FTC NN9

• See FTC Workshop Transcript for index

What Framework Best Promotes Competition and Consumer Welfare/Industry Reviews Panel

This session debates what framework best promotes competition and consumer welfare in the area of broadband Internet access. The first panel explores industry views on this subject, while the second panel explores academic and policy analyst views. Among the topics discussed are the following: Is existing agency oversight by the FTC, FCC, and others sufficient to address the concerns raised by net neutrality proponents? In other words, is enforcement of existing antitrust, consumer protection, and communications laws sufficient? If broadband connectivity regulation is the best option, what form should it take? Something akin to the FTC's broadband policy statement and related conditions imposed on recent telephone mergers? To whom would it apply: ISPs, Internet backbone operators, both? How and by whom would it be enforced? If not broadband connectivity regulation, what will best promote competition and consumer welfare?

>>MARY BETH RICHARDS
We're going to get started with our panel on what framework best promotes competition and consumer welfare industry views. I just want to remind you at the end of this panel which finishes around 4 o'clock, we will go directly into the next panel which is the same topic, but has academic and policy views. So at this point I'll pass it over to my assistant director, Greg lube.

>>GREGORY LUIB
Thank you, Maureen, welcome everyone to the first of our last two panels of this fine workshop. As Maureen mentioned we will take a look at what framework best promotes competition and consumer welfare in the area of broadband Internet access, and this panel will consider industry review -- industry views, while the second panel will explore academic and policy views. And I think this panel will also give us an opportunity to hopefully wrap up some of the issues that have been raised in our previous panels, though based on the lively debate I've seen so far I'm not holding out hope for reaching a final consensus on this particular issue. I'd like to introduce the panelists. Yesterday Chairman Majoras talked about having a dream team of panelists and I think that certainly applies to the folks up here, all of whom have appeared at previous network neutrality conferences, and or testified in front of Congress on this issue. and Given the height of the two folks on either side of me, dream team I think is especially appropriate. I will introduce the panelists as they will be presenting, and I'll just give a brief description. Full bios as you probably know by now are available in the folders that we distributed and on our workshop Home Page as well. First we will have Paul Misener to my immediate left. Paul is vice president for global public policy at Amazon.com where he's responsible for formulating and representing the company's public policy positions worldwide. Paul previously was a partner in the law firm of Wiley, Ryan and fielding, and before that Paul served as senior legal advisor to a commissioner of the federal communications commission. Then two down to the left from me is Chris Wolfe who is a senior partner in the Washington, D.C. Office of Consumer Rhodes where he shares the Internet and privacy law practice group currently Chris co-chairs the coalition hands off the Internet with former Clinton press secretary Mike McCurry, and when I first heard the moniker I wasn't sure whether that was directed at government or network operators, but I now know who that moniker is directed to. Chris also chairs the international network against Cyber hate, a coalition of NGO's addressing the issue of misuse of the Internet by terrorists, extremists and hate groups. Tod Cohen will speak next, all the way down to the end to my left. He is vice president and deputy General Counsel of government relations for eBay where he is responsible for global public policy and manages eBay's government relations team around the world. Prior to joining eBay Tod was vice president and counsel sell of new media for the motion picture association of America. And before that he served as European Legal counsel sell and vice president for the business software alliance in the London offices of Covington and Burling. Next we will have Joe was who is to my immediate right. Joe is vice president external affairs and public policy counsel sell for Comcast corporation where he has primarily responsibility for Comcast public policy positions and advocacy strategies. He also oversees the company's political action committees and charitable programs serving as director of Comcast's global action committees and President of the Comcast foundation. At the NTTA convention in 2002 Joe was presented with the cable industry's highest honor, guard award for his work in government and community relations. Finally two down to my right, we will hear from Gary Bachula who is vice president for external relations at Internet II, a not for profit partnership of universities, companies and affiliated organizations dedicated to advance together state of the Internet. Prior to joining Internet 2, Gary served as acting undersecretary of commerce for technology at the US Department of Commerce where he led the formation of government industry partnerships around programs such as GPS and the partnership for a new generation of vehicles. Gary's other previous positions include vice president for the consortium of international Earth science information network and chief of staff to US representative Bob Traxler. Now we will have each panelist give about a 10 minute presentation and then we'll have what I hope will be another lively discussion. Before the panel concludes we will also take some questions from the audience and as you know, we will greatly appreciate you filing those questions through the ushers who will get those up to me, and with that I'd like to turn the floor over to Paul Misener who will lead off this panel.

>>PAUL MISENER
Thanks very much, Greg. Thank you, Maureen, also for inviting me today. This is a terrific workshop and I think the more light that is shown on this particular issue, the more that is understood bit, the better off everyone will be, and in particular consumers. It's hard to know what to say that hasn't already been said yesterday and this morning. But we have a focus in this panel as Greg indicated, and I will -- I'll address most of my remarks to that. I just want to start off by saying, though, that the Internet is fundamentally different than all the media that have preceded it and that fundamental difference I think dictates in many respects the policies that are applied to it. The fundamental characteristic that I'm thinking of, of course, is pull, that is to say the consumer's access information that is made available on the World Wide Web but that information does not get into the broadband Internet access providers' networks until their paying customer asks to have it pulled through. If the provider of content is never accessed or never -- their content is never sought by a customer of the broadband Internet access provider, that information never gets in the network. It's very different, of course, than the cable TV model broadcasting newspapers, bulletin boards, mail, everything else, there was a decision made up front to send the content through. This is pulled through, not pushed. And that was I think somewhat mischaracterized yesterday in one of the panels. But going to the heart of this particular panel, I think it just has to be said over and over that the market for broadband residential Internet access is not competitive and will not be any time soon. It just simply is not. The commission, the federal communication commissions most recent data indicate that well over 95% of consumers get their broadband Internet access from either the phone company or the cable company, and even though the FCC decided this last time to expand the definition slightly of what would be considered broadband residential Internet access, even that only brought up the other technologies up to about 3, a little over 3%. So it's a duopoly. It's going to be a duopoly for the foreseeable future, and as such it is at least worthy of looking at to see if regulation is appropriate. Incidentally, of course Amazon wouldn't be in this debate at all if our customers had meaningful choice of broadband residential access. If they could choose at will and had some sufficient meaningful number of choices we wouldn't be involved. So to us the lack of competition is the touch stone for the policy debate here. I want to contrast this, of course, to the debates in the -- that led up to the 1996 telecommunications act which was all about breaking up market power. That's not what's going on here with Net Neutrality. We don't begrudge the broadband Internet access providers their market power. We're not trying to break them up in any sense. We're not even looking for an investigation into, say, the pricing or the levels of service that they provide for their Internet access product, which all go to the premise of the 96 act, at least as applied to telephone companies. Rather we're trying to prevent the spread of this market power from market power over the network to market power over content, in a way that has not been possible before. And so it really is, again, not begrudging them the market power, there are reasons why they have this duopoly. But we don't seek to bust up the duopoly but rather prevent its spread to control over Internet content. So for something as important for consumer access to information on line and all the services that heretofore have been available, we strongly believe that Congress should dictate the national policy here. This is an important matter. It's worthy of a national policy set by our Congress and we believe that Congress ought to direct the expert agency, the federal commission to enforce a nondiscrimination rule applied to broadband Internet access. This is why we so strongly support the Dorgan snow bill introduced last month, it's a terrific bill, it's the right way to get these things done, and highly appropriate for all the reasons that have -- I've tried to indicate already. With all due respect, I have some concerns about antitrust enforcement. Some have been articulated before much better than I will be able to, including the time it takes for an antitrust action to occur, the ad hoc nature of it, the lack of a general policy, rather sort of an Ex ante approach that would not give certainties either to consumers or to businesses, but I guess the consistent view would be to, for example, to abolish the federal communications commission and go back to a position where there wasn't an expert agency in this area and everything with respect to telecom would be handled through antitrust actions. This would take us back to I guess 1927 or maybe 1912, something like that. But as long as we do have an FCC, an expert agency that has decades of experience enforcing nondiscrimination rules it's only appropriate for another nondiscrimination rule on a matter this important to be enforced by the federal communications commission, and speaking of consistency, I do want to show you. This is the Dorgan Snow bill that we favor the enactment of, but here is the bill that the network operators, particularly the telephone companies favored the adoption of last year. You can see it's a little bit heavier, right? And throughout here there are nondiscrimination provisions that run in their favor, enforced by the FCC. So to say that the FCC is not in a position to enforce a nondiscrimination rule is a little bit disingenuous when it was sought in a very highly regulatory form by the same opponents of Net Neutrality. But back to the point. I guess some of the folks who actually opposed the imposition of merger conditions, for example, on the AT&T/BellSouth merger and prior mergers opposed it on the basis that it seems like an ad hoc way to enforce a policy or to introduce a policy and I have a lot of sympathy for that when I was at the FCC, I opposed those kinds of conditions being added onto mergers. We -- the feeling was that the merger ought to be granted or not, but not sort of ancillary conditions imposed upon it, but the same opponents of the impositions of these kinds of add hock fact specific or company specific conditions are the same ones who are also now seeking antitrust enforcement for Net Neutrality which is exactly the same thing, it would be ad hoc and company specific and so forth. This is why we believe it would be in consumers' and industries' best interests for certainty and for national policy to be set by the federal government at the very highest level. That is the Congress and the President in a bill. This is why we support the Dorgan snow bill and I certainly would ask that you all do the same. Thanks very much, Greg.

