Web 2.0 Podcast: A Debate on Net Neutrality

by Daniel H. Steinberg

Web 2.0 Summit program chair John Battelle moderated a debate on net neutrality between Google VP and chief internet evangelist Vinton Cerf and Robert Pepper, who leads a team driving Cisco's global agenda for advanced technology policy.

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Transcript created by Casting Words.

ANNCR: Web 2.0 summit Program Chair John Battelle moderated a debate on net neutrality between Vint Cerf and Robert Pepper. Cerf is known as one of the fathers of the internet. He is now a VP and chief internet evangelist for Google. Pepper served in the Federal Communications Commission as an advisor to the last six chairmen. He now leads a team driving Cisco's global agenda for advanced technology policy. Here is the Web2.0 debate on "Net Neutrality."
John Battelle: We didn't have to actually search too hard to find someone who was pro net neutrality. It's actually funny how I found the person who was willing to argue the other side. I found him through Vint Cerf. Vint has been very public and very vocal on behalf of both Google and his long affiliation with the web and the internet. He said: "The person who I would like most to be onstage with is Bob Pepper, because Bob is very thoughtful, and we know each other, and we're pretty sure we won't throw chairs." So, with that, I'd like to bring Vint Cerf and Bob Pepper up. Let me give you a little background on these two guys.
Vint Cerf: Do you have to?
John: I do actually, I'm sorry. You both are very accomplished, so I want to put it out there. You are vice president and chief internet evangelist for Google. Before that you served as a senior vice president for MCI, an upstart in the Telco world, at least it used to be and upstart in the Telco world. So, you understand that side of the world very well. You've lived in its underbelly. You are widely known as one of the fathers of the internet. Are you going to graduate to grandfather at some point?
Vint: I hope not.
John: You are TCP/IP co-designer and the architect of the internet. You were recently awarded the presidential Medal of Freedom for you work congratulations. And you are chairman of ICANN, the Internet Corporation for Assigned Names and Numbers, which has to be the most aptly named corporation in the world. The Internet Corporation for Assigned Names and Numbers. Sort of Kafkaesque. Something an engineer would have come up with as a name for a corporation.

Now, Bob reminded me earlier in the greenroom that he does a lot more than argue about net neutrality. He leads a team driving Cisco's global agenda for advanced technology policy, and there is a lot going on around the world to discuss: IP enabled services, broadband, wireless security. He joined Cisco in July of last year from the FCC, the federal communications commission, where Bob served for the last six chairmen of the FCC on policy development focusing on issues cutting across industry and institutional boundaries.

I did a bunch of reading up and I found a bunch of stuff that Bob had written recently, so that might get us started. You laid out a position on the issue that net neutrality debate is laid out on, what you called, on a false choice. New regulations will only stunt the network economy. And I'm quoting from your latest article in NetworkWorld, "Pro-regulation net neutrality advocates, but the problem they are trying to solve is theoretical. It does not exist." Let me start with a statement from both of you.

John: Let me let Bob start. So, Bob why don't you start and then I'll let Vint respond.
Bob Pepper: So, actually, yesterday Barry gave me a great intro. He said, "Where are you going to find ANYBODY who is against net neutrality?" Well, part of the problem is that it is not a well-defined term. I used to come to meetings like this -- PC forum and Vortex and your sessions -- and I always had a guaranteed laugh line when I came from the FCC. I'd stand up and I'd say "Hi, I'm from the government, and I'm here to help you."

Guaranteed laugh line. Because people understand that the government is not here to help, not always. Right? And part of the problem is that when you ask the government to come in and solve problems, it had better be a real problem. Because when government comes in to solve something it doesn't always leave, and you have to be really careful what you ask for. So I can't use that laugh line anymore. But now that I'm no longer at the FCC, I can tell the truth.
Vint: Actually, you could say "Hi, I'm from Cisco and I'm here to help you." and you'd still get a laugh.

John: All right, now settle down. Let him continue.
Vint: No, we'd just take out the order book, right?
Bob: So now, actually, the truth is, "Hi, I'm from Washington, the land of false choices." So let me tell you what the false choices are. A year ago, there was a very senior CEO of a phone company who said, "Google, Yahoo, who are these guys?" Why are they doing so well, essentially? I want to control what they do. And if I don't, we're going to have chaos. So there you have one side of it. If you don't control you have chaos. Then Vint and some of his buddies said, "Oh, my God, if we allow the phone companies to manage these things we're going to have tyranny."

