Phone, Cable May Charge Dot-Coms That Want to Race Along the Internet
Toll booths might start popping up on the information superhighway.
As Internet traffic starts to clog, the telephone and cable companies that control the nation’s telecommunications networks are considering charging dot-coms such as Google Inc. and Yahoo Inc. extra to make sure their data gets special treatment -- zooming along faster and more reliably than anyone else’s.
The idea has ignited a sort of online road rage in the technology and entertainment industries and in Congress. Although differential pricing is widespread -- think first-class airline tickets or box seats at the theater -- it defies the Internet’s egalitarian tradition.
“It is one of those debates that has a world war sense about it,” said analyst Blair Levin at investment banking firm Stifel, Nicolaus & Co. “Everyone is implicated and billions of dollars are at stake.”
Right now, data on the Internet are generally treated equally, like cars outside the carpool lane on a freeway. But like a freeway, the Internet can get congested, particularly as data-heavy applications such as movies and music gain popularity.
You see that congestion when streaming video stops streaming or when the download bar on your computer slows down. So phone companies, which have limited capacity on copper lines, are proposing special tolls on Internet companies to, in effect, set aside a special lane of fast-moving traffic. Cable companies also would benefit.
For instance, online film sites like CinemaNow Inc. might have to pay a premium to send movies uninterrupted, or Apple Computer Inc.’s iTunes Music Store might tack an extra fee on a song download to guarantee instant delivery.
That worries heavy Internet users like Chad King.
“If they start charging Google and Yahoo to deliver movies and other things to me, that opens the door for all sorts of things,” said King, a 32-year-old Gilroy resident who pays $40 a month for high-speed Internet access from his cable company, Charter Communications Inc. “There would be surcharges for uploading photos and home movies to my website, for blogging and buying things on the Internet, for movies I download from the Internet.”
In Washington and Silicon Valley, the debate is over the long-held tenet of network neutrality -- the notion that access to all the Internet’s offerings should be free from interference from the companies that own the vast fiber-optic and copper-wire networks linking the world’s computers.
Those companies -- phone and cable companies, mostly -- counter that they are entitled to offer expedited delivery services because the growth of online video, music and games is jamming their lines. Already, they charge companies for premium offerings such as private networks.
Senate Commerce Committee Chairman Ted Stevens (R-Alaska) sees network neutrality as the most contentious issue in Congress’ overall effort to amend federal communications laws.
On Friday, Sens. Olympia J. Snowe (R-Maine) and Byron L. Dorgan (D-N.D.) issued a draft bill that contained strong language protecting network neutrality. It would bar broadband providers from charging Internet companies for priority access to faster lanes.
In contrast, a House subcommittee on Wednesday shot down a toughened net neutrality provision championed by the chief executives of Google, Yahoo, Microsoft Corp., EBay Inc., Amazon.com Inc. and IAC/InterActive Corp. A weaker provision gives federal regulators less authority to enforce neutrality principles.
“Consumers embraced the Internet because innovation was rapid and anyone could provide lawful content without interference or permission from those companies that control the networks,” the chief executives wrote in a letter. “This policy has been hallmark feature of the Internet and is a principal reason why our companies and the U.S. Internet industry are global leaders today.”
AT&T; Chairman Edward E. Whitacre Jr. said last month at a Las Vegas trade show that his company would not block or degrade anyone’s service, but that it should be allowed to charge content providers “different prices for different levels of speed, reliability and security.”
Network owners in other countries already are charging for premium services.
In Canada, cable TV company Shaw Communications Inc., which is rolling out phone service, is charging its customers $10 a month extra if they want to “improve the quality and reliability of Internet telephony services” they get from other phone service companies. Internet calling company Vonage Holdings Corp. has protested to Canadian regulators.
Last year, the U.S. Federal Communications Commission stopped tiny telecom provider Madison River Communications Corp. from blocking Vonage phone service, and no evidence exists to show that any U.S. network owner is doing anything like that now.
AT&T; Chairman Whitacre didn’t provide specifics on his idea to charge extra, such as how AT&T; would decide which company should be charged or how much they would pay.
Whatever the price, said King, the Gilroy Internet user, he would use the Web less.
And that scares entertainment companies and dot-coms that are just beginning to exploit the Internet as a way to distribute music, videos and games. For most of the last decade, Internet connections were too slow to deliver much besides text or pictures.
As high-speed, or broadband, connections proliferate, such diversions become more practical.
“The Internet has to be open,” said CinemaNow President Bruce Eisen. “Any user can go to any site now, and people have come to expect that. If the telcos charge the sites, that cost will ultimately fall on the consumer. And the consumer has other choices for Internet service.”
Google warned in its annual report to securities regulators that a failure by government to “protect the Internet’s basic neutrality ... could limit Google’s ability to innovate and deliver new features and services, which could harm our business.”
But network owners and content owners depend on each other. Network owners benefit because demand for high-speed access grows as retail websites, search engines, movie makers and other Internet services become popular. And demand for content increases as the broadband pipes deliver higher speeds and more capacity.
“While the debate takes on the characteristics of being ‘the brawl for it all,’ in fact, it is not a winner-take-all debate -- it’s winner-take-more,” Levin said. “Neither side has an interest in the outright destruction of the other.”
The fight is over who gets to charge the premium for services.
AOL, for instance, has proposed its own service that allows advertisers to pay extra to have their e-mails bypass spam filters. Online movie services such as Movielink and CinemaNow want to charge customers a little extra to download new movies rather than buy them on DVD. And Starz Entertainment Group, through its new Vongo service, offers its channels plus several thousand videos on demand over the Internet for a fee.
“Net neutrality is meant to ensure there is no impediment to anybody’s ability to fully utilize the Net,” said Qwest Communications International Inc. Chief Executive Richard Notebaert at an industry conference last month. “It does not mean -- and never was intended to mean -- that your company and my company cannot reach commercial agreements to provide you with services that enhance your position.”
Internet phone service pioneer Jeff Pulver, however, said that such a tiered system -- one for content providers willing to pay for a super-highway to the home, the other for those who stay on increasingly crowded freeways -- could effectively relegate basic broadband to the backwaters and end up blocking the chances of success for tomorrow’s Googles and Amazons.
By Pulver’s reasoning, the broadband providers would, in effect, be picking winners and losers among the creators of videos and other content and among search engines and aggregators that collect and sell that content to consumers.
“It’s not like we’re free riders,” said Pulver, who co-founded Vonage and whose Pulver.com oversees more than a dozen Internet companies involved in radio, video and phone service. “We’re actually paying somebody for Internet access too.”
Tech-savvy user Brad Beutlich of Monrovia believes that fees and rising prices “would kill the Internet.”
In his household, DSL service “is pretty much the center of all communication and entertainment in the home.” Traveling two to three times a week, the software security provider whiles away the flight time watching some of the two dozen or so movies he downloads for his portable media player.
“If they start cross-charging,” Beutlich said, “I may be less inclined to go to certain websites because I know they have a lot of pictures.”
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