>>GREGORY LUIB
Thank you, Paul. Next we'll hear from Chris.

>>CHRISTOPER WOLF
Thank you, I want to thank you and Maureen for this workshop and this particular session. I wanted to say a couple words further about hands off the Internet which you introduced when you introduced me, to explain that we are a nationwide coalition of Internet users and companies that are united in the belief that the Internet has flourished, and because of nonregulation, because of hands off we believe that unnecessary regulation in the future will indeed adversely affect the build-out of the Internet infrastructure that is vital to the coming demands for broadband capacity. So our answer to today's question, to the question of this workshop, what framework best promotes competition and consumer welfare is that the existing framework, the one that encourages and promotes invasion and progress is the one that is best for the Internet, for competition and for consumers. The current framework is the one that doesn't impose needless restrictions to address hypothetical concerns, especially where regulation has the potential we think and others join us, for seriously adverse unintended consequences that will in the end harm consumers. The current framework is the one that correctly takes a hands off approach, but it's one that's available to provide remedies if and when remedies are required. To analogize for a moment because that's what we lawyers do, just as a doctor would not prescribe needless medication for a growing and lesson on the possibility on the possibility that someday that adolescent might develop a condition, so too we think regulators are prudent to reframe from prescribing conditions that may in fact stifle or injure needed growth. In particular, the members of my coalition believe that the adoption of so-called Net Neutrality regulation will have adverse consequences for innovation and for competition in the market for broadband access, by among other things, making it more difficult for ISPs and other network providers to recoup their investment in broadband networks. There are no facts, no evidence of harm to consumers or to competition to warrant that regulation. Moreover, the competitive conditions in the marketplace despite how Paul describes it and I feel like I'm sitting between duopoly of online commerce, Amazon on my right and eBay on the left but I know there are other alternatives. The conditions for the marketplace for broadband access will protect the consumers by the hypothetical harms that are theorized by the neutrality proponents, and beyond that the current laws as well as current regulatory oversight such as that that Paul mentioned at the FCC are sufficient to address any harms that may arise. I should add that as much as we might disagree for the need for new regulation we agree completely with those on the other side of the regulatory question that no legal website or content should be blocked by a broadband provider. We also share the belief that it is and should remain improper for service to be intentionally degraded. In addition, we fully support the use of existing law to pursue any competitive conduct, if and when it occurs. We have more faith in the antitrust laws than perhaps Paul in Amazon does, and we believe that the FCC, FTC, department of justice and state attorney general as well as the private bar are all empowered right now and have tools at their disposal that may be used if there is indeed any competitive or unfair tactics engaged in by broadband providers. We think existing law provides sufficient oversight in our view, especially, especially in light of the adverse unanticipated consequences of proposed new regulation. We especially part company with those calling for Net Neutrality mandates where they seek to have all traffic travel at the same speed and thus prevent management of Internet traffic and block smart network technology. Smart network technology will allow traffic to be managed so the time sensitive data does not get stuck in traffic jams and large data files don't crowd out other traffic flowing over the network. Removing network message means simply only dumb networks can be built for the future. That's one of the adverse unintended consequences of Net Neutrality. The call for new regulation also unfairly shift business costs to consumers by barring network operators from offering premium services to those content providers placing large amount of traffic on the network. This would have the full cost of the network, the network upgrade to be covered by the consumer's monthly Internet access fees and we don't think that's fair. Lost in the debate over network neutrality are fundamentals which are useful to point out. First fundamental is this. The public Internet is a series of interconnected networks and it works because of private investment. Competition and innovation is what makes the Internet what it is. Secondly, the Internet is experiencing an unprecedented surge in traffic that will strain the capacity of the current infrastructure, some like the Wall Street "Wall Street Journal" have referred to this as the exo flood, a term that references a comet coming Internet onslaught many times the measurement of data, the observation byte. I was taken by a study prepared by Deloitte & Touche. One of the key possibilities for 2007 is that the Internet could be approaching its capacity. The twin trends causing this are an explosion in demand largely fueled by the growth in video traffic and the lack of investment in new functions capacity. Bottlenecks are likely to become apparent in some of the Internet's back bones, the terabit capable pipes exchange in traffic between continents. Investment either in laying new cable or lighting existing fiber may be stifled by continuing falls in wholesale capacity prices. Similar capacity constraints may well appear in the ISP and the telecommunications network to provide broadband connectivity to consumers. The impact may be most notable in the form of falling quality of service, surfers are most likely to be annoyed by the slow down in service and it may only take an unexpected upsurge in video usage to turn the inconvenience caused by a drop in access speeds into full scale consumer dissatisfaction. On the heels of that report is the report recently in the media that U tube last year transmitted data equal to all Internet data transmitted just five years ago -- or seven years ago, rather. And against this backdrop we think it's obvious that the capacity of the Internet will have to increase exponentially and rapidly to handle the coming exponential increase in traffic generated by Internet video alone. So the last thing that is needed is new regulations whose red tape will slow down the Internet. We think that broad regulation will mean for the first time we will have the government and private lit gators setting the rules on caching, co-location, packet prioritization, reassembly and other aspects of managing Internet traffic. Even pier to pier agreements would be subject to review and possible litigation. These are incredibly complex technical decisions made in managing networks the industry heretofore always has performed and I should add performed well without government interference. And added regulatory regime will cost broadband developers time and resources that frankly could be spent on improving services. If proponents of legislation use today term Net Neutrality it refers to a rigid regulatory regime that could ultimately allow the federal government and self-interested litigation parties to get in the way of new technologies and new services on the Internet. Current proposals could prevent broadband providers from offering enhanced levels of service for specialized applications such as telemedicine or to offer their own branded or co-branded products of services, arrangements that will help pay for the build-out of next generation of Internet pipes. It's especially the case in the air I have network neutrality where it is virtually impossible to draft legislation dealing with search a complex medium with specificity and without unintended adverse effects. In some we think there is no current demonstrated need for the proposed legislation or regulation. The asserted fierce the networks may someday be degraded or there will be discrimination against content on the Internet are hypothetical at best. Consumers will be best served if the proven exist Pentagon legal framework is continued to be used to protect consumers. The Internet should be allowed to grow and thrive based on the very principles under which the significant medium has been allowed to develop up to now. These principles are network diversity, not network neutrality. Thanks very much.

