Overview of Network Neutrality

1. Overview of Network Neutrality Kyle D. Dixon Senior Fellow & Director, Federal Institute for Regulatory Law & Economics The Progress & Freedom Foundation Presented to the California Foundation on the Environment and the Economy Roundtable Conference on Telecommunications and Advanced Technologies May 4-5, 2006

2. Overview of Network Neutrality • What is network neutrality? • Increasing complexity of the concept • Public policies and proposals

3. What is Network Neutrality? – Out with the Old Telephone Cable Video Broadcast Traditional Communications Networks

4. What is Network Neutrality? – In with the New Applications, Content and Devices Internet Protocol Network Infrastructure Broadband IP (“Edge”) Networks

5. What is Network Neutrality? – The Opportunity

6. What is Network Neutrality? – Early Conception • Origins in “open access” debate (i.e., choice of ISPs on cable modem service) • Consumer perspective: freedom to use broadband to access content, applications and devices of their choice • Company perspective: broadband networks may not “discriminate” in favor of their own or affiliated content, applications or devices

7. Increasing complexity – Blocking/Degradation • Blocking – not allowing certain data traffic to reach end user (e.g., blocking voice packets or ports) • Denying interconnection – refusing to link networks physically • Re-routing – manipulating routes taken by certain data traffic

8. Increasing complexity – Network Management • Quality of service – adjusting network performance for specific applications • Security – preventing viruses, spam, etc. • Spectrum reservation – on broadband connection for affiliated content, applications • Traffic shaping – limiting bandwidth available for specific applications or end users • “Acceptable use” policies • “Caching” – storing content nearby

9. Increasing complexity – Premium Service Fees • Prioritization – speeding delivery of data for extra fee to consumer or service provider • Tariffed tiering – offering content/applications providers fee schedule for improved delivery • “Access charges” – charging content/applications providers to deliver traffic to end users over “last mile”

10. Increasing complexity – Limits on Networks • Technical feasibility • Commercially sustainable (e.g., avoiding “bypass” on other networks or dodging intended constraints) • Acceptance by government

11. Increasing complexity – Limits on Networks • Likely to Prohibit: • Blocking • Denial of interconnection • Re-routing traffic • Access charges • Case By Case: • Virus, other security • Spectrum reservation • Traffic shaping • “Acceptable” uses • Caching • Probably Allow: • Quality of service • Prioritization of traffic • Tariffed tiering

12. Public Policies and Proposals – The FCC Net Neutrality Policy Statement • Codifies commitment to openness and competition among broadband networks • Limited where harm to network, law enforcement needs • Rejects industry-wide rules at this time Bell Merger Conditions • Temporary, limited to merging companies

13. Public Policies and Proposals – The FCC

14. Public Policies and Proposals – Congress Congress • Several bills address net neutrality • Approaches vary: • monitoring/enforcement of Policy Statement • abuse of “market power” test • specific prohibitions with exceptions reflecting evolving concept of “neutrality” his time • Division on this issue may complicate statutory reform generally

15. Stay tuned . . . Kyle D. Dixon, Senior Fellow The Progress & Freedom Foundation Phone: 202-289-8928 kdixon@pff.org