USTR and broadband policy
Is it possible that the U.S. could be violating its World Trade Organization commitments (under the WTO Basic Telecommunications Agreement) by supporting the efforts of AT&T and Verizon to bar new entrants from providing broadband access services using their networks?
The U.S. and its trading partners have promised to require “major suppliers” of public telecommunications services (entities with significant market power) to allow interconnection to their networks “under non-discriminatory terms, conditions (including technical standards and specifications) and rates and of a quality no less favourable than that provided for its own like services
or for like services of non-affiliated service suppliers or for its subsidiaries or other affiliates.”
Verizon and AT&T don't want to allow anyone to connect to their fiber networks to provide competing broadband access services.
Back in 2001, the office of the United States Trade Representative cited those obligations when it strenuously objected to Deutsche Telekom's obstructionist approach:
Concerns raised in this year's review [by USTR of Deutsche Telekom] relate to (1) unbundled loop rates, (2) excessive co-location conditions and provisioning delays (i.e. relating to access to space in DT buildings), (3) absence of a reference interconnection offer [a standard fee for connection], and (4) excessive licensing fees. Additional areas of concern involve alleged moves to lift price controls on DT in certain sub-markets, continued backlogs on interconnection requests, pricing of Internet services, and lack of transparency in judicial proceedings. . . . .
USTR welcomes the progress Germany has made over the past few years in developing a competitive telecommunications market. It would be unfortunate if that progress were defeated by further efforts by DT to stifle competitive entry. We urge Germany to remain vigilant in its efforts to prevent anticompetitive practices.
This may be where all the confusing talk about “private networks” being provided by Verizon and AT&T comes from. Arguably, if these networks are public (and they are), and if these actors have market power (and they do), then the U.S. can't release them from interconnection requirements without violating its own treaty obligations.
Tomorrow — back to something less fraught. Like the weather. Oh — right — the weather is fraught too.
"Private" networks, MSN, Cisco, and Deutsche Telekom
The puzzle fits neatly together. MSN will never support an open internet. It's making far too much money from European walled gardens, and it plans to move its act to the U.S.. Here's how this works:
Deutsche Telekom's revenues are being undermined by the growth of VoIP services. (DT is the monopoly incumbent telcom provider in Germany.) And its traditional model is threatened by new fast-growing municipal networks: Both Amsterdam and Paris are making great strides in laying their own fiber and avoiding the incumbent telecom operator. DT’s responsive tactics are very similar to what incumbent telcos here in the U.S. are working towards: acquire legislative protection for complete control over their broadband infrastructure.
Deutsche Telekom has persuaded the German government that its investment in fiber needs to be protected from regulatory intervention — including any obligation to interconnect on mandated terms with anyone else. DT has threatened (sound familiar?) not to build a planned 50-city fiber network unless it gets the protection it wants.
The European Commission has reacted strongly to this suggestion, threatening legal action against Germany. Viviane Reding, the EC commissioner for information society and media, said “We cannot afford to create new monopolies out of short-term political opportunism.”
In response, DT is saying (sound familiar?) “We cannot possibly invest €3bn [$3.9 billion] in setting up a network without receiving adequate protection for our investment in return.”
DT, and its friends in the German government, takes the view that (sound familiar?) ”new and emerging markets in which market power may be found to exist because of ´first-mover´ advantages, should not in principle be subject to ex-ante regulation.”
DT has announced that it intends to remain Europe’s “number one” telecom operator, and it is poised to buy other network operators to hang onto this status.
MSN recently made a deal with DT that was MSN's second biggest deal ever. Under this deal, MSN will provide IPTV software to Deutsche Telekom. DT will use this software, and boxes provided by Cisco, to provide packaged services to consumers — starting this month. (This will be the biggest roll-out yet of triple-play services.) Consumers will be offered about 100 channels, including existing satellite and cable feeds, and video-on-demand movies. This MSN platform will also offer web surfing, VoIP, and “other interactive entertainment services.”
MSN has similar deals in place with British Telekom, Telecom Italia, Swisscom, and the new combined AT&T entity.
So — that's it. This is when the internet becomes an “interactive entertainment service,” with help from legislators around the world who will lift regulatory requirements of access and interconnection. All of this is very very good for MSN and Cisco and network providers.
Yes, DT has more market power than our telcos here do. But that's only a matter of degree, not a matter of kind.
Of the seven Baby Bells formed after the breakup of Ma Bell in 1984, only four remain. The old AT&T, Southwestern Bell, Ameritech, SNET, Pacific Bell, and BellSouth are now collectively “AT&T.” Similarly, GTE, Nynex, Bell Atlantic, and MCI have joined together to form Verizon. Two Baby Bells, the new AT&T and Verizon, control telco access around the country. The vast majority of Americans have at most two choices of broadband provider wherever they are, and competition between these providers is not intense. Prices have stayed high and speeds have stayed low. In effect, the industry is re-monopolizing.