So, we now have this dichotomous false choice: tyranny vs. chaos. And of course, neither is true. And, by the way, neither is acceptable. Neither tyranny nor chaos is acceptable on the net. Because without networks that work, you can't develop the services that everybody in this room is trying to develop. You can't do what Google does. So, where are we? How do I think about this as a former regulator and understanding the costs of regulation? Three years ago there was a group of high-tech companies called the high-tech broadband coalition. I was still at the FCC, and they brought to the FCC a platform, a set of principles.

First, consumers should have the right to connect their own devices to the net, and they should be interoperable. Very simple. Without that, you don't have the net.

Second, within the terms of service that you buy, you have the right to go out and get any content that you want and use it.

Third, you have the right to go out and get legal applications, which you paid for. The same thing with content. And you can run those applications.

Fourth -- probably the most important principle -- is that consumers have sufficient information so they can actually see what they are buying, and so they know what they bought.

So, if you want to translate that, those four principles -- no blocking, no steering, no degradation -- it is also important to understand that you have to manage networks. Networks today are managed. Networks were always managed. You worked for MCI. How many people here work for companies that have a Virtual Private Network, a VPN? So it is not black or white. It is not either or. These are core principles on which the internet has grown up and the internet has thrived. And those principles have to remain and they need to be strong going forwards. If people violate those principles, they should be punished.

In fact, when I was at the FCC, we had a case in which we did that. There was a small, rural phone company called Madison River that was blocking the SIP ports because they didn't want competition from Vonage. Very interesting. We got a complaint. Staff called up the small phone company, got one of the senior executives -- I think it was the CEO -- and said, "Sir, there is an allegation that you are blocking SIP ports." He said, "Damn straight I am. They're using my network and not paying for it!" The answer was, "Sorry, you can't do that." So they stopped. That was done very quickly.

So, if there are problems we think that the right way to do this is on a case-by-case basis creating case law. What we don't think is necessary is the creation of a whole new regulatory regime that will inevitably lead to price regulation. It will lead to overreaching regulation of things that, while I was at the FCC for a decade, we fought against.

We did not want the internet to be subject to access charges. We did not want the internet to be subject to telephone regulation. We did not want the internet, especially in the peering and transit and backbone, to be subject to rate regulation. And we succeeded in that. The extreme advocates, and Vint is not one of the extreme advocates, are calling for a regulation of the internet that we have all fought against for at least 10 year.
John: Now, Vint.
Vint: First of all, I have a lot of respect for Bob. I worked for him, off-and-on, all the time that I was at MCI. He was a permanent fixture and voice of reason within the FCC. Let me remind everyone that the internet's success, in part, has been a consequence of its basic architecture. The layered architecture. The distinction between the transmission layers, the switching layers, and the application. And the fact that it was basically an end-to-end system. So people who wanted to try out new systems could do that because the intelligence was at the edges, not at the middle. You didn't have to get permission from a switching service provider in order to try out new things.

I'm going to use the word "non-discriminatory access" before you levitate; my intent here is not to use some legal term but one which basically says that everyone was free to try things out and do things on the net without constraints in the interior. That has lead to a cornucopia of applications. Web2.0 and the discussions that are going on today are more evidence of that, and all of us I think -- including Bob -- want to preserve that characteristic of the internet, because it has led to so much innovation.

If there was enough competition today in the broadband world I would not be sitting here being an advocate for net neutrality or something along those lines. But there isn't a great deal of competition. The circumstances are that about 60% of the populations has a choice of one of two broadband carriers. 30% have a choice of one or the other but not both, and 10% have no choice at all. If there were three or four or five choices I would feel differently.

When we were a dial-up environment, you did have almost unlimited choices. There were several thousands of Internet Services Providers and it was easy to change between them; you just changed the phone number that you dialed up to get to a different modem bank. But when it comes to broadband, the choices are very limited and switching is actually hard. If you wanted to go from a cable carrier to DSL, there's a truck roll involved and some other fairly complex stuff. Maybe your email gets changed and so on.

The reason that I and my colleagues are very concerned and the reason there has been this debate is that there is ample evidence is that the current duopoly -- and in some cases monopoly -- is inclined to be anti-competitive. So as an example, attempts made to prevent by law the implementation of municipal networks on the grounds that this is somehow the government competing with the private sector.

The local exchange carriers have been quite visible in that effort. I find the reasoning there to be quite specious. If a municipality and its citizens decide that they want to build a broadband network and they tax themselves to do it with a bond, they will typically turn around have it built by the private sector.

So, I don't think that this is really government interfering with the private sector at all. The big issue for me, and the one where Bob and I probably agree, is that consumers are at risk if we do not manage this process so that they are protected against anti-competitive behavior. And so this debate basically boils down to "How do we do that?"

