BOSTON, Mass., January 15, 2010 – Academics, economists, technology specialists, application creators, internet service operators and investors descended on the campus of the Massachusetts Institute of Technology on Wednesday to discuss the possible effects of the proposed net neutrality rules on innovation, investment and internet users.
Sharon Gillett, chief of the Wireline Competition Bureau at the Federal Communications Commission and Paul de Sa, chief of the FCC’s Office of Strategic Planning and Policy Analysis, moderated the late afternoon and evening workshop.
Agency Chairman Julius Genachowski provided an opening statement via video feed. He established the goal of the hearing as a discussion on how to preserve the internet that generates innovation, investment, job creation and growth.
Genachowski pressed for answers as to how to optimize innovation and investment throughout the edge and core of the networks, so that internet can play a critical role in our future.
Meredith Attwell Baker was the only agency commissioner to attended in person; she told the audience that she was “still unconvinced that there is a problem that they should be addressing.”
“Nothing should interfere with the deployment of broadband,” she said. She said that she attended to get the facts from the policy experts, designers and operators themselves.
The workshop itself was organized into three different sections. After opening statements by Sally Shipman Wentworth, Senior Manager for Public Policy of the Internet Society, the audience heard presentations from Barbara van Schewick, Assistant Professor of Law, Stanford Law School; Shane Greenstein, Kellogg School of Management, Northwestern University; Marcus Weldon, Corporate CTO, Alcatel-Lucent; and Jeffrey Glueck, CEO, Skyfire.
These presentations were followed by a respondent’s panel, consisting of Tim Berners-Lee, Director, World Wide Web Consortium; David Clark, Senior Research Scientist, MIT Computer Science & Artificial Intelligence Laboratory; Susie Kim Riley, Founder/CTO, Camiant; and an official from Akamai Technologies. Ajay Agarwal, Managing Director, Bain Capital Ventures; Nabeet Hyatt, Founder/CEO, Conduit Labs; Amy Tykeson, CEO, BendBroadband; and Christopher Yoo, Professor of Law and Communication, University of Pennsylvania Law School rounded out the second panel.
The portions of this article designated as Premium Content include summaries of the comments of each of the presentations, respondent’s reactions, and the general discussion that followed at the MIT forum.
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Barbara van Schewick began her presentation with the story of three different innovations and how they came to succeed: Ebay, Skype and YouTube. In all three of these examples the innovators came up with an idea, the users demanded that idea and there was a low cost of entry that that enabled applications to develop. If there were an increase in cost of access then benefit incentive for innovators might be lost. When there is uncertainty about technology and user’s needs, larger and more diverse groups will provide for better innovation to meet those needs.
Van Schewick added that when it comes to deciding which applications are more successful “users and providers have different criteria, users will use applications that meet their needs and networks will choose applications based on cost and use of bandwidth.” Applications do not create value through their existence but by letting us create the value we want. “Protecting factors that fostered innovation in the past can ensure innovation for the future,” she said.
Shane Greenstein’s main point was that wide participation in innovative activity is encouraged through transparency and consistency. Greenstein said that “we still live in an immature internet economy that will continue to evolve.” This quote was debated amongst many of the speakers in the panels.
Greenstein added that the two things that make the internet economy today different are: the rise of platforms and the emergence of a concentrated set of broadband suppliers. Given these two factors, transparency and consistency matter because platform providers can affect a small firm’s ability to capture value and in order for applications to succeed they must work on the networks of multiple internet service providers.
“Proprietary firms in ideal conditions would be punished by consumers for a lack of transparency and consistency; however market power leads to a stance that is not in line with the innovation we would like to see,” said Greenstein.
Marcus Weldon’s theme revolved around the idea of openness, best efforts and what he called a hybrid solution to this net neutrality debate. He said that openness was key as long as it was affordable and without bandwidth restrictions. Additionally, he said, the revenue stream must be large enough to sustain quality-of-service-style product offerings. Through his work at Bell Labs, Weldon tackled the question of how to quantify the cost of networks. The most effective proposal became apparent in a hybrid solution, creating a system of application innovation where users decide their level of access to different services for additional fees.
