Where There's Smoke ... Part VI Three New Issues

Network Neutrality

It wasn't long that a new issue arose to sit beside the proposed guarantee for municipalities to own and operate networks. The issue of Net Neutrality reared its head.

Incumbent ISPs had begun to complain that "bandwidth hogs" placed undue burdens on their networks by consuming large amounts of bandwidth from applications like video downloads and uploads and peer-to-peer file sharing. They suggested that network operators should have the right to charge such consumers different rates, but more importantly, they should be able to charge content providers like Google and others different rates to guarantee premium service levels and speedy delivery of their content. Consumer advocates warned that this would violate the spirit of the Internet, which was designed to be a dumb distributer of undifferentiated bits of data, which had until then ensured that all data was treated the same. The issues of Net Neutrality emerged.

- After all, didn't consumers already pay for Internet access in the fees that they paid to their ISPs? Additional fees charged by operators would be "double dipping."
- And what would happen when network operators discriminated by delivering their own content first?
- Or what if only large companies could guarantee delivery of their content by paying those fees to operators - a two-tier Internet would result, where good quality content delivery would be expected from large well-heeled providers like Google, but smaller companies who would not be able to pay a separate fee. Network operators would offer slower service and smaller content companies would watch their market share decline, as consumers showed a preference for the faster but more mainstream content.
- Much of what made the Internet special, its widely diverse and off-beat content offerings, would fade under this scenario, and the Internet would start to resemble the broadcast networks with their limited, mainstream content offers.

In summary then, Proponents of Net Neutrality argued that Net Neutrality legislation was needed to ensure that network operators would not abuse their positions of power and discriminate in how they delivered content. It was needed to preserve the Internet as a neutral distributor of content. Opponents of Net Neutrality argued that Net Neutrality legislation would put undue burdens on network operators, who would face increasing costs but have no offsetting fees or revenue sources to allow them to stay financially healthy.

Statewide and National Franchise Fees

Interested in entering the cable TV market to compete with cable providers in offering lucrative video services, telecommunication companies began to argue against the current system of local municipal franchises, where a large company would have to negotiate separately with hundreds or thousands of city governments for the right to offer TV service in a local market. The costs would be huge.

To offer competition and lower rates for consumers, telecom companies argued, it would make more sense to have franchise fees standardized over entire states, or better still, over the entire nation. This would eliminate a significant barrier to entry and increase competition, opening up closed markets. Cable companies objected that they had had to win all these municipal franchise agreements, and would be bound by a patchwork of agreements and fee structures, while the telecommunication companies enjoyed a new, streamlined system. Most notably in Texas in 2005, the telecommunication companies prevailed with a statewide franchise agreement law.

Spectrum Policy

The FCC regulates who can use which sets of radio wavelengths, how they can use them and where they can use them, in what locations - together, these regulations come under the heading of Spectrum Policy. For the uninitiated, spectrum is a physical trait of electromagnetic radiation. On the low end is sound , this graph below is a great introductory overview.

More to the point, here below is the multi-colored eye chart of Frequency Allocations of Radio Spectrum produced by the US Department of Commerce, National Telecommunications and Information Administration, Office of Spectrum Management, available for download in a PDF here. As you can see (in your downloaded, blown up version, not in the miniscule eye chart below), unlicensed spectrum bands are in dark green, labeled Amateur Band - look for the Wi Fi spectrum band at 2.4 GHz.

One key issue of spectrum policy is how much spectrum to devote to unlicensed use, based on the success enjoyed with Wi Fi equipment, creating a new industry and spurring innovation out of what had been considered "junk band" frequency, the province of baby monitors and microwave ovens. Should the FCC make more such spectrum available, or sell the spectrum licenses like so much valuable real estate, to raise funds for the federal government?

That issue jibes with another issue up for timely discussion in this area: the allocation of the 700-MHz band of spectrum licenses held for the longest time by television broadcasters. As part of the move to digital television, these bandwidth are no longer needed by those broadcasters and so they're being reallocated to new users. This is an attractive band for radio data transmission because the signals are better able to penetrate solid objects and so network designers can use fewer devices to cover more territory - these licenses make for a more efficient wireless broadband network, and more efficiency means lower costs.

There is much speculation on whether this auction of 700 MHz spectrum licenses coming up in early February 2008 will result in one of two potential outcomes: Option A - one of the incumbent players wins the auction and rights to the spectrum, in which case they may set it aside to keep it away from competitors - meaning less competition and maintenance of the status quo. Or, Option B - a new player (like Google or Apple) will spend to gain the licenses and use them to enter into competition with traditional telecom providers - meaning more competition and a challenge to the status quo.