One side says that we should legislate it so that it is crystal clear and black and white that if you do the following things you will be punished, or there will be consequences. And the other side says, "That's dangerous, because getting the legislation right is very difficult and if you get it wrong you get tangled up in snarls of court cases that don't ever sort themselves out."

Just to make it clear that, at least my view, we are not trying to prevent the broadband carriers from charging more for increased amounts of capacity. So if you buy 1x data rate service and you buy 2x, I'd expect to pay more. And I'd also appreciate being protected from denial of service attacks and other things that occur at the internet level.

As for viruses, if I were getting email service, value added service, from the same broadband provider, I would expect them to help filter those things out. But if I am getting the email service from somebody else, I don't expect the broadband provider to be digging deep into my packets doing that for me. That is a higher-layer application. I would expect protection from my email service provider.

I don't think it's OK for the broadband provider to take advantage of the control over the physical layer to impose choices on consumers at higher layers. And if I understood what you said earlier you would agree with that. So, this boils down to, really, how do we protect consumers and maintain their choice. How do we protect providers and maintain their opportunity to innovate. That's what we are struggling with -- not the bumper sticker.
Bob: And so, John, one of the important issues that Vint raises is "How do you approach it?" Ironically, and what I find to be so sad is that there WAS legislation that passed the House. A slightly different version passed the Senate Committee. It's all bottled up now, it's not going to happen, that would have addressed specifically these issues that Vint raises.

Arguably, with the status with today's situation, there is a question about FCC authority, I think they have it, they think they have it, but somebody would challenge it in court, right, so there's some level of ambiguity. The legislation would have clarified, the senate bill more directly clarify that the FCC explicitly has authority to go after bad actors that would violate these principles because these principles would be put into statue.

The second thing arguably there is a concern about is the speed of action because it is an open ended process. The senate bill would have put a 120-day shot clock that said if the FCC gets a complaint, it had to decide and issue a decision within 120 days. You know, those two things in legislation would have gone a long way resolving this and giving the FCC teeth and unfortunately because of the regulatory advocates -- the people who wanted more -- that legislation is dead.
John: Are you sure it's dead only because of that? Did Cisco back that legislation?
Bob: Yes.
John: Did the Telcos back that legislation?
Bob: Yes.
Vint: Yes, they did.
John: That's probably why the advocates were against it.
Bob: Well no, but there were others who backed it as well, there were other, there were a whole slew of issues within the legislation, but if you, you know, if you look at all the reports coming out of Washington and in terms of the congressional committees, the statement by members, the statements by the staff. It was the net neutrality issue that essentially stopped that legislation.
John: Vint, did you back that legislation?
Vint: No, we didn't back that legislation to be quite frank with you and the reason we didn't is that we weren't persuaded by your argument that that would solve the problem. My concern, frankly, is that we've not seen success always in the past with FCC attempts to enforce protections that we're concerned about.

There are really three elements here, one of them is the possibility of anti-competitive action, which would generally speaking fall for the Department of Justice. The question of consumer protection which would fall for the Federal Trade Commission and this question about whether Internet service is an information service or a communications service, the shift from the Title two to Title one worry me anyway and this is a place where I think some real dialog would be useful.

I always thought of the presence of Internet in Title two as guaranteeing that there would be a kind of common carriage rule that assured that if you wanted to get access to the Internet, you couldn't be denied access nor would you be getting distorted access as a consequence of actions by the suppliers.

You seem to, in the greenroom discussions, you seem to think that we were better off having things in Title one were this is an information service in which there is no Common Carriage protection. Can you explain...
Bob: Oh, first the dial-up where telephone network access, yeah, that was Common Carriage, but if you moved up the layers, it was not, and that's what we kept outside of the telephone regulation. When Vint says Title 2, that's telephone regulation and the law, Title one is general FCC authority and that's where information services where we defined the Internet and Internet access as an information service.
Vint: OK, so here's a place where...
Bob: So, by the way, the other thing is cable access, right, two thirds of Americans get their broadband connection over cable, cable was never in Title two to begin with. So, it's a more complicated mix...
Vint: This is theorem 207, everything is more complicated.
Bob: Sure.
Vint: All right, the thing that bugs me about moving over into the information services is it removes any of the layered view of the system and Internet is very... has benefited from this layered structure which really is a communications component. And that communication component is accessible to everybody who is just trying to move bits from Point A to Point B. It doesn't bind you, necessarily, to the same ISPs...
Bob: But you know, we did... There's bits from Point A to Point B in the backbone, right, there was never regulated... that was defined as an information service, that was never regulated as Common Carriage, thankfully. You just came back from Athens where there was the Internet Government's Forum. There are advocates in other countries that want to regulate in a price regulation across the entire Web, there are...

