Internet innovation shouldn't need permission, Google says
Washington - With the U.S. government passing an economic stimulus package that contains $6 billion US in spending on improving the country's broadband infrastructure and an internet-aware president at the helm, many tech-savvy Canadians can't help but feel a little jealous of their American neighbours. A number of commentators have said the Canadian government's $225-million broadband plan — coupled with its stated aversion to meddling in the internet market — is too little at best and backwards at worst.
Why is there such a big difference in attitude toward internet issues between the two countries? Richard Whitt, Google Inc.'s chief telecommunications and media lobbyist in Washington, discussed the differences — as well as broadband rollout, regulatory and net neutrality issues — with CBCNews.ca.
CBCNews.ca: Our two countries seem to be heading in very different directions. What do you make of this?
One could argue that here in the States we're trying to play a little catch-up. President Bush back in 2004-2005 made a statement that we were going to have ubiquitous broadband in this country by the end of 2007. As far as anyone can tell, that was the extent of the national broadband policy of the United States. The end of 2007 came and went and some of the more conservative bloggers said, "See look, we've accomplished it, we're done!" Most of us said, "Yeah right." Right now we're in a situation where the economic situation is dire and at the same time we have many people who have been clamouring for a U.S. broadband policy for years now, particularly the perceived need to upgrade our facilities to include more fibre and 4G [wireless] spectrum. So a confluence of events has brought us to where we are with the stimulus package, which doesn't include enough money from many peoples' perspective in terms of actually putting [in] next-generation broadband infrastructure, but I think it does give some prods in important places and fills in some gaps that need to be filled. But in terms of the broader question of why that's happening in the States and not in Canada, I can't really speak to the Canadian experience as well. To me it seems like we're playing some catch-up and taking advantage of the need for more broadband infrastructure in a way that builds a strategy that hopefully will take hold over time.
CBCNews.ca: It almost seems like a question of ideology. You mentioned Bush paid broadband lip service but didn't actually do much. Now you've got a Democrat president and it looks like action is going to be taken. Canada appears to be more Bush-like right now. Have you found that to be the case worldwide, where conservative governments tend to be more hands-off?
I think that's a fair approximation. If you look at many of the countries that are more activist in terms of getting government more involved in infrastructure — broadband is just one example — that tends to lead to … money going into building broadband, sometimes government owned, sometimes through private-public partnership. Generally speaking with some of the more activist governments … they've actually taken additional steps beyond just saying they have a broadband policy and "let's put some money into this." They are actually trying to inject competition into the marketplace where they perceive there's been a lack of competition. Unlike many countries, the U.S. at least does have a duopoly [of phone and cable companies] that has been driving broadband infrastructure for a number of years. To me that's not adequate competition but it's still better than a lot of places that have only one provider.
Rob Atkinson at [the Information Technology and Innovation Foundation] did an interesting report that tried to look at different government policies and whether that leads to more competition and better, fatter broadband pipes, greater consumer uptake, greater positive externalities overall in the economy. What he concluded is that roughly three-quarters of the differences can be attributed to things other than policy. It can be attributed to demographics, geography — there are some countries that are made up of large cities, where it's a lot easier to build broadband than over a wider base like in the United States or Canada. Policy certainly does play a role. It remains to be seen how things play out with the Obama administration but you're already seeing a clear sea change in terms of the rhetoric around the need for a national broadband policy, support for network neutrality as the end game or the environment we want for the consumer, and the U.S. government playing some sort of role in the market.
CBCNews.ca: Canada and the U.S. are both laggards in fibre deployment. Do you think we'd be dealing with issues like throttling if we weren't?
Throttling in the eyes of many broadband providers is a natural network management technique that you need in the event of scarcity. You could surmise that there would be a relative lack of scarcity if you have fibre plant that can carry tens if not hundreds of megabits per second rather than the five or ten megabits we're seeing. That's a reasonable statement to make. On the other hand, throttling as a network management technique — the benefits of it aren't entirely clear and it's also not clear that it's the best management technique to use. In other words, even in the face of scarcity, there may be other things that can be done short of throttling that can bring most of the benefits, most of the time to most of your customers.
CBCNews.ca: Can you give an example?
My understanding is there are ways to manage packets at the router level that don't include choking back capacity but rather involve prioritization based on the type of traffic. So if you've got latency-sensitive traffic — VoIP or streaming video, for example — there are ways to manage which allow traffic to go through the router with priority and without pulling back on the overall capacity. You also have different pricing points that can send a clear economic signal to the heavy users. We're always hearing about the five per cent of users who consume 95 per cent of capacity — whether it's true or not, by the way, is not entirely clear — but if you accept the premise that that is happening, there are ways to send a clear economic signal to the cost causers in a way that doesn't require you to throttle back traffic.
CBCNews.ca: Canadian ISPs seem to have settled into a state of equilibrium where they're not really competing fiercely for new customers. Is that the case in the U.S.?
That's an interesting question. I've thought about it a bit and written some things on it. There are different kinds of competition. You can have what I call relatively shallow competition, which is based on price or maybe a different way of packaging offerings. A deeper kind of competition is where you actually provide a wholly different business model. I would argue, for example, that Verizon's deployment of FiOS [high-speed fibre optic broadband internet] is a deeply competitive response in that they're putting in infrastructure that allows them to do things you cannot do with other infrastructure. So rather than saying we'll take $5 off your price or you'll go from five to seven megabits per second or we'll give you a new DVR, it's all about giving you a hundred megabits to your house. You'll have real capacity and it's a real game changer. By and large the other things I see in the market are these sort of incremental things where you try and one-up the other guy without spending a lot of resources … that will change the nature of the game.
