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Google and Verizon's Net Neutrality Compromise is Pretty Weak

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Updated: Google and Verizon have agreed to a compromise on network neutrality that lays out seven principles tied to how operators can manage traffic on their networks. As expected, the compromise makes network neutrality enforceable on wireline networks, without extending the same to wireless. However, the agreement does ask for transparency in network management on wireline and wireless networks.

The Google and Verizon agreement also leaves room for broadband operators to offer managed services, although Verizon CEO Ivan Seidenberg pledged that the goal of such managed services would not be to circumvent providing quality services to consumers, which was a concern the FCC had for such products. Google CEO Eric Schmidt and Seidenberg followed up their announcement with a conference call, and I’ll update this post with more information from that.

The formal announcement today follows the last Thursday’s collapse of closed door negotiations related to net neutrality after the news of Google (s goog) and Verizon (s Vz) reaching a side deal leaked, and follows almost a year of debate on the issue of how and when a broadband provider can discriminate against certain types of web traffic. Google and Verizon have been working together on this for the last 10 months, and filed a joint statement to the FCC laying out their common ground on network neutrality in January. However, a close reading of Google’s comments on network neutrality from the same time suggested that their work was a meeting of minds, not a marriage.

Both the FCC and President Obama have been public supporters of network neutrality, but the effort to institutionalize the issue into a regulatory framework was stymied in April when a federal appeals court said the FCC didn’t have the proper authority to regulate broadband –ironically the court case stemmed from when the previous FCC had chastised Comcast (s cmcsa) for interfering with the flow of P2P files on its network in a clear violation of net neutrality principles.

Update:After the conference call and reading the agreement, I’m not sure there’s much to say beyond the fact that this agreement basically keeps the network neutrality situation the same. It formalizes the original Broadband Principals from 2005 for wireline and adds transparency as a requirement when mucking about with traffic for both wireless and wireline networks. Essentially, if Verizon wants to block something on its wireless network, it just has to tell you: kind of like AT&T did when it tried to keep Slingbox off its network last year.

The compromise also includes a carve out for “additional online services” that look a lot like the managed services that the FCC was so concerned about last year. From the agreement:

Additional Online Services: A provider that offers a broadband Internet access service complying with the above principles could offer any other additional or differentiated services. Such other services would have to be distinguishable in scope and purpose from broadband Internet access service, but could make use of or access Internet content, applications or services and could include traffic prioritization.The FCC would publish an annual report on the effect of these additional services, and immediately report if it finds at any time that these services threaten the meaningful availability of broadband Internet access services or have been devised or promoted in a manner designed to evade these consumer protections.

This is theoretical today, and is where the potential for big controversy lies. Google’s Eric Schmidt stressed that Google wouldn’t send its traffic over an additional online service, and suggested that if Verizon did end up degrading the “public internet” that competitors would arise to address the problem, something that’s pretty hard to believe given the costs associated with building a network. However, when Verizon’s Siedenberg said on the call, “Who knows what new services technology will bring in the future?” and suggested that 3D content or any other service needing certain quality of service guarantees might be delivered over such a specialized service, it doesn’t take a lot to see Verizon angling to protect its ability to profit over its control over its pipes.

The good news is nothing about this compromise has any teeth without the FCC deciding to made it part of its official rules on network neutrality. However, given the FCC’s precarious position as a broadband regulator and a lack of support from Congress on this issue the temptation to accept this compromise as good for everyone may force a version of network neutrality that leaves mobile, one of the fastest areas of innovation on the web, out of the new rules. It also enables an alternative version of the public Internet that could lead to the creation of a first-class and a second-class system of packet delivery.

Related GigaOM Pro Content (sub req’d): The New Net-Neutrality Debate: What’s the Best Way to Discriminate?

19 Responses to “Google and Verizon's Net Neutrality Compromise is Pretty Weak”

  1. I think we are circling around a couple of facts without really explaining them. From what I understand, Google has agreed that a wireless providers should be able to differentiate between the types of content. To give a reduced and artificially simple example, consider this to be video versus non-video.

    Google believes that Verizon should not discriminate between video from Hulu versus video from Youtube. That Comcast should not prefer video over video. See where we are going…?

    However, Google does seem to agree that video from Youtube should be less preferred than the comment entries associated with a video. That is that video can be limited in order to allow other types of traffic (text, DNS queries, etc) to function by having precedence over video.

    Now, it so happens that most of what comes out of Youtube is video, but at least Youtube will not be killed because of other video coming (hypothetically) from a new Verizon video partner.

  2. if we have net neutrality for wired but not wireless than what is stopping the major telecoms from slowing the buildup of wired networks and than increasing the price so that most consumers move over to the wireless networks that they are free to control as they please.

    with 4G networks coming what we really need is head on competition between wired and wireless. legally there should be no distinction.

  3. Aaron et al–

    Broadband customers pay their ISPs for access to the Internet, and edge companies do the same.

    All that residential ISPs like Verizon want to do is get paid twice for the same packets. They’re free to let their customers pick and choose what services should get priority. But they should go behind their customer’s backs and change the nature of the Internet in a double-charging scheme.

    People keep making bogus FedEx arguments. Imagine if Amazon paid to have a package shipped to you–but then FedEx wanted you to pay a second time.

