December 2010 Archives

After years of debate, the FCC has voted on a net neutrality order.

The intent of this order is to bring clarity and certainty to this area so as to encourage greater investment in broadband capacity and utilization.

Unfortunately the FCC has failed egregiously in bringing clarity to these complex issues.

How can I say that? Simply.

While this order states that providers can't discriminate against content/services/apps and especially can't do paid prioritization, it also suggests that providers must also be allowed to manage their networks and experiment with new business models.

Well here's the problem: most all of the new business models broadband providers are considering involve some form of paid prioritization.

For starters, one could argue that facilities-based services are already benefitting from paid prioritization. As an example, a broadband provider who's offering IPTV is doing so using quality of service that Internet video doesn't get. So does this mean they shouldn't be allowed to do that? Should they be forced to open up this level of quality of service to all Internet video providers? No one's necessarily suggesting they should, but this is just one implication of what a ban on paid prioritization could mean.

Then there's the Level 3 vs. Comcast debacle. The gist of this issue, as I understand it, is that Comcast is running their Internet capacity at full hilt, and pressuring content delivery networks that handle sites like Netflix to pay up to peer directly with Comcast's network to improve the quality of their video delivery. Should this be legal or illegal? And either way, how should these business relationships be regulated to make sure that broadband providers don't flex their muscle too much to squeeze money from content/app providers to the detriment of broadband users?

These are two of the biggest issues related to net neutrality, and yet there seems to be no answers in this order for how to address them. But these are really just the start.

For example, say a broadband provider wants to start selling a videoconferencing service with some kind of QoS on it. Let's assume they don't build their own but rather want to partner with a best-of-breed provider. Does this violate net neutrality? They're providing paid prioritization, but they're also pursuing what seems like a legitimate new business model that could enable a new class of apps and services. If they are able to do this, does that mean they have to offer this access on the same terms to everyone?

Now what happens if that broadband provider developed this videoconferencing service in house? Some might argue providers shouldn't have the power to pick winners and losers in terms of Internet apps/services, but are we really saying that private companies shouldn't be able to determine how they monetize the networks they built and paid for with their own apps and services?

The two extremes of net neutrality are that government should do nothing or that government should embrace the paradigm of structural separation, where network owners/operators are only in the business of moving bits and not delivering services.

In this order the FCC has attempted to find a middle ground, but in so doing they've exposed the complexities of these issues and the shortcomings of their approach for trying to address them.

While this order has been decried as both a government takeover of the Internet as well as the end of the open Internet as we know it, in reality the only clarity this order brings is that we now know beyond a reasonable doubt that the FCC is unwilling and/or unable to even consider the possibility of achieving real net neutrality.

Another thing that's clear is that even the modest half steps proposed in this order are unlikely to ever be seriously operationalized as it's much more likely they'll be challenged by broadband providers in court and delayed or struck down entirely.

So while this order may do little to nothing to bring clarity to how to deal with specific potential violations of net neutrality, it does bring clarity to broadband providers that they have nothing to worry about when it comes to the FCC pushing to actually shift the paradigm and trajectory of Internet and broadband evolution.

In the end, while there's been endless sound and fury surrounding the release of this order, the reality is that it signifies nothing. This isn't a government takeover of the Internet, and it isn't the end of the Internet as we know it (at least not yet). Instead it's just another step down a long road of ineptitude as the FCC continues to fail to provide America with the regulatory leadership we need to remain leaders in the global digital economy.

So the FCC released its latest report on the state of internet services.

Most of the hullabaloo is about how more than half of America's so-called broadband subscribers aren't actually subscribing to broadband as defined at 4Mbps down and 1Mbps in the FCC's national broadband plan.

This is an extremely important thing to point out as it shows how even by the underwhelming bar of 4Mbps/1Mbps, America's still underachieving and there's a lot of work left to be done.

But at the same time we have to be careful about decrying this as evidence that there's a broadband supply issue as this report talks in terms of connections, and it could be that speeds greater than 4Mbps/1Mbps are available, it's just that consumers aren't seeing the need to pay more for more bandwidth.

Yet there are even more troubling facts that can be pulled from this data that not only clearly show America's broadband deficits but also the shortcomings of our entire national broadband strategy.

Taking on these issues in sequential order, the first figure shows the distribution of reportable connections by downstream speed.

