for a steady 50 kbps VoIP stream than for a steady 50 kb/s gaming
application where the QoS requirements—that is, the incremental cost of
providing QoS to the two content providers—are the same.
But under each of the net neutrality bills in Congress, non-
discrimination in the supply of QoS means something more extreme: if a
broadband provider offers enhanced QoS to any individual content
provider, then it must offer the same enhanced QoS to all content
providers for free. The apparent motivation for such a restriction is to
stymie efforts by any content provider to secure enhanced QoS from
broadband providers, and instead to force all contracting for QoS to
occur between broadband providers and end-users.
These bills generally
do not distinguish between broadband services offered by access
providers versus those offered by backbone networks, and they would
presumably impose their net neutrality restrictions on both types of
networks. Because of the unquestioned lack of market power in
backbone services—for example, even a combination of the backbone of
Verizon (including MCI’s backbone) and AT&T (including the old
SBC’s backbone) would account for less than 30 percent of all Internet
traffic, while combining the top seven backbones would account for
roughly 65 percent of total Internet traffic—there is certainly no
competitive virtue in imposing non-discrimination restrictions on
If this non-discrimination objective has any sense,
it must relate to competitive issues in the access network. Hence, we
discuss the implications of net neutrality for broadband access networks.
One net neutrality bill in the House, H.R. 5273, explains in its
preamble that “a network neutrality policy based upon the principle of
nondiscrimination is essential to ensure that broadband
telecommunications networks, including the Internet, remain open to
independent service and content providers.”
With respect to end-users,
H.R. 5273 would require that access providers “not block, impair,
degrade, discriminate against, or interfere with the ability of any person
3. See Jon M. Peha, The Benefits and Risks of Mandating Network Neutrality, and the
Quest for a Balanced Policy, 34
.,at 17 (2006), available at
4. See, e.g., Net Neutrality: Hearing Before the S. Comm. on Commerce, Science, and
Transportation, 109th Cong. 2 (2006) (statement of Lawrence Lessig, Professor of Law,
Stanford Law School) (“To oppose access tiering [with content providers], however, is not to
oppose all tiering. I believe, for example, that consumer-tiering should be encouraged.
Network providers need incentives to build better broadband services. Consumer-tiering would
provide those incentives.”).
5. See Opinion of the Cal. Attorney Gen. on Competitive Effects of Proposed Merger
of Verizon Commc’ns, Inc. & MCI, Inc., Cal. PUC Dkt No. 05-04-020 (2005), available at
http://www.cpuc.ca.gov/word_pdf/news_release/49697.pdf. Thus, this analysis will focus only
on the potential effects of imposing such restrictions on access networks.
6. H.R. 5273, 109th Cong. § 2(10) (2006) [hereinafter H.R. 5273].
J. ON TELECOMM. & HIGH TECH. L.
to utilize their broadband service.”
With respect to content providers,
the bill would require that access providers “not discriminate in favor of
itself in the allocation, use, or quality of broadband services or
interconnection with other broadband networks.”
In addition, access
providers must ensure that unaffiliated content is delivered “at least equal
to the speed and quality of service that the operator’s content,
applications, or service is accessed and offered, and without interference
or surcharges on the basis of such content, applications, or services.”
Finally, “if the broadband network provider prioritizes or offers
enhanced quality of service to data of a particular type, [then it must]
prioritize or offer enhanced quality of service to all data of that type
(regardless of the origin of such data) without imposing a surcharge or
other consideration for such prioritization or quality of service.”
bill defines a “broadband network provider” as “a person or entity that
owns, controls, or resells, facilities used in the transmission of a
broadband service and includes any affiliate, joint venture partner, or
agent of such provider.”
Note that there is no distinction between an
access provider and a backbone provider—both backbone networks and
access networks are comprised of “facilities used in the transmission of a
broadband service.” Hence, enhanced QoS provided at either the access
level or the backbone level for a fee by an access provider would
presumably be prohibited under this bill. Indeed, because the bill defines
“broadband service” as “two-way transmission capability that . . .
enables the user to access content, applications, and services,”
could implicate any supplier along the bit stream, including a supplier of
enhanced QoS like Akamai. An important exception to the non-
discrimination provision contained in H.R. 5273 is that access providers
may “offer varying levels of transmission speed or bandwidth,”
presumably to both end-users and content providers. Nonetheless, under
H.R. 5273, access providers cannot offer different levels of QoS, and
they cannot set a price for enhanced QoS.
Another “net neutrality” bill, S. 2360, similarly would prevent an
access provider from discriminating in the provision of QoS to content
and it would ban any charges for QoS.
But S. 2360 also
7. Id. § 4(a)(2).
8. Id. § 4(a)(5) (emphasis added).
9. Id. § 4(a)(6) (emphasis added).
10. Id. § 4(a)(7) (emphasis added).
11. Id. § 4(e)(1).
12. H.R. 5273, 109th Cong. § 4(e)(2) (2006).
13. Id. § 4(b)(2).
14. S. Res. 2360, 109th Cong. § 4(a)(6) (2006) (An access provider must “treat all data
traveling over or on communications in a non-discriminatory way”).
15. Id. § 4(a)(4) (An access provider must “offer communications such that a subscriber
can access, and a content provider can offer, unaffiliated content or applications or services in
would deny an access provider from discriminating against either a
content provider or end-user with respect to bandwidth.
neutrality bill, S. 2917, would prevent an access provider from
discriminating against a content provider with respect to bandwidth or
Access providers could offer prioritization to end-users but could
not impose a fee for such service.
In December 2006, the FCC approved an $86 billion merger
between AT&T and BellSouth, two large providers of DSL service in
Two FCC commissioners would not
approve the merger unless AT&T promised to abide by several
conditions, one of which concerned network neutrality. Under the
network neutrality condition, AT&T agreed to conduct business in
accordance with the principles set out in the FCC’s Policy Statement for
a period of 30 months.
In particular, the condition required that AT&T
not provide or sell any service that “privileges, degrades or prioritizes
any packet transmitted over AT&T/BellSouth’s wireline broadband
Internet access service based on its source, ownership or destination.”
Three provisions in the merger commitments narrowed the scope of
the network neutrality conditions. First, the requirement did not apply to
service available only to enterprise customers, including VPN and
Second, the requirement applied only from “the
network side of the customer premise equipment up to and including the
Internet Exchange Point closest to the customer’s premise . . . .”
implies that the merged entity has the right to offer prioritization to
content providers at portions of its network just beyond the network side
of the customer premise equipment such as edge services.
the same manner that content of the network operator is accessed and offered, without
interference or surcharges”).
16. Id. § 4(a)(2) (An access provider must “not discriminate in favor of itself or any
other person, including any affiliate or company with which such operator has a business
relationship in—(A) allocating bandwidth”).
17. S. Res. 2917, 109th Cong. § 12(a)(4)(A) (2006) [hereinafter S. 2917].
18. Id. § 12(a)(5).
19. Press Release, FCC, FCC Approves Merger of AT&T Inc. and Bellsouth
20. Letter from Robert W. Quinn Jr., Senior Vice President, AT&T Servs. Inc. to
Marlene H. Dortch, Sec’y FCC, in Response to Notice of Ex Parte Communication in Review
of AT&T Inc. and BellSouth Corp. Application for Consent to Transfer of Control, WC Dkt.
21. Id. at 8.
22. Id. at 9.
23. Id. at 8.
24. See, e.g., FTC Able to Address Broadband Discrimination, Majoras Says, TR
, Jan. 9, 2007 (“The network geography to which this applies is between the end user
and the first network server reached . . . . Things that happen upstream [under agreements with
J. ON TELECOMM. & HIGH TECH. L.
commitment does not apply to AT&T’s Internet Protocol television
service, which is expected to compete against cable television and direct
broadcast satellite service.
FCC Chairman Kevin Martin supported the AT&T-BellSouth
merger, but not the concessions relating to network neutrality. In his joint
statement of dissent with Commissioner Deborah Taylor Tate, Martin
supported the merger for enabling a wider array of IP-enabled services
for customers and faster speed of broadband deployment in the BellSouth
But Martin argued that the condition involving network
neutrality was not merger-related and he expressed concern that the
network neutrality condition might deter facilities investment, thus
creating a major obstacle to the FCC’s key goal of broadband
deployment to all Americans.
Martin also explained that the provision
would in no way bind the FCC in future decisions regarding Internet
Following on the heels of the merger approval and AT&T’s merger
commitments, on January 6, 2007, Senators Byron Dorgan and Olympia
Snowe reintroduced network neutrality legislation.
Senator Snowe, “[t]he reintroduction of this legislation and the FCC’s
imposition of net neutrality conditions as part of the merger are
significant victories in the fight to ensure nondiscrimination on the
The reintroduced bill was identical to the original bill
introduced in 2006. Thus, the bill would prevent any contracting between
access providers and content providers. That provision would greatly
expand the common meaning of “non-discrimination,” which typically
would require that an offering to an affiliated content provider be
extended to non-affiliated content providers.
reintroduced bill appeared to ignore the limitations in the scope of the
network neutrality provisions contained in the AT&T merger
carriers] are fair game.”).
25. Quinn, supra note 20, at 9.
26. See Press Release, FCC Joint Statement of Chairman Kevin J. Martin and
Commissioner Deborah Taylor Tate in AT&T Inc. and BellSouth Corporation Application for
Transfer of Control, WC Dkt. No. 06-74 (Oct. 29, 2006), available at
27. Id. at 2.
29. Dorgan, Snowe Take Another Stab at Net Neutrality Legislation, TR D
, Jan. 9,
31. See, e.g., ‘Nondiscrimination’ Will Become Focus of Net Neutrality Debate, Martin
Says, TR D
, Jan. 10, 2007 (explaining that the FCC traditionally has meant by “‘non-
discrimination’ that a carrier had to offer the same deal to all customers, but some net
neutrality advocates seem to use the term to mean that broadband Internet access providers
cannot charge content providers” any price).
Thus, the reintroduced network neutrality legislation is more
restrictive than the AT&T merger commitments in the sense that the
legislation forbids an access provider’s contracting with content
providers at any portion of the network, whereas the AT&T merger
commitments tolerate an access provider’s contracting with content
providers beyond the Internet exchange point nearest to the customer.
This is not to say that the merger commitments relating to network
neutrality will not impose costs on AT&T and society. Efficient
contracting for prioritization that could occur between “the network side
of the customer premise equipment up to and including the Internet
Exchange Point closest to the customer’s premise”
—and the associated
welfare gains that could flow from such contracting—will be prohibited
under the merger commitments. The mere fact that, at the time of merger
approval, such contracting had yet to occur at that portion of the access
provider’s network (yet had occurred beyond that portion of the network)
does not imply that such contracting could not occur in the subsequent 30
C. A Guide to the Debate
According to net neutrality proponents, any surcharge for enhanced
QoS would impair an unaffiliated content provider’s ability to compete
in the upstream content market.
For example, an unaffiliated content
provider might be denied the same QoS as that offered to an affiliated
provider, or an unaffiliated content provider might be offered the same
QoS at a higher price than that offered to an affiliated content provider.
Net neutrality proponents also argue that surcharges for enhanced QoS
would deter entry among upstart content providers by reducing expected
We analyze those anticompetitive claims in Part II.C.
Finally, net neutrality proponents argue that the mere offering of
enhanced QoS to any content provider (affiliated or not) implicitly or
explicitly degrades the effective QoS received by all other content
This position, of course, could be correct only to the extent
32. Quinn, supra note 20, at 8.
33. See, e.g., Lawrence Lessig & Robert W. McChesney, No Tolls on the Internet,
, June 8, 2006, at A23.
34. It generally does not matter to net neutrality proponents whether the affiliated
provider offers content that competes with the unaffiliated content. They argue that QoS
preference for any traffic necessarily discriminates against all other traffic.
35. Ben Klemens, Net Neutrality Fosters Competition Between Technologies, S
36. Net Neutrality: Hearing Before the S. Comm. on Commerce, Science, and
Transportation, 109th Cong. 8 (2006) (statement of Lawrence Lessig, Professor of Law,
Stanford University) (“Thus, working with the network provider, large video companies could
secure sufficient provisioning to enable their content to be served while leaving insufficient
J. ON TELECOMM. & HIGH TECH. L.
that overall broadband network capacities are constant and no content
application ever tries to absorb more than its fair share of capacity—both
counterfactual assumptions. Broadband access network capacities have
been growing rapidly over the past several years,
and many popular
applications seek to absorb all available access bandwidth.
analogy of unaffiliated content providers being relegated to the “digital
equivalent of a winding dirt road”
is hyperbole. Such providers likely
will continue to have more and more access to bandwidth available to
them year after year. And for the same reason as painting a stripe down
the middle of a road to create two lanes is likely to speed all traffic (no
driver is permitted to hog both lanes by driving down the middle),
offering enhanced QoS to some content providers at a surcharge may
even benefit content providers that decline the option.
Against these alleged costs, one must weigh the social benefits
associated with permitting access providers to offer enhanced QoS to
content providers at a positive price.
Net neutrality proponents speak of
enhanced QoS as if it were a hypothetical offering that would be
employed by an access provider for anticompetitive reasons only. In
reality, enhanced QoS offerings at certain layers of the networks for both
end-users (primarily enterprise customers) and content providers are
already prevalent in the marketplace, presumably because some (but not
all) customers value those services. Access providers are considering
extending QoS offerings more broadly through their networks.
these QoS offerings at service application layers of the network have
bandwidth to other competitors.”).
37. Cable Broadband Prices Stable; Video Rates Increase, C
, Oct. 2, 2006
(“Transmission speeds rose at major operators. Cablevision raised download speeds 50% for
Optimum Online customers this year to 15 Mbps and doubled upload speeds to 2 Mbps
maximum . . . . Prices haven’t risen in 3 years, said a Cablevision spokesman. Road Runner
download speeds top out at 10 Mbps, compared with 1.5 Mbps in 1996, TW said. Comcast
increased online speeds 4 times and added many features at no charge the past 3 years, said a
38. For a discussion of how Skype supernodes may saturate users’ connections, see
Juha Saarinen, Skype Supernodes Sap Bandwith, C
, Oct. 25, 2005,
Posting of Om Malik to GigaOM, http://gigaom.com/2006/01/10/skype-the-bandwidth-hog
(Jan. 10, 2006).
39. Lessig & McChesney, supra note 33.
40. Other articles have examined the consumer welfare effects associated with net
neutrality provisions. See, e.g., J. Gregory Sidak, A Consumer-Welfare Approach to Network
Neutrality Regulation of the Internet, 2 J. C
L. & E
. 349 (2006), available at
41. Net neutrality proponents generally have not attacked current QoS offerings, but
they express immense concern for any expansion of QoS.
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