One of the arguments that we effectively used, right, when we dealt with these countries was to say look, in the U.S. we don't regulate the Internet, we don't regulate these things as phone companies, and the reality is that we've had all these wonderful services developed on top of that. In Europe, they want to regulate video over the Internet as broadcast television.
Vint: Let's be careful about which part of Europe we're talking about, because in the U.K. off-commons is much more open.
Bob: No, but this is the European Commission...
Vint: This is... OK... I don't know whether we're helping or not...
Bob: No, but the point is that you... Once you begin to peel this regulatory onion, right, there are all kinds of unintended consequences and it comes down to benefit/cost. We agree that the end-to-end principle is crucial. We agree that there shouldn't be any competitive behavior. Right?

We agree that bad actors should be punished and punished quickly. The question... I think the only difference that we have is what's the best mechanism to do that with, right? It boils right down to it. And, you know, on the one side you have people who say, well, we can write detailed regulation that, you know, might be price regulation because we've talked to some people up on Capital Hill who said: "Regulate the Internet, why not?"

Right? That's not where I want to be and I don't think it's where you want to be. And... and... so the issue is a strong case-by-case approach, right? Is benefit/cost better or is detailed telephone type regulation better and there are costs and benefits with each approach.
Vint: First of all, I don't believe and I don't agree that this leads inevitably to price control, so there's a place where we absolutely don't have in...
Bob: You've never been a regulator.
Vint: I'm sorry, I think you're wrong about that given my current role at ICANN. I'm forced into regulatory like problems anyway, so don't tell me I'm not a regulator.
Bob: You heard it here first: Vint is a regulator. [laughing]
Vint: However, I don't agree necessarily that price regulation is the outcome of all that and I worry about case-by-case stuff because I worry that it doesn't necessarily stick and it takes a long time to figure out what the boundaries are of legitimate behavior and the way you discover it is having case after case after case of abusive behavior and you have to deal with it one by one. So, I'm much more interested in having a framework established from the outcome, from the outset, that clearly lays out what's valid behavior, what's legal behavior and what is not and what the punishments are.
John: Can I just ask you: Pose a scenario here, I think that from the point of view of the folks in the audience and certainly my limited point of view is, you know, I'm paying $50-60 a month to SBC / ATT / whoever they recently bought to give me DSL. It works most of the...
Bob: They don't give it to you, you buy it from them.
John: I buy it. Right. I spent a fair amount of money to do that.
Bob: Right.
John: I think that's my ticket and I'm done. I don't need to think again about anything. I am now allowed into this world and there's no constraints on what I do as long as they're legal.

The scenario that I think people are concerned about, and certainly that you explained to me from Google's point of view and that I think Barry Diller was referring to, is that after I pay that $50, the folks at AT&T/Verizon/Comcast want to go to Google and charge even more to ensure that you can deliver the services to me that I think that I'm getting for that $50 a month.
Bob: Doesn't this sound like the protection racket?
John: Well, it certainly does. And so obviously from my point of view I think, "My God, that sounds awful."
Bob: Let me give you an example, though, of where--actually, this is for the double pay argument, which I don't think is what they're talking about but certainly wouldn't be acceptable. But let me give you a very concrete--
John: But if it's not acceptable, why not just canonize that?
Bob: No, no, let me give you a specific example. So, BellSouth ran a beta trial last year of something called their Turbozone. So for people who bought their 3meg service, they could go to the Turbozone.

Movielink was on there, HDNet was on there, it was essentially a video on demand service. 3meg. You buy, you go there, you get it, you were able to download it no problem. You were able to see it streamed. Not a problem.

If you were an entry-level BellSouth DSL subscriber, and it's 768 down, 128 up, you couldn't do that. So, they had a place on there that when you clicked on it, there was an arrangement that for the time of that movie, the two hours or whatever it was for the movie, you paid Movielink to get the movie, which if you were a 3meg customer you would have done.

If you were the 768th customer, you got to watch the movie, but Movielink paid BellSouth for the duration of the movie to boost you up to whatever speed was necessary for you to see the movie.