>>GARY BACHULA
Thank you, Chris. Next we'll move to Tod Cohen.

>>SPEAKER
Good afternoon. I lost my voice soy hope you can all get what I'm trying to say. I would love to got go to the doctor that Chris to are goes to that doesn't believe in prevention or vaccinations or the ability to prevent something from happening that would be bad. That would be a great doctor to only wait until you are already injured or harmed. So I can't take the view that we should start from the premise of wait until it's all destroyed before we do anything about it. So I'm going to start with that premise and let's talk a little bit about what we don't think this issue is about. First off, it's not simply network neutrality. There are and should remain many networks on which network providers are free to discriminate based on the source, ownership or destination of data. Nor is it broadband neutrality. Providers of broadband networks should also in many cases remain free to discriminate. It is about Internet neutrality, a prohibition on the discrimination, positive or negative, in connection to or carriage over the Internet. The interconnected network of networks that has always been neutral and open as a matter of architecture, and it is the consumer benefits delivered by the Internet, not by the freestanding closed networks that should be our focus. The panel title speaks about competition and what are the competition that we're talking about? To us the issue is not primarily about competition between network providers or even between private providers of access to the Internet. Yes, that competition is good for consumers and barriers to which should be dismantled. And yes, the Internet neutrality problem is made worse by the fact that so many consumers today have at the most two or sometimes only one way they can access the Internet. But no. In our view even if the consumer had three, four or five competitive means of Internet access, the problem would not be solved. Because each of those network providers would have the same incentives to act as a gatekeeper to make deals to give preferential or exclusive treatment to some data over others, and to discriminate. The competition that we should focus on is on the competition among applications, not the networks. And specifically about competition about the network disruptive applications. The ones that are unpredictable that appear inevitable only in hindsight. I'm thinking about invasions like the World Wide Web which transformed the Internet from a scientific research network to a place where we all go to shop, work, learn, play, communicate; pier to pier technology with the promise to truly realize the dream of making the distinction between speakers and listeners irrelevant. Most recently with our friends at Skype. EBay's local marketplace which has opened up Internet commerce and the world of commerce to practically everybody everywhere for the first time in history, and to create entirely new business sectors of which we're proud of over a million people make full or part time living selling across eBay around the world. And at the time they debuted, it would have been impossible to note if these innovations could succeed. Only the market could make that decision. Only consumers and users could make that decision. They were all highly disruptive, ask the music industry, the local and long distance telephone companies, some of the brick and mortar retailers, the event ticket planners and everyone else that the critical point is that not one of those innovations required permission from network operators in order to bring the innovations to millions and hopefully billions of people around the world. They did not have to negotiate. They did not have to persuade Orca Joel network providers for special treatment. They simply made their innovations available to consumers. They didn't even have to determine whether they had an exclusivity agreement that even if the network operator wanted to provide them access that they couldn't provide them access because they'd already closed that part of the market off. So what did they do? They made those innovations available, not the gatekeepers. And the gatekeepers were not in a position to any longer decide what you would and wouldn't see over your Internet connection. And that may be what we all really kind of want which is the growth of the economy and the growth of interaction based on the choices of the users, not based on the gatekeepers. The network, the Internet network is and was neutral, and that was the starting point for all these non-corporate unpredictable disruptive innovations to launch without anyone's permission, so only to whether consumers or businesses would accept or reject them. That really is what is at risk today. And this is a global issue. The Internet is global, it is a network of networks. Neutrality is built into it worldwide, nondiscrimination in routing packets, innovation without permission, and all network interoperates can interconnect. But more and more countries may find it in their interest to fragment the global Internet as some of the friends in the network operators in the US would like to do erosion of neutrality will make it easier for them to do that. Why would they want to do this? For the reasons that you can imagine. Censorship from our friends in China, cultural motivations, Europe as to cultural limitations and content quotas as we fight every day with the TV without frontiers directive and in lots of other instances. And in the US itself with our prohibitions on online gambling. So fragmentation though, fortunately, is rather hard to achieve right now on the Internet. But the threat is greatest if neutrality is a fundamental feature of the Internet is eroded. The policy decisions we make here in the US will have repercussions worldwide. So it's not just a state of competition in the US market that is at issue here, but the overall competitiveness of US application providers and end network providers too worldwide. At eBay we provide a global marketplace. We are constantly battling efforts around the world to restrict or constrain the desires of their citizens to participate in this marketplace. Here in the US we are mainly concerned about the economic incentives for gate keeping, but many others incentives would be in place in those other markets, including on economic terms nationalistic, domain content and application and content favored over the foreign, over the US content. And content base, content that's subjected to ideological driven filters that could give preference over content that is not filtered. Abandoning neutrality would be an open invitation for everyone else around the world to do the same thing, and would undercut our efforts by our trade negotiators right now to prevent discrimination against US companies. So thank you very much for the opportunity to be here. I do think in the end that I believe that we sometimes have to get a vaccination and this is one of those times.

>>GREGORY LUIB
Thank you, Tod. Next we'll hear from Joe was.

