Disclaimer: this is a very first draft. I will revise and enrich it using the comments and feedback I am receiving.
This paper tries to clarify some key concepts related to the Net Neutrality debate. In particular, it aims at confuting some positions and comments that are based on wrong assumptions or misleading interpretations of the expression “Net Neutrality”.
1. The Great Debate
Net Neutrality is one of the most debated concepts of the past years, as it has a wide relevance and impact on the nature and structure of the telecommunication market and, in general, on our ability to foster and sustain a continuous and beneficial exploitation of these essential technologies and services. Recently, the debate has been significantly reignited by the FCC’s decision (and before that by President Obama’s position) that appears to strongly support Net Neutrality principles. Of course, this has generated heated comments by Net Neutrality opponents.
Indeed, the issue is quite complex and not easy to frame and address. Many comments by Net Neutrality opponents seem to be biased or even patently wrong. For this reason, it is essential to deepen the understanding of Net Neutrality concepts and intrinsic nature, and confute erroneous positions, myths, and arbitrary interpretations.
2. How the Internet Changed Telecommunication Networks and Markets
In the past decades, we have witnessed a radical revolution in the telecommunication market. This revolution can be compared to disruptive innovations and market changes such as the introduction of airplanes on transatlantic routes (and consequently the extinction of transatlantic liners), or the advent of low-cost airlines in the modern air travel market.
From Circuit Switching to Packet Switching
Since the introduction of phone services in the late nineteen century, telecommunication was based on the notion of circuit switching:
Circuit switching is a methodology of implementing a telecommunications network in which two network nodes establish a dedicated communications channel (circuit) through the network before the nodes may communicate. The circuit guarantees the full bandwidth of the channel and remains connected for the duration of the communication session. The circuit functions as if the nodes were physically connected as with an electrical circuit. The defining example of a circuit-switched network is the early analog telephone network. When a call is made from one telephone to another, switches within the telephone exchanges create a continuous wire circuit between the two telephones, for as long as the call lasts.
Basically, in circuit switching communications, a channel is established between two end-points. In order to establish this channel, the “network operator” has to create a specific end-to-end pipe to carry the information.
The introduction of digital communication and in particular of packet switching has radically changed the situation:
Packet switching is a digital networking communications method that groups all transmitted data into suitably sized blocks, called packets, that are transmitted via a medium that may be shared by multiple simultaneous communication sessions. Packet switching increases network efficiency, robustness and enables technological convergence of many applications operating on the same network.
In practice, any information is converted in a stream of bits. This stream is divided in a number of packets that are sent independently from each other from source to destination. Packets can even follow different routes, depending on the state of the network.
Packet switching is the heart of the Internet. It was originally introduced to optimize the communication among computers. Eventually, it has had a much wider and radical effect: with the introduction of packet switching, the network has become a general-purpose transport means for bunches of bits. The network has (must have!) little — if any — clue about the nature and meaning of the information it is transmitting. The network operator is not required to create a channel between two end-points, but to dispatch packets as efficiently as possible across adjacent nodes of the network.
In this perspective, an essential characteristics of packet switching is that it inherently deliver packets according to a best effort policy: delivery time and even ordering of packets are not guaranteed a priori.
Best-effort delivery describes a network service in which the network does not provide any guarantees that data is delivered or that a user is given a guaranteed quality of service level or a certain priority. In a best-effort network all users obtain best-effort service, meaning that they obtain unspecified variable bit rate and delivery time, depending on the current traffic load. It can be contrasted with reliable delivery, which can be built on top of best-effort delivery (possibly without latency and throughput guarantees), or with circuit switching schemes which maintain a defined, continuous quality of service.
In reality, the Internet has been enriched with protocols and layers (such as MPLS) that provide means to enforce specific levels of quality of service (QoS). Still, it is essential to keep in mind the intrinsic nature and characteristics of the basic approach used in the Internet (best effort) since it has a number of important and strategic consequences.
