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How to move the IP era out of neutral

MCI exec Richard Whitt says the answer is not to build a 21st-century telecom "network of networks" under 20th-century laws and regulations.

It is indeed a "mad, mad, mad telecommunications world," as Randolph May emphasized in a recent guest commentary.

As the Progress & Freedom Foundation senior fellow noted, the digital revolution has led to Internet-based communications networks, applications, services and devices being unveiled almost daily.

Unfortunately, we are attempting to build a 21st-century telecom "network of networks" under 20th-century laws and regulations. This is why Washington, D.C., is buzzing with anticipation as Congress appears poised to begin considering a substantial rewrite of the Communications Act of 1934.

One of the first things Congress likely will do is take a close look at the existing system of "silos" that has governed the communications sector for decades. These inflexible divisions assume clear, unwavering distinctions, but in today's Internet-based world, the lines between various services and technologies are quickly blurring. If our legal thinking and structures are not adapted to technology and market-driven realities, future competition and innovation will be stifled.

If our legal thinking and structures are not adapted to technology and market-driven realities, future competition and innovation will be stifled.

The real question, then, is what should replace this outmoded system of silos? As May suggests, one of the most talked-about, viable options is an alternative known as the network "layers" framework. This framework establishes a new, fresh way to look at telecom regulation in an IP world. One proposal put forward by MCI identifies four software-derived data layers: first, the physical layer, which represents the physical infrastructure (for example, copper lines); second, the logical layer, which connects the physical infrastructure (for example, Internet Protocol); third, the applications layer (for example, Web browsers); and fourth, the content layer (for example, the words on CNET's Web site).

While May's article questions layers-informed thinking, the framework's guiding principle seeks to fit our laws and regulations to the ways that the Internet is constructed and operated, rather than the other way around. Moreover, MCI's layers proposal looks to the existence of significant market power as the chief rationale for economic regulation. Conversely, the presence of competition in a particular network layer means that no such regulation is warranted.

The Progress & Freedom Foundation shares many of the goals of the layers approach--such as eliminating vertical silos, relying on antitrust theory for economic regulation, and removing unnecessary legal and regulatory requirements. Nonetheless, May's reasons for opposing MCI's layers proposal fail to pass muster.

For starters, he ignores the fact that network layering is a fundamental organizing principle for all data networks, one that has been used by engineers for decades. As a result, the Internet has been built and operated with layers-based concepts that likely will not change appreciably over time. Moreover, the layers approach should be used as a flexible, dynamic conceptual tool. It is not intended to mirror the current straightjacket of the Communications Act's vertical silos.

May's suggestion that the layers framework would lead to overly regulatory outcomes also is misplaced. The layers framework, when properly understood and employed, gives policymakers all the right reasons not to impose laws or regulations. The intention is to constrain government, not the market.

A prime example of this deregulatory focus is the debate over regulating voice over Internet Protocol (VoIP) services. Under the layers framework, VoIP would be placed in the "applications layer" because it is a software-derived application. It would be classified and treated differently from traditional regulated voice service. In contrast, May apparently would have us treat all "voice" services the same, even though those services may come from very different worlds. This view actually could lead some policymakers to impose more unnecessary, arcane regulations on VoIP--hardly the outcome that May would endorse.

This "hodgepodge" approach does not represent a nuanced and contextual analysis of the telecommunications marketplace.

May also disagrees with MCI's belief that the consumer broadband market is not sufficiently competitive today. Based on this view, he apparently would not endorse tailored government action to increase broadband competition or protect consumers and "edge" providers of IP-based applications. The larger point, however, is that utilizing the layers framework as an overall organizing principle is different from applying that framework to a particular market situation. Under any conceptual framework, a specific finding of market power depends on the test being used and the evidence being analyzed.

So what is May's suggested alternative? He apparently would have us throw all the elements of today's services and networks into one huge silo and proclaim its contents as fully competitive. This "hodgepodge" approach does not represent a nuanced and contextual analysis of the telecommunications marketplace--it seems more like an absence of such analysis.

There is more that unites than separates the Progress & Freedom Foundation and MCI visions of the coming Internet-centric economy. We, however, look to the network layers framework as a way to make our communications laws finally begin to match the incredible creativity and competitive spirit at the heart of the Internet. May's stated concerns aside, the layers framework represents the best opportunity to topple the artificial silos that have constrained the digital marketplace for too long.