What this highlights is not only that more than half of American broadband subscribers have access to less than 3Mbps downstream capacity, but also that there are nearly twice as many people in that situation as there are people subscribed to service above 6Mbps down. This demonstrates tremendous shortcomings either in supply or demand; there's just no way around it.

But the situation gets even worse in the next figure, which shows the distribution of reportable connections by upstream speed.

Half of American broadband subscribers have less than 756Kbps up, and another 40% only have access to between 756Kbps and 1.5Mbps. This is astonishingly putrid.

While some have called out America's upstream shortcomings, I continue to be amazed at how little serious attention this issue is given despite having profound economic implications. These implications are simply: what kind of a digital economy do we want in America? One where users simply consume content, or one where they're contributing content? Do we want to be a country of eaters but not farmers? Do we want a country of buyers but not manufacturers? Not to fall too deeply into hyperbole, but these are the clear ramifications of having a broadband infrastructure with such pathetic upstream capacity.

The next figures highlight America's upstream problem even more clearly. The first shows that if you have less than 3Mbps down, then you almost certainly have less than 1.5Mbps up. The same generally holds true if you have between 3Mbps and 6Mbps down. Only once you start to get above 6Mbps down do we start to see upload speeds above 1.5Mbps, but even then only about 10% of all broadband subscribers in America today are on a pipe that's greater than 6Mbps down and 1.5Mbps up.

Moving on to the next two figures is where things get really interesting. They both compare various speeds of service relative to the number of providers within specific geographic areas.

The first focuses on residential fixed location connections. What this grid shows is that the faster the speeds go the fewer providers there are to deliver it. Once you get above 6Mbps down and 1.5Mbps up, the best you can hope for is two providers, the vast majority of the time there's only one provider, and as often as there are two providers there are no providers.

To me this shows the fallacy of relying purely on market-driven facilities-based competition to move our country forward. Only having two competitors does not a robust marketplace make, and the reality is that unless we force open broadband networks, then the best case scenario for competition above 10Mbps is three competitors: a telephone company, a cable company, and a fiber overbuilder.

So many people refer to competition as the panacea for all our broadband woes, but unless that competition comes in the form of requiring all broadband operators to wholesale access to their network, then it'll never come as facilities-based competition won't work.

But some of you may be asking, what about wireless? Won't that provide the competition we need to drive up the speed and down the cost of broadband?

If you listened to the FCC's rhetoric you'd certainly think so given how much energy they've put on issues like spectrum and a desire to lead the world in mobile broadband, but their own data shows that this rhetoric does not match with reality.

In the next figure they take the same data as the last but then layer on mobile wireless networks. You know what happens? The number of providers in areas with 3Mbps down and either 200Kbps or 756Kbps up increases, but the number in areas with 6Mbps or 10Mbps down and 1.5Mbps up stay exactly the same.

What this clearly shows is that wireless does NOTHING in terms of providing greater competition to deliver faster broadband to Americans.

Now, some might cite the oncoming deployment of 4G wireless as a white knight racing to the rescue, but here's the thing: 4G services aren't delivering all that fast of service today, it's going to take a few years before they're anywhere near fully deployed and actually delivering 10Mbps-type service, and by the time this happens the bandwidth benchmarks the FCC's using won't be relevant any more as by then 10Mbps will (hopefully) be the lowest speed tier and not the highest.

What this all boils down to for me is that America's got a crisis on its hands when it comes to enabling a competitive marketplace for high capacity broadband networks. Sure when it comes to the slow stuff things are looking OK, but the rest of the world isn't waiting around for us to catch up. The fact that we're still ranking broadband based on a top-end downstream tier of 10Mbps and an upstream tier of 1.5Mbps should be a national embarrassment.

And yet that's not the rhetoric you hear coming out of the FCC. Sure they may allude to things not being optimal, but that's such a milquetoast response relative to the clear and present need this data shows. And this isn't just an issue of getting rural america connected; this data also represents America's cities.

When Chairman Genachowski entered office he claimed this was going to be a new era of data-driven decision-making at the FCC. Well here's your data showing that the current state and trajectory of America's broadband is abysmal and systemically broken. Now what are we going to do about it?

On Monday, President Obama gave a speech in NC on the economy where, intentionally or not, he juxtaposed Sputnik and South Korea.

