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The Network Neutrality Debate and the Future of the Internet

By William B. Wilhelm, Jr. & Ronald W. Del Sesto, Jr.


The debate over network neutrality will gain importance in 2006 with the Federal Communications Commission (FCC) and in Congress. AT&Ts announcement of its plans to acquire BellSouth will force the FCC to revisit the issue. Meanwhile, Congress will consider network neutrality as it grapples with a rewrite of the Communications Act and attempts to determine how to preserve consumer welfare and to promote the continued deployment of broadband networks.

The term network neutrality has become the phrase encapsulating the idea that consumers should be able to access the content of their choice and use any device they desire with their broadband Internet connection. Today, consumers can browse Web sites and subscribe to all sorts of services distributed over the Internet without restriction. Proponents of network neutrality argue that consumers should continue to have unfettered access.

But the builders of the on-ramps to the information superhighway, including regional bell operating companies, like AT&T (quote - news - alerts), Verizon (quote - news - alerts), and Bell South (quote - news - alerts), counter that someone must pay for the new infrastructure needed to gain access to high-speed services and content. Facing costly capital investment in upgrading existing broadband connections, network operators argue that their investment and costs must be recouped from those that want to reach consumers through their facilities.

The FCC has partially weighed in on this debate by defining what constitutes unacceptable conduct on the part of network operators. The FCC became formally involved in the network neutrality debate in February, 2005 when a VoIP provider filed a complaint with the FCC that its communications were being blocked by a regional telephone company. The matter was quickly resolved by the FCC and the telephone company entering into a consent decree providing that the telephone company would not block such communications for a period going forward. Following the consent decree, the FCC adopted an Internet policy statement in late September, 2005. The unenforceable policy statement affirmed that consumers should be able to access content, connect equipment, and run applications of their choice over their Internet connections. The policy statement also provided that consumers should be entitled to competition among network, application, service, and content providers. The policy statement later became a merger condition to the combinations of SBC and AT&T, as well as Verizon and MCI. The FCC has not addressed whether network operators can require content providers to pay for faster access or for a certain quality of service when distributing content to consumers via the Internet and the operators facilities.

Congress is now becoming actively involved in the network neutrality debate and is considering whether legislation is needed to preserve consumer welfare. During network neutrality hearings held by the Senate in early February, 2006, representatives from trade associations of telephone companies and cable operators stated that they would not block, impair, or degrade content, applications, or services that traverse their networks. The debate over network neutrality has since evolved away from arguments that network operators have the right to block or otherwise degrade the performance of services carried over their facilities. Instead, the issue has become whether network operators should have the freedom to tier access to the Internet. In addition, questions have arisen regarding whether network operators must continue to peer with each other or whether larger providers can discontinue service to those network operators that remain unwilling to pay a fee for delivery. In the view of some, in order to ensure continued investment in broadband infrastructure, Web site operators, Internet application service providers, and other network operators should be required to pay a fee in addition to what consumers pay for their broadband access. Some further argue that consumers should be required to pay fees based on the type of applications they choose to run over their Internet access connection. The FCCs policy statement has left these important matters unanswered.

Recent legislation authored by Senator Wyden aims at preserving network neutrality in its broadest sense. Among other things, the draft legislation would prohibit network operators from blocking, impairing, or altering any bits, content, application, or service transmitted over a network operators facilities and would bar network operators from restricting the type of equipment that can be attached to devices used to deliver high-speed Internet access. The draft bill would also forbid network operators from discriminating in favor of themselves by reserving bandwidth or in transmitting content or applications to consumers. Furthermore, Senator Wydens proposed legislation would proscribe network operators from charging companies that wish to provide content to consumers through network operators Internet connections.

The debate over network neutrality will remain a high-profile issue this year on the Hill and at the FCC for myriad reasons. The United States broadband penetration rate continues to decline as compared to other countries. A few years ago, the United States was ranked 11 in broadband penetration but recent studies place the United States at 16 with network operators arguing that they need additional revenue streams to spur broadband deployment while proponents of network neutrality highlight that free access to innovative applications increases the take-rate of high-speed Internet connections. Improving the rate of broadband penetration remains a top priority of the executive and legislative branches. As a result, the necessity of protecting network neutrality has arisen in the context of Congresss rewrite of communications laws. Does Congress need to legislate in this area or should the marketplace sort it out?

AT&Ts plan to acquire BellSouth will no doubt renew the network neutrality debate in the context of the FCCs review of the planned mega-merger. Both AT&T and BellSouth executives have been vocal advocates about their intention to explore new revenue streams from their broadband Internet access facilities by introducing premium service for Internet content providers. Many believe that network neutrality is a watershed moment in the evolution of the Internet and whether content will remain free is vitally important to the future of the Internet as a force of innovation and economic success. IT

William B. Wilhelm is a partner and Ronald W. Del Sesto, Jr., is counsel at the global law firm of Bingham McCutchen LLP. For more iformation, please visit them online at (news - alerts). The preceding represents the views of the authors only and does not necessarily represent the views of Bingham McCutchen LLP or its clients.

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