Net Neutrality

The Internet is one of the greatest vehicles of innovation since the invention of the wheel. Its contribution to society and the economy is measurable and significant. But if we don't ensure net neutrality and the openness of the Internet, we may be handing control of the network over to the telephone companies, thus stifling future innovation.

It is hard to believe that organizations whose last bit of real innovation was the touch-tone telephone are in a position to kill the network as a vehicle of innovation by limiting the amount of services that can be freely delivered. This is the issue of "network neutrality" that governments and regulators should be concerned about.

There has been a lot of debate amongst the Internet intelligentsia about the significance of net neutrality. Most of the discussion has been focused on whether telecom carriers should be allowed to build the "toll roads," for example, by offering premium, high-speed services or charging for certain type of content. The carriers claim they need to offer these differentiated services in order to underwrite the costs of broadband deployment.

In general, regulators have concurred with the carrier rationale, saying they can offer premium or "differentiated" services as long as they are provided on a non-discriminatory basis: That is, they can't be offered exclusively to certain customers -- the services must be available to anybody that has the money to buy them.

The danger here is that there are a number of tools and techniques that carriers can apply to provide differentiated services, which at first glance appear to be non-discriminatory, but in the end will have the result of blocking important applications and services. The classic example is the use of packet sniffers to block many popular peer-to-peer applications.

Peer-to-peer applications like those of BitTorrent Inc. , Skype Ltd. , and Joost , to name a few, are the new way of delivering high data-volume content like video and music. If successful, they clearly will represent a threat to the carriers as they siphon of traffic from their traditional services of telephony, video on demand, and cable TV distribution. They also impose loads on the network that limit the carrier's ability to do any type of rational traffic engineering.

Many of these new Internet application providers, in addition to Internet service providers and applications developers like Google (Nasdaq: GOOG), are saying that allowing carriers to charge for any differentiated services is wrong.

We shouldn't lose site of the ultimate goal, which is to foster innovation. If you believe the Interent is a really good platform for innovation, attempts to monetize broadband connections will only stymie it. Innovative technologies such as various P2P applications and Web 2.0 services might be crushed by allowing the carriers to offer non-discrimatory services, as eventually this will inadvertently turn into discrimination.

You might look at this as a sort of Catch 22: In order to pay for the platform for innovation, we kill the innovation. The fact is, we need new business models. We need to find new ways to finance these networks, which do not put restrictions on these networks. Rather than trying to offer these as differentiated services, perhaps we should bundle them with gas and water.

Things may already be moving in this direction. New business models based on "free-conomics" such as free broadband and other cross-subsidized services are blossoming around the globe. Some examples of these include Inuk Networks , a free telephony, TV, and Internet service in the U.K. and Canada; Iliad (Euronext: ILD), the free music and Internet service in France; and, most obvious of all, Google, which is providing free broadband underwritten by its advertising business.

Many of these new businesses are already enormously successful, and they will represent a huge challenge to the carriers, who say they need to monetize all transactions that cross their networks by charging fees.

— Bill St. Arnaud, Senior Director of Advanced Networks, Canarie Inc.