Google Public Policy

Thursday, June 28, 2007 at 1:04 PM

Posted by Richard Whitt, Washington Telecom and Media Counsel

I’ve addressed some of your comments about the broadband market and differentiating web traffic based on type. Now I’ll turn to another big subject of your comments on net neutrality.

Doug, Keith, Drywall, asokoloski, psmith, and others engaged in a lively debate about whether and how Google and other Web companies compensate the telecom infrastructure providers for our use of their network facilities. As many well know, the Internet’s longstanding charging arrangements allow each party to pay for its own connection to the Internet. That party then is free to utilize that connection in whatever lawful ways are desired. Google believes that consumers should be able to acquire higher speed or performance capacity from the broadband providers, and then use this capability to reach any service they wish on the Internet. In particular, consumers should be able to purchase tiered pricing arrangements, based on the use of bandwidth, latency requirements, or other objective measures. Such arrangements would constitute an appropriate, cost-based practice that fully compensates the broadband provider for the additional capabilities provided.

On the other end of the “pipe,” Internet-based companies spend billions of dollars annually on R&D to create and deploy compelling content, applications, and services for American consumers. This massive amount of material typically is deployed on millions of Web servers located around the country. In order for the content and applications to be delivered into the Internet, so it then can be made available to consumers, Web companies must arrange with network operators to: carry the data traffic from company facilities to their Web servers over local telecom lines (the “last mile”); carry the data traffic from the Web servers into the Internet over high-speed, high-capacity data lines (“special access”); and carry the data traffic over the numerous interconnected networks that make up the Internet (the “Internet backbone”). To accomplish these important connectivity and transport functions in a fast and effective manner, Internet companies collectively pay many billions of dollars per year to network operators, which fully compensates them for their network investment.

We believe that broadband providers should be precluded from charging content providers for terminating traffic to a particular end user. Allowing broadband providers to leverage their “situational monopoly” over terminating traffic would allow them to choose which content providers receive preferential treatment over others, thereby distorting the marketplace. The institution of terminating charges also could lead to the balkanization of the Internet, in which each of the hundreds of local telephone and cable operators around the country – and, perhaps even more importantly, around the world — would assess its own set of fees for terminating traffic on its network.

I hope these clarifications have been helpful, and that you’ll keep sharing your thoughts.

P.S.: Be sure to check out Robert Cannon’s outstanding blog, Cybertelecom, which should be required reading for anyone interested in the Internet and broadband policymaking discussions in D.C.

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Wednesday, June 27, 2007 at 10:14 AM

Posted by Richard Whitt, Washington Telecom and Media Counsel

Yesterday I addressed some of the comments on my net neutrality post dealing with the broadband market. Today I’ll delve a little deeper on another issue you asked about: type-based traffic differentiation.

Several users commented on Google’s position that reasonable type-based differentiation of Internet traffic can be an acceptable business practice. As we explained in our FCC comments, we do not dispute that broadband providers should have the ability to manage their networks, as well as engage in a broad array of business practices. To us, the real question comes down to what kinds of business models and network management techniques rely on unilateral control over last-mile broadband facilities (the proverbial “on-ramps” to the Internet), in the service of anticompetitive or discriminatory intent.

Most known network management techniques will create few if any marketplace harms. So, for example, we believe that a broadband provider should have the leeway to utilize legitimate application and content-neutral network management practices that seek to neutralize objective network harms. These practices would include halting harmful denial of service (DOS) attacks, or blocking certain traffic containing viruses or worms.

We also stated that it may be a reasonable business practice to prioritize all packets of a certain application type. Our rationale for that position is that there may well be tangible end user benefits from giving preferential treatment to certain Internet packets, such as those in a streaming video transmission, in order to enhance the end user experience. As long as the categories of “type” are identified and designed with objective criteria in mind (such as sensitivity to latency or jitter), and prioritization is apply in an even-handed manner to all packets in that category, the practice can be a fair one. If, on the other hand, type-based prioritization is used to promulgate discriminatory practices – such as degrading or prioritizing certain applications based on an intention to impair the offerings of competitors – such practices should be prohibited as unreasonable.

I will be the first to say that allowing type-based prioritization is a close call, and reasonable minds certainly can differ. Many in the Internet community lack trust that the broadband provider will employ packet prioritization over last-mile networks in a manner that still preserves an open Internet environment and does not facilitate the introduction of anticompetitive practices. Moreover, prioritization generally creates a host of practical, economic, and technical problems, not least of which is that the broadband carrier has fewer incentives to build out its network capacity where it can make more money simply by charging for differentiated service.

