Briefing : The Future of the Internet

A Virtual Counter Revolution - Economist Briefing - 04 September 2010

The internet has been a great unifier of people, companies, and online networks. Powerful forces are threatening to balkanise it.

1. Governments are reasserting their sovereignty. Countries have demanded that law enforcement have access to emails sent from smart phones.
2. Big IT companies are building their own digital territories where they set the rules and control or limit connections to other parts of the internet.
3. Network owners would like to treat different types of traffic differently, in effect creating faster and slower lanes on the internet.

Devotees of a unified cyberspace are worried that the online world will soon start looking as it did before the internet took over: a collection of proprietary islands reminiscent of AOL and Compuserve.

Net Neutrality - every packet of data, regardless of content is equal, and should be treated the same way and every effort should be made to forward it.

1. If operators were allowed to charge for better service, then those not willing to pay would be forced to crawl in the slow lane. Allowing broadband carriers to control what people see and do online would undermine the principles that have made the internet such a success.
2. Opponents say that this could discourage operators from investing to differentiate their services. And given the rapid growth in file-sharing and video, operators may have good reason the manage data flows, lest other traffic be crowded out.

America has a relative lack of competition in broadband service. In Europe and Japan, open access rules requires network operators to lease parts of their network to other firms on a wholesale basis, thus boosting competition. Countries with such rules enjoy faster, cheaper broadband service than America because the barrier to entry for new entrants is much lower. And if any company starts limiting what can be done, they will just defect.

American operators have insisted that open access requirements would destroy their incentive to build new and faster networks since they would have to share them. As a result, America has a small number of powerful network operators, prompting the concern that they will abuse power unless compelled by a net neutrality law to treat all traffic equally.

Rather than trying to mandate fairness, it makes more sense to deal with the underlying problem of lack of competition.