    Tiered service is one thing. Exploitatively taking advantage of your middleman position in an oligopolistic market isn’t tiered service, it’s anti-competitive behavior with no market redress.

    • Devron McAllister

      OK, let’s imagine that Amazon pays Fedex to have a package shipped to you, but then Fedex wants to charge you a second time. It is unlikely that a law banning that practice would lead to cheaper and faster package delivery.

      Suppose Amazon pays $5, and you pay $10, both for delivery of the same package. If that’s too much — if the economic cost of delivery is really $12, then UPS will have an incentive to undercut Fedex.

      If the problem is oligopolists colluding, we’ve already got laws against that. It would be strange to restrict how or who Fedex can charge for its services because you’re paranoid about potential collusion. Such restrictions have unintended and severe side effects. It’s their service. They have every right to charge you for using it whether you are the sender or the recipient.

      Ever receive or send a wire transfer? You may have realized, both ends are charged.

      • Marcos El Malo

        I just love anything hinting at a car analogy. Most things are incomprehensible to me unless put into terms of roads and internal combustion engines.

        So here is the situation as I see it:

        What if Fedex and UPS owned all the driveways and various traffic choke points? They could charge you a fee just to leave your house to go to the grocery store and charge the store a fee for allowing you to enter the store parking lot. They could also charge the car manufacturers a fee to use the parts of the roadway in between Point A and Point B.

        What a lovely business model! And there is nothing stopping competition from keeping Fedex and UPS honest, because all a competitor need do is create new alternative driveways for all potential customers. Piece of cake, infrastructure-wise. Right?

        But what about public transportation? What if cheapskate dirtbag customers tried to evade rightfully paying for their cars’ entrances and exits by walking to and from the bus stop? Well, Fedex could just charge such socialist ingrates to leave or enter their own houses. Why not? In fact, why not give them control of the bus stops, so they can charge you an extra fee for getting on and off the bus?

      • @ Marcos

        If you want to stick with road analogies we can do that:

        It doesn’t matter how many times the road owner charges you to use the road. What matters is the total amount charged – the revenue based of the road. Toll roads today could put tollbooths every five feet if they wanted and lower the price to fractions of a penny. It would be less efficient, but what matters is that it costs x amount to get to my destination. Whether they charge me once, 10 times, a monthly fee, or charge the locations I visit, all that matters is the total amount of cost to me (revenue to them).

        Why this is important is that if the toll road operator began raising prices to the point that they were raising more money in revenue than it costs to build and maintain the road as well as an additional reasonable profit, a competitor would surely step in and build a competing road to get a piece of the action.

        What this means for internet: it matters less how many times we are charged than what the total amount paid is. Competition or merely the threat of competition is enough to hold down prices.

        Back to roads: why isn’t it reasonable that the road operator charge the guy who is clogging traffic and pulling a large trailer that blocks two lanes more than the motorcycle that takes up less space and doesn’t clog traffic? But if the guy with the trailer desperately needs to move his trailer right now, why shouldn’t he be allowed to pay an extra amount for the reserved right of way? (The president’s motorcade already closes down highways when necessary.)

  4. MrktmInd

    So if you have a 3″ broadband pipe coming into your house .5″ of it will be for the “Public Internet” and 2.5″ of it will be for “Special Services”.

    Why don’t we stop screwing with these duopolies and just build municipal ISP’s that are owned by the LOCAL community. Each locality can vote to spend tax $ based on the quality of service they desire.

    • Would you still have a problem if your current pipe was .25″?

      Municipally owned networks would be akin to road networks funded by tax dollars. Who here is happy with rush hour traffic on the local community owned road network?

      So if I am a heavy user who demands to actually access the internet at reasonable speeds during peak periods, I must pay for my own wired connection on top of the taxes I already pay. I pay for internet twice. How is this beneficial again?

  5. Net neutrality has been amazingly good for the internet.

    Basically because all bandwidth is the same low low flat price we have seen the huge diversity from websites to video to VOIP and everything in between.

    The most obvious immediate consequence of dropping neutrality – mobile providers will choke telephony such as Skype which directly attacks their mobile telephony segment.

    Anyone who thinks that free telephony a la Skype is bad for consumers – probably works for the mobile providers.

    This is just the first casualty however.

  6. I am confident that in the name of consistency everyone who is scared of a world with tiered packet delivery is equally fearful of the existence of toll roads, bottled water, and organic food. These premium products that charge more than regular products (clogged highways, tap water, and not-organic food) if allowed by FCC (or FDA or whatever other government agency you prefer) would certainly harm consumers too. Oh wait… maybe choices aren’t so bad after all.

  7. We don’t force FedEx to deliver all its packages at the same speed, with no priority for people willing to spend more. Why should Verizon be mandated by the government to do just that? Let them decide how to use their own network and the market will decide what’s best for consumers.

    • addicted


      Your metaphor is off. A better metaphor is that the government and private road owners dont not allow Fedex a higher speed limit, or access to a special fast lane, because they pay the government money for it.

      • Devron Mcallister

        Excellent metaphor. Consider how much time people waste sitting in traffic jams. Traffic would actually flow if access to the highway were rationed by prices.

      • Verizon built their network with profits made from selling service. No one was forced to pay, people chose to pay in exchange for what they felt was valuable. If people find faster YouTube downloads and speedier Android updates valuable, then let them pay.