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Note: If the Telcos continue to whine about the cost of rolling out their video delivery service - and they feel the need exact a massive public service giveback in the form of fewer PEG services, elimination of net neutrality and the elimination of local control over right of way - then maybe their business model is terribly wrong. If this is the public cost necessary for phone company competition in cable TV - it's not worth it.

from: Seattle Times

Plan for two-tiered Internet puts higher price on speed

By Kristi Heim
Seattle Times business reporter

On some highways, drivers pay for access to lanes that let them move faster than ordinary traffic. Will that same concept work on the virtual highway?

As the Internet becomes the conduit for more traffic, especially the heavy demands of transporting music and video, that question has become central to the debate over how to pay for its expansion and set new rules of the road.

The U.S. Senate Commerce Committee is nearing a vote today on a sweeping telecommunications bill, but one issue under consideration — so-called "network neutrality" — is causing sharp divisions. The technology-centric Seattle area has much at stake in its outcome.

Telecommunications companies such as AT&T, Qwest, Verizon Communications and Comcast want to be able to charge different fees to Internet content providers for different levels of service on their networks. Google, Amazon.com, Microsoft and other content companies favor rules that would require neutral treatment, barring telecom companies from charging them fees for priority delivery of Internet traffic.

Consumer groups have criticized the current bill and called for net neutrality, saying blocking or slowing access to some Internet content would result in fewer choices and higher prices.

In Seattle, the city's ambitious initiative for high-speed access calls for partners to build a fiber-optic network with connections to homes and offices, and network neutrality is an essential element of its approach.

"Without net-neutrality guarantees, the Internet as we know it will cease to exist," said Tony Perez, director of Seattle's Office of Broadband Communications. "The cable and phone duopoly will begin to architect their networks to discriminate among application and content providers and possibly favor their own content and applications."

In Kirkland and Snohomish County, however, Verizon is already building a fiber-optic network and says it has a right to charge extra for the new high speeds and greater capacity it can deliver.

"We're making a major investment here, and if Google or AOL or someone else wants to be able to have it guaranteed at some level of speed, our question is what is the problem of charging for allowing them to be able to access our customer base in that way?" said Verizon spokesman Kevin Laverty. "We're certainly not denying anybody access to the Internet."

A two-tiered system would change the way the Internet works today. As it is now, Internet content itself isn't handled differently based on relationships its owner — for example, Amazon — has with an access provider. Under a two-tiered system, if one online bookstore paid for premium service, for example, its pages would be delivered faster than others, giving it a competitive advantage.

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Although not an ideal outcome, prohibiting a tiered system would not change Verizon's plans for the network buildout, Laverty said.

U.S. has fallen behind

The need to build more robust networks and decide how best to run them comes at a time when the United States has fallen behind countries in Europe and Asia. Broadband service in the U.S. is slower and more expensive than in places like France, South Korea and Japan. The telecommunications bill, called the Communications, Consumers' Choice, and Broadband Deployment Act of 2006, had about 200 amendments filed by Wednesday. Addressing digital television, municipal broadband and a host of other issues, it represents the most massive overhaul of telecom policy since 1996.

Commerce Committee Chairman Ted Stevens, R-Alaska, has not indicated which amendments he will entertain during today's debate and vote in his committee. But if the bill passes his committee, it will then go to the full Senate. Phone, cable and high-tech companies have spent several million dollars in lobbying on this legislation since last fall.

A network-neutrality bill co-sponsored by Rep. Jay Inslee, D-Bainbridge Island, failed in the House of Representatives earlier this month. Amendments being proposed in the Senate have similar language, including one by Sens. Olympia Snowe, R-Maine, and Byron Dorgan, D-N.D., that Sen. Maria Cantwell, D-Wash., says she is supporting.

She signed on to the Snowe-Dorgan amendment Tuesday. Cantwell, a member of the Commerce Committee and high-tech industry veteran, has been criticized for not taking a stand on the issue earlier.

"Where is Maria Cantwell?" asked Art Brodksy, communications director of Public Knowledge, a public-interest group for technology policy. Cantwell was not present at the committee's three main hearings on the bill in May and June, including the May 25 meeting on net neutrality, said Brodsky.

Cantwell said she has worked through Sen. Daniel Inouye, D-Hawaii, the ranking Democrat on the committee. "We were hoping these guys [Stevens and Inouye] would come up with language that would be good," she said. "We kept hearing that these guys understood the issue."

The sheer number of amendments pending "shows the level of controversy about the bill," she said. "We have a proposal that's got a lot of holes in it."

Cantwell said getting a net-neutrality provision into the bill is important.

"We don't want to pass language that gives someone the impression you can ... arbitrarily take content and start charging for those services," she said. "I think it impacts the way the Internet operates as a free and open system today."

"No speed limit"

Verizon and other companies support the current bill and are eager to push ahead. Verizon is spending tens of millions of dollars this year to roll out its fiber network to at least 60,000 homes in Kirkland, Redmond, Bothell, Kenmore and Snohomish County. It's part of an estimated $20 billion plan to provide fiber-optic service to homes nationwide, using the network initially for voice and data, and as a video alternative to cable TV in the future.

"If Verizon charges Google or AOL [more] for delivering their services at a highly predictable rate of speed — maybe faster than Papa John's Pizza's Web site — it's so that these companies can take advantage of the physical network we are building, which has virtually no speed limit," Laverty said, adding that speed and capacity can be easily adjusted without adding cost to consumers.

If priority lanes would be fast, others necessarily would be slower, content providers argue. Worse still is the possibility that telecom gatekeepers would block access to competing sites.

"It's like the Tony Soprano of net transport," said Perez. "Pay us so we can ensure your bits get preferential treatment."

Unfair competition?

So far, the debate has mostly been between industry giants, though groups such as musicians and evangelical Christians have weighed in favoring neutrality. Some small-business owners, meanwhile, worry they will get lost in the shuffle.

Seattle-based BillMonk is a growing Internet startup with a shoestring budget offering a shared bill-paying service. Having to pay broadband providers fees to guarantee higher-quality service would hurt BillMonk, said co-founder and Amazon.com veteran Chuck Groom. In addition to raising costs and taking up valuable time to negotiate agreements, a tiered system would introduce unfair competition.

"A large company could oust BillMonk from the market simply by purchasing a much faster connection to the end-user," Groom said.

Added co-founder Gaurav Oberoi: "It would make it much harder to enter the playing field if we had to start competing with giants who could pay for delivery." He gave the example of YouTube, a video-sharing Web site started by two entrepreneurs that became an instant success.

"Would they have gotten as big had the network not been neutral?" he asked. "How would they have been able to compete with Google?"

Kristi Heim: 206-464-2718 or kheim@seattletimes.com. Seattle Times Washington, D.C., reporter Alicia Mundy contributed to this report.