The European Commission is vehemently opposing what DT wants to do. In years past, the U.S. government hasn't looked kindly on anticompetitive actions by MSN. We should wake up and recognize that the DT approach is coming to our shores, and notice what the European Commission is saying.
VisuAl Gore
It's a warm night in Greenwich Village, NYC. Suspiciously….warm.
Along with a lot of other people this weekend, I went to see Al Gore's movie. You should see it, too.
Although I'd love to see Sen. Gore get involved in the net neutrality debate, he's got this other problem to work on — global warming. He's making people see this issue — visualize it — in a very persuasive way.
He's got pictures. He's got film. He's got charts (and all the lines on all the charts go up and to the right). He's got animations. He's got a key prop — a levitating platform that lets him physically show just how sharply up and to the right some of those lines are going.
Earth Day, and the environmental movement, didn't take off until we saw a picture of the earth from space. Sen. Gore makes this point at the beginning of “An Inconvenient Truth,” and it's clear that he's trying to create the same kind of motivating visualization. But this time, the picture has a thousand different aspects. It also has a time element, the key driver for any thriller. The picture shows us that we're running out of time.
Senate hearing recap: the new "communications network"
Today's Senate hearing on net neutrality was more than a talking-point recitation. The witnesses (most of them, anyway) knew what they were talking about and scored strong points. Here's the key idea we should take away from the hearing:
Don't let Sen. Stevens mash ten people representing “stakeholders” in a room and command that they emerge with a bill in a week.
It's clear that the issues raised by the proponents of net neutrality are real and difficult and that momentum is building to “do something” about this issue. (The House Judiciary Committee also passed the Sensenbrenner bill today.) It's also clear that Sen. Stevens is frustrated and wants to get a bill passed right away. He's looking for a “consensus” that will provide a “fertile investment climate for network operators.” In other words, he'd like to give these operators some assurance that they can recoup their investments. Sen. Stevens is inadequately aware of the risks to the future of the internet that this approach poses.
The risk that a hand-picked group of lobbyists will compromise away this future is too great, in my view. The only standard that will keep the architecture of the internet optimized on innovation (instead of billing) is to ensure that all broadband pipe providers (cable as well as telco) are required to unbundle their facilities so as to promote competition. That's a huge step from where we are now, and it will take work. But my hope is that we'll get there eventually. We shouldn't be rushed.
The telcos' central argument, which came across very clearly from Tom Tauke of Verizon, is that their investments in fiber needed to provide new communications services must be paid back, and that the only way to do that is to allow them to price-discriminate. These new communications services won't be the internet, he assures us. They'll be private networks that are controlled, end-to-end, by Verizon. Internet access will still be available, and won't be blocked or degraded. “We should be able to offer new services that don't affect internet access over that same fiber connection,” he says. Again and again, he said that regulating “access generally” shouldn't happen (by which he means access to the new “communications network” that-is-not-the-internet).
Tauke's argument is that in an “old world” of limited capacity, you need to require nondiscrimination. But his new fiber has unlimited capacity. He'll provide 30Mbps of internet access (not upload, but download), but he wants to provide “things beyond internet access.” And he thinks that's different. He claims we've had a “real change in the paradigm.”
(If these communications services aren't the internet, how will this help us in the much-ballyhooed global “broadband penetration” debate?)
(And if a newspaper spends an enormous amount building a new color printing plant, should it expect to have legislation passed that will enable it to recoup its investment?)
Timothy Regan, of Corning, made the point that the legislators are trying to solve a problem that hasn't been clearly defined. He and Tauke both claim that there is ample competition for broadband access in the U.S.
Ben Scott, of FreePress, noted that an extraordinary grassroots coalition has arisen in connection with this issue that spans the political spectrum, and that getting rid of nondiscrimination principles would undermine the primary reason for the internet's success.
Earl Comstock, of CompTel, pointed out that we have lots of experience with the cable industry. They don't let competitors use their facilities, and they don't let consumers pick what they want. (Sen. McCain, it's good to know, has had some bad experiences with his cable company.) Comstock noted that Verizon essentially wants to say: here is a line into your home. “You can buy a second line if you want to — but for that second line we're going to control what you can do with it and what you'll see. You can't buy a second uncontrolled line.” Comstock made the key distinctions (and I hope the Senators were listening): “This fight is about regulation of transmission, not content. No one wants content regulation. What we're worried about is having providers of broadband access leverage their market power over transmission into content.”
