Interview on network neutrality: a requirement for competition?

Monika Ermert

Net Neutrality

Dr. Barbara van Schewick conducted research on network neutrality before the topic became known to the general public. Now, van Schewick is keeping up with the heated debate on US legislation from her office at the Technical University of Berlin, where the legal expert and computer scientist now works as a senior researcher in the Telecommunications Networks Group. She is convinced that lack of regulations to prevent discrimination of content would hamper European innovation and competition.

heise online: Ms van Schewick, how did the debate in the US about network neutrality become so emotional?

Dr. Barbara van Schewick: Last autumn, the Federal Communications Commission (FCC) did away with the regulations that, for decades, had applied to operators of broadband telephone networks. Since then, neither US telephone nor cable network operators are obligated to provide independent internet service providers access to their networks. While the FCC admittedly reiterated its commitment to network neutrality in a policy statement released upon de-regulation, none of this is binding. At the moment US network operators therefore have no obligation to neutrality.

heise online: What was the effect?

van Schewick: Application developers, content providers, and consumer protectionists fear that network operators will exploit their control of physical networks to slow down the transport of independent applications and content, if not exclude them completely from their networks. They are therefore calling on the US Congress to add rules to the current Telecommunications Act that would prevent such actions.

heise online: What do the network operators want?

van Schewick: Because internet content and applications, without rules for network neutrality has been so economically successful, network operators see gaining control of their networks as an opportunity to increase their profits. For them, it's about money. That's why they have launched a lobbying campaign against network neutrality rules.

heise online: And what is Europe going to do?

van Schewick: To begin with, Europe never had the kind of comprehensive obligation to network neutrality currently being discussed in the US. While German telecommunications regulations do allow regulators to impose neutrality upon network operators under certain conditions, this has not yet happened. Antitrust legislation also contains individual regulations that prohibit the discrimination of market players. But all of this is only applicable if certain pre-requisites have been met, and network operators take advantage of their legal leeway. For instance, Vodafone has announced that it will be technically preventing the use of internet telephony applications over its UMTS mobile communications network, starting in 2007.

heise online: Will legislators in Europe start dealing with the issue now that it has flared up in the US?

van Schewick: That is already happening in the context of the review of the European legal framework for electronic communications networks. For instance, the Dutch government has asked the EU Commission to include network neutrality rules in European law. But as a working paper published last week shows, the EU Commission believes that current rules are basically sufficient. Frankly, I'm a bit surprised that the topic is not higher on our agenda.

heise online: Why do you think it's so important?

van Schewick: In a world without network neutrality rules, network operators can determine what the network is used for. If an application competes with one of the network operator's own applications, the operator can simply exclude it from the network. Customers who used that network then can no longer use the application. Telephone network operators are not exactly interested in losing their telephone customers to internet telephony providers – from their viewpoint this is one good reason to impose a technical block on the use of internet telephony. Network operators also have an interest in generating advertising revenue by having all of their customers set the operator's portal as their homepage – one good reason to transport access to your own portal faster so that customers enjoy using it more. In this scenario the market no longer determines whether applications are successful or not; network operators do.

heise online: So network operators want to earn money from certain content or applications in this way?

van Schewick: Exactly. Network operators could exploit their right to discriminate in order to generate additional income. For instance, you could offer an inexpensive basic version of internet access in which the use of certain applications is technically impossible. Users who insist on such applications would then have to choose a more expensive premium package in which internet access is available for those applications. Think about having to pay extra in order to conduct online banking, for example. But network operators don't have to make users pay; they can also collect fees from providers of applications or content. So the operators tell these providers, "You want to make your videoconferencing software run on my network? I think we can do that – provided we share the profits appropriately." I'm not exaggerating about such business strategies; they have indeed already been suggested to network operators in numerous white papers from network equipment manufacturers such as Cisco.

heise online: Who stands to lose?

van Schewick: This business model will mean that the development of new applications will be less attractive for application developers and content providers. In particular, numerous small developers, who have traditionally been the source of innovations and new applications, will be detrimentally affected. Most successful internet applications started out in a garage somewhere, and such developers are simply not able to prevail in legal combat with network operators or have the resources to purchase the right to use a network. If network operators had been discriminating all along in the way they are now considering, we might never have seen Google or eBay, to mention only two such successful applications. But the risk not only affects application developers. After all, it is such applications that make the internet so valuable to users. At the same time, application innovations make a tremendous contribution to economic growth. Finally, a lack of network neutrality would threaten the competitiveness of European industry.

heise online: Why?

van Schewick: Industry now takes the use of the internet for granted. A lot of business processes depend on it. If internet-supported applications are used cleverly, companies can gain decisive competitive advantages. Up to now, companies have been able to launch new internet-based applications without having to ask network operators for permission and without having to share the profits from such applications with them. If the European network operators now refuse to give such consent and make the application process time-consuming or costly, European companies will quickly be at a disadvantage compared to companies from countries with rules for network neutrality.

heise online: Is there so little awareness about how such policies affect economic growth?

van Schewick: We take it for granted that we can use all applications and content on the internet. Up to now, this has worked well without rules for network neutrality. Many people are therefore now asking why we suddenly need such rules. But if discrimination has not yet been a problem, it is certainly not because network operators were not interested. Rather, until now networks have not been technically able to distinguish between various applications and content.

That has since changed. Politicians and business people do have a hard time seeing how these things are interrelated. But companies directly affected by discrimination, such as eBay and Google, are aware of the danger. In contrast, most companies who use the internet in their daily work as nonchalantly as they use telephones would never imagine that network operators might one day demand payment for the use of a new application via the internet. Therefore they do not feel that the debate affects them.

heise online: What would you recommend to European regulators?

van Schewick: Rules for network neutrality must be adopted, and network operators must not be allowed to slow down or exclude the transport of external applications or content on their networks. I would not, however, be so severe when it comes to the question of quality-of-service agreements. In practice, some services do require more bandwidth or are less able to deal with delays.

One example of such an application is video-conferencing, as opposed to email. Here, it might make sense to introduce quality of service mechanisms that handle the various needs of different applications on the network accordingly. We might argue about whether such distinctions are truly the best solution, but I do feel that a complete ban on quality-of-service offers would unnecessarily restrict the leeway that companies should have in designing business models. If we do allow this technology to be used, however, we do have to be careful that programs not be treated differently if they are the same type of application, but come from different vendors.

heise online: What's going to happen in the US?

van Schewick: Hard to say, because so many different proposals are being discussed. What is clear is that proponents of network neutrality are having a hard time being heard in Washington. It seems that the lobbyists who handle telecommunications issues either work or used to work for telcos and cable network operators. It is therefore hard to find the lobbyists who are willing to work with the proponents of network neutrality.

On the other hand, a large group of strange bedfellows turns out to be supporting network neutrality proposals. They include: consumer protectionists; such founding fathers of the internet as Vint Cerf and Tim Burners-Lee, who invented the World Wide Web; and firms directly affected by discrimination, such as Google, eBay and Amazon. In addition, companies that use the internet are increasingly becoming aware of the problem. For example, financial service providers are worried that they might be asked to pay more for online banking, possibly because of demands for security requirements. So until the U.S. Senate passes a bill on network neutrality, the debate will remain interesting.

(Monika Ermert)