The final presentation came from Jeff Glueck of Skyfire. Skyfire is a cloud computing service that boosts the power of web browser for mobile phones. Glueck explained that mobile innovation is filled with uncertainty when it comes to access to application stores. He equated the mobile application market to Dell saying that a user could not use Firefox on their computer.
This tension with openness discourages innovation, competition and new entrants. Glueck said it would be horrible if we enabled a market where users would have to pay for a service like Skype. Instead, “nondiscrimination should be the Hallmark of network management.” He suggests that those users that are taking up incredible amounts of bandwidth are most likely performing illegal activities. Glueck continued that there is nothing in the net neutrality principles that would prevent an ISP for going after someone that is committing a crime of piracy or any other internet crime.
First Panel of Respondents
David Clark led the discussion about quality of service. He argued that “different sets of bits should define what quality of service you want.” Users should be able to pick their quality of service tailored to the applications that they care about. Clark said that the presentations did not discuss the issue of interconnection. In order to make quality of service available the ISPs need to negotiate interconnection. “The FCC’s role in this area should not be regulation but rather facilitation,” explained Clark.
Tim Berners-Lee’s main concern was discrimination in delivery of different packets. He does not want someone that is paying money to affect where he can buy his shoes or research his religion. He said “the neutrality of the web is the basis of how I go out and learn things.” Berners-Lee also remarked that at the beginning of the web, there was a lot of good will, but now the internet has changed.
His most important analogy was that while the free market works, not anyone is allowed to print their own money. “There are simple rules to a free market and we need some of those simple rules when it comes to the internet.”
Susie Kim Reilly believes that “application innovation and net innovation are not mutually exclusive.” Her main point harkened back to the quality of service discussion. She claimed that “the unintended consequences of no quality of service would be poor quality of service.” She agreed that there needs to be openness and transparency, but a subscriber should be able to choose which applications they want to be quality of service enabled.
The representative from Akamai technologies expressed his opinion as a leading company offering video transactions and content delivery networks online. “Quality of Service” has a slightly different meaning to Akamai other than just increasing the experience of the end-user, the official said. Akamai accelerates 15-20% of all web traffic for 3,000 well established customer websites.
Commissioner Baker began the discussion questions by asking Tim Berners-Lee which governments should have internet rules within this global forum and what is the role of the government in shaping net neutrality rules in the next stage of the internet? Berners-Lee again stressed the need for the most basic rules so that ISPs do not use their information in an underhanded way to affect things that should be independent.
Kim Reilly then asked the panel whether they would differentiate between non discrimination and a quality of service approach. Berners-Lee believed that bits cannot be treated in different ways.
Kim Reilly pointed to Akamai, she said “if you want to accelerate content, pay Akamai. It costs money to build infrastructure.” It is important to allow open standards but to let all collaborate. Berners-Lee then countered and suggested that Akamai could favor Google over all other search engines simply because they have more money and can afford to pay more.
Barbara van Schewick object to the entire discussion about quality of service. She said she wanted some clarification on which types of quality of service were being discussed; there is a need to distinguish bad quality of service from the good. Some forms of quality of service do not give users the same choice.
Van Schewich continued, “like treatment means you need to treat more applications alike, but the question is, what is alike if a new application comes along and a network provider can then say that you are not quite like video.” She called for a good rule that differentiated between bad discrimination and good discrimination.
The next question from the audience asked whether it is normal for cost of service to equal revenue. Weldon insisted that cost should never equal revenue, he also mentioned that the all you can eat model does not work so well in a perfect storm of growth. Greenstein disagreed. He claims that revenues from internet access have been growing and the market for an ad supported internet will continue to grow. Revenue growth in the industry is not flat.
