Richard Epstein - Some questions on internet access

In a report issued last week, LeggMason, the financial adviser, highlighted an important policy issue emerging in the United States. It concerns one of only two great internet policy proposals floating about in Washington just now (the other has to do with spectrum), and is an idea that the rest of the world could benefit from as well.

The proposal is to get regulators to help preserve the neutrality of the internet. Last month, led by Vermont's Public Services Board, the National Association of Regulatory Utility Commissioners unanimously endorsed a proposal calling on the Federal Communications Commission to ensure that access to the internet remain neutral, meaning that access providers be prevented from exercising control over how consumers use the network. A few days later, a strange coalition of companies and consumer activists, including Disney, Microsoft, and the Media Access Project, sent a letter to the chairman and members of the FCC, asking the government to ensure the "ability of consumers and business to communicate with one another ... without obstruction from network service providers." Both steps signal, LeggMason reported, a "key policy issue" that will increasingly frame the telecommunications debate: "the extent to which the network provider can restrict the customers' use of the network."

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The question here is an old one, but it is important that a broad range of commercial and non-commercial actors now agree upon it. The internet was born a "neutral network", but there are pressures that now threaten that neutrality. As network architects have been arguing since the early 1980s, its essential genius was a design that disables central control. "Intelligence" in this network is all vested at the "end" or "edge" of the internet. The protocols that enable the internet itself are as simple as possible; innovation and creativity come from complexity added at the ends.
  
This "end-to-end" design made possible an extraordinary range of innovation. When Tim Berners-Lee started to sell the idea of a "World Wide Web", he did not need to seek the approval of network owners to allow the protocols that built the internet to run. Likewise, when eBay launched its auction service, or Amazon its bookselling service, neither needed the permission of the telephone companies before those services could take off. Because the internet was "end-to-end", innovators and users were free to offer new content, new applications or even new protocols for communication without any permission from the network. So long as these new applications obeyed simple internet protocols ("TCP/IP"), the internet was open to their ideas. The network did not pick and choose the applications or content it would support; it was neutral, leaving that choice to the users.
  
This ideal of neutrality predates the internet. It would be a strange and bad thing if the electricity grid discriminated against Sony television sets by serving reliable electricity only to Panasonic TVs. Likewise, it is desirable that the roads are not built to favour Ford trucks over BMWs, but are instead designed to favour none, equally. In both cases, policymakers have long understood the importance of platform neutrality. In both cases, neutral platforms enable the broadest scope for innovation and growth.
  
But increasingly, the providers of internet connectivity are pushing a different principle. US broadband companies are trying to ensure that they have the power to decide which applications and content can run. Under such a regime, if Microsoft wants to sell Xboxes to run on the broadband network then it will have to pay the network providers for that privilege. Or if Disney wants to stream movies on the internet, it too will have to pay the network tax.
  
Now Disney, and Microsoft are big companies, you might think. What's wrong with taxing the rich? But the argument of this emerging coalition is that neutrality on the network  helps innovation generally. An internet where innovation required the permission of the network owner would be much less creative. The growth and potential of the network comes from leaving it open to grow as consumers and innovators choose.
  
This neutrality will not come naturally. The tendency of network providers will always be, as it has been so far, towards control. But it is an important and promising development that so broad an alliance of companies could join consumer activists to push the government to preserve the most crucial aspect of the internet’s original environment.
  
It might seem strange that this lesson in preserving the original values of the internet should come from Microsoft and Disney - two companies that have suffered a great deal of criticism from network activists. But on this issue both deserve praise. Policymakers must see that what makes innovation possible on the internet is the freedom to innovate without the permission of a network owner.

Lawrence Lessig is a professor of law at Stanford Law School and author of The Future of Ideas: The Fate of the Commons in a Connected World

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I have a few short comments to make about Prof Lessig's instructive column, which brings to general attention the possible threats to open access on the internet. As a matter of principle, he is surely correct that end-to-end access is the central feature of any effective network, and that the internet in its current configuration encourages that useful result.  In the usual configuration access to the internet is achieved by allowing connections to be made via ordinary telephone hook-ups, through which the telephone companies are not permitted to deny access nor to discriminate against any classes of users.  But before we treat the current practice as though it represents the ideal situation, it is important to ask the further question of whether the rates on interconnection provide any form of subsidy to these services from other classes of telephone users. 

On the factual questions I remain for the moment cheerfully agnostic, knowing that the answers are better supplied by others who work closely on pricing issues. Yet at the higher level of analysis, it is important not to confuse claims for an open and neutral system with those for a system subsidised by individuals who wish to use the telephone lines for other purposes. Subsidies in general lead to excessive consumption of the goods so subsidised, and result in the imposition of taxes on other goods and services and the concomitant reduction in their level of use and consumption.  The internet is no exception to the general rule. This methodological caveat is one of genuine importance here, for so much of the current travail in telecommunications comes from the implicit subsidies created by FCC rules requiring the sale of various unbundled (or rebundled) network elements at below cost. Our devotion to the internet should not blind us to this risk.

The second point here is that the broadband services are not generally regarded as common carrier services, but as ordinary private facilities to which the usual rules securing exclusive access to owners apply.  That level of exclusion was necessary in order to encourage the building of these networks in the first instance, and it is important to note that the shift from private to common carrier status may carry with it a sharp reduction in the capacity of broadband operators to recover the cost of their invested capital. In this setting, it again seems incumbent to ask two questions: if there is a genuine choice in broadband suppliers, why will competition not lead to the optimal mix of services from the point of view of the consumer, at which point open access may not be necessary? Alternatively, if that is necessary, then someone should have to think very hard about the question of whether the conversion in status from a private to a common carrier counts as a taking for which compensation is appropriate.

These observations are not meant to suggest that all practices of the broadband carriers should be protected. In its release on the subject, the Media Access Project claims that certain preferred websites come up quickly on the broadband services while others are programmed to appear only more slowly, with erratic connections. The claim here is that the residential end user will think that the inferior service is a sign of a poor website and not of a weak connection. Those issues cannot be ignored, for at the very least consumers should be told that some website operators will have preferred access to their networks. But the question here is one of contract law and consumer protection. My own suspicion is that a full disclosure obligation will lead to sharp reductions in the practice. The rectification of these issues still leaves open the harder questions on takings and regulation mentioned above.

Finally, I am a bit mystified about Prof Lessig's concern that broadband operators or anyone else place content restrictions on what can be transferred over the net. Before assessing that serious charge, it would in my view be critical to see what those purported restrictions are, and to see whether any plausible justification has been offered for them. Clearly no common carrier could impose these restrictions, and broadband operators should have no incentive to impose these restrictions. The mere mention of this subject should give rise to a genuine sense of unease.  Here a fuller account of the issue would be helpful in order to determine what legal and business responses should be taken to the alleged practices.

Richard Epstein is a professor of law at the University of Chicago

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