A Paradigm Shift: The Dawn of the Stupid Network
The conventional telecommunication market was based on the notion of intelligent network: all the services were provided through specific features that were part of the network infrastructure, while terminals (such as POTS — Plain Old Telephone Service) were “stupid” (i.e., they were just able to accomplish very simple and fixed operations: basically, to dial numbers).
Conversely, the Internet is “stupid” — it has just to deliver packets efficiently from a source to a destination — as David Isenberg wrote in a famous essay many years ago. All the “intelligence” is in the devices, i.e., in the software applications on users’ terminals: they know the meaning of the bits transmitted and received. Notice that the above comment does not imply that a “stupid network” is easy to build and operate. The network is “stupid” at the external pins, if considered as a black box. Actually, the “stuff ” inside the box is extremely complex.
In general, the key beneficial effect of the introduction of the Internet (and packet switching) is that it is possible to decouple the problems related to the construction of a reliable and effective network from those related to the creation of innovative services and applications. This has made it possible to exploit the huge potential of innovators and developers operating at “network borders.”
Anybody can be an innovator, even if he/she does not have any “control” over the network. Anybody can create new services and compete.
These observations lead to two important questions:
- Can a network operator compete with the universe of service providers? The answer is “no”, as it is impossible for a single company to compete with millions of individuals and companies living in our society. Google, Twitter, Skype, YouTube, and Flickr were not invented by telecom operators: they were created by people and companies who exploited the raw features of the network to enable new services and models.
- Is it reasonable and convenient to revert to a scenario where the telecom operator is also the service provider? This situation is often referred as a walled garden, where the same company offers a close and integrated (vertical) stack of service. Indeed, the Internet is inducing a different segmentation of the market that is difficult to block or substantially change. Moreover, from the viewpoint of customers and of the society in general, this new scenario is much more convenient and able to stimulate innovations and the creation of new services.
A New Market Structure
Summing up, the market is moving from vertical segmentation (walled garden), in which each telecom operator offered the entire stack of services, to horizontal segmentation, with different players at each level of the stack. The main actors of this new market can be described as follows:
- Physical Infrastructure Operators. They own and/or manage a physical infrastructure, such as a metropolitan fiber network (e.g., MetroWeb in Milan) or a wireless GSM/UMTS network (e.g., Ericsson for H3G).
- Internet Service Providers (ISP). They offer Internet connectivity and access exploiting one or more wireless and wireline physical infrastructures. They can have roaming agreement to offer IP connectivity through other ISP in areas that they do not cover directly. A typical example of service offered by an ISP is an ADSL line, i.e., pure IP connectivity (usually based on a flat rate) without any other additional application service (in particular, no voice calls).
- Application Service Providers (or “Over The Top” OTT). They offer application services to customers. Typical examples are Skype, Netflix, Google, and YouTube. These services can be offered through any IP network, regardless of its nature (wireless or wireline).
This is the scenario that defines the context for the discussion on Net Neutrality. It is characterized by a radical technological innovation that cannot be ignored or distorted, unless we want to completely change the intrinsic nature, structure, and behavior of the Internet. Unfortunately, many commentators and decision makers seem to ignore or overlook these basic concepts and notions.
3. The Distorted Interpretations of Net Neutrality
It is not easy to define Net Neutrality in simple and concise terms. Basically, it refers to the techniques and policies used to manage the transport of information on the Internet. In a neutral network, ISPs cannot interfere with the nature of the packets being transferred. More precisely, they cannot discriminate a specific packet based on its value or creator, but must “move it” as best as they can, according to the quality of the access channels (pipes) used by the end-points.
This is a crucial point: Net Neutrality does not imply that all users (and application service providers) are guaranteed the same quality and performance, at the same price. They are guaranteed that, once they have selected specific quality levels for the pipe they are using to access the Internet, traffic in not discriminated based on the source or value of contents, but just adapted to the nature and quality of the pipe.
The Relationship between Price, Value, and Quality
A different way of looking at this issue is to consider the relationship between price of the access pipe and value of the services being purchased:
- In a non neutral network, end-users and service providers pay for the transport of specific contents. The transport cost is related to the value of the contents being accessed.