On balance, though, we believe that the possible end user benefits from differentiating between certain broad categories of Internet traffic outweigh the potential competitive and discriminatory threat. That doesn’t mean that we cannot subsequently criticize, and seek to halt, any such practices that take an anticompetitive turn. Nor does it mean that Google somehow is going “soft” on network neutrality. We have merely drawn the line in a slightly different place than others in the pro-net neutrality camp.

Tomorrow, I’ll address your comments about another net neutrality topic: paying for bandwidth.

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Posted by Richard Whitt, Washington Telecom and Media Counsel

Thanks to all who read my initial posting on network neutrality, and especially to those folks who took the time to leave comments. While I don’t have the personal bandwidth (ouch) to respond to each and every posting while also taking care of my “day job” here at Google, I will check back periodically and offer follow-up reactions.

I believe it is important for companies like Google to establish a place of meaningful dialogue with the general public, and to open our policy advocacy role to outside analysis — and yes, criticism. I also welcome your thoughts on other telecommunications and media policy issues of interest to you (my own current favorite topic is the FCC’s ongoing consideration of rules governing the upcoming 700 MHz auction). And I urge folks to take their views to the places where they ultimately count: the well-trod halls of the FCC and the U.S. Congress.

Today, I’ll offer some thoughts on one of the key issues raised in some of the comments on my net neutrality post: the broadband market. Later this week I’ll address two other issues you asked questions about: type-based traffic differentiation, and payment for bandwidth.

Market analysis

Scott Cleland asked whether the search market is as highly concentrated as the broadband market, and thus deserves network neutrality regulation as well. Scott asked me the same question at an EDUCAUSE policy conference last month, but I’m happy to repeat my response and elaborate here.

I’m certainly no economist, but I do try to keep up on the latest thinking about how markets function. The available evidence demonstrates that the U.S. consumer broadband market is highly concentrated, with extensive barriers to entry, high consumer switching costs, and no near-term competition. By stark contrast, the search market is robustly competitive, with numerous major players, new near-term competition, no significant barriers to entry, and zero user switching costs.

• First, the broadband market suffers from a pronounced and intractable lack of competition. At best, consumers have a choice today between a telephone company and a cable company. The Congressional Research Service has described the current market as a “broadband duopoly,” where telephone and cable companies face little real competition. The FCC’s own skewed July 2006 figures still showed an overwhelmingly concentrated broadband market, with telephone companies and cable companies controlling access to 99.6 percent of all U.S. consumers. The share of alternative broadband platforms also has been decreasing steadily over time, from a less-than-impressive 2.9 percent in 1999 to an anemic 0.4 percent today. The GAO further found that only about 28 percent of all US households subscribed to broadband service in 2005, and noted that DSL and cable modem service together constitute the only broadband technologies actually available to consumers.By comparison, the market for search engines in the United States is highly competitive. Stats from comScore and other market analysis firms show that Google has only about half of the overall U.S. search market. Indeed, Google competes every day with large, well-funded companies like Yahoo, Microsoft, AOL, and Ask.com. Aggregator search services such as dogpile.com also flourish, along with dozens of other popular search-based services in the U.S. alone. In short, the U.S search market is anything but concentrated.

• Second, while emerging technologies may eventually enable viable competitors, such channels currently do not compete in terms of speed, price, availability, or technological maturity. In fact, each of the supposed technology alternatives –- such as broadband over powerline (BPL), satellite internet, and 3G wireless — provide no real competitive option. In particular, 3G wireless fails the test because, among other drawbacks: (1) most services do not qualify as “high speed” under the FCC’s current definitions; (2) data plan prices typically are at least double what consumers pay for cable or DSL service; (3) wireless providers block many common Internet applications and services, foreclose outside network attachments, and reserve the right to terminate service arbitrarily for using “non-conforming” services; (4) few consumers have substituted wireless broadband service for wireline broadband service; and (5) the FCC’s figures include all owners of 3G phones, whether or not they have purchased or used them for Internet access. Perhaps most significantly, the largest national wireless high speed Internet providers represent two incumbents from the wireline market and two longstanding telecommunications provider. The appropriate way to add up the available consumer options is not by simply counting individual broadband technology platforms, but rather independent platforms.By contrast, the search market is dynamic and expanding all the time. Not only do we seen a raft of new entrants in the text-based search market, but also nascent services such as video search, image search, news search, and other specialized search functions. No company can afford to rest on its laurels in this ongoing race for faster and better search functionality.

• Third, considerable and insurmountable barriers to entry also limit the possibility of new competition. To build and operate a nationwide broadband system capable of competing head-on with the incumbents, would-be market entrants must (among other things) pour tens of billions of dollars into constructing local, regional, and national communications infrastructure, pay for backhaul, access rights of way, and interconnect with hundreds of other U.S. carriers. On top of that enormous investment, the market entrant then must create a commercially viable service offering, complete with retail sales outlets, technical and customer support, and advertising.By contrast, barriers to entry in the search market are quite low. Even though established search engines from Yahoo, Infoseek, MSN, Altavista, and many others had a considerable head start in the late 1990s, Google showed how a good idea hatched on a neutral and open Internet can change the industry in a few short years. Of course, any individual or company with an algorithm, and a means of accessing the Internet, can pave their own way into the burgeoning search engine market.

