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Making Sense of Google & Verizon's Internet Proposal

Google and Verizon are teaming up to present their vision for Internet regulation. Google CEO Eric Schmidt and Verizon CEO Ivan Seidenberg say they hope the FCC and Congress adopt these regulations, which they say are designed to incentivize a robust public internet. These proposals reveal Google and Verizon's vision for the future of the Internet, which looks a lot more complex than it is now. Here are the highlights of their outlook.

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Hand using mouse with laptop

* Wireline service providers should not discriminate against certain types of content.

At the core of Schmidt and Seidenberg's vision is wireline net neutrality: they say wireline service providers should not be able to discriminate against lawful internet providers. They vehemently oppose paid prioritization: this means that Internet content providers like Google should not be able to pay the likes of Verizon to prioritize their content.

The flip side: unlawful Internet content needs to be prosecuted. They propose fines of up to $2 million for non-compliance.

* Wireless service is an entirely different story: Paid Prioritization is an option.

Schmidt and Seidenberg emphasize that wireless service is very different, stressing the competition. But the main issue differentiating wireless and wireline is capacity—wireless carriers face major capacity constraints. The implications are clear: wireless carriers are so strapped for space to transmit data-rich content like video, it makes more sense to charge for prioritization in wireless. In fact, allowing companies to pay for prioritization may be crucial to the success of the likes of video conferencing.

* Get ready for new Private Networks.

While the companies agree that they should not be able to charge for the open internet, they introduce a new kind of service. They say that service providers should be able to charge extra for what they call "differentiated online services." They're talking about dedicated networks, separate from the free Internet that would offer fast premium services, like streaming entertainment content. This whole new category could enable new services, like sophisticated health care monitoring.

Get ready for a new type of Internet—a premium YouTube-type service with super-fast speeds, which wouldn't be a regular website, but perhaps accessed through an App, or a separate type of Internet browser. If the goal of these rules is to treat everyone equally, does this new type of service create a category where those rules don't apply?

The web is changing fast, and instead of just addressing the broadband and wireless issues facing companies today, Verizon and Google are looking to the future, carving out areas a paid model for fast, prioritized service.

We'll see how the FCC responds to this proposal. For now the commission says "no comment."

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.