It wasn't double payment, because you were not a 3meg subscriber. So, what's wrong with that?
John: I think everyone understands paying more for a higher class of service.
Bob: But it's a two-sided market, as the economists would describe it. In this instance, it wasn't the end user paying for 3meg, it was for the duration of the movie, the content provider paying BellSouth to boost you for that purpose.
Vint: Nothing would have been wrong, on the other side, of having the user charged for that, too.
Bob: No. Exactly right. So, they actually ran that as a trial. So for the duration of the movie, you would have to buy more, and nobody did it. It was too complicated.
Vint: What's complicated about, "Click Here to watch the movie"?
Bob: Well, they didn't do it. So you want a ban, you would ban 800 service. Because this is absolutely analogous to the two-sided market of 800 service. So, Vint, it's not double paying if I'm a $19.95 customer as opposed to the $50 customer. And I want to get content for somebody at the other end.
John: I don't think anyone's arguing that.
Bob: Vint just argued against that.
Vint: No, no. The big lie that I think we heard earlier, not from you, is that the application service providers were getting a free ride.
Bob: Of course they're not.
Vint: And you're paying a ton, so--
Bob: You're paying a ton, and the other thing that was not right was when somebody said, "Google--these guys, don't invest." In 2005, CAPEX was $800 million, this year it's going to be way over a billion, you spend a lot of money on your data centers.
Vint: The point is made that the ability for someone to pay more for an increase in capacity on a temporary basis is a perfectly sensible thing. I don't have a problem with that as long as the users know what's going on.
Bob: And it all goes back to user empowerment and user information. Exactly.
John: Doesn't some of this come down to the folks at Verizon and Comcast and others looking around at the people in this room and saying, "All these guys are being innovative and entrepreneurial and getting a bunch of money, and look at Google and they're so wealthy and they're going to the moon, and they're doing it on our network, and we want to get in on some of this action. We're sick of being plumbers, we want to do this other stuff."

Look at Comcast. They've got a portal now, they're trying to be Yahoo. Now, if they've also got a significant percentage of the broadband access business, and they start to divert people toward Comcast services--
Bob: Preferentially.
John: Now, preferential treatment, you're saying you're against that, but you'd prefer not to have it canonized, but rather argue it case-by-case.

I think all of us in the room are a little worried that those guys from Verizon and Comcast are a little better in Washington than we are.
Vint: Could we just make one observation, that there is now in Korea a problem precisely of this kind? A Korean carrier has either blocked or interfered with the provision of video by competitors other than that particular broadband carrier's video offerings. That's an example of...
Bob: Sure. That's a violation of the principles, and that should be dealt with through an adjudication and a process that...
John: But shouldn't that just be against the law?
Bob: The short answer is, yes, and it would be on a case-by-case basis. When you have competition authorities that deal with any competitive behavior, you want them to have swift enforcement capability to say, "This is not permissible. Stop it. We're going to fine you," or whatever.

The fact is that is how competition law works. But you can't in competition law come up with every conceivable scenario, every conceivable theoretical way of acting anti-competitively. You have a process that looks at that, and you enforce it.

So, it really does come down to this question of, do you enshrine detailed regulation that...nobody has been able to tell me, when I've asked--light regulatory touch sounds great.

Vint: It's an oxymoron.
John: All right.
Bob: But let's actually see what it means, and how does it work, and how does that, with quality service tradeoffs, how does that get you to the point where you're not regulating prices and you're not regulating things that you don't want to regulate?

Let's prevent and punish bad behavior, and have the tools to do that. Let's put in the law the high-tech broadband coalition principles, which could be done.

I really fear that this was the last year that we would have a chance to do that, because this year, in the dynamic in Washington, the Bells had a reason to push legislation, and that was to get cable franchising relief.
John: We can't go into cable franchising relief, we're running out of time. But I do want to give Vint a chance to do a summary or his last statement because I let you open, because we're running out of time.
Vint: Well, thank you. I appreciate that. First of all, thank you for letting both of us have this discussion.

I think that what it boils down to is focusing on a constructive effort which I think you and I both would like to see happen, and that is focus attention on protecting consumers from abusive behavior by monopolies or duopolies that are interfering with the kind of innovation that the Web 2.0 participants are engaged in right now.

Whether we achieve this through regulatory mechanisms or others I think is part of the debate, but that we want to achieve that objective is, I think, essential and agreeable.
John: Thank you both very much for coming, and I'm sure these folks will have lots to talk to you about at the break.

ANNCR: Vint Cerf and Robert Pepper debating net neutrality at the Web 2.0 Summit 2006.

Daniel H. Steinberg is the editor for the new series of Mac Developer titles for the Pragmatic Programmers. He writes feature articles for Apple's ADC web site and is a regular contributor to Mac Devcenter. He has presented at Apple's Worldwide Developer Conference, MacWorld, MacHack and other Mac developer conferences.