>>JOE WAZ
Thanks, Greg. I'm glad to be here representing Comcast which from a standing start about a decade ago has grown to become the nation's leading high speed Internet broadband provider with about 11.5 million customers, and we actually just set a record for new additions this past year adding another 1.9 million customers, so I think we've got -- I think we're doing and delivering to consumers what they want and expect from their service, and I'll say hi to all the folks who are Comcast Internet customers who are listening to the streaming audio today and hi to the folks in Sweden as well who I understand called this morning to ask why the hearing hadn't started yet, so hopefully they've caught up with us and they are up now at about their dinner hour. Greg, you've asked this panel to describe what kind of policy framework will best promote competition and welfare on the Internet. Do we impose new and increased regulation on broadband providers or do we focus on promoting competitive networks. Do we regulate do we do so Ex ante or ex post. Consistent with the goal of the Chairman said yesterday focusing on the facts I want to focus on the recent facts in the marketplace that I think will shed additional light on the matter. 11 years ago there was a major rewrite of our communications act, as Paul mentioned earlier. Congress said it wanted to embrace a pro competitive deregulatory policy toward communications and it did so, but not completely. It's instructive to contrast the result of Congress's two different approaches. I draw a different lesson from them than Paul did, I think. First, Congress said it wanted more phone competition so it tried to get there by setting the rates, terms and conditions under which competing companies could get access to the then monopoly works of incumbent phone companies, so-called resale and unbundling rules. In other words it took a let's regulate the access to network approach. Compare that with how the same act treat today cable industry. Congress said cable, we're going to ease up a bit on the economic regulation of your TV business, and we'll let you get into the phone business. And this Internet business you seem to be interested in. We're also going to knock down barriers so that other people can build facilities to compete with you. Phone companies, satellite companies, wireless companies. In other words, on this front Congress took a let's promote facilities based competition approach. What were the results of the two different approaches? After more than a decade of resale and unbundling, the bells faced very little facilities based competition in video, none of the companies that took advantage of the resale unbundling regimes ever invested in a meaningful way in competitive facilities to reach residential users. A decade of legal disputes over regulated access over the bells networks made lobbyists and lawyers rich but consumers were poor for a lack of competition. Now let's look at the rest of the market where Congress put it's phase in deregulation and competition. Video choice has exploded. More importantly cable companies invested over $110 billion to be the first to bring high speed Internet to American homes. And we did it with risk capital just like Jeff Bezos at Amazon, and eBay and not with government subsidies. Meanwhile the phone companies have since won deregulation of their new broadband investments so they and companies like RCN and knowledge and satellite companies and wireless companies are all pouring 10s of billions of dollars more into new Internet services. Now cable is investing billions more to become the first ubiquitous wire line voice competition in the marketplace. So all that competitive investment is what makes it possible for Google and Yahoo! and eBay and Amazon and others to be here today and yesterday during the workshop. It's what made possible the creation of U tube and it's billion and a half dollar purchase by Google. It's what happens when you promote investment in competitive facilities, instead of trying to regulate the terms of access to facilities. So the lesson is clear. When Congress removes barriers to investment in facilities and reduces regulation of those facilities our nation wins. Where Congress sets up a regulatory regime of enforced sharing of facilities, our nation loses. Now the commercial advocates of Net Neutrality are seeking a new regime of government mandated and forced sharing in the name of Net Neutrality. They insist this regulation is essential to save the Internet as we know it well, I just sized up the median age in this group in this room and I think this line will work. To quote cross by stills and gnash, a band from back in the days before MP3s and I tunes, we have all been here before. We spent several years around the turn of this century debating something called open access. Back then companies like AOL and EarthLink demanded that the government set the rates, terms and conditions under which they could use and resell the broadband Internet networks that cable and phone companies were constructing. We were warned that competition was in jeopardy, free speech was at risk, giant network builders would control the Internet and the Internet would not grow, very familiar arguments. So what happened? AOL decided it made more sense to invest in facilities than Time Warner. So EarthLink link and others lobbied this agency to impose open access conditions on time Warner's cable system and almost no one took advantage of them. The outcry for open access faded away, the government stepped away. What followed was not a debacle but an incredible broadband explosion. With less government dictating these of use investment and innovation boomed. In that same merger the FCC imposed interoperability on AOL AOL's instant messaging service, significant for something I mentioned later and picking up a point Tod made, this was regulation by a federal agency of an Internet application. Competitors of AOL put together coalitions that insisted the IM platform was essential to the future of communication human communications and had to be regulated. I've spent time discussing the rationale for that condition with one of the federal officials who was responsible for putting it in place. I appreciate the logic of his position. I know he did it and he and his colleagues did it in good faith. But just two years after the condition was adopted, AOL asked the FCC to lift it and they did with no opposition from the very companies that wanted the condition in the first place. So I think the lessons of history are clear. Less regulation in terms of conditions and network access leads to more broadband, leads to more innovation and choice and when government gets prodded into adopting Ex ante regulation time and again it proves to be a waste of resources. Picking up on the point, this is really about Internet neutrality, I'm going to assume for a second that I'm wrong, and that we will not see more competition at high speed Internet networks, and so we accept that assumption, then as regulation of access to the so-called physical layer of the Internet in favor of those who provide commercial content the right answer? I believe it's not. Here I want to return to the roots of Net Neutrality. It really derives out of a model that engineers applied in thinking about the Internet that slices the Internet basically into four layers, more or less. The content layer, the information and data we send, the videos we want to see, pictures we want to share, the text we want to read T applications layer, things like Web browsers, media players, instant messaging that are used to access and manipulate the content. The logical layer in which the two most important protocols are transmission control protocol and the Internet protocol, and of course the physical layer, the broadband networks themselves and may I add the really expensive part. Now, the notion is that all layers, in all layers of the Internet all data must be treated the same, that the net must be neutral. And if market power occurs at any layer of the Internet and is exercised so as to result in nonneutral or discriminatory treatment that causes harm, that runs against the Internet ethos. Now, I want to elaborate on these remarks about the fact that the Internet is far from neutral. You've already heard how companies like AKAMI give major content providers a leg up over other providers by speeding up their content. We all know that eBay and Google when Tod and another gentleman from Google were on a panel at Aston last summer, the question came up about Google having a preferred position on Sony, Ericsson Web enabled phones and Google and eBay couldn't reason whether that was Net Neutrality or not. The list goes on and on and I'll be glad, Greg, to provide some more details for the record, but I want to try to draw a couple conclusions from this observation. First, market power can arise, can arise at any layer of the Internet. Google's share of the search market, Microsoft's share of the browser market, eBay's share of the online auction market are each larger than Comcast's share of the high speed Internet market much course, market share is only the beginning of the analysis. You need to look for other indices of market power. Clearly in the broadband space speeds keep increasing, prices are flat or falling, the market is contest testable which has been mentioned by many witnesses over the last few days by wireless and BPO and other providers, again market power can arise at any layer of the Internet. Seconds, if standards of neutrality should apply as a matter of law at any layer of the Internet they should apply at all layers of the Internet. And noting the prevalence of nonneutrality at the other layers I think it's bogus to exclusively focus on the physical layer. Third, if neutrality is to be enforced at all layers of the Internet then we need to choose whether to try proceed foe -- proceed fill lack tick regulation or antitrust laws. Do we vaccinate or do we live a healthy lifestyle. I think the healthy lifestyle here is the latter, to encourage more investment in competitive facilities and to rely on current competition policy to address any issues that may arise. So I want to wrap up by thanking Greg and Maureen and the Chairman and everyone again for this enlightening and intensive two days of workshops, and for really trying to focus on the facts. I hope you'll pull more out of this, Greg, as the balance of the hour goes on. If you need a daily affirmation of the wisdom of how the hands off the Internet process has worked so far, let me point you to a website that's called Net Neutrality scare ticker.com. It tallies the days since November 19, 2002 when a group of ecommerce companies first warned government agencies that immediate action was essential to prevent broadband Internet owners from blocking or impairing access, Internet connectivity at the present time services or devices. For those of you on line now, if you check it out you'll find that the ticker shows it's been 1,547 days since that proclamation of DOOM and still the proponents of regulation haven't been able to point to a real genuine problem that has not been addressed by existing law. I have a high degree of confidence when the five of us find ourselves on another panel like this in another year's time that that ticker will still be ticking. Thanks, Greg.

>>GREGORY LUIB
Thank you, Joe. Next we'll hear from Gary.

