The FCC is now considering a new position on Net Neutrality, and also a new way of classifying multi-channel video programming distributors (MVPDs) that would allow streaming providers who offered “linear” (continuous distribution, similar to channelized RF) programming as opposed to on demand to be MVPDs. That would enable them to negotiate for licensing deals on programming as cable companies do. The combination could raise significant issues, and problems for ISPs. It could even create a kind of side-step of the Internet, and some major changes in how we build networks.
Neutrality policy generally has two elements. The first defines what exactly ISPs must do to be considered “neutral”, and the second defines what is exempt from the first set of requirements. In the “old” order published under Chairman Genachowski, the first element said you can’t interfere with lawful traffic, especially to protect some of your own service offerings, can’t generally meter or throttle traffic except for reasons of network stability, and can’t offer prioritization or settlement among ISPs without facing FCC scrutiny. In the second area, the order exempted non-Internet services (business IP) and Internet-related services like (explicitly) content delivery networks and (implicitly) cloud computing.
The DC Court of Appeals trashed this order, leaving the FCC with what it said was sufficient authority to prevent interference with lawful traffic but not much else. Advocates of a firmer position on neutrality want to see an order that bars any kind of settlement or payment other than for access, and implicitly bars settlement among providers and QoS (unless someone decided to do it for free). No paid prioritization, period. Others, including most recently a group of academia, say that this sort of thing could be very destructive to the Internet.
How? The obvious answer is that if neutrality rules were to force operators into a position where revenue per bit fell below acceptable margins on cost per bit, they’d likely stop investing in infrastructure. We can see from both AT&T’s and Verizon’s earnings reports that wireline capex is expected to decline, and this is almost surely due to the margin compression created by the converging cost and price. Verizon just indicated it would grow wireless capex, and of course profit margins are better in wireless services.
You can see that a decision to rule that OTT players like Aereo (now in Chapter 11) could now negotiate for programming rights provided they stream channels continuously might create some real issues. It’s not certain that anyone would step up to take on this newly empowered OTT role, that programming rights would be offered to this sort of player, that consumers would accept the price, or that the new OTT competitors could be profitable at the margin, but suppose it happened. What would be the result?
Continuous streaming of video to a bunch of users over the Internet would surely put a lot of additional strain on the ISPs. One possible outcome would be that they simply reach price/cost crossover faster and let the network degrade. The FCC can’t order a company to do something not profitable, but they could in theory put them to the choice “carry at a loss or get out of the market”. I don’t think that would be likely, but it’s possible. Since that would almost certainly result in companies exiting the Internet market, it would have a pretty savage impact.
There’s another possibility, of course, which is that the ISPs shift their focus to the stuff that’s exempt from neutrality. That doesn’t mean inventing a new service, or even shifting more to something like cloud computing. It means framing what we’d consider “Internet” today as something more cloud- or CDN-like.
Here’s a simple example. The traditional scope of neutrality rules as they relate to video content would exclude CDNs. Suppose operators pushed their CDNs to the central office, so that content jumped onto “the Internet” a couple miles at most from the user, at the back end of the access connection. Operator CDNs could now provide all the video quality you wanted as long as you were using them. Otherwise, you’re flowing through infrastructure that would now be unlikely to be upgraded very much.
Now look at my postulated opportunity for mobile/behavioral services through the use of a cloud-hosted personal agent. The mobile user asks for something and the request is carried on the mobile broadband Internet connection to the edge of the carrier’s cloud. There it hops onto exempt infrastructure, where all the service quality you need could be thrown at it. No sharing required here, either. In fact, even if you were to declare ISPs to be common carriers, cloud and CDN services are information services separate from the Internet access and sharing regulations would not apply. It’s not even clear that the FCC could mandate sharing because the framework of the legislation defines Title II services to exclude information services.
You can see from this why “carrier cloud” and NFV is important. On the one hand, the future will clearly demand operators rise above basic connection and transport, not only because of current profit threats but because it’s those higher-level things that are immune from neutrality risks. The regulatory uncertainty only proves that the approach to the higher level can’t be what I’ll call a set of opportunity silos; we need to have an agile architecture that can accommodate the twists and turns of demand, technology, and (now) public policy.
On the other hand, the future has to evolve, if not gracefully then at least profitably, from the past. We have to be able to orchestrate everything we now have, we have to make SDN interwork with what we now have, and we have to operationalize services end to end. Further, legacy technology at the network level (at least at the lower OSI layers) isn’t displaced by SDN and NFV, it’s just morphed a bit. We’ll still need unified operations even inside some of our higher-layer cloud and CDN enclaves, and that unified operations will have to unify the new cloud and the old connection/transport.
One of the ironies of current policy debates, I think, is that were we to have let the market evolve naturally, we’d have had settlement on the Internet, pay for prioritization by consumer or content provider, and other traditional network measures for a decade or more. That would have made infrastructure more profitable to operators, and stalled out the current concerns about price/cost margins on networks. The Internet might look a little different, the VCs might not have made as much, but in the end we’d have something logically related to the old converged IP model. Now, I think, our insistence on “saving” the Internet has put more of it—and its suppliers—at risk.