The Net Neutrality debate in the U.S. is starting to intensify – a Senate committee is investigating today incidents where Cable companies and Telcos have discriminated against Internet traffic sources. The unexpected part is that this investigation is now seemingly expanding to cases which do not involve the Internet per se. The committee will be looking at the case in September where an abortions rights group was initially denied access to a text messaging program over Verizon Wireless. In effect, the broader theme of Net Neutrality is somewhat akin to a freedom of speech argument - and ultimately asks the question, “Does the carrier provide a public utility service and as such shouldn’t be able to discriminate about what gets carried over their pipes?” The importance of this question is that it could very determine the role of the carrier in battle between the incumbent carriers and over-the-top service providers like Google and Amazon. Essentially if the U.S. government decides to wash its hands of the situation, it could allow service providers like Comcast to insert itself into the value chain, charging a toll now only to the end consumer (as it does today) but also from the content providers. For content providers, this outcome would be disastrous, as it could kill their business models that have been modelling in negligeable data transport costs.
In a separate announcement, Comcast announced that it will be working with Pando Networks on an initiative to craft a “P2P Bill of Rights”, which would outline the responsibilities and expectations that users and service providers would have regarding distribution of legal peer-to-peer content. This could be an important agreement between industry players that could enable peer-to-peer filesharing as a viable and economic feasible content distribution method.
What type of things will be enabled in this P2P Bill of Rights? For consumers, it will mean the ability to control when P2P filesharing is enabled, but will also extend to the right to not have spyware or viruses within or delivered through their P2P application. For service providers, some knowledge of where the content sources (end users, local caches, content distribution networks (CDNs)) are in real-time would be important as it will minimize the amount of backbone traffic consumed by legal peer to peer traffic. In addition, for service providers, this knowledge would also allow them to develop a way of charging back its services to content owners to some degree. The takeaway here is that this agreement could see all parties work together to ensure that legal peer to peer is helped along at each point in the value chain, with everybody getting their fair slice of the pie. This agreement comes at a time when government appears to be ready to take action to ensure Net Neutrality, and is clearly meant to try to head off regulatory actions.
Thus far, Comcast, Pando, and the DCIA appear to be supporters of this initiative, but at an upcoming DCIA meeting on May 5, this group will be expanded to include on a voluntary basis content owners, P2P companies, and service providers, and at some later point, CDN vendors, equipment vendors, and public advocacy group may be added as well.
While this all sounds good, there are a number of critical and unresolved issues related to this topic:
1) Illegal peer to peer which we hazard to guess makes up the vast bulk of peer to peer filesharing, is not addressed under this initiative. Actually, we do need to separate this out, as there is likely a significant and growing amount of peer to peer traffic which is not illegal but is not officially released by a major studio. Examples of this include unsigned band content, concert recordings, and open source software distribution. The question mark is whether this type of content will be relegated to the status of “second class citizen”? In other words, will service providers be looking to provide paid “gold tier” status for sponsored content distribution? This is almost a certainty, but if the performance between sponsored and unsponsored tiers is too great, then we could end up with a managed Internet to a great extent – something which the government is hoping to avoid.
2) The economic model is still really the key sticking point, with over-the-top service providers really winning a disproportionate amount of the growth in value of the Internet. Clearly, service providers will want to claw some of this back as legal peer-to-peer evolves, but getting consensus amongst all of these parties may be difficult.
3) The other challenge with respect to legal content tracking is that suddenly the service provider now has greater knowledge about what’s been carried on their networks. No doubt, there will be pressure to use this information to stamp out illegal transmissions of this content. With consumers clearly using P2P for illegal purposes to a great extent, this action could turn off a lot of customers and push them towards alternative service providers.
In summary, supporting the P2P Bill of Rights is a big step for a monolithic company like Comcast – a sign of a “change in religion”? To some extent, yes. However, we are still in the early days of resolving the overall P2P equation. The basic contradiction that is challenging to solve is that while illegal peer to peer has been driving broadband adoption in the U.S., it has also been increasing the capex and opex required by carriers. Until reasonably priced legal content can “fill the gap” that was fulfilled by illegal peer-to-peer, it will difficult for consumers to accept this radical change in Internet content. All in all, the wheels of change are starting to move albeit slowly…
Bottom line: This announcement from Comcast is encouraging, especially as it may increase the transparency that service providers will give with respect to its traffic management policies. For the government, this may however not be enough, as it may be akin to the fox guarding the henhouse. Basic regulatory provisions from the government could be very bad for the service providers, as it would tip the balance of power towards over-the-top service providers as a new economic model vis-a-vis legal peer-to-peer distribution is being formulated.