>>GARY BACHULA
Thanks, the Federal Trade Commission for the invitation today. All too often this Net Neutrality debate gets characterized as nothing more than the debate between big and powerful telecom and cable companies on one side and big and powerful content companies on the other. But I want to remind you that there are many many other players in this game. The debate includes thousands of not for profits, community groups, state and local governments, public interest groups, educational and research organizations and many more who use the Internet every day to do their work. It's not just big business versus big business. A case in point. I'm here today representing EduCause and Internet II, two organizations who represent and build and manage information technology systems within our nation's colleges and universities. EDU CAUSE represents the IT professionals in over 2500 colleges and universities from the CIOs down to the systems guys that manage the LANs closet. Internet 2 is a not for profit partnership of 209 research universities along with 70 companies and 50 other affiliated organizations, including many federal government agencies and laboratories. Our mission is to advance the state of the Internet and we do that primarily by operating for our members a very advanced private ultra high speed research and education network that enables millions of researchers, faculties and students to live in the future of advanced broadband, by providing very high speed uncongested pipes that run at 10,000 times faster than your home broadband connection, in our backbone. We enable our members to try new uses of the network, develop new applications, experiment with new forms of collaboration, experiencing today what we hope the rest of America will able to have in just a few years. Our colleges and universities are large consumers of the Internet. We cannot accomplish our research and education missions without it. We've become dependent upon it. The we are also big providers of content, and we are inventors, and innovators in new applications that use the Internet. We do research on future networks and network architectures. We innovate in the network and we innovate on how the networks are used. Our nation's colleges and universities have come to depend upon a robust neutral Internet to educate and train our nation's work force to distribute classroom content, communicate with students, to deliver health care from our medical centers, to conduct collaborative research across the nation or around the world. While we build and manage ad -- advanced networks on and between our campuses we still depend upon the commercial public Internet to reach our faculty, staff and students in our local communities. As well as the students and alumni who live around the world. One example is that MIT is putting all of its course ware up on line, making it available literally to hundreds of millions of people anywhere on the globe. Stanford and 100 other universities are beginning to follow suit. That's the kind of content we would like to see flow on the Internet. As opposed to just entertainment. We support simple rules designs to enforce Net Neutrality in the public Internet. Those rules could be general guidelines along with effective enforcement mechanisms. Those rules need be no more complicated than the 75 words used to guarantee Net Neutrality in the recent AT&T agreement with the FCC. Those rules would be designed to preserve the neutrality that began with the original network design. The original architecture of the Internet, and was underpinned by the common carrier rules when the first Internet was built on top of telephone lines. The Net Neutrality that led to an explosion of innovation and applications at the edge of the network the Internet is important to our mission of education and research, it is equally important to all elements of our economy and our society. It is important to free speech, political discover -- discourse and advocacy. Universities are fierce defenders of the right of all Americans to speak their thoughts, to debate and to advocate. Now, some claim that they would never suppress first amendment rights using the technologies that we've heard about today. But just look at the debate about Net Neutrality and television franchise legislation itself last year. There were public complaints that some cable companies would not permit TV ads from telephone companies criticizing cable business practices. We also believe that the Internet has become a vital underlying infrastructure for our information economy, the central nervous system of our information economy. As such we are persuaded by arguments that label the Internet as an essential facility that could give a network provider control and an unfair advantage in other upstream markets. This topic was discussed by commissioner rush this past November in France, a speech that is on his Web page. Last my mild broadband facilities can indeed be a bottleneck to upstream providers and we believe there should be ability to deal with those upstream providers. Don't the uses of Internet, video, for example, provider network to discriminate.

>>SPEAKER
Don't sound network management principles require the use of quality of service packet prioritization? We have heard in this workshop that new router technologies exist that can discriminate but must we? Are there less expensive alternatives? When we first began to deploy our Internet II network some 8 years ago our engineer started with the assumption that we would have to find technical ways of prioritizing certain bits such as streaming video or video conferencing in order to assure that they arrived without delay. For a number of years we seriously explored various quality of service techniques, conducted a number of workshops an even convened an ongoing quality of service working group. But as it developed, though, all of our research and practical experience supported the conclusion that it was far more cost effective to simply provide more bandwidth. It was cheaper to provide more bandwidth than to install these sophisticated quality of service prioritization techniques. With enough bandwidth in the network there is no congestion and video bits do not need preferential treatment. All the bits arrive fast enough even if intermingled. Today our Internet II network does not give preferential treatment to anyone's bits but our users routinely experiment with streaming HDTV, hold thousands of high quality two way video simultaneously conversations and transfer huge files of scientific data around the globe without loss of packets. Yesterday the representative Level3 made the statement that they don't use quality of service in their backbone because they have enough capacity to deliver all of the bits as fast as they can travel. If there is a problem in the last mile in the local loop in terms of capacity, the solution is not QoS, it is more capacity. We would argue that rather than introduce additional complexity into the network fabric and additional cost to implement these prioritizing techniques, the telecom provider should focus on providing Americans with an abundance of bandwidth and the quality problems will take care of themselves. A simple design is not only less expensive, it enables and encourages innovation. There is no technical nor economic imperative for telephone and cable companies to build prioritization into their networks. We are concerned that their current policy to create scarcity 0 they can charge more. Restricting output in order to raise prices, charging monopoly rents. Some have argued that competition will solve this problem. We've heard about duopolies, we've heard about how many there are in the markets. Let me tell you that in Fairfax county where I live in McLain, according to the FCC's survey, there are 14 providers. The truth is that at my home in MC lane, Virginia, I can only get Internet service from Cox communications. I'm too far away from the central telephone office to get Verizon DSL and they don't offer FIOS service there yet. One choice I have, Cox communications. They do a fine job, by the way. But I have one choice. I'm not in some remote rural part of MC lane. I am at the corner of 123 and Kirby. I'm about 500 yards from the C.I.A.. And I have one choice. So let's remember when we hear all these data and surveys, let's get down to practical. What do people actually have. I'm less concerned about whether I have a second choice for broadband service than whether one or both of those choices would interfere with my right to go anywhere on the net or access any service or application by favoring their own services or those which they have a separate economic agreement. If telephone companies are in the upstream market either directly with their own services and content or indirectly by contracting with particular services or content providers, they have an incentive to give more favorable treatment to those services or content. It is simply logical profit maximizing behavior. But for colleges and universities who are nonprofit producers of content, we have no profits to give the cable and telephone companies. The priority is going to be given to commercial interests, to the eBays and Amazons and especially providers of entertainment, and not to educational institutions. It may be an overused analogy, but educational institutions will get left on the dirt road while commercial providers can purchase access to the four-lane super highway. So what is the remedy? First simple oversight will not be sufficient. Cable and telephone companies have already publicly announced they intend to offer certain providers with premium access to their networks. Second, relying on after the fact enforcement through the antitrust laws is not a practical remedy for universities. Universities often do not have the time or resources to pursue an antitrust action if they face anti- competitive behavior. Educational institutions may or may not have a standing to pursue an antitrust claim and even if they do, those cases often take years to pursue with enormous legal cost. Our preference is for the government, either the FTC or the FCC or both, to issue specific and enforceable guidelines to insure that the cable and telephone companies maintain open and nondiscriminatory networks. Those guidelines must be enforceable. The guidelines should put an obligation on each broadband service provider to insure that each politician or service provider is able to send us information without distortion or degradation through the network and that consumers are similarly able to receive that information. Now we've had a number of presentations by economists here over the last two days. I'm reminded that President Ronald Reagan once said one definition of an economist is somebody who sees something happen in practice, and wonders if it will work in theory. Internet neutrality has worked in practice. For 13 or 14 years in the commercial Internet and for 20 years before that when the Internet resided in the research community. Internet neutrality sparked enormous growth both use of the Internet and in the applications and content available to Internet users. We are not asking to issue something new. We are asking to stay with what we've had in the most successful explosion of an economic engine for the last 30 or 50 years. The Internet has become an essential piece of our economic infrastructure, a foundation of the information economy. It enables productivities increases across the board in the economy from manufacturing to banking to airline reservations, to real estate, to E government. The Internet has permitted businesses to reengineer their process, eliminate middle men and become more efficient. We should be very wary of tampering with this engine of economic growth by permitting behavior that has been taboo for the entire history of the Internet. The key is the end-to-end architecture of the Internet that encourages enables and permits invasion by the users. Without permission, without negotiating new services from an ISP, without setting new technical standards within the backbone, changes that tamper with the end-to-end architecture threaten that innovation. Invasion in the network itself has and will continue but it is nowhere near as important as invasion using the Internet, to achieve the former by sacrifice together latter would be a mistake. To compete in the global economy we need a simple inexpensive and open network, not a costly complex, closed and vulcanized one. Thank you.