The reference to Sputnik was about how it served as a catalyst that spurred innovation and how it's what our country needs to get out of these economic doldrums. To quote him directly:

"In 1957, just before this college opened, the Soviet Union beat us into space by launching a satellite known as Sputnik. And that was a wake-up call that caused the United States to boost our investment in innovation and education -- particularly in math and science. And as a result, once we put our minds to it, once we got focused, once we got unified, not only did we surpass the Soviets, we developed new American technologies, industries, and jobs."

There were two references to South Korea, one about the recently signed trade agreement that's aimed at increasing exports from America to South Korea, and the other to cite their 90% to 65% edge in broadband adoption rates.

In this speech President Obama also spoke about the need to invest in infrastructure to drive innovation and economic growth, declaring:

"If this is truly going to be our Sputnik moment, we need a commitment to innovation that we haven't seen since President Kennedy challenged us to go to the moon."

But despite alluding to the need to invest in our information superhighways as one facet of America's Sputnik moment, he fails to make any mention of South Korea's massive investment in its nationwide fiber infrastructure.

There's a disconnect here. how can you talk about South Korea in a speech about America needing a Sputnik moment and not talk about fiber?

Making the omission more glaring, much of the speech was about industries of the future, like biotech and clean energy, all of which require fiber connectivity to operate in the 21st century economy.

And not to nitpick, but the speech was given in North Carolina, a state that through the e-NC Authority has been a leader in driving fiber deployment and utilization, yet they garnered no mention.

My intent in writing today is not to criticize these omissions. Instead I'm here to point out their significance within a larger context, namely that of America needing to understand the fierce urgency of now when it comes to spurring not just fiber deployment and adoption but also utilization and innovation.

As I've argued previously, utilization is the point at which people are able to start realizing the benefits of fiber. From a societal point of view, this is where we're able to start optimizing the operations of our institutions to take advantage of the efficiencies and new opportunities made possible through fiber.

Innovation then is about expanding the possibilities of what fiber can do. From a societal point of view, this is where we start to drive new economic growth, the creation of apps, services, and content that can be sold into a global marketplace.

It should be mentioned that utilization and innovation are intimately tied together as well as innovation is meaningless without utilization, and the best innovations often come from closely examining what's needed to maximize utilization.

To date our federal government has focused most of its energies on issues of deployment and adoption. While the national broadband plan starts to get into utilization, it's no further along as a plan than South Korea's government was more than ten years ago when they started this process.

And at this point there appears to be no coordinated strategy to push fiber-powered innovation at the federal level.

So here's why this is so scary.

On the utilization front, research has shown it takes years for communities to start really changing the way they operate to take advantage of what fiber makes possible. So that means the businesses, individuals, and organizations of South Korea are already realizing large-scale economic gains while we're still getting our act together.

But where I'm even more concerned is on the trajectory of America's position as a leader in the digital economy.

The reality of digital innovation in the US today is that the vast majority of investment and development energy is being poured into applications built for the 20th century Internet where bandwidth was scarce and unreliable.

Now, I don't blame developers, entrepreneurs, and investors for doing this as they want to build products to sell to the biggest markets, and at this point there are a lot fewer users on 21st century broadband networks than there are on 20th century in the US.

But that's not the case in a country like South Korea, where basically everyone's on an ultra high speed connection. What this means is that their creative entrepreneurial energy can start focusing more on the development of next gen apps that 21st century broadband makes possible.

What this could ultimately lead to is that despite America having built the Internet and most global internet brands being grown in American soil to date, the next wave of Internet giants that are developing next gen apps won't necessarily be doing so here.

What happens when some kid dreams up a killer cheap HD videoconferencing utility that revolutionizes how business is done? Do we want that to be in a garage in South Korea or in America?

Because that's what's at risk right now. The imagination of South Korea's innovators is unlimited by bandwidth constraints. They're free to dream up all sorts of new ways to leverage these 21st century networks. while the dreams of America's innovators seem mostly limited to the next big thing in social media.

While President Obama avoids this whole conversation in his speech, he does manage to allude to what's at stake:

"Look, right now the status quo -- South Korea is selling a whole bunch of stuff here and we're not selling it there."

But while the government focuses on correcting this imbalance for physical goods, if we don't acknowledge the need to bolster our production of 21st century digital goods then we'll have missed the boat on the greatest economic opportunity of our lives.