Tauke responded, strongly, that Verizon has no interest in discriminating against internet content. His point is that he wants to discriminate in providing other, “new” services over fiber. He frequently used the example of medical operations — hospitals should be allowed to choose a VPN that one provider controls to assure that they can monitor heart patients. “When we talk about these special arrangements, they're not being delivered over the internet.” At one point, Tauke said passionately that [paraphrasing] ”We're being forced not to differentiate. If you can't differentiate you can't innovate. You become a commodity. There is no business case for fiber to the home under those circumstances. The key to getting competitive markets moving is to be able to differentiate. Those new networks need to differentiate. Nondiscrimination means commoditization and no innovation for consumers.”
Comstock's response on this point is a very strong one: There are many VPNs out there. Why should Verizon be allowed to use its privileged position to be a gatekeeper for a single VPN that all of use will have to use?
He points out that we know how difficult it is to negotiate with an incumbent who doesn't want to sell to you. We need help to have competition for broadband services. We need more networks — but we're facing entrenched incumbents. So we need to force them to share their networks for now. Network providers should be doing just that — selling us transmission. They're not prevented from selling other content to us. Comstock notes that what the network providers want to do would un-do the internet. They will impose different protocols (”not the internet”) to protect their own material.
Comstock's key point was that what the network providers want to do is turn the internet into a cable system. Ben Scott also made this point well. Comstock noted that the network providers are [paraphrasing] “trying to reserve capacity for their exclusive use. They'll make deals. They'll always provide some capacity that's unrestricted — like leaving one lane of an eight-lane highway open.” Comstock said that the network providers should be required to make whatever capacity they have available on a nondiscriminatory basis.” “My companies provide VPNs every day, but we can only do that if we can resell to consumers.”
Sens. McCain, Snowe, Dorgan, Boxer are all very concerned about concentration in the market for broadband access. Sen. Inouye called the testimony “extraordinary” and seemed very appreciative (and very frail). Sen. Boxer, in particular, asked good questions about what Verizon should be paid for. She understands that Verizon has gotten public rights of way, and notes that they come with certain obligations. She thinks that Verizon should be paid for transferring information — and wonders why they should get more than that.
Regan, finally, said that this new service of Verizon's won't be an “internet connection.” Instead, it will be a “communications connection.” Sen. Boxer, to her credit, thinks that the network providers are making up this distinction.
It was a good day — and we shouldn't be pushed to speed along a bill. We need to get this right.
Grinding slowly
I was inside the criminal justice system all day today (and will be all day tomorrow too): jury duty in state criminal court. Nothing much happened until about 3:30, when ninety of us slowly shuffled down the corridor to a courtroom to hear that a man had been accused of a series of heinous crimes. There was a slight audible gasp from the group of ninety when these crimes were described. The defendant stood up and turned towards us all, and smiled gently.
The judge asked if anyone had any reason why they couldn't serve as jurors. About thirty people lined up and explained why they couldn't, and they were all excused. I couldn't hear all of the excuses clearly — some had to do with the nature of the heinous crimes, and some with the nature of the business that the potential juror ran.
Then some of us were sent up to sit in the jury box and explain how many friends and relations we had in the criminal justice system. More people were excused at this point, including me, so my dramatic story ends here.
You may not believe this, but New Yorkers are pretty tolerant and civic-minded. They'll show up, sit quietly, and pay attention when a judge is talking. They'll follow orders and they're nice to one another. I've seen them squashed into subway cars, stoically, silently taking it when a guy decided to play his enormous boombox and yell that he's selling CDs — just swaying back and forth with the motion of the car, waiting for the next stop and the end of the noise. Today I saw them mildly, quietly waiting to be called, rolling their eyes at each other every once in a while when the jury clerk was scolding people for one thing or another — but otherwise being very patient.
The jury clerk got particularly noisy when people apparently detached the public computers from their power sources so that they could plug in their own devices. “These computers are really, really old,” she said. “So whenever you do that, we have to call in the network guy so he can fiddle around with the computers and get them started up again. That's completely annoying. So don't touch anything except the keyboards.” She said this in an increasingly loud voice, hands on her hips, glaring at us.
This must happen every day. I bet she wishes computers had never been invented. The people around me just kept reading their magazines and napping.
Getting the point across
Even if Al Gore showed up and tried to explain to his former colleagues how the internet works, there's a good chance that a bunch of them wouldn't understand. It's not that they're dumb or Gore is dumb. It's just a problem of communication.
Many geeks, policy wonks, and policy geeks (the geeks who care about policy and wish they could be wonks) just aren't capable of persuading non-geek/non-wonks that the details of the issues they care about are important. If you took your average cyber-utopian and plunked him down in a bar in Milwaukee and told him to get everyone excited about net neutrality, he'd be lucky to get out of there unscathed. (Possible reality show?)
This fact of geek life is a frustrating one. You can count up all the lies told by the telcos, you can tick off all the world-changing benefits of the internet, you can be amazed by the serendipity of online life, but you cannot convince the guy in the middle seat flying with you from Atlanta to Chicago that his elected representative is going the wrong way when it comes to giving telcos control over the internet.