>>GREGORY LUIB
Thank you, Gary. Before I key up some of my own questions I wanted to remind folks that they can funnel their own written questions through the ushers up to me. And also I want to give a couple minutes to each of our panelists to respond if they would like to some of the specific statements made by the other panelists. Why don't we start with Tod and work our way down to my ride here. Tod.

>>TOD COHEN
I have no comments at this point.

>>GREGORY LUIB
Okay.

>>MALE SPEAKER
I have a couple. Tod, I'm not going to your doctor either because he wants to inject me with a vaccine that's never been tested for a disease that's never been diagnosed. But beyond that the only comment I would have about Gary's comment about simply build more capacity as if that can be done with a magic wand and as if it would be paid for instantly by someone unspecified, the analogy to Internet II I think fails completely because by his own description there are 209 providers of content, so if there is ever a problem with excess video content, HD or otherwise, you can pick up the phone and call one of those 209 universities and say look what are you doing to the network, and we need to come to some resolution here. Moreover, there are rules on their usage. You can't do that with the public Internet.

>>SPEAKER
You'll recall I started off with a boring description of how the Internet works. That whole business being the Internet being about pull and not about push. The reason I mentioned that right at the start is because I was anticipating that someone would raise the open access comparison such as my friend Joe did, and it's just not an appropriate comparison. He talked about companies who are content providers trying to obtain access to their networks. That's not the point. That's not how the Internet works. It's his customers who demand they pull the content through the networks that they pay for. It's not about us obtaining access. It's about Net Neutrality for their customers who are also our customers.

>>SPEAKER
I'll take a second to respond to that.

>>MALE SPEAKER
The service that we provide end users is developing and is likely to develop a wide range of business models, many of which content providers are going to find to be attractive. And I'll give you an example of a differential model that really is more of a push model going on right now. That is ESPN 360. This is a broadband service provided by Disney, an Internet service. You can access some of their content right now on line, those of you who are on line. But ESPN takes this product to broadband network providers, Comcast, Verizon, AT&T and Time Warner and says to the network provider this content is valuable to your customer. Please pay me X cents per customer per month for this content or you can't provide it to them. That's a reasonable business model. Verizon has chosen to provide ESPN 360 to its customers on its FIOS system. Comcast has not chosen to provide that service. Each broadband provider I assume is making up their own mind about it. But it is a content provider paid by network model that ESPN 360 has chosen to pursue. Other content providers may choose 0 pursue the same models. Other variations on that model, other partnerships on that model. Some of those partnerships may give the next guy in the garage a chance to compete with Google. Google claims to be concerned about the next Google. I'm probably more concerned about the next Google because I want to see new companies coming along as well and be able in some cases perhaps to partner with them to give them a chance to take on the entrenched guy.

>>GREGORY LUIB
I don't know if you have any other responses?

>>GARY BACHULA
Not at this second.

>>GREGORY LUIB
I think I've got a pretty good sense of the panelists' views on existing agency oversight. I'm wondering if I could get them to comment on what seems like one of the many third ways that folks have been trying to forge in this area, and more specifically one that would include, and again the devil is in the details, I understand, but heightened scrutiny under the antitrust and consumer protection laws regarding the latter, perhaps a standardized set of material terms that have to be disclosed, and Internet access agreements, combined with streamlined complaint process that could be at the FTC, could be at the FCC. I suppose it could be at both. And just wanted to get folks' response to an approach like that. Why don't we start with Gary.

>>GARY BACHULA
Let me respond to that approach and I guess the other items that were in the proposal from Dr. -wiser and rob Atkinson. They had sort of four ideas, disclosure and they also talked about the mandatory provision of open unmanaged Internet, any broadband provider, and tax breaks for broad infrastructure investment was sort of the four in their paper. an I have no problem with those four. I'd like to suggest adding maybe one or two more. Our universal service funds should be restructured to promote broadband deployment, and to not be continuing to subsidize only 100-year old telephone service, some 6 to 7 billion a year in the universal service fund that could do and awful lot of background build-out. Then my suggestion is that any company that takes advantage of the tax breaks for broadband investment or any company that benefits from the universal service fund, taxpayer dollars should have to obey Net Neutrality rules.

>>MALE SPEAKER
I think it would make sense to comment on the folk-wiser and Atkinson approach which I was hitting at. Including in that provision of an unmanaged open Internet offering by any broadband service provider that is providing Internet access.

>>MALE SPEAKER
I've told Phil and rob before that I want to suggest a second and third way which is really to get more competitive networks out there. I'll respond to what they put on the table. Look, disclosure is good. You can go overboard or underboard with disclosure, I'm afraid I miss today previous panel so I don't know to what extent they tapped on this. Consumers should know what they are getting, and I hope we're doing a good job of that today. If we are not, somebody tell us and I'll make sure we're doing a better job. But disclosure, many people know what they are paying for is always the right policy. Tax breaks for broadband infrastructure investment, not all providers and not all would be providers can take advantage of tax breaks. By the way, you know, the cable companies, phone companies, wireless companies are throwing as much capital as they possibly can at new broadband networks so I don't think there is really a shortage of interest. Right now I don't think there is a shortage of dollars available. The thing that would cause people to short putting dollars into this would be more regulation in the area. I'll pick up on this gentleman's comment on USF availability for broadband. USF really does need a makeover. I think we can all concede that, that the way it's working today it is used to subsidize 100-year-old copper, and it's out of control. And I think we really do need to figure out ways to collect universal service funding better and targeted better to bring broadband to those last unserved areas around the country. And I think, you know, if government is going to put energy into this area right now it really is about closing that last remaining rule and geographic gap around the country to make sure that everybody does have access to broadband.

>>MALE SPEAKER
I think the summary would be that those would be helpful steps but not sufficient. They should not be a substitute for a clear nationwide national PCMCIA is adopted by the Congress, but we would certainly welcome the FTC's continuing interest in oversite here. Streamline complaint process, that seems like a positive thing to me, enhanced disclosure requirements, that sounds helpful to let consumers know what's really going on. But it really is no substitute for a nondiscrimination rule adopted by Congress.

>>SPEAKER
I guess the only thing I would add to this discussion is that to mention the example of the only complaint that I'm aware of where there has been blocked access, the Madison river case where the complaint was filed and it was resolved with IP a very expedited period of time, and so I would say that if there is a pattern of complaints that can't be resolved quickly I, then yes, expedited consideration should be mandated. But in the absence of that our fundamental position is that no new regulation is required in the absence of a real problem.

>>GREGORY LUIB
Tod, would the gentleman yield for a moment on that point? Thanks. You should note that Madison river is often introduced as an indication or proof that the FCC can and will enforce against these kinds of blocking problems. But you should also know that Madison river was decided, the decree was entered before the FCC reclassified broadband telephony. It was based on section 201 of the communications act which no longer applies to broadband Internet access providers. It's not exactly clear to me how a Madison river kind of enforcement could occur today at the FCC.

>>TOD COHEN
I think it is because using your own words at previous panels we've been around a lot together, I thought I understood you to say that title I would provide the FCC with the power to consider complaints like that. If you don't think it does then maybe there is another issue.

>>GREGORY LUIB
It does did you tell Madison river is not the example. Title one is sufficient authority in my view to guarantee Net Neutrality, but Madison river was based on section 201, common carriage.

