Attach Devices (re SP)2,3

Entitlement to Competition

Source, FCC, 05-151, 9/23/05http://tinyurl.com/ow4tp

1 Subject to the needs of law enforcement2 Legal devices3 Devices that do not harm the network4 All these principles are subject to reasonable network management.

Weaknesses in COPE Title II

Reminder:Entitlement to Access Legal ContentEntitlement to Run Applications1

Entitlement to Attach Devices (re SP)2,3

Entitlement to CompetitionSubject to Reasonable Network Mgmnt

Specifically Forbids FCC Rulemaking for EnforcementAdjudication of “violations” on Case-by-Case Basis

Four Principles do not coverAccess to contentOffering of tiered services to content providersOffering of degraded or impaired access or attachmentBundling and other forms of price discrimination

Whole new category of law?How do you enforce principles that expressly are not laws?

Two Different Questions

Telcos and Cablecos: How do we change the Internet so we survive?

Answer: Make discrimination legal, allow “participation” in application revenues.

Citizens: How do we change network service provisioning so the Internet survives?

Answer: Not so obvious!

Breaking News!

We’re gonna lose

Prognosis . . .

However, Lessig turned the Eldred loss into the CC revolution. . . and I’m looking for how to do that in Layer 0-3

I’m still fighting, but . . .

It Takes Smart People to Fight Laws that

Destroy the Stupid Network

Kids, Don’t Eat This

Telco Reaction

“We will not block, impair, or degrade content, applications, or services . . . If you can go there today, you can go there tomorrow. The functionality you have on the Internet today, you will have tomorrow . . . [but] Instead of new laws, we believe in the discipline of the marketplace . . . alongside the continued, proven vigilance of the FCC..”

Walter B. McCormick, Jr., President of the U.S. Telecom AssociationNetwork Neutrality as Quid Pro Quo for Franchise Reform, Feb 7, 2006

http://commerce.senate.gov/pdf/mccormick-020706.pdf

Wireless Revenues Under Pressure(The cry of the “shrinking ARPU”)

Source: Telegeography, 2005http://www.telegeography.com/press/releases/2005-10-19.php

Lower Your Garden’s Walls, Lower Your ARPU

Voice revenues are maxedLock-in achieved via (a) hosting (which leads to liability), or(b) arms-length billing relationship, which Leads to(a) very slow growth(b) untrustworthy relationships and turned-off customers(b’) fear of another 900 number-type debacle(c) stupid “innovations” like ring-back tones driving arpu

In other words, walled-garden app growth doesn’t scale

The main competition for mobile services is the InternetSolution: Neutralize the competition.

http://www.intercastingcorp.com/blog/archives/2005/10/lower_your_gard.html