Some people think Al Gore has this same communication problem. They say Gore can't reach the average man-on-the-street when he talks (unless that man-on-the-street went to St. Albans or Harvard). I hope that's not true, because when Gore gets warmed up about global warming he's remarkable — and it would be great if he could be similarly passionate about the future of the internet.
But the problem is a big one. People understand telephones, they understand investment in property and infrastructure, and they don't like being told that online companies are just trying to shift costs to consumers. In order to get the point across in 2007, we're going to need an affirmative campaign that is neither geeky or wonky or particularly detailed. Something about protecting America's future, or the importance of public investments in critical resources (water, electricity, internet access) — those kinds of messages might work.
At the same time, the geeks don't really want to lose the details. The details are important, because they make up the difference between a telephone system and the internet. I personally (I'm not a real geek, I just go to meetings with them) don't want to give up on the details. And that's why I'll never be a politician.
Learning something new
Whatever job you have, it's a good one if you learn something new every day. I'm lucky to have a job like that.
Don't stay on the 9th floor at the Sheraton Delfino in Santa Monica, because the dance floor is right above your head.
There's a good recent BusinessWeek article about the upcoming wireless auction. Lots of money, mystery, and new entrants. Let's hope they don't go bankrupt trying. There are rumors that some large online companies are interested in the auction as secondary players. Becoming a network provider would be a major change in an online company's DNA. But stressful situations can lead to just these kinds of changes:
[E]volution by natural selection has led to the construction of mechanisms that alter DNA in response to the signals that cells receive from other cells or from the environment.
[Evolution in Four Dimensions, by Jablonka and Lamb, MIT Press 2005].
Om Malik points to a startup that wants to get in on the action — but with free spectrum.
Wouldn't it be great if Al Gore showed up and started explaining to his former colleagues in Congress how the internet works?
Tomorrow I'll be leaving the Sheraton Delfino and its dance floor, and I'm hoping that will give me a chance to return to longer-form thoughts.
IMS
On this blog and in other contexts I've said that IMS is important because if adopted widely it would allow for all the billing glory that the telcos are looking for.
It's a formless thing, though, this IMS, but I understand that it includes use of SIP as the signaling standard. That's a very telco standard.
I'm wondering if readers of this blog have links to useful resources about IMS and its adoption that would be helpful to a general audience. I'll also be looking around, but the collective undoubtedly knows more about this than I do. I'll post links here that you tell me about.
Optimizing on billing
A key goal of the telcos internationally is to find a way to “upgrade” the internet from a network optimized on innovation (layer independence, unauthenticated use allowed, open interconnection) to one optimized for billing (IMS, NGN).
Hardware manufacturers also like upgrades (and billing), so it's no surprise that 34 hardware makers sent a letter to the House yesterday in opposition to network neutrality.
It's unfortunate that these manufacturers can't take the long view. They can't because their shareholders want quick results, and because they need to sell more and more boxes all the time. The long view might be that an open, innovative internet is ultimately good for society (all of those positive externalities) and good for the company — because they'll be part of a more innovative world. But that's too far off, and too speculative, their advisors will say.
In other news, there's a new House Judiciary telecom bill (Public Knowledge comments here) and the second CALEA order from the FCC is out (here). The second CALEA order may become moot (or much of it may), depending on what the D.C. Circuit says in the next few months.
============================
As for me, I'm in LA for an ICANN board retreat. Oddly (only for me), we're meeting across the street from my old high school, Santa Monica HS (”Home of the Vikings”). In my day, we had the highest truancy rate in the nation — an open campus, a few blocks from the beach. My year had more than 900 people in it. Emilio Estevez was in my class and was voted “Prettiest Hair” our senior year. I spent most of the time in the band room. This was before personal computers. Now the kids who go there are probablybeyond personal computers — it's all texting, all the time.
The definition of net neutrality
There are lots of people out there saying “we need to treat all VoIP alike, all video alike, and all blogs alike.” For them, that's network neutrality.
That's not what I hope we'll end up meaning by net neutrality. That would require a heavy-handed regulator enforcing a provider's determination of what packets are “like” other packets. I am not in favor of that approach.
I have a different vision. I hope, someday, we'll treat broadband access like the utility it is. That would mean separating transport from other activities, and separating access from backbone and backhaul transport. That doesn't require a great deal of discretion to repose in any particular actor.
Yesterday's debate at PDF seemed to be focused on the fuzzier definition of network neutrality (”treat all VoIP alike”). That definition plays directly into the arguments of the telcos. It would give the FCC an enormous amount of discretion and power.
Given enough bandwidth, all the need for prioritization in the last mile goes away. The question is who will provide that bandwidth and at what cost. In other countries it has been treated like a utility, unbundled and open to competition, and speeds are much higher and costs are much lower. That's the model I'm working towards.