Another questioner asked whether there could be benefits from deep packet inspection? Kim Reilly said that she has no problem with a form of DPI that “sits” in the network and looks at data traffic to see what applications are on the network and what usage patterns are there.
Berners-Lee, on the other hand, said he was concerned about the extreme commercial value of DPI information; the information in the wrong hands is very dangerous. When asked about is thoughts on Google doing the same thing with web search information, Tim countered that Google tracks and anonymous user ID.
Commissioner Baker directed her last question to Jeff Glueck. She asked whether effective transparency can solve concerns in the mobile internet market. Glueck added that the providers have just been slow to add capacity to their mobile networks. Rules need to be established to attack network management because in the current market there is a lot of opportunity for abuse.
Glueck attacked the idea of quality of service by saying by saying that users obviously want the application they are using at the time, he did not like the idea of letting the provider target his network for applications that were not gaming for example. Again he restated his position “network operators should charge the hogs more but do not discriminate between one application or another.”
Second Panel of Respondents
To start the second panel at the January 13 event, Ajay Argawal presented a case study of Skyhook Wireless to demonstrate how an open ecosystem unleashes innovation. Though the iPhone is not completely open, the development of Skyhook’s precise location devise has spurred innovation in such a way that during the last two years about 20 percent to 30 percent of all iPhone applications are using the Skyhook capability. He added that “regulation is a very big factor when it comes to putting dollars to work, certainty and clarity are very important from an investors point of view.”
Nabeet Hyatt said that “crazy” is a substitution word for innovation. He said that disruptive innovation is extremely important in the economy. Although he runs a game company that uses a lot of network bandwidth, he does not want to argue the side of preferential services because “anything but neutrality creates a small menu of services and then ‘crazy’ does not happen.”
Amy Tykeson represented the only ISP on either panel. Her bottom line came down to customer satisfaction. She stated three main concerns with the inquiry on net neutrality regulation. First, she agreed with Baker that if the Internet is not broken, there is no need to fix it.
“Light-handed operation has fueled innovation over the past decade,” said Tykeson. Second, she acknowledged that the eco system blurred the line between application and content providers, if you look at what si happening with search engines, you realize that ISPs are not the only ones directing traffic. Finally she stated that in order to ISPs to enhance customer experiences they need flexibility in order to adapt to solve congestion problems.
Professor Yoo said he believed that the market may actually be reaching maturity. Once usage starts hitting saturation, there is a flat stage notion of competition that fundamentally changes. Providers acquire new users through higher value and managing costs. We are in a phase where consumers actually care about every bit they receive. Carriers will begin to find ways to get more op ex rather than cap ex.
Van Schewick reacted to Yoo’s comments by noting that under the state of the current architecture – which no one is really fond of – still does foster innovation. Tykeson mentioned the creation of the cable industry’s DOCSIS 3.0 as an example of innovation that is still happening to improve the experience for customers.
As the discussion moved back towards the topic of usage tiers, Weldon said that although usage tiers may feel comfortable, real innovative services may only need the additional bandwidth for a second or for the duration of the application. The higher tiers may end up being a waste of allocated bandwidth.
Greenstein then brought the conversation back to the issue of internet maturity. He claimed that the ad industry is not set, the web will still cause great suffering for the film industry. He said however that the key growth and the one that is hardest to see is in enterprise internet protcol, the combining of wireline and wireless that is happening at different firms could foster massive innovation.
“When we look at that, where does the FCC have leverage?” Greenstein answered his own question, turning to Baker and saying, “the most important thing the FCC can do is provide more spectrum, release more spectrum, it will get used.”
He concluded by restating his position that because the Internet is not mature there are transparency and consistency problems that will need to be addressed.
Hyatt made his final remarks by stating that “something has changed that now required regulation.” Today and ISP is no longer just an ISP, if they make money they place it into cap ex and then all of a sudden they are the content provider as well. Tykeson responded by reminding Hyatt that the same goes for search engines like Google, manipulating content like Google Maps.
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