>>TOD COHEN
When you lack a voice it's always good for others to speak up. The notice question, we come at this somewhat slightly differently because we think that the mandatory notice and disclosure are being helpful, especially to my colleagues in the legal profession. We don't think it would have that much impact on users and in ways, the only type of notice that would work for a user would be literally a pop-up. But when you click on the link which they would say you can't go to this website, your network provider has a deal with this content provider, and you have to go here, and that's exactly the type of regulation that we all pretty much agree is the horror -- is the horror show of what we want to avoid, and so therefore the only type of notice that would work would be something that would be so intrusive nobody would want to use it. So what we would think instead is to go back to what Paul said is really just it's a simple nondiscrimination clause, be it the 75 words in the AT&T/BellSouth merger, that would be fine. We'd be happy to go back to our August, 2005 when the DSL rules are changed where all the investments that were being made and are currently being made were already planned and somehow they were able to live under the regime and still make investments in broadband.

>>GREGORY LUIB
Thank you, Tod. I guess to return to the medicine metaphor --.

>>MALE SPEAKER
I'm going to be sorry what I started.

>>GREGORY LUIB
If folks up here could, regardless of your views of the present state of competition in the market for broadband Internet access give us maybe two prescriptions to promote that competition, whether it be revised local franchise rules revised federal spectrum policy, government incentives, what do you think would be best in this case? And no one -- we don't all have to respond if you don't want to.

>>JOE WAZ
Just maintaining consumer choice, Internet neutrality itself is probably the greatest driver. Users choosing to have faster speed and higher speed rather than the network saying which and where they can go is the greatest incentive we can give to building out more broadband.

>>MALE SPEAKER
I'll throw one idea, it's an idea I put on the table five years ago when we started having this debate, 1,527 days ago. It is spectrum policy, and I was on a panel out in Boulder this week where Dale Hatfield, the former chief technology for the FCC was running through things that matter in communications policy and he said spectrum policy really really really matters. And I think we're seeing evidence these last few years, particularly at the FCC, and increasingly on the hill that we do have to start doing a better job of managing and allocating spectrum an encouraging more investment in that space. You had an AWS auction recently, a chunk of spectrum that's been auctioned off that the cable industry which is a new entrant into the wireless space bought a sizable piece to be able to provide mobile competition against phone companies and other wireless companies around the country. You have a new 700 megahertz auction coming up later this year where both EchoStar and DirecTV, the two satellite providers have been lobbying the commission to make sure that there is a national license available. Apparently they intend to get into the broadband Internet space as well. This is the way to do it. The way to do it is to get more investment in competition out there; and I don't -- as a company that's competing like crazy today head to head with the bells, I don't have any choice about whether it's going to be more competition, but it is the inexorable March of technology and investment dollars that are going to go after this.

>>GREGORY LUIB
Next I'd like to take up the general issue of the need to act now, and we certainly have heard that if we don't act quickly, the technology, the development of the Internet, incumbent positions in the marketplace will, if we give it a few years, result in no turning back. And then the response on the other side typically has been, well, we have the FCC broadband principles and the merger conditions in place with respect to AT&T and Verizon as well as commitments by the major ISPs not to block or degrade lawful content. So I guess I'm wondering if I could get folks to respond to a topic, the need to act right now and for those folks who presumably think we do not need to act now, are there a set of circumstances that you could foresee where we really would have to, if not act at that point, reevaluate things significantly? Let's start with Tod and work our way down.

>>TOD COHEN
I think we can't let up on the pressure fundamentally. That's one of the things that's helping to move the debate, the AT&T/BellSouth merger was a significant step. I do think that it makes a lot more sense to do this now. I do think that the danger of waiting is quite significant, and I do think that that's because it's so much more difficult to unroll it. I think that what Joe is talking about with ESPN 360 is a really really interesting issue and an area we all need to spend a lot more time thinking about what is that model and how does that impact it and whether that is a viable way to still maintain a network that is neutral, an Internet network that is neutral and yet allow innovation to occur in those spaces, so I think the debate is important right now but I would like to see law passed as soon as possible.

>>MALE SPEAKER
I think my direct comments really address this. We think at hands off the Internet we don't think any action is required now. We think competition should apply the pressure Tod is talking about and Paul, and Gary, rather than have regulation set in advance. But we do think that if content is blocked or if service is degraded, then it is time for action. But again, we haven't heard any examples of that happening and I like the clock which is like the death clock in New York that's being away which actually serves as a very good disincentive to doing all the parade of horribles that so many Net Neutrality advocates say will happen.

>>MALE SPEAKER
Do you think that the Chinese Internet is neutral?

>>MALE SPEAKER
I'm not sure I'm prepared to answer.

>>MALE SPEAKER
Are we concerned that we likely could end up with the same type of Internet access as the basic Internet access exists in China?

>>MALE SPEAKER
It's a question of gatekeepers.

>>MALE SPEAKER
What you don't have in China is competitive forces, whether it's a duopoly or more than that, I think it's more than that, makes a big difference in how broadband providers act but I'm not a student of Sino Internet technology so I don't want to answer that.

>>MALE SPEAKER
We need to calibrate the time scale. I heard row's comments about spectrum, I'm a big fan of Dave Hatfield, I know a little bit about the area I agree, it's going to be a welcome development when consumers can readily choose among a large number of broadband Internet access providers, but this won't happen any time soon. It is for the foreseeable future, I mean on sort of the half the age of the Web time scale going to a duopoly for American consumers, well over 95% of consumers get their Internet access broadband either from the phone company or the cable company and it's not going to change any time relevant, and that's why there is a need for immediate action. Now, the ticker is cute. I wasn't aware of that website. It's a cute idea and it does make a point. But you need to know that there are reasons why there haven't been these kinds of incidents. One is they haven't yet invested in the high end deep packet inspection routers from Cisco. My friends at Cisco even tell me that they've got orders waiting for resolution of the telecom policy debates and that's the other reason we haven't seen this kind of blatant discrimination. They've been on their best behavior. This is a smart action on their part. Now, they've announced to Wall Street that they fully intend to do this. The quotes are well-known from the leadership of the broadband Internet access providers. They intend to do this. They just haven't done it yet pending the outcome of the telecom policy debates at this agency and on the hill, and at the FCC. So the absence of problems to date is -- does not in any way diminish the clear and present danger.

>>MALE SPEAKER
As Paul said, the number of large companies have made public announcements, both in the Wall Street and in the "Washington Post" that they intend to employ these new technologies that have just become available to them, Cisco has got orders, you know, pending, that will create, that will create this tiered kind of network, fast lane and the slow lane. It hasn't happened yet, but once it happens and once business contracts are signed and once a company's quarterly cash flow is dependent upon those contracts it's going to be very hard to unravel it which is the reason why we should be in it now and not sort of wait to see what happens. Again, we have heard a lot in the last two days about all of these huge investment that's made by the cable companies, $100 billion, $18 billion by Verizon, all this great expansion that's taken place. That has taken place before any of these prioritization and other techniques were put into the network. So that was taking place in an environment that was -- if it wasn't legally required to be net neutral it was -- it was a de facto net neutral environment, and lots of investment got made and lots of innovation happened and all these great wonderful things that we're hearing from the telephone and cable companies happened in that environment. Now they want to change it. I think that's a very risky thing to do.

>>GREGORY LUIB
I don't think anybody is talking about changing anything. I think the status quo is the status quo. We have an FCC policy statement that I believe every facilities based ISP that I'm aware of which the exception of Madison river which I'm sure somebody has mentioned in the last two days has abided by. We're not blocking, we're not degrading. I go home every night and use Amazon and eBay to my heart's content, and half.com, a great place to buy CDs. But I just -- we need to focus on the here and now, and when we get to day 1,528 without a problem we can make it onto the next day. And when that pressure appears, this agency and the FCC will know it and they can act on it.

>>MALE SPEAKER
I want to go further than that. I think that these business relationships are not defacto pernicious. In fact, they are the things that will help pay for the capacity that will allow the Internet to grow at the rate it needs to grow. So that consumers don't bear the entire freight of the expansion of the Internet.