CBCNews.ca: What was Verizon's impetus for FiOS? Were they getting clobbered?
I just think they were more far-sighted than other broadband providers in this country. They looked at the overall opportunity and realized that having a big fibre footprint gave them a lot more options. It also helped them that they were the new entrant in the video market. Cable companies were trying to protect their investment so a greater percentage of their platform was taken up by video rather than internet or VoIP or other things. I think Verizon decided it was going to get into that market and to be successful against the cable companies, they had to offer something different. Having fibre allowed them to offer many more HD channels, real-time offerings and still gave them enough capacity to have a really good voice and internet offering. They deserve kudos for being brave enough to bet on the prospects of big capacity.
CBCNews.ca: Do you think Verizon will spark its competitors to similarly invest more?
I think by now I would have liked to have seen more of that. Some of the cable companies have adopted [network upgrade] DOCSIS 3.0, which is good, and AT&T, Comcast and Cox are all talk about building fibre deeper into the network. None of them are making any noises of replacing the co-axial cable or copper and putting fibre right into the end user's premises. Given the economic climate, I don't expect any of them to change their tune any time soon.
CBCNews.ca: There are variable perceptions of outgoing Federal Communications Commission chairman Kevin Martin, depending on what side of the border you're on. In Canada, he's perceived as being very consumer friendly despite being a Republican while in the U.S. he's viewed as pro-industry. What's your view?
Your perception of Kevin Martin comes down to what industry you happen to be in. It's no great secret that he was not a fan of the cable industry. If you're Comcast or a Cox, you were very glad to see him go because he took many opportunities to find ways of coming after the cable industry, whether it had to do with video services or the Comcast [peer-to-peer blocking] complaint and order. If you're a telecom company, a lot of them did OK — I'm not sure they had a lot to complain about. There have been some concerns raised in the press that he ran a very tight ship that didn't brook dissent easily within the agency and that the information flow was a difficult process to break into. On the Silicon Valley side, we were generally satisfied with what he did, whether it was the 700 megahertz [wireless spectrum] auction where he championed the openness conditions, whether it's the white spaces order in November or the Comcast decision. Those were good outcomes for our side despite the fact that we're not regulated entities. It's a mixed bag that any chairman of the FCC is going to leave behind. Google had a good relationship with him. He listened to us, he took technology seriously and he took open networks as a concept seriously, so you couldn't really ask for much more.
CBCNews.ca: Are there any requirements that prevent FCC staff from having worked for the companies they regulate?
No, there aren't and in fact one of my small beefs over the years is that too many folks who end up in leadership positions at the FCC have little to no actual business experience, whether it's working for companies they might end up regulating one day or even generally in the business field. It's not a detraction because in some case it can be a real positive benefit. Julius Genachowski's name is out there as the likely new chairman of the FCC. In his case, after he worked for several years at the FCC as a staffer, he then went to work at [new media conglomerate] IAC as an executive there and then was running an investment firm for small startups. He seems like a person who is primed to understand how regulation and policy affect business models and I've got to think that's the kind of experience that will serve him well in terms of understanding the marketplace and his proper role there.
CBCNews.ca: Do you draw a line somewhere? Should FCC commissioners have experience working for the companies they regulate?
I think there would be a concern if for example a commissioner was coming straight from a Washington, D.C. lobbying office of a major telecom or cable company. That would be viewed as inappropriate, or the wrong kind of way to seal a revolving door. In [Genachowski's] case, he worked at IAC, which is a company that is not regulated by the FCC, it's an internet company. There are a number of posts at the FCC … at the staff level who have worked at companies or law firms that represented companies that are regulated and I don't see that as a major problem because for the most part these people are working on behalf of the commissioners so they're not creating their own agendas in an unsupervised manner. Regardless which side of the fence they came in on, whether it was from the competitive industry or the incumbent side, that's all good experience in terms of helping them understand the issues and come up with solutions.
CBCNews.ca: Some people, particularly politicians, still don't understand the economic value of broadband. How do you explain it to them?
The initial value is putting it in place — the jobs in building the infrastructure, actually going out and digging the trenches and pulling the fibre through and all of that. Then you're creating the services on top of that from the broadband company side, you're layering on the video, the internet access and the various components. That's all good and fine and a direct investment benefit but there's a whole other set of benefits that people tend to overlook, and it's what economists call "positive externalities." That's all the spillover that's generated from broadband. Broadband means nothing unless you take it and do something with it. The benefits I see most directly is when you use it for high-speed internet access. Then you're creating a much bigger pipe to get to the net that wasn't there before, meaning that device makers and application makers can come up with cool, new ways of using that capacity. Over time, that creates additional economic value and it also creates additional ways for end users to interact with each other. The basic premise is very sound that the initial investment will generate many times over in economic benefits.
CBCNews.ca: How do you define net neutrality and why is it important to you and to Google?
It's the end game. It's the environment we want to see. Part of the confusion about it is because some people tend to focus on it as a prescription or a means to get some place. I think of it as, "Don't screw around with my bits." It's pretty fundamental — it's the basic principles of the internet and extending it to broadband, and making sure that the on-ramp to the internet is open. It's important because the internet was based on it and the internet is the biggest success story in the history of human interconnection. Right now we're only seeing a small portion of its potential and what can be done. [Internet co-inventor and Google vice-president] Vint Cerf talks about it as "innovation without permission." It creates a place where barriers to entry are very low with various innovations and entrepreneurship [resulting]. You want to encourage that kind of thing to continue happening. The problem is, if you start creating hurdles by blocking it or creating fast lanes and slow lanes and broadband companies picking winners and losers, all of that creates the wrong kind of impediments to innