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YES on net neutrality!

The debate is raging on the merits and pitfalls of “net neutrality”.  The lobbyists are working overtime.  Both sides have employed semantics to try to appeal to the average citizen who may not be as versed on the nuances of policy in this area:  according to supporters it’s about innovation; about according to critics it is about freedom, the freedom not to be held to some government rules.  It was funny to see the whole thing spoofed during Jon Stewart’s daily show last night.

The debate is about whether internet access providers (wireline and wireless) can charge extra fees or throttle back services offered by third party application providers.  One recent example was the alleged rejection by Apple of Google’s Voice application (some guess at the request of AT&T, although AT&T denied it) for apparently replicating some of the phone functionality.  For companies like AT&T, the threat is real.  It is the difference between being a value added service provider versus a generic internet access platform.  After all, why not use another VoIP application to make calls on my wireless internet plan for free or close to free than pay AT&T’s voice rates on a per minute basis?  For the record, I am not sure that this path is necessarily a bad outcome for AT&T.  Someone has to provide the access to the internet…

So companies like Comcast, AT&T, Verizon and others are trying to fight for the right to charge more to certain third parties on their network.  They argue that some applications might disproportionately tax their network and “free-load” on the access fees that everyone else pays.  But, what it is really all about is protecting home turf from innovative new applications that compete against their core communication or entertainment services.  The digitization of these services allows delivery via packets over the internet at a substantially lower cost that traditional dedicated networks (albeit at a sometimes slightly reduced reliability).  “Cloud” services providers like Google are likely to benefit significantly from this trend.

Let’s be clear here: net neutrality is a necessary public policy structure and principle for technology innovation. Without it small companies like many of our portfolio companies could be stifled by large incumbents who are bent on preventing corrosion to their business.  Innovative services like Skype, Hulu, and Youtube may have never happened if access providers were allowed to charge extra for usage.  This battle has been fought for a few years.  What’s new is that it now moves to the realm of wireless carriers.  Phones are becoming computers and iphone, with its app store, has unleashed huge opportunities for technology innovation by small companies.  The FCC needs to step in, as it is doing, and create a clear net neutrality framework that will allow this activity to flourish.  By the way, does anybody find it ironic that Apple, who used its muscle to break the old barriers in the music industry and wireless phone industry is now the one that has to “approve” which apps can go on your phone?

There are legitimate arguments on the part of the carriers.  Some applications disproportionately tax their networks.  These are concerns that can be managed, however, and the FCC has tried to strike a balance that accounts for the telcos’ legitimate need to manage the network, but not use that as an excuse to stonewall.  At the same time, the FCC needs to find new spectrum to license to carriers in order to accommodate the explosive demand for new services.  That will allow telcos to be able to handle the traffic.

I actually believe that competition would inevitably lead us to greater network openess, as one or two telcos would like use an “open-network” strategy to compete for business against the others and they would then all have to follow.  However, an active public support for openness will accelerate the trend and is a key ingredient to guaranteeing that we stay ahead on the global innovation front.

In summary, I think the freedom argument is on the side of net neutrality and not the other way around, and we all need to support it.