>>MALE SPEAKER
The consumers don't bear the entire freight now. Every bit that travels on the Internet now today is paid for on both ends. The companies that put those bits on from Google and Amazon and eBay pay for their capacity just as much as the consumer pays on the other end.

>>MALE SPEAKER
Without getting into too esoteric a debate and without getting out of my depth, obviously YouTube is not paying for the last mile for the torrent of data they are provider and talking about the last mile.

>>MALE SPEAKER
The consumers who have paid for their Internet access are controlling what goes through that network. They are the ones pulling it through. That's why I keep going back to that. Could I raise a point that doesn't seem to be discussed too much and I'm hoping it's a little bit helpful here. And that is there hasn't been enough focus in my view on private networks. Joe raised AKAMI as a service. I'm not sure you are familiar with the model but essentially you've got a company that has set up edge serving facilities, that is to say server farms outside of major metropolitan areas, and what they do is they occasionally ping the sites that pay for their services and keep essentially a copy of the content locally to the customers of the website so a website base, for example, in Austin could have a lot of customers in New York City and have AKAMI severs outside in Hoboken so that when the customer in New York goes to access that content it doesn't have to go all the way back the Austin through all the many hops of the Internet and provides a better service. That exists today. I don't think Net Neutrality is in any way designs to prevent that kind of a service in the future. Like-wise physical private networks that skirt the core of the Internet are available today. You can -- companies like mine can purchase those kinds of private networks to provide better service to their customers, and there is no problem with that. One concept that seems to be lost at least in my view is that physical separation of networks from the public Internet and the source of private networks is certainly allowable and it's already done today but there is a possibility also for logical separation where perhaps in the core of the network on new capacity, that is to say capacity does not take away from the public Internet, companies could use that -- could pay for that kind of a private network within the core that does not again take away from the public Internet capacity. And that kind of a private network is the sort of thing that companies already earn, many content companies are already paying for and might be willing to do so in the future. In that way.

>>MALE SPEAKER
Can I pick up on that? I think Paul makes an excellent point which is what brings me to one of my biggest concerns about a number of legislative proposals and that is what is the Internet for purposes of regulation? What is this thing we're talking about. A number of the legislative proposals actually devil delve deep into the network and talk about how the broadband network will be used. It's an extremely hard line drawing exercise where some who have attempted to draw these lines are drawing them very deep into the network. Paul, I think you are hitting on something that's worth for the conversation the.

>>PAUL MISENER
I agree. Of course I agree with myself. But if you think for a moment what the network operators really want to do, they don't want to put deep packet inspection routers in the last mile. This is not about somehow substituting some very expensive device at the D slam. That's not economically tenable. What they want to do is put these routers as far upstream as possible so they have to buy the fewest and put the fewest loads on the network downstream. It's possible that if properly defined private networks could rely on that kind of technology so long as again the public Internet is not affected, just the way that private physical networks an AKAMI style downstream serving are permitted today.

>>MALE SPEAKER
Bust it's equally possible legislation or regulation may prevent that just because of this discussion.

>>MALE SPEAKER
That's why we want to write it correctly so help us write it.

>>MALE SPEAKER
It will look something like your thick packet rather than your thin packet.

>>MALE SPEAKER
We've got the thin packet. That works.

>>GREGORY LUIB
We've got a few more minutes left. I'm wondering with all the mention of AKAMI there is some how orchestrating this entire debate. And I'm going to take the opportunity to bundle a few questions for the proponents of regulation. First, what kind of time frame do I foresee? I think both you and Tod have made statements that no amount of competition is enough to prevent the concerns that you have raised. And then also are there concerns about enforcement of the regulation, particularly identifying violations of the Net Neutrality and where within the network that occurs and how you might address those. Why don't we start with Tod.

>>TOD COHEN
I sometimes get upset when I hear about the proponents of regulation. I mean what we are advocate suggestion where we were in August, 2005, and before brand X. So it's really a return to the status quo as where it was. So it's not a proponent avenue new set of regulations. On the proper way to regulate, I'll leave that to others at this point.

>>MALE SPEAKER
What I said and I think said already in this panel is that Amazon would not see a need for these sorts of rules if there were meaningful competition available to consumers, that is meaningful choices rather available to consumers. It's more than just pure numbers of providers, however, because of course, the switching costs among providers is extremely high. A truck rolls, new equipment, possibly inside wiring changes, service contracts that are long-term, all these things make it much more difficult to switch among Comcast an AT&T than it is between Coke and Pepsi. So it's not just a pure numbers game. It really is some level of meaningful competition and no agency is better equipped than this one to determine what meaningful competition is.

>>MALE SPEAKER
I guess the great news for consumers is the struck roll and inside wiring prices have to be eaten by us, if not, Verizon keeps the customers. If someone wants to switch from Venezuela to com cast or vice versa, switching costs are not a barrier for folks going from Internet provider to Internet provider. The more competition that gets out there the probability is that those barriers switching become lower still.

>>MALE SPEAKER
I'd like to conclude by I guess taking us outside of the US briefly here. Tod mentioned China and we've discussed the international context in some of the other panels, and I guess I'd like to see if anyone has any insight into the debates happening outside of the US right now, anything that we can or should draw on from those debates, you know, whether that means embracing what is happening in other countries or running away from what is happening there.

>>MALE SPEAKER
Greg, my favorite example with respect to that is just north of the border in Canada you mentioned that I chair a coalition of NGOs that are fighting Cyber hate, and one of our -- I won't say members but an individual who supports our efforts was successful under Canadian law which doesn't have the first amendment in getting a hate monger on the Internet arrested and jailed. That would never happen here and that's probably a good thing, as a first amendment proponent. But someone in the United States really objected violently to that, not in Rowan oak Virginia and started posting death threats against this individual on the Internet. The individual went to the Canadian equivalent of the FCC and said may I ask the ISPs to block these death threats, please, because I'm afraid it will inspire people in Ottawa and Toronto to drive over and kill me. They are posting his address, wife's name and picture. The Canadian equivalent of the FCC said no, this has to be noticed and put down for a hearing. There needs to be opportunity for comment. And to this day, this happened last October, to this day those death threats are still on the Internet, thank God this guy hasn't been hurt. Talk about adverse unintended consequences.

>>MALE SPEAKER
To answer your question having to do with Net Neutrality, the Canadians are considering regulation in this area. They've had some public hearings on this and are watching what we do frankly. More -- of more concern in Europe, we've seen announcements from the CEOs of major telecommunications firms that they fully intend to extort the source of rents that Gary mentioned from companies, content companies. But the companies that they mention are all American companies. They are Google, Yahoo!, Amazon and each bay. Those are the four companies mentioned by the CEO of Deutsche Telekom. So they don't even have this sort of interagency considerations we have within the US. If we get it wrong here undoubtedly it will be wrong there, and the principle losers will be American content companies who are very successful overseas. They'll be up against often state partially owned monopolies.

>>GREGORY LUIB
Anyone else?

>>MALE SPEAKER
There is a lot not to like about what's going on abroad. I think somebody alluded to the television without borders virus that's going to expand into other forms of content as well, in the EEU. There is pat to like on what's going on in the United States, and these last several years there has been a constant flood of observers from abroad and a lot of ambassadors going out including our own ambassador David gross going abroad promoting the fact that facilities based competition is the way to go, liberalization of markets is the way to go. So I hope more foreign authorities will learn from us.

>>GREGORY LUIB
That concludes this panel. Why don't we take a three to five minute break before we turn the last one, help me in thanking our panel..

• See FTC Workshop Transcript for index