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Future of open Internet in question?
WASHINGTON (MarketWatch) - Big phone carriers would like to charge Internet companies for the right to reach their customers, but such a tactic is fraught with political risk and could invite a backla

By Jeffry Bartash / MarketWatch
January 7, 2006

At stake is the very openness of the Internet and ability of customers to go to any site they want without complication. If phone companies get their wish, customers could end up paying more indirectly to surf the Net - or find it more difficult to reach certain sites online.

Worries that phone and cable operators could turn the Internet into a closed network - thereby making them toll collectors - have been growing for months. Several bills aimed at preserving the openness of the Internet have circulated recently in Washington and regulators are monitoring the issue closely.

If network owners press their case too aggressively, Congress could react by passing a strict law to protect "Net neutrality." The aim would be to ensure that network owners such as AT&T Inc., and Comcast Corp. (CMCSK: comcast corp could not discriminate against big Internet companies such as Google and Yahoo! or against small obscure Web sites that attract only a handful of customers.

Phone and cable companies, for their part, say their intent is not to discrimate. Executives understand it would be folly to prevent customers from connecting to the Web sites they like most. Unhappy subscribers would be tempted to change Internet providers if that were to happen.

Still, phone and cable operators complain that their networks cost billions of dollars to construct and maintain and that Internet companies should pay a share of the cost. They have broached the idea of charging Internet content providers a fee to guarantee quick and reliable access for customers trying to access their Web sites.

"We have to make sure they don't sit on our network and chew up our capacity," Verizon Communications CEO Ivan Seidenberg said Thursday after a speech at the annual Consumer Electronics Show extravaganza in Las Vegas. "We need to pay for the pipe."

Under such an approach, Yahoo! would pay Verizon a fee to enable customers to access their Yahoo! email at accelerated speeds. Or Comcast would charge Vonage a fee to ensure its customers receive a rock-solid connection to Vonage's cheap Internet-phone service.

Web surfers would still be able to go to any site they want, but at regular connection speeds, or so the argument goes.

Not surprisingly, most Internet content providers publicly balk at the idea. They say the user fees could become a form of ransom. Customers of companies that didn't pay could mysteriously find it harder to reach certain sites.

Consumer advocates see other problems. A fee system would favor bigger Internet providers over small ones, thereby stifling competition and innovation. They also note that customers have already paid for Internet access when they send monthly fees to their phone or cable supplier.

So far, the Federal Communications Commission has declined to step in, though the agency has argued in favor of the principle of Net neutrality. It would take an act of Congress, however, to give the FCC the power to enforce such an edict.

For the most part, examples of network operators blocking Internet users from reaching certain sites have been rare and isolated. Yet recent comments by Seidenberg and AT&T CEO Edward Whitacre Jr. indicate the phone companies aim to push the envelope to see what lawmakers will allow.

For many in Congress, though, the message is clear: The Internet should remain open. There appears to be broad support to enact Net neutrality into law, though the precise details of such a bill remain up for debate. A Republican draft that circulated last fall was widely criticized for both going too far and not going far enough.

If Congress needs any reason to pass a bill, they're likely to get one if irate Americans suddenly find it harder to reach certain Web sites at the speeds to which they've become accustomed. Nowadays most Americans take the idea of an open Internet for granted.

In some ways, the open nature of the Internet is viewed much like the interstate highway system - a public utility to which everyone deserves the right of way.

On the other hand, the strain on Internet networks is clearly growing, as Internet content providers rush to offer bandwidth-devouring applications such as music and movies.

Google, for example, is expected to announce a deal to let customers download programs from CBS over the Internet. Apple Computer has a similar arrangement with Walt Disney Co.

In light of those trends, phone and cable operators will have to spend money to boost the capacity of their networks to ensure that they can handle the expected increase in traffic. Otherwise congestion would result. Just like in the highway system, network operators say there's a need for toll roads to spread the cost and make the Internet work more efficiently.

While it's understandable that network operators would like Internet content providers to pick up some of the tab, they'll have to walk a fine line to prevent a hostile reaction from customers and lawmakers.


Jeffry Bartash is a reporter for MarketWatch in Washington.