In the nearly 20 years that the Internet has been in private hands, it has been an engine of innovation throughout the world. In our society today, we use the Internet for applications that could not have been conceived of when the Department of Defense (DoD) initially constructed the Internet's predecessor, the DARPAnet.
The Internet has resulted in profound structural changes to the telecommunications industry. It has been able to do what regulators have been unable to do-that is structurally separate the applications layer from the network layer. As a result of this structural separation, we have seen a proliferation of new businesses, new applications, and an improvement in productivity. Previously, networks were constructed for a specific application. And for the first time, the Internet allows new businesses to be created, which do not require the construction of a facilities-based network.
In providing Internet services, there are two distinct types of networks that deliver these types of services. Local access networks (which can be either wireline or wireless) have historically been regulated industries in which there are substantial barriers to entry and very little true competition. Backbone networks continue to experience real competition and prices continue to fall because of that competition. Today, the local access networks are being adapted to carry Internet traffic, and it is appropriate that these natural monopolies continue to be subject to some level of regulation. The US government has embarked upon a stimulus program to promote the extension of broadband services to all Americans. But one must not confuse "Broadband" with "Internet access." This, in fact, is at the heart of the net neutrality debate.
Many networks that have constructed broadband facilities are attempting to utilize their networks for proprietary broadband services, such as cable TV. The Internet is a network of networks, and is predicated on the unfettered interconnection of these networks. Many of these local access network operators allege that the application and content businesses are expecting a free ride on their networks. The application and content providers purchase Internet connectivity from one of the global backbone operators. Similarly the local access network operator charges its customers for access to the Internet. What many of these former monopoly-based businesses are attempting to do is limit their customer's access to the full Internet by restricting their customers to content that is approved or controlled by the access provider. Consequently, they are not providing true Internet connectivity.
Truth in advertising must prevail, and any broadband access provider that claims to deliver Internet services must make the full Internet available on a non-discriminatory basis. The access provider should be allowed to limit access to specific content only if the access provider explicitly tells the consumer that its "Broadband" services are not "Internet access" services.
There has been a long history of cross-subsidization in American telecommunications policy. Business subscribers have generally subsidized residential subscribers. Urban subscribers have subsidized rural subscribers. And finally, voice subscribers have subsidized data subscribers. There needs to be a new regulatory regime that reevaluates the need for subsidies in a world where applications and networks are delivered by different providers.
The Internet grows at an unprecedented pace, doubling its traffic every two years. The Internet, however, is a direct result of a revolution in optical transmission and routing technologies that has the cost of delivering these services falling faster than the rate of traffic growth. The telecommunications industry is reeling under the pressures of the deflationary onslaught that the Internet has brought. While many legacy service providers are attempting to replace the declining revenues from their historical service offerings, they are struggling to extract from their subscribers the value that their customers obtain from using the Internet.
Internet access subscribers should not be required to subsidize integrated telecommunications companies for the declines in their legacy businesses. There is ample revenue from Internet access to fund the deployment of new technologies and new networks. The Internet has grown in this open environment, and only recently have service providers attempted to constrain traffic in an attempt to extract additional revenue from their customers. Most Internet service providers suffer from an inherent conflict. This conflict is: only a small percentage of their revenues are derived from Internet services, and the majority of their revenues are derived from their legacy product offerings. For this reason, these providers have opposed net neutrality. They are attempting to limit the proliferation of the Internet in order to protect their legacy revenue streams. For the Internet to continue flourishing, Internet service providers must separate their need to protect legacy revenues from the need to provide the highest quality, lowest cost, Internet services to their consumers.
We have benefited from an open Internet. The value of the Internet increases as the square of the number of users (Metcalfe's Law) times the number of applications used. The Federal Communications Commission (FCC), in its recently proposed rules, is attempting to codify that openness and protect consumers. This is a question of truth in advertising. All broadband is not broadband Internet access. It is the policy of our government to promote broadband access, but what is really meant is broadband Internet access, as it is this interconnected network of networks with multiple applications that has created the miracle of communications known as the Internet.
Dave Schaeffer is the Chief Executive Officer of Cogent Communications and a special guest contributor to FierceTelecom.
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