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Speed bumps on the information highway
San Francisco Chronicle


June 24, 2006

In this age of information, wealth and ideas flow through wires and cables just as wheat, iron and other goods once traveled over railroads and highways. Who controls today's digital thoroughfares, and whether they get to charge extra for safe and speedy passage, has emerged as a potentially defining debate for the Internet.

This issue is commonly referred to as "network neutrality," a slogan that leans heavily to one side of the argument. The debate centers on whether all Internet traffic should be given the same delivery treatment at the same price, as it has since the start of the Internet, or whether the companies that deliver the traffic to consumer's homes can charge heavy users more.




A major reason for the debate is the Internet's stunning growth - and the new uses to which companies and their customers are putting it. A system once used almost exclusively for e-mail is now eyed by businesses that want to send huge video files as large as 75,000 e-mails. The result is a growing traffic jam that threatens everyone's deliveries.

On one side of the fight are the companies that own the wires that lead into your home. To lessen the congestion, they want to add new wires.

These companies, led by AT&T, along with other phone and cable firms, want to erect the digital equivalent of toll lanes so they can charge big Internet content companies, such as Google or Yahoo, more money for faster, guaranteed delivery of content. The cable and phone companies say that if they charge extra for delivering some of the Internet's content, they can use that money to upgrade their lines and won't have to pass on the cost to consumers.

In a widely distributed quote that sparked the debate last fall, AT&T Chairman Edward Whitacre Jr. made clear his determination to make companies pay more during an interview with BusinessWeek: "We and the cable companies have made an investment, and for a Google or Yahoo or Vonage or anybody to expect to use these pipes (for) free is nuts!"

Not so, say large Internet content companies, led by Google and supported by disparate organizations such as and the Christian Coalition. Charging tolls on the Internet would give phone and cable companies too much power over the World Wide Web, their argument goes, stifling innovation and creating a system that could allow a few companies to manipulate what kind of content is delivered over the Internet.

"What I am worried about from the national point of view is that up until now there have been no constraints or restrictions on whose (digital) bits can be transported," said Internet guru-turned-Google-executive Vinton Cerf, adding that innovation on the Web came from "people with interesting ideas who did not have to leap over any kind of a hurdle to buy access to customers."

Congress must now take sides. The House recently passed a bill that would let the wire owners have a relatively free hand to experiment with tolls. Now, it's up to the Senate to follow the House's lead, or consider an amendment that would force the FCC to preserve equal treatment of content on the Net.

Ultimately this debate is about the future of the information highway. Not too long ago, we only expected it to deliver e-mail. Today we use it to get movies and music and interactive games. This new traffic generates huge files.

Where is the congestion? Who is doing what to relieve it and at what costs? And who should ultimately pay for upgrading portions of the Internet? These are the questions on the table as the Senate writes its prescription for keeping the Internet a vital artery of commerce and culture that has the capacity to deliver what people want.

To grasp the net neutrality issue, one must realize that there are two chunks to the Internet: the long-haul wires between cities, and the short-haul wires that lead from the greater Internet to the home.

In the long-haul wires, often called the Internet "backbone," there is a glut of capacity. Due to heavy investment during the dot-com boom, as well as cutthroat competition among these long-haul carriers, there's plenty of bandwidth to handle the coming rush of video files that will flood the Internet as the network is increasingly used to deliver video - i.e., TV - to people's homes.

James Crowe, chief executive of Level 3 Communications, a publicly traded backbone provider based in Colorado, told investors earlier this year that the current pricing debate had no relevance to its business because companies like his lacked direct access to consumers.

"Net neutrality is a term that simply refers to preventing access providers, cable and DSL companies, from charging extra for preferential access," he said. "It's not about the backbone."

So, if it's not about that vast expanse of cyberspace known as the backbone, what is it about?

The only place where differential pricing and net neutrality matter is the "last mile" of wire that leads to the American home. About 29.4 million U.S. households get high-speed Internet access from their cable provider, according to a recent report by the eMarketer research firm. Another 21.5 million homes get their high-speed connection via phone company digital subscriber lines, commonly known as DSL. (About 26 million Americans still have slow dial-up connections, but that number is expected to shrink rapidly.)

In this emerging two-way competition, the cable industry has spent about $100 billion over the last decade to build a network of fiber-optic lines to the neighborhood and coaxial lines to the home.

While the cable industry has been relatively quiet in the Internet debate, Daniel Brenner, senior vice president for law and regulatory policy for the National Cable and Telecommunications Association in Washington, D.C., framed the question that underlies the industry's argument:

"Is the only potential payer going to be the end user, the customer, or are there other ways to finance infrastructure by asking content providers to pay as well?" he asked, adding, "This debate is about whether Congress should prevent us from doing that."

Vince Vittore, a telecom analyst with the Yankee Group, said the telephone companies have led this debate because they face the greatest needs to revamp their wires - and not simply to boost their broadband offerings. Instead they want to deliver television and Internet signals on the same wire, just as their cable competitors do.

"The telcos want to compete with cable operators to provide video entertainment," he said.

The two leading phone companies, Verizon and AT&T, have different strategies to get their networks up to television speed.

Verizon has said that by 2009 it will bring high-capacity fiber-optic lines directly to 18 million homes. At roughly $1,500 per home, that works out to a $27 billion investment for a network that delivers more than 100 video channels in addition to broadband Internet service at download speeds up to 30 megabits per second, with room to grow faster.

AT&T plans to spend $4.6 billion to expand its home access network and upgrade its wires, focusing on improving video delivery but not significantly speeding up traditional Internet service. It will build fiber-optic lines to the neighborhood level and switch traffic onto existing copper phone lines for the last few thousand feet. This will give it the ability to deliver digital traffic at speeds of 20 to 25 megabits per second, most of which will carry four video channels.



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