Q&A: Cogent CEO Dave Schaeffer on Net Neutrality

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The fight between those who want unrestricted online communications and those who would rather regulation be left to the invisible hand of the free market is one that impacts billion-dollar companies, millions of users and even democracy.

The “network neutrality” argument is that Internet users, not Internet Service Providers or governments should be in control over what content they view and what applications they use on the Internet. To do otherwise, argues online search and content provider and net neutrality supporter Google, essentially gives those with power over Internet access the ability to discriminate against competing applications or content.

“Just as telephone companies are not permitted to tell consumers who they can call or what they can say, broadband carriers should not be allowed to use their market power to control activity online,” says Google’s statement on net neutrality.

On the other hand, many telecommunications companies argue that they need to engage in Internet traffic management practices in order to assure network performance by throttling certain types of data such as peer-to-peer file sharing to improve the performance for other users.

Earlier this year, it seemed that communications giant Comcast struck a deathblow to net neutrality when the US Court of Appeals ruled that the Federal Communications Commission does not have the authority to require all businesses to adhere to network neutrality rules.

Tensions over regulation were renewed last month, however, when the FCC chairman Julius Genachowski said he would like Internet service providers put into the same category as telephone companies in a move aimed at solidifying the agency’s authority over the broadband industry.

In a Q&A interview with the WHIR, Cogent Communications founder and chief executive officer Dave Schaeffer argues that net neutrality should be part of every government’s regulatory framework, Internet services should be seen as a utility, and that ISPs should embrace neutrality practices.

WHIR: Why should ISPs embrace the principles of net neutrality? And, as a pure-play ISP, does Cogent have more to gain from net neutrality, given that it doesn’t offer competing services like phone lines and cable TV?

Dave Schaeffer: An ISP should embrace net neutrality because an open Internet with no application filtering will ensure that consumers more fully utilize the network and the service provider will derive additional value from its network. If service providers offer a bundled service where they are providing an application along with network functions, they are internally conflicted and will always look to protect their legacy revenue streams from those bonded services, such as cable TV or telephony services. As a pure-play ISP, the network operator should be indifferent to the applications that are running over its network and should be comfortable in allowing the consumers to benefit from those applications, and the application providers to profit from such audience, independent of any fees paid to the network operator. It is important that an ISP providing local access adequately charges its customers for the provisioning of that network access without attempting to implement any tax or additional charges on its consumers based on the types of applications they are running.

WHIR: Does the implementation of traffic shaping practices by other ISPs affect ISPs that choose to govern their networks using the principles of net neutrality?

DS: The implementation of traffic shaping on an access provider’s network does not impact other ISPs except that it potentially reduces the total amount of traffic and overall usefulness of the Internet to all users. Access providers absolutely can and should manage traffic on their network, but they need to adequately disclose these methods to their access customers, and whether or not it intentionally degrades a specific product or service they are also trying to sell in competition with their Internet products. The implementation of net neutrality is actually very different when it pertains to the interconnection of ISPs to one another, whether through peering or transit relationships. Traffic shaping at those interconnection points is done for different reasons and is generally not something that is beneficial to the Internet. What you are in fact trying to do is make sure there is adequate interconnection capacity between access network operators and backbone networks.

WHIR: Due to recent legal battles with Comcast, the FCC seems to be losing its authority over Internet services. What sort of regulatory body do you think is needed to ensure that the Internet is not restricted by ISPs? And as a corollary, is government regulation the only answer?

DS: Local access is a natural monopoly. In North America there is a duopoly of facilities-based access providers, due to the fact that two different networks were built with different applications in mind, and from those applications these networks are now branching out and selling a converged Internet service product. Regulators have traditionally allowed this type of competition to replace any overt regulation, but because there is a great deal of market power with these natural monopolies or duopolies, it is generally in the consumers’ best interest to have government regulations to balance market power. At an absolute minimum, the government should require access providers to clearly inform consumers what quality of service they are providing and what, if any, restrictions exist either intentionally or unintentionally on that service. The FCC does appear to be reasserting its authority through Title II Lite legislation. The Internet is global, but the local access regulations are typically governed by each country in which a particular access provider operates. For that reason I feel the FCC is most likely the appropriate body to regulate local access networks. Global Backbone regulation is very different: global backbone networks currently operate in a deregulated environment and probably should continue to do so, provided network operators do not intend to strengthen their own access business by slowing down their access to other access network operators. To date that has not been the case.

WHIR: While net neutrality remains a hot button issue in the United States, is it beneficial to look to other jurisdictions for examples of neutrality practices both positive and negative?

DS: Net neutrality does remain a very politically sensitive issue in the United States. In any country in which there is an attempt to increase broadband penetration and to have the general economy participate in the productivity improvement made possible by the Internet, net neutrality should be a core component to the government’s strategy. Throughout Western Europe we see policies very similar to the United States’ in promoting net neutrality, whether it is France, Germany or the United Kingdom. We’ve seen some of the Scandinavian countries go even further and propose that Internet access is not a service but a right to which all citizens are entitled. It is too early to see whether or not this form of social engineering will have any positive impact. It is probably best to view Internet services as a utility, therefore something that needs to be regulated but not necessarily something that needs to be offered ubiquitously as a right.

WHIR: Is there anything else you think is important to put out there?

DS: I think net neutrality is at the heart of whether or not the Internet is going to continue to enable new business models and new applications. Many of these new business models are most likely not going to succeed, but some of these models may end up creating a radical new way of doing business. We will continue to see an improvement in productivity as a result of the efficiencies that people are able to achieve using the Internet. So, not only for the benefit of the Internet, but for the greater benefit of society, I think net neutrality should be part of every government’s regulatory framework and our societies will continue to benefit from the technological improvements that the Internet has been able to achieve.

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