Monday, August 9, 2010, 4:17 PM ET|Posted by Will RichmondResponding to rampant rumors last week concerning a potential side-deal on net neutrality, Google and Verizon held a conference call this afternoon unveiling a "Legislative Framework Proposal" by their respective CEOs Eric Schmidt and Ivan Seidenberg. The proposal is meant to influence other net neutrality stakeholders, including the FCC. Google and Verizon insisted there's no companion business deal between them.
On positive side, the companies' proposal tries to break the Washington net neutrality logjam by endorsing an open Internet backed up with a sensible, transparent and non-discriminatory approach that mainly leaves it up to networks to act responsibly. However, the proposal comes with at least 2 big loopholes which until clarified, will no doubt undercut a lot of the proposal's credibility.
The first big loophole is to "allow broadband providers to offer additional, differentiated online services, in addition to the Internet access and video services (such as Verizon's FIOS TV) offered today." Though examples like health care monitoring and smart grid were cited, so were new entertainment and gaming options. Had Verizon said that it wanted to retain flexibility to periodically add IP-based content to FiOS TV, its managed video service, that wouldn't have been controversial. But the provision appears to allow for a third tier of services (which some media on the call began referring to as a "private Internet").
It's not clear at all what entertainment content would fit into this third tier (Schmidt said Google wants to remain on the open Internet), but the mere allowance for it raises the possibility that it could be a Verizon workaround to the companies' insistence that there would be no "pay for prioritization" practice for Internet delivery (which last week's NY Times article asserted). At a minimum, until their explanation is more lucid, this provision will be open to interpretation and suspicion.
The second big loophole is that none of the high-minded legislative framework will apply to wireless networks, except for the transparency provision. As I wrote last week, by exempting wireless, the companies are drawing an artificial distinction just as mobile data and video use is taking off. The justification offered - that "the mobile marketplace is more competitive and changing rapidly" - is off-base to me. Regardless of its development, if appropriate network management latitude is in place than why should wireless access be any less open than wired? Here again the companies have made themselves vulnerable to concern about ulterior motives existing, since they are close, Android-focused wireless partners.
It's hard not to interpret the compromises that underlies this proposal as follows: Google wanted a big network owner to publicly commit to openness; Verizon wanted a big content player to bless it retaining flexibility for new premium wired Internet services and maintaining full wireless freedom. While these compromises may have helped the partners craft their proposal, the resulting loopholes created may preclude it from gaining any real influence. We'll see.
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