Who wins the net neutrality debate? Google, of course

Who wins the net neutrality debate? Google, of course

ISPs and carriers don't want to be regulated. Content providers don't want to be throttled. Welcome to the net neutrality debate

In the debate over net neutrality, AT&T and Cisco are warning that fiber optic cable rollouts could be delayed -- and revenues lost -- if President Obama's recently proposed rules move ahead.

Critics argue that those threats are overblown, that AT&T doesn't really have 100 cities ready for fiber installs anyway and while Cisco might lose out, it's been losing revenues from the likes of AT&T for a long time, regardless of this week's brouhaha.

There's no question a lot of rhetoric is flying around, most of it focused on who stands to lose the most as the Federal Communications Commission (FCC) carries its deliberations into 2015.

Carriers like AT&T and others in the CTIA industry group (and several Republican U.S. senators) argue that regulating carriers and other ISPs under Title II of the Telecommunications Act would be too restrictive and limit their ability to innovate. But content providers like Netflix, Kickstarter and Youtube and many citizen action groups want the Obama-style regulations adopted to keep ISPs from prioritizing, or throttling certain content on their networks. They, too, argye that without such rules, innovation could be stifled -- mainly the innovation from small Web-based groups.

Given that landscape, can anybody truly win the battle?

Well, yes, Google can win. It probably already has.

Google plays both sides

That's because Google really operates on both sides of the debate. It is an ISP with fiber optic rollouts under its 1 Gbps Google Fiber initiative and a content supplier, with Youtube and other Web sources.

No matter how the FCC rules next year, Google can move forward with fiber rollouts, even if they're restricted, because it will still be earning far-healthier revenues from carrying content.

Google's two-pronged strategy has been ovious for a long time, but lately it has looked genius given the net neutrality battle. While it's a strategy only a very large company could undertake, other very large companies never even tried.

If it's not genius, it's at least very savvy, this "build-your-own-trunk-and-pump-your own-junk" approach. By that way of thinking, Google is building a network made up of the "last mile" or "local loop" of fiber optic connections to homes as well as what's called the bigger "trunk" lines for connecting switching centers to those local loops. Whether Google's content can be described as "junk" is subjective, but junk does rhyme with trunk.

Google "is playing both sides of the game," said Roger Entner, an analyst at Recon Analytics. "Their approach is to build their own network and then pump their own content and then keep their mouth shut."

Google, unlike AT&T, this week said it plans to continue its Google Fiber rollouts. That includes an ongoing effort in Kansas City, Kans., and Kansas City, Mo., where it just began service to small businesses in some neighborhoods in addition to service for families and individuals.

It also has rollouts in the works in Provo, Utah, and Austin, Tex., with potential others in 34 cities in nine metropolitan areas: Portland, Ore., San Jose, Calif., Salt Lake City, Phoenix, San Antonio, Texas, Nashville, Charlotte, the Raleigh-Durhamarea and Atlanta.

Google plans to announce which cities get Google Fiber by the end of the year.

Fiber optic rollouts to stop?

In contrast, AT&T CEO Randall Stephenson said his company would "pause" its deployment of fiber in 100 cities to get a better understanding of what the FCC's rules will look like.

Some AT&T critics said Stephenson is bluffing or never had those cities lined up for rollouts. Indeed, shortly after his remarks, AT&T's North Carolina President, Venessa Harrison, said the company will continue working on a Next Generation Network there. AT&T has signed contracts with several North Carolina municipalities, including Raleigh, Cary, Durham, Chapel Hill, Carrboro and Winston-Salem.

AT&T didn't respond to a request for more detailed comment on the status of other fiber optic rollouts in the U.S.

Google has also been very clear on its attitude about controlling content when it functions as an ISP. In a May blog post, Google Fiber officials said they don't throttle content to customers, as some other ISPs do, partly because Google has partnered with providers likeNetflix and Akamai to locate their content servers at various switching centers closer to customers. Google said it doesn't strike deals with the content providers to prioritize their video packets over others or "otherwise discriminate among Internet traffic."

Google said it doesn't charge for priority to video content because it saves money co-locating video servers closer to customers, rather than transporting it thousands of miles.

Google's model for its fiber optic rollout differs from that of AT&T, Verizon or others building fiber networks across vast areas of the nation to serve large and small companies as well as homes. "Google doesn't have the large, sunken national access network investments that AT&T and Verizon do, so it's a lot less threatening for Google to comply with the Obama-backed restrictions," said Bill Menezes, an analyst at Gartner.

"For Google, net neutrality really doesn't hurt them much and it might even help them if it keeps their content flowing," said Jack Gold, an analyst at J. Gold Associates.

What the FCC must sort out

Many carriers and ISPs want the FCC to avoid regulating them like traditional telecommunications carriers. What they fear is that they'd be require to file formal requests with the FCC to modify their networks or change the services and products they offer.

"If Title II regulations existed in 2006 and 2007, do you really think Steve Jobs would have gotten the iPhone on AT&T?" Entner said. "With Title II regulation, you're not managing innovation. Everybody is fully aware that the business model for carriers is in flux, not just the technology they use."

As such, carriers need room to maneuver, he added.

Entner and most carriers support having the FCC regulate ISPs under Section 706 of the Telecommunications Act instead of Title II. Section 706 allows for a more targeted oversight by the FCC; Entner described it as requiring the FCC to judge an ISPs investments in technology and decide whether an ISP is doing something anti-competitive. "If a company blocks content, then that could be anti-competitive," Entner said. "Then the FCC could apply fines and penalities."

Using Section 706 powers instead of Title II was recommended by the U.S. Court of Appeals in Washington when the FCC's authority was successfully challenged early this year, Entner and others noted.

"Obama's trying to use a sledge hammer to fix a problem that needs a scalpel," Entner said. "Title II is such a heavy-handed tool and is completely disproportionate to what's needed."

The primary distinction between the two portions of the Telecommunications Act is that Title II would require ISPs to ask the FCC for permission to do many things, while Section 706 would allow them to operate freely -- but under the threat that the FCC could ding them for anti-competitive moves, Entner said.

After the FCC adopts its new rules, the next U.S. Congress is expected to initiate a vast rewrite of the Telecommunications Act, which was approved in 1996 as a major amendment to the Communications Act of 1934. That update could take a decade to achieve.

In the meantime, Google can continue to play it cool.

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