Thursday, May 25, 2006

News story from the future: a world without net neutrality

The first incident occurred only weeks after President Bush signed the new telecommunications bill into law. Critics had warned that the law's laissez faire   treatment of the carriers was rife for abuse. Because net neutrality protections had been omitted from the verbiage, critics claimed that the carriers could -- and would -- abuse the system.

In fact, some observers stated that telco lobbyists had prevented words like "block", "impair", or "degrade" from appearing within the new law despite the fact that those very words had played a prominent role in the carriers' PR statements.

The new law also limited the FCC's role to adjudicating complaints about unfair treatment of content-providers. Worse, as it turned out, the FCC was handcuffed by the law: it was explicitly forbidden from interpreting or codifying new rules around net neutrality.

An Exclusive Deal with NetReelz

In February, online movie provider NetReelz signed an exclusive high-speed video distribution deal with the two remaining telcos: BellWest and BellEast. The deal positioned NetReelz as the premier high-speed provider of online DVD delivery to consumers.

Only days after the new distribution arrangement began service to consumers, video giant BlockDuster filed suit in federal court claiming discrimination on the part of the telcos. In part, the complaint read:

...carriers are impeding delivery of claimants' best-effort video streams, which have worsened noticeably and significantly, resulting in lost revenue and other damages as specified in [Exhibit 33]. These performance claims have been verified by three independent reports [Exhibit 47] and have been described in dozens of unsolicited consumer feedback submissions [Exhibit 48]...

Within weeks, BlockDuster's market-share of DVDs distributed through the telco channel dropped from 38% to 16%. Its claimed damages ran into the billions of dollars.

Oddly, NetReelz soon sued the telcos as well, claiming predatory and collusionary pricing practices. Noting that pricing for the telcos' premium delivery services -- BellWest's Platinum-Band and BellEast's Titanium-IP -- were nearly identical despite vast geographic and infrastructure differences, NetReelz complained of price gouging and unfair business practices.

The Telco's New Search Engine

In the search engine market, Google and Yahoo had waged fierce battles in the years leading up to the new law. Neither could gain complete control of the complex and increasingly verticalized search market. Just as Google appeared to gain an edge, eBay and Yahoo executed a collaborative agreement. And when Yahoo appeared to reach critical mass, consumer products giant Procter & Gamble signed a massive advertising deal with Google.

This back and forth was interrupted by a startling development: BellWest introduced its new search engine. FindRay was neither revolutionary nor superior, according to experts. It did have the advantage, however, of prioritized carriage through BellWest's network.

Software executive Raymond Drai of TransparenSoft was an early user of FindRay. "One day Google worked wonderfully -- snappy, with very relevant results -- and the next it seemed to be slower than a turtle wading in molasses. Yahoo also seemed to be bogged down... results took forever to return. What was weird, I mean, at the time it seemed weird, was that BellWest's search engine (FindRay) was lightning fast."

Subsequent complaints from consumers and governmental groups fell on deaf ears. The FCC, which had aired grievances, was unable to take action as the carriers' attorneys executed stall tactics. A series of lengthy appeals prevented the FCC from punishing BellWest over behavior that seemed, at best, nearly criminal. Two related lawsuits -- one a massive class-action on the behalf of millions of users -- were later filed.

Vonage's bankruptcy

The turning point occurred, most experts agree, the day that Vonage filed for bankruptcy. Its IPO in 2006 appeared to point to an era where independent application providers could invent new methods of communication from whole cloth. That dream faded, however, when tens of thousands cancelled the service due to dropped calls, static, popping, and related problems.

Vonage senior executives cried foul, claiming that the carriers were to blame. The telcos' retort noted that more consumers were choosing premium VoIP service sourced by the carriers. BellWest spokesperson Chandree Fowler said, "as more consumers choose our premium VoIP services, third-party providers are bound to suffer. Consumer choice is causing these issues, not the telephone companies."

The FCC, tied up in several lengthy appeals processes, was unable to react quickly to Vonage's problems. Thus, the independent VoIP provider could not gain timely relief from the catastrophic decline in business. The company filed for bankruptcy soon thereafter. Multiple lawsuits are now wending their way through the courts.

The Law Brings Change to the Internet

"Much has changed since the new law took effect," said Dr. Marc Arnotti, chairman of the Joint Internet Freedom Organization (JIFO), "we've seen an increasingly balkanized Internet. That has resulted in a dearth of venture capital entering the Internet space and a sad drop in innovation here in the U.S."

Analyst Jeffry Ironton of Adams, Hill & Lester verifies that investment has stalled. "No one is willing to invest in Internet software business models without some protection from the carriers. We have seen investment drop from $2.4 billion in the sector last year to less than $300 million projected for this year. It's safe to say that other countries are picking up the slack. India and Israel are going gangbusters right now."

JIFO, an offshoot of the bi-partisan Save The Internet campaign, has led an increasingly strenuous attack against the carriers. Its political action arm has raised over $24 million in the last 12 months and threatens to "turn over 40% of the House" if net neutrality enforcement isn't strengthened before the mid-term elections.

Its technology group, in conjunction with SourceForge, has developed a new, secure browsing technology based upon Firefox. The FireFighter peer-to-peer (P2P) browser offers consumers encrypted and anonymous browsing technologies based upon the Tor Onion Router. Arnotti notes, "the carriers can't inspect packets, can't sense true source and destination, and can't do anything but cap bandwidth."


If you don't want to read this story in your newspaper a few years from now, go to Save The Internet. Take action. Do it now. You know you want to.

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