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Web Plan Is Dividing Companies

Claire Cain Miller and Brian Stelter|The New York Times
Thursday, 12 Aug 2010 | 8:06 AM ET

In an emerging battle over regulating Internet access, companies are taking sides.

Facebook, one of the companies that has flourished on the open Internet, indicated Wednesday that it did not support a proposal by Google and Verizon that critics say could let providers of Internet access chip away at that openness.

Meanwhile an executive of AT&T, one of the companies that stands to profit from looser regulations, called the proposal a “reasonable framework.”

Most media companies have stayed mute on the subject, but in an interview this week, the media mogul Barry Diller called the proposal a sham.

And outside of technology circles, most people have not yet figured out what is at stake.

The debate revolves around net neutrality, which in the broadest sense holds that Internet users should have equal access to all types of information online, and that companies offering Internet service should not be able to give priority to some sources or types of content.

In a policy statement on Monday, Google and Verizon proposed that regulators enforce those principles on wired connections but not on the wireless Internet. They also excluded something they called “additional, differentiated online services.”

In other words, on mobile phones or on special access lanes, carriers like Verizon and AT&T could charge content companies a toll for faster access to customers or, some analysts worry, block certain services from reaching customers altogether.

Opponents of the proposal say that the Internet, suddenly, would not be so open anymore.

“All of our life goes through this network, increasingly, and if you can’t reach your boss or get to your remotely stored work, or it’s so slow that you can’t get it done before you give up and you go to bed, that’s a problem,” said Allen S. Hammond IV, director of the Broadband Institute of California at Santa Clara University School of Law. “People need to understand that’s what we’re debating here.”

Decisions about net neutrality rest with the Federal Communications Commission and legislators, and full-throated lobbying campaigns are already under way on all sides. The Google-Verizon proposal was essentially an attempt to frame the debate.

It set off a flood of reaction, much of it negative, from Web companies and consumer advocacy groups. In the most extreme situation that opponents envision, two Internets could emerge — the public one known today, and a private one with faster lanes and expensive tolls.

Pricing the Internet Highway
Discussing net neutrality with Craig Aaron, of Free Press, and Adam Thierer, of the Progress and Freedom Foundation.

Google and Verizon defended the exemptions by saying that they were giving carriers the flexibility they need to ensure that the Internet’s infrastructure remains “a platform for innovation.” Carriers say they need to be able to manage their networks as they see fit and generate revenue to expand them.

AT&T said in a statement Wednesday night that “the Verizon-Google agreement demonstrates that it is possible to bridge differences on this issue.”

Much of the debate rests on the idea of paid “fast lanes.” Content companies, the theory goes, would have to pay for favored access to a carrier’s customers, so some Web sites or video services could load faster than others.

That would be a big change from the level playing field that content companies now enjoy, Mr. Diller, who oversees Expedia, Ticketmaster, Match.com and other sites, said last month. Speaking of the telecommunications carriers, he said, “They want the equivalent of having the toaster pay for the ability to plug itself into the electrical grid.”

These fast lanes are fairly easy to understand when it comes to wireless Internet access. But what confused many was the suggestion by Google and Verizon that future online services that are not part of the public Internet should also be exempt from equal-access rules.

These services would be “distinguishable from traditional broadband Internet access services,” the two companies said in a joint blog post. “It is too soon to predict how these new services will develop, but examples might include health care monitoring, the smart grid, advanced educational services or new entertainment and gaming options.”

Some experts were puzzled as to what these services might be and why such an exception might be necessary.

“Broadband that’s not the Internet? I don’t know what they’re talking about,” said David A. Patterson, a professor of computer science at the University of California, Berkeley. “They seem to have an idea of something other than the public Internet as a way to ship information, but by nature, to have value it has to go to a lot of places, and right now, that’s the packet-switched Internet.”

Josh Silver, chief executive of the nonprofit group Free Press, said the exemptions amounted to “the cable-ization of the Internet,” in that cable subscribers pay extra for premium tiers of service and for certain channels. Mr. Silver’s group is promoting a petition to the F.C.C. titled “Don’t Let Google Be Evil.” Silicon Valley investors have expressed trepidation that the new rules, if adopted, could put a damper on innovation, particularly for mobile start-ups.

The wireless Internet is quickly emerging as the dominant technology platform, said Matt Cohler, a general partner at Benchmark Capital, a prominent venture firm in Silicon Valley that has invested in start-ups like Twitter. “It is as important to have the right protections in place for the newer platform as it is for the older platform.”

Facebook sounded a similar note on Wednesday, saying in a statement that it supported net neutrality principles for both wired and wireless networks.

“Preserving an open Internet that is accessible to innovators — regardless of their size or wealth — will promote a vibrant and competitive marketplace where consumers have ultimate control over the content and services delivered through their Internet connections,” the company said.

Technology companies like Amazon and eBay also expressed concern with Google’s compromise, but have been less vocal.

Some start-ups see possible advantages in tiered access. Danny Stein, the chairman of eMusic, a music download service, said there needed to be Internet service that remained open and neutral, “but that doesn’t mean there can’t be premium options to appeal to some amazing consumer experience outside of the garden of net neutrality.” (Click here to read CNBC's Julia Boorstin's take on the subject).

The silence of big media companies like Comcast and the News Corporation on the issue has been noticeable. Media companies’ traditional business models have been about controlled pathways to the customer, and they may see benefits in restoring some of that control.

Mr. Diller asserted that the Google-Verizon proposal “doesn’t preserve ‘net neutrality,’ full stop, or anything like it.” Asked if other media executives were staying quiet because they stand to gain from a less open Internet, he said simply, “Yes.”

Miguel Helft, Brooks Barnes and Joseph Plambeck contributed reporting.

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  • Matt Hunter is the senior technology editor at CNBC.com.

  • Cadie Thompson is a tech reporter for the Enterprise Team for CNBC.com.

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

  • Jon Fortt is an on-air editor. He covers the companies, start-ups, and trends that are driving innovation in the industry.

  • Lipton is CNBC's technology correspondent, working from CNBC's Silicon Valley bureau.

  • Mark is CNBC's Silicon Valley/San Francisco Bureau Chief covering technology and digital media.