Without 'Net neutrality,' will consumers pay twice?

On Tuesday the Senate Committee on Commerce, Science & Transportation is holding a hearing to discuss the issue. Companies such as Amazon.com, eBay, Google and Microsoft are pushing congressional leaders to draft legislation that calls for "network neutrality," which would bar phone companies and cable operators from picking favorites.

The carriers, not surprisingly, strongly oppose any legislation that would limit their ability to charge for carrying content on their network. They believe that a so-called tiered service model will let them deliver new services, such as video, more efficiently and more cheaply to consumers.

No broadband provider at this point has started charging Internet companies for delivering content. And so far, none of them has proposed outright blocking of traffic. But some experts fear that if broadband providers are given free rein, they could impose Internet traffic restrictions: The customers of companies that refuse to pay for premium network access will have such poor quality service, consumers will be forced to go elsewhere.

In the end, these experts say, this will lead to fewer choices for consumers. They also say it will increase the cost of delivering those services and content.

"It seems to me that if broadband operators are charging Google and Amazon for the use of their network, then those costs will automatically get passed on to consumers," said Gigi Sohn, president and co-founder of Public Knowledge, a Beltway advocacy group. "And ultimately that will lead to higher prices for consumers."

To understand how consumers will be affected by broadband providers prioritizing and charging fees for delivering applications and content, one first has to understand how the Internet works.

Content that travels over the Internet is chopped into "packets." The Internet is designed so that these packets can travel through multiple paths to get to their destination. Some packets go one way while others go a different way. Then they're reassembled at the end.

While the packets travel through the network, they can face congestion and get slowed down. They can be dropped, forcing the sender to resend them. Sometimes this seemingly haphazard approach causes delays. It's usually not a big deal for most data applications, such as e-mail. But for time-sensitive data, like telephony or video, delays can degrade the user's experience.

As broadband providers, AT&T, BellSouth and Verizon Communications can control the flow of traffic in their network. They can give certain packets priority in the network over other packets, helping guarantee a better user experience.

Broadband providers reject the notion that prioritizing some traffic will inherently hurt the performance of nonprioritized traffic. In fact, they argue the opposite will happen because prioritizing some traffic is like opening an "express lane" on the highway, which ultimately keeps all traffic flowing.

"We are building a fifth lane on a four-lane highway," said Dave Pacholczyk, a spokesman for AT&T. "If you offer a high-occupancy

Broadband companies say that if they can charge to deliver the services of content and application providers, they can guarantee better service to those providers, without requiring broadband customers to upgrade to a higher-speed broadband package.

For example, the broadband providers argue that if broadband customers are paying $12.99 per month for AT&T's 1.5mbps DSL service and they want to download a movie from Movielink, they shouldn't be forced to spend more than twice as much for a 3mbps service.

Instead, AT&T could propose that Movielink pay a fee to AT&T so that its movie download service gets preferential treatment. The providers say this lets people at home use their broadband connections more efficiently.

The downside, of course, is the risk that Movielink would pass costs on to consumers. Either way, then, consumers pay more.

Some experts agree that, in concept, a tiered approach could enable broadband providers to provide better services that could benefit consumers. And they caution lawmakers about enacting new legislation before a real problem has emerged.

"What I worry about is that if we have mandated network neutrality that consumers will miss out on some enhanced functionality being developed by the phone or cable companies," said Kyle Dixon, a senior fellow and director at the The Progress and Freedom Foundation. "Fears of market dominance aren't to be dismissed, but I think there is a risk in assuming that there will be a market power problem before there really is one."

But other experts disagree. Sohn, of Public Knowledge, believes that allowing carriers and cable operators to charge fees for prioritizing traffic will end in fewer choices for consumers, because broadband providers can use the relationships they have with preferred companies to squeeze out competitors.

For example, AT&T and Verizon each have marketing arrangements with Yahoo. If they instituted a tiered service, they could, theoretically, give priority to Yahoo's search engine, and make the access service of its competitors such as Google painfully slow.

"We're not saying that broadband providers shouldn't market with Internet companies," Sohn said. "But they shouldn't favor those providers more than others, because ultimately, the consumer suffers."

Companies such as Vonage, which lets consumers turn their broadband connections into IP phone lines, worry that the telecommunications companies and cable operators will squeeze the best-effort "lanes" of traffic so small that services from Vonage and the others will function poorly, costing them customers.

"The assumption that the best-effort Internet will always be there may not be true," said Chris Murray, director of government affairs for Vonage. "It's monopoly economics 101--charging premiums, creating artificial scarcity and then driving up prices for consumers."