• Fourth and finally, even assuming the ability to choose another broadband provider in a particular area, consumers endure considerable switching costs. Providers typically bind their customers with multi-year contracts (sometimes termed “stickiness”), bolstered by substantial early termination penalties. The prevalence of bundling together different services also helps providers reduce “churn,” where there are competing offerings. Equipment costs, truck rolls, and even legacy email accounts all create disincentives for consumers to move to another broadband service provider.By contrast, it is the user of search engines that possesses all the power. If an end user decides he or she no longer likes a preferred search engine, the time and cost to change search engines is zero. Changing search engine preferences – as with many other Web-based businesses — is literally just a mouse click away. As a result, stickiness is not a common feature of Web-based entities.

Together, these salient factors — excessive market concentration, no viable competitors, considerable consumer switching costs, and substantial barriers to entry — should lead policymakers to conclude that there is a major competition problem in the broadband market. No such problems exist in the search market.

I’ll have more to say later this week about some of the other issues you’ve raised. In the meantime, what do you think?

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Friday, June 22, 2007 at 3:36 PM

Posted by Andrew McLaughlin, Director of Public Policy and Government Affairs

The Associated Press is running a story headlined “Google Asks Government to Fight Censorship.” The story highlights some (until now) fairly quiet discussions we’ve been having with various parts of the U.S. government, including the Departments of State and Commerce, the Office of the U.S. Trade Representative, and various House and Senate committees.

We’ve been making the following case:

• The information industries –- broadly understood to mean Internet companies, book and periodical publishers, broadcasters, and the music and film industries –- together comprise a critical and growing component of the U.S. economy. They create jobs, spur economic growth, and bring to the world the best of American ideals about freedom of expression, creativity, and innovation.

• To industries that depend upon free flows of information to deliver their services across borders, censorship is a fundamental barrier to trade. For Google, it is fair to say that censorship constitutes the single greatest trade barrier we currently face.
• Some forms of censorship are entirely justifiable: the worldwide prohibitions on child pornography and copyright infringement, for example. Others, however, are overbroad and unwarranted. When a government blocks the entire YouTube service due to a handful of user-generated videos that violate local sensibilities –- despite our willingness to IP-block illegal videos from that country –- it affects us as a non-tariff trade barrier.
• Just as the U.S. government has, in decades past, utilized its trade negotiation powers to advance the interests of other U.S. industries, we would like to see the federal government take to heart the interests of the information industries and treat the elimination of unwarranted censorship as a central objective of our bilateral and multilateral trade agendas in the years to come.

It’s important to stress that this isn’t a political thing –- we’re not interested in forcing the U.S. Constitution’s First Amendment on other countries. Rather, we’re seeking to ensure that our information-based industry can thrive and flourish in all corners of the world. We take seriously Google’s mission “to organize the world’s information and make it universally accessible and useful.” To accomplish that for individuals everywhere, we need the assistance of the U.S. and other like-minded governments in combating unwarranted censorship. (We’ve started to make the same case, by the way, to other governments, such as the member states of the European Union.)

The good news is that the uniform reaction to this argument in Washington has been the nodding of heads, typically coupled with a request to hear more about how this can practically be done. Clearly, it isn’t going to happen overnight. But my hope is that the U.S. government can begin to move – incrementally, agreement-by-agreement, over the coming decade and beyond – to include in our bilateral and, eventually, multilateral trade agreements the notion that trade in information services should presumptively be free, absent some good reason to the contrary.

We’ll have more to say about this as we refine our thinking and apply it to specific issues and situations. Feedback & ideas are, as always, welcome.

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Tuesday, June 19, 2007 at 8:44 AM

Posted by Pablo Chavez, Policy Counsel

New York City Mayor Michael Bloomberg — a guy who knows firsthand about using technology to make information more available — visited the Googleplex yesterday to see the campus and talk to Googlers about a broad range of issues.

In an hour-long discussion, the CEO Mayor of the Big Apple discussed a broad range of topics with Google’s Sheryl Sandberg. Among other things, the mayor touched on privacy in the Internet age, the challenges of running America’s largest city in the wake of 9/11, the status of the U.S. in the world, and the state of the presidential campaign.

Mayor Bloomberg also addressed the question of whether he plans to throw his hat in the presidential ring (at about the 38 minute mark). What did he say? Check out the video on YouTube:

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