Photo: iStockphoto
Photo: iStockphoto

Myths of Net neutrality

The Internet has not been neutral for a long time and can never be under its present commercial models

Tim Berners-Lee, inventor of the World Wide Web and MIT professor, has said: “The neutral communications medium is essential to our society. It is the basis of a fair, competitive market economy. It is the basis of democracy…it is the basis of science… Let us protect the neutrality of the Net."

It is believed that the neutrality of the Net—the end-to-end design principle under which winners and losers were decided by decisions at the edges of the network, by content and application providers (CAPs) and users, rather than by the core that managed the transmission of content—caused a thousand flowers to bloom including Wikipedia, Hotmail, Google, Amazon and Facebook.

However, the way in which the commercial and technical architecture of the Internet has evolved has rendered it non-neutral for a long time. It is not merely transmission intermediaries that are responsible, but also the very companies that espouse net neutrality from the rooftops. The recent episode of zero rating in which big content and application providers have tied hands with big Internet service providers (ISPs) represents the act of the largest violators of neutrality coming together to further violate the principle.

This is not to say that it is possible or even desirable to return to the pristine version of Net neutrality. We have ventured too far afield. However, the techno-economics of Internet businesses also make it incumbent to evolve specific methods of regulation beyond standard practices of competition law.

Perhaps it may be suitable to define Net neutrality, a many-splendoured phrase, if one were to go by the varieties of its recent usage. Net neutrality implies the minimization of distortion of the relationship between the CAP and the end-user on the part of the transmission intermediary along two dimensions—traffic management protocols and pricing. On traffic management, this implies minimal differentiation of packets. On pricing, the orthodoxy recommends a zero-pricing rule, under which the ISP cannot charge the CAP and must recover costs from the end user.

Data traffic has been exploding for the past few years and traffic management has been around since the introduction of Transmission Control Protocol/Internet Protocol version 4 in the 1980s when routers began to prioritize packets in their queues based on type of service, thereby improving the quality of service. Similarly, zero pricing is a myth even in jurisdictions that claim to follow Net neutrality. This is because most traffic is routed through search engines such as Google.

The search returns consist of a list of websites that come up in an organic search as per the algorithm used by the search engine and a list of websites that constitute the paid search returns. Organic search returns are influenced by paid search returns. Google also personalizes search returns based on a user’s past browsing history. Thus, the lion’s share of Web traffic is influenced by payments made by companies to intermediaries and by proprietary algorithms used by intermediaries, a far cry from the end-to-end design principle.

It is important to climb down from the emotional rhetoric and face reality. The Internet has not been neutral for a long time, and can never be neutral under its present commercial models. Yet, something needs to be done to protect innovation in light of the peculiar characteristics of Internet businesses—technological dynamism, network externalities and vertical integration.

Network externalities are present when the value of a network increases exponentially with the size of the network. A social media site is a good example. Network externalities are ubiquitous on the Net. Even e-commerce sites are able to throw up better personalized recommendations with an increase in the number of users.

Vertical integration is the phenomenon of companies in different levels of the value chain partnering or even merging to take advantage of complementarities. The integration of search with email and social media as practised by Google is an instance. Due to network externalities, and vertical integration of incumbents, new entrants face significant barriers to entry.

Consequently, one must ensure some kind of a level playing field to achieve dynamic efficiency, or long-term productivity growth driven by technological innovation. For this, providing the CAP an inexpensive way of accessing the end user with reasonable quality is absolutely essential.

Hence, ISPs must be made responsible for ensuring a minimum quality of network for all applications, and must allow start-ups to pay them via a revenue share, at least for a certain number of years. This amounts to the established firms and the end-users subsidizing start-ups, something that must be done for the continued dynamism of the Net.

Zero rating and represent a coming together of the big CAPs and ISPs to provide free service to the user, thus hurting companies not part of the deal and depriving the user of the technological dynamism of the Internet. They must be regulated. However, while ensuring the neutrality of the Net, one must not forget to curb the actions of the big Internet companies whose commercial models are as much a threat to the freedom of the Internet as the actions of intermediaries.

The call for Net neutrality is an anguished cry for lost innocence. Youth can never be regained, but youthfulness must not be bargained away.

Rohit Prasad is an associate professor at IMD Gurgaon.

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