2. Overview of Network Neutrality Kyle D. Dixon Senior Fellow & Director, Federal Institute for Regulatory Law & Economics The Progress & Freedom Foundation Presented to the California Foundation on the Environment and the Economy Roundtable Conference on Telecommunications and Advanced Technologies May 4-5, 2006

3. 2 Overview of Network Neutrality  What is network neutrality?  Increasing complexity of the concept  Public policies and proposals

4. 3 What is Network Neutrality? – Out with the Old Traditional Communications Networks TelephoneCable Video Broadcast

5. 4 What is Network Neutrality? – In with the New Network Infrastructure Internet Protocol Applications, Content and Devices Broadband IP (“Edge”) Networks

6. 5 What is Network Neutrality? – The Opportunity TraditionalNetworks Broadband IP Networks IntramodalCompetition E.g., telecom resale, UNE-p, leased access E.g., voice, video or data content, applications, etc. IntermodalCompetitionMinimal Existing and potential

7. 6 What is Network Neutrality? – Early Conception  Origins in “open access” debate (i.e., choice of ISPs on cable modem service)  Consumer perspective: freedom to use broadband to access content, applications and devices of their choice  Company perspective: broadband networks may not “discriminate” in favor of their own or affiliated content, applications or devices

8. 7 Increasing complexity – Blocking/Degradation  Blocking – not allowing certain data traffic to reach end user (e.g., blocking voice packets or ports)  Denying interconnection – refusing to link networks physically  Re-routing – manipulating routes taken by certain data traffic

9. 8 Increasing complexity – Network Management  Quality of service – adjusting network performance for specific applications  Security – preventing viruses, spam, etc.  Spectrum reservation – on broadband connection for affiliated content, applications  Traffic shaping – limiting bandwidth available for specific applications or end users  “Acceptable use” policies  “Caching” – storing content nearby

10. 9 Increasing complexity – Premium Service Fees  Prioritization – speeding delivery of data for extra fee to consumer or service provider  Tariffed tiering – offering content/applications providers fee schedule for improved delivery  “Access charges” – charging content/applications providers to deliver traffic to end users over “last mile”

11. 10 Increasing complexity – Limits on Networks  Technical feasibility  Commercially sustainable (e.g., avoiding “bypass” on other networks or dodging intended constraints)  Acceptance by government

12. 11 Increasing complexity – Limits on Networks Likely to Prohibit: Blocking Denial of interconnection Re-routing traffic Access charges Case By Case: Virus, other security Spectrum reservation Traffic shaping “Acceptable” uses Caching Probably Allow: Quality of service Prioritization of traffic Tariffed tiering

13. 12 Public Policies and Proposals – The FCC Net Neutrality Policy Statement  Codifies commitment to openness and competition among broadband networks  Limited where harm to network, law enforcement needs  Rejects industry-wide rules at this time Bell Merger Conditions  Temporary, limited to merging companies

14. 13 Public Policies and Proposals – The FCC TraditionalNetworks Broadband IP Networks IntramodalCompetition E.g., telecom resale, UNE-p, leased access Voluntary access to content; agency can intervene if necessary IntermodalCompetitionMinimal Regulation could thwart investment, consumer choice

15. 14 Public Policies and Proposals – Congress Congress  Several bills address net neutrality  Approaches vary:  monitoring/enforcement of Policy Statement  abuse of “market power” test  specific prohibitions with exceptions reflecting evolving concept of “neutrality” his time  Division on this issue may complicate statutory reform generally

16. 15 Stay tuned... Kyle D. Dixon, Senior Fellow The Progress & Freedom Foundation Phone: 202-289-8928 kdixon@pff.org