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It is time to redefine net neutrality

V Sridhar / Rohit Prasad
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The existing definition of the concept does not necessarily reflect the complexities of the internet today

Cat and mouse games On internet pricing and freedom
Cat and mouse games On internet pricing and freedom

Telecom regulator TRAI’s decision to disallow differential pricing schemes based on content has led to the expected furore with indignant voices being raised for and against the order. While the concept of net neutrality has seen many vicissitudes in its 10-year history in many countries, it is worthwhile revisiting the architecture of the internet today to assess whether the definition of net neutrality propounded by Tim Wu way back in 2003 still holds good.

The stylised model of the internet envisages it as a two-sided market with the content and application provider (CAP) on one end and users at the other end, connected through the broadband platform of the telecom (and internet) service providers (TSPs).

The principle of net neutrality is based on the end-to-end design principle: that innovation in a network should be determined by decisions at the ‘edges’, i.e. decisions of the CAP and the end-user should govern the growth of the internet while the intermediary (TSP) should be a ‘dumb pipe’ and play no gatekeeping role.

The gateways

In the late 1990s as the number of websites as well as the amount of data on each site mushroomed, new technologies of content delivery emerged that utilised distributed storage of web-based content on the internet.

The practice of ‘caching’ and “mirroring” implemented, among others, by firms such as Akamai Technologies, allowed websites to place their servers closest to the end users inside a TSP network.

This also led to the growth of the hosting service providers (HSPs), which provide content distribution services to websites in partnership with the TSP. The speed of Google Search to some extent draws on its partnerships with specific ISPs to place content closer to end users.

Further, in recent times the CAPs have also become layered with services such as search and social networks, becoming important gateways to the internet.

Finally, the advancements in digital advertising, including the omnipresent Google AdWords search algorithms, and the rise of iconic consumer devices like Apple phones have shifted the power hierarchy on the Internet.

The number of possible commercial arrangements between different entities in the Internet ecosystem has increased multi-fold.

These include contracts between CAPs and advertisers, CAPs and HSPs, HSPs and TSPs, CAPs and TSPs, CAPs and end users and TSPs and end users. Web search results today are avowedly non-neutral with the content of the search engine getting priority over organic returns, and paid search dominating the first page.

There can also be vertical integration between the different entities. For example, the large CAPs such as Amazon, Facebook, and Google started out as pure CAPs but now are HSPs as well.

New definitions

In this situation the old definition of net neutrality that treated the internet as a simple two-sided market does serious injustice to the complexity of the internet today and overlooks many links of the network that could do serious damage to the spirit of the end-to-end design principle.

One of the main questions that net neutrality advocates must examine today is vertical integration: of CAPs and TSPs, CAPs and HSPs, and HSPs and TSPs. When HSPs and TSPs are integrated the TSPs could adopt the “zero pricing” rule favoured by net neutrality advocates under which the TSP does not charge a CAP for providing access to end users; however, compensates it with higher charges levied on the CAP in its role as an HSP.

This tendency would be exacerbated if the TSP is linked with another CAP which is a competitor to the CAP in question.

Hence the net neutrality debate is not just about TSPs or CAPs but about regulating competition in the vertically integrated internet of today where challenges to the end-to-end design principle could come not merely from TSPs but also search engines, social networks, device manufacturers and HSPs.

Fight for control

The important questions of privacy and security, and challenges to the relative importance of state and non-state actors posed by the internet also cannot be brushed aside.

Wu, the person who coined the definition of net neutrality, studied the rise of the major technologies of communication including the telegraph, radio, TV and the internet in his 2010 book The Master Switch .

He outlines how a technological innovation starts as a hobby and inevitably ends up as an industry controlled by a few powerful corporations.

He advocates the ‘Separations Principle’, which creates salutatory distance between each of the many layers of the information economy.

On the other hand, the Chicago School advocates no intervention in vertically integrated markets based on the argument that the integration of complementarities must be presumed to outweigh the negative effects on competition in the individual markets.

While the internet has indeed come a long way from the research network of the 1960s, we are just at the beginning of a revolution that could end up creating a giant information system of interconnected devices, and objects with human beings merely one of the many entities in the system.

Future facing regulation would recognise the nature of the internet that is coming into being, and not be tied to formulations that reflect the way things used to be.

Sridhar is a professor at IIIT Bengaluru; Prasad is a professor at MDI Gurgaon

(This article was published in the Business Line print edition dated February 11, 2016)

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