- In a neutral network, end-users and service providers pay (must pay!) for the quality of the pipe used to access the Internet. Price discrimination is not based on the value of contents, but on the quality of the pipe that end-users (and service providers) decide to purchase and use: if they want to efficiently transmit and receive complex contents (e.g., real-time video), they need to buy a better pipe.
In other words, in a neutral network the end-user’s access pipe will deliver on the end-user’s side the same performance whatever is the service provider he/she decides to access. Of course, if a service provider on its side has a “weak access pipe”, the end-user’s experience will be affected. Globally, the overall experience of the end-user is determined by the quality of the weakest link in the chain connecting its premises to the contents sources.
In conclusion, in a neutral network, there is a discrimination of performance and price, but this is not related to the value of the contents, but to the quality of the access channels/pipes used by the two end-points.
Net Neutrality Opponents’ Criticisms
To better understand the different angles of the Net Neutrality debate, it is worthwhile to analyze each individual comments and observations made by Net Neutrality opponents.
- “Net Neutrality means the same prices for everybody for any type of contents”. This is absolutely misleading. Nowadays, all ISP services are offered at different prices depending on the performances and quality of the line in terms, for instance, of speed and data cap. The price of an asymmetric 4Mbs ADSL with a data cap is quite different from the price of an unlimited and symmetric 100Mbs fiber connection! Of course, if we buy a slow or limited pipe as the ADSL mentioned above, the quality of the services we receive is limited and we cannot do “many things in parallel”; if we spend more and a buy a “better pipe” (a better ADSL or a fiber connection), our experience is better. The key point is that in a neutral scenario, access prices are determined by the intrinsic nature and quality of the pipe users buy, not by the specific services they want to use through that pipe. As in the electric grid, we pay for the quality of the electric outlet (and based on the power consumption), while there is no connection at all with the appliances and related applications operated using the power we buy.
- “Net Neutrality means that operators cannot manage and optimize traffic and network performance”. This is not true as well. Network management has always been done and is not forbidden by Net Neutrality. The key issue is that a neutral network do manage traffic, but with public, declared, and non-discriminatory policies, e.g., by category of traffic (e.g., video vs. audio) and not by specific providers (e.g., Google vs. Yahoo). Of course, this is also done according to the “raw” characteristics of the pipe purchased by the end-user (or service provider): it is obvious that if one pays for a low-end ADSL line, he/she cannot have the same performance and quality guaranteed by a much more expensive (it must be more expensive!) 1Gbs fiber connection.
- “We are forced to be interoperable, open, and neutral, while OTTs are not”. This observation is partially true and partially misleading. Certainly, SMSs and voice calls offered by telcos are interoperable. Conversely, OTT services such as Facebook Messenger, Whatsapp, Skype, or Telegram are basically “closed” environments. Indeed, SMSs and voice calls were services strictly bound to the “old” telecommunication network: they were intrinsically merged with and part of the infrastructure. In the Internet world, they have been assimilated to and emulated by software apps running over the network. So it is quite inevitable that services of this kind are offered by multiple providers in competition, with different quality levels, diversified and even proprietary features, and specific business model. Certainly, there are two aspects that cannot be ignored. First, apps (all apps!) should be interoperable. Therefore it would be important that each application service provider offers at least an API to allow the development of cross-provider services and apps. This problem is not addressed enough in the current debate. Second, the interoperability requirement is particularly important when a service has to guarantee specific quality levels (think of the problems related to 911/112 calls and similar emergency numbers). Nevertheless, all these issues should be reinterpreted taking into account the evolution of the telecom market and, specifically, the transformation in software apps of classical infrastructure service such as voice calls and SMSs. In other words, we cannot interpret the future with “eyes” and interpretation schemes of the past: the classical market is fundamentally and unavoidably changed by the evolution of technology.
