CHICAGO--The day before the FCC is expected to start the ball rolling on new regulations to keep the Internet open, Verizon Communications CEO Ivan Seidenberg painted a doomsday picture of what could happen in the industry if stricter rules are imposed.
During his keynote address Wednesday at the Supercomm 2009 trade show here, Seidenberg said that Verizon is very troubled by the regulations being proposed by the Federal Communications Commission. He argued that imposing stricter regulations would pit network providers against application providers in a way that would ruin the Internet's potential for economic growth and societal change.
"Proponents (of Net neutrality) have a worldview that network providers and application providers, like Google, occupy different parts of the Internet: dumb pipes versus smart apps," he said. "This is a mistake pure and simple. It's an analog idea for a digital world. It completely understates the need for sound practices and ignores the benefits of smart networks."
Last month, FCC Chairman Julius Genachowski said heand also proposed adding two more rules. The five-person commission is controlled by Democrats, who all favor Net neutrality regulation, which means new rules almost certainly will be adopted.
On Thursday, the FCC will begin the process of developing these official rules.
Verizon and other large broadband providers, such as AT&T and Comcast, have opposed Net neutrality rules. These companies argue that imposing new regulation will stifle innovation and hamper investment in the network.
Seidenberg pointed to telemedicine as an example of how strict rules could hamper innovation. He said that companies like Verizon need to be able to prioritize packets that are transmitting medical monitoring data--over such items like e-mail or spam--to make sure they get through the network quickly. But if rules are in place that prohibit carriers from prioritizing traffic, he said, then such medical services cannot be offered.
Loss of ROI?
He also alluded to new business models that would allow network operators to sell different tiers of service. Verizon's CEO said that without the ability to provide these types of services that the FCC will essentially be taking away the company's ability to make a return on their investment.
While Seidenberg and other network providers make good points about how strict rules could hurt innovation and network investment, the FCC's chairman has stated hethat would prevent carriers from managing their networks. Genachowski has said several times that he simply wants to protect the rights of consumers to use the Internet freely.
Verizon and other network operators already agree with the first four Open Internet principles adopted by the FCC. In summary, these principles state that operators cannot restrict access to lawful Internet content, applications, and services nor can they prohibit users from attaching nonharmful devices to the network.
Genachowski has also proposed adding rules that would prevent network providers from discriminating against particular Internet content or applications, while at the same time allowing for reasonable network management. And he proposes ensuring that Internet access providers are transparent about the network management practices they implement.
Google and other influential Web companies, such as Amazon.com and Facebook, have banded together to support Net neutrality regulation.
Earlier this week, several CEOs from these major Web companies.
Vint Cerf, Google's chief Internet evangelist and one of the original architects of the Internet, joined other pioneers in sending another letter to the FCC expressing support for the commission's proposed rules.
Cerf discussed the letter with a reporter from The Washington Post and offered his thoughts on why an open Internet is needed to ensure innovation and growth on the Web.
"The issue is nondiscrimination against applications and against consumer choice," The Washington Post quoted him as saying. "That should be clear by the letter from my colleagues, and by others, that the fundamental concern is that the provider of broadband service not be able to take advantage of that to act in an anticompetitive fashion against others that are trying to provide competitive applications using the same broadband facilities."
Can't have it both ways
But Seidenberg said these Net neutrality proponents want to have their cake and eat it too.
"It's really ironic that the digital elites in Silicon Valley are also pushing for faster broadband and more wireless networks," he said. "The two don't add up."
Seidenberg also warned that if the new rules favor one part of the industry over another, that the policy repercussions could mirror what happened after the 1996 Telecommunications Act, which tried to create competition in the broadband market.
He said this ill-fated policy led to investor speculation and the build-up of the telecom bubble in the late 1990s and early 2000s. And he said it ultimately led to that bubble bursting in late 2000 and 2001. He even blamed this policy for helping cause the WorldCom debacle.
Instead of wasting their time with Net neutrality, Seidenberg said, the FCC should focus on creating conditions for more growth. Specifically, he said the agency should increase the amount of available wireless spectrum. He said the FCC should also streamline the process for getting cell phone towers approved.
These are actually two issues that the FCC chairman has.
"I personally believe that government can play a role in public policy," Seidenberg said. "But it should not be a means to an end. You can't create a smart economy by dumbing down the critical infrastructure."