And this isn't something we can wait around on. The longer we sit the further ahead countries like South Korea get. We need to find innovative ways to encourage greater utilization and innovation now if we have any hope of leading in the future.

That's why I moved to Lafayette, LA to found FiberCorps, a new non-profit dedicated to solving precisely this challenge of how do you encourage greater utilization and innovation through fiber.

We're working hard to answer these questions at the grassroots level, but our odds of success go up exponentially if the federal government in general and the White House in particular decides to make developing America's digital economy part of its Sputnik moment.

I hope this post makes some small progress towards helping the federal government recognize the need for it to set an agenda attuned to the fierce urgency of now in encouraging greater utilization and innovation of fiber in America.

While we can't take our eye off the ball when it comes to deployment and adoption as they're what enable and create the marketplace of the digital economy, fostering greater utilization and innovation is what'll help generate the demand that will drive greater broadband supply and secure our future as a world power in the digital economy.

Uh oh, net neutrality just got weirder.

A couple of weeks ago Level 3, a major Internet backbone provider and growing content delivery network (CDN), made news when it aired the dirty laundry it has with Comcast.

The gist of the dispute is that since Level 3 is becoming Netflix's CDN of choice and Netflix accounts for upwards of 20% of all Internet traffic during primetime viewing hours, Comcast has decided that the terms of their peering agreement with Level 3 need to change.

While this may sound complicated it's actually relatively simple. Prior to Netflix choosing Level 3, Comcast and Level 3 had an agreement to deliver traffic between their networks for free since each entity was delivering about the same amount of data to the other's network.

Now with Netflix as a customer, this balance is going to get thrown out of whack, with Level 3 delivering more data to Comcast than Comcast is sending to Level 3. And because of this imbalance Comcast thinks Level 3 should have to pay to deliver that extra traffic onto their network.

Before going any further I should admit that this perspective is more Comcast's than Level 3's. According to Level 3, this move by Comcast is a direct violation of net neutrality and is being driven more by Comcast's fear of how over-the-top video providers like Netflix compete with their traditional TV service than any traffic imbalance.

But the point I want to make today is showing how this dispute is a prime example of how "net neutrality" is not the simple bumper-sticker argument some make it out to be but rather issues surrounding how neutral networks should be can get very weird very quickly.

The basis of net neutrality is that the Internet needs to be open to all innovators, content providers, and users to do whatever whenever, to be an open marketplace for the exchange of ideas and services. And in general, at least publicly, everyone involved with all sides of this debate agrees with this notion.

But where the weirdness comes in is when this concept is extended to the actual delivery of Internet traffic, and the Level 3 v. Comcast dispute is a perfect example.

If you read through FCC Chairman Julius Genachowski's latest attempts to find a regulatory solution to net neutrality you'll notice that he doesn't really address how to deal with a dispute like this.

Some might argue that he's right not to try and meddle with this as Internet peering agreements have generally taken care of themselves to date, but that doesn't mean there aren't issues here, in particular the competitive disadvantage these peering agreements put smaller players at.

And it seems likely that as more bandwidth intensive apps like Netflix take off that this probably won't be the last time a dispute like this comes up.

So who's right and who's wrong in this situation? Many have rushed to judgment against Comcast, decrying their actions as a violation of net neutrality, and yet what are they supposed to do? And perhaps even more importantly, what is the FCC supposed to do or not do to try and resolve this situation?

Unfortunately I don't think there are any easy answers as we're now getting into issues that go beyond freedom of expression and get to the heart of the underlying business model for how the Interent generally and broadband specifically works.

What Level 3 v. Comcast shows me is that we can't solve net neutrality without introducing new paradigms both for how we want the Internet to work in the future, and what role government should play in making that future a reality.

Net neutrality is about a whole lot more than just freedom of speech and preserving the open marketplace that is the Internet. And if we don't realize that then the best we can hope for is minor improvements around the margins, which is basically all that Genachowski's proposed to date.

What impact Level 3 v. Comcast will have on the overall net neutrality debate has yet to be seen. But I'm hopeful that at a minimum it'll cause our policymakers to realize both that this isn't a simple topic with an easy answer as well as the fact that a solution is desperately needed to keep disputes like this from holding our country back from realizing the full potential of broadband.