- “Net Neutrality means that the OTTs are not paying for the investment in infrastructures”. This is a quite naive comment. Do TV manufacturers directly pay for the investments made in the electric grid? Would we, end-users, pay our utility bill for a power connection if there were no electric appliances we can use in our homes? OTTs services are “the” reason we spend money for IPSs services. Otherwise, who would care for an “naked and empty” Internet access? Would we spend money for a fiber connection that does not offer any service? Do OTTs ask ISPs to share OTTs’ investments?
Two Different Markets
The bottom line is that network services (ISPs) and application services (OTTs) define different and inevitably distinct, even if strictly related, markets.
Each of them must offer its own services with charges and prices that are related to the costs and investments (and market value) of what they offer.
Unfortunately, most ISPs are still overstaffed and organized according to a (old) market structure in which they controlled the (few) services that the network was able to offer. In a modern — and inevitably — neutral market, they have to streamline their operations and structures in order to be an efficient “dumb pipe”, as in electric grids or low-cost airlines.
This is the core of the problem: it is no longer possible to combine/bundle together transport services and application services. This is against the nature of the Internet and, most important, against users’ interests.
Indeed, most of the confusion about Net Neutrality derives from the assumption that the Internet is still seen as organized in vertically integrated and monolithic silos, where a single operator controls both access and application services. This is no longer valid in the era of the “stupid network”. Therefore, it is absolutely reasonable to regulate transport services as utilities while application services are not: they are different kinds of services and markets.
Two Additional Remarks
- A topic that should be discussed in great detail is the set of policies and rules used to manage peering and IP transit among ISPs and OTTs. In principles, peering is supposed to be free (“sender-keeps-all”) as it should be balanced, i.e., inflows and outflows are equivalent. Nowadays this is not the case anymore, especially when peering is accomplished not only among ISPs but also across ISPs and OTTs. For this reason, it is reasonable to rediscuss peering rules and, possibly, update them to reflect this complex scenario.
- The rules governing the Internet should be discussed and agreed upon at an Intenational level. It makes little sense for an individual country (and even for larger aggregations such as the European Union) to define rules that are inconsistent or, worse, conflicting with the ones adopted by other major states and western partners (e.g., USA).
4. Ultimately, Who Chooses Application Services?
The key issue underlying the Net Neutrality debate is not related to forcing a “flat, undifferentiated fare for any surfer or contents”. Rather, it deals with who really chooses the application services used by end-users.
- In a non-neutral network, ISPs have a huge negotiation power with service providers and can negotiate/force specific agreements. This way, they inevitably imposes their choices to end-users. In other terms, they can speed up or slow down a specific application service, and, consequently, they can strongly influence end-users’ options and choices: it is the ISP through its agreements with OTTs that implicitly selects or imposes the application services that end-users will use or that will have the best performances.
- In a neutral network, end-users (and application service providers) do pay differentiated prices depending on the quality of the pipe they want to use, but then end-users select the application services they prefer, without any interference or influence of the ISP. This means that ISPs loose their negotiation power with OTTs, and are more and more assimilated to a commoditized utility. Obviously, this is difficult to accept and manage for companies that in the past decades had been the “kings and queens of the network”.
In other words, in non neutral networks ISPs negotiate primarily with application service providers (OTTs) and implicitly select the application services that end-users will most easily use; in neutral networks, ISPs do offer differentiated access services to end-users, based on the “raw” quality of the pipe, but the final choice on the application service to use is made by end-users.
A final remark
Undoubtedly, the debate on Net Neutrality is deeply and significantly affecting one of the most important and crucial markets in our modern society. Therefore, it cannot be tackled and “solved” easily and superficially.
For this reason, it is essential to avoid and dismiss interpretations of the Net Neutrality concept that are either instrumental or superficial. It is a key concept and, as such, deserves to be studied and addressed with great clarity and no misleading arguments.
- The definitions and quotes in Section 2 are taken from Wikipedia.
- Section 2 is based on a previous white paper of mine, “The Net is Flat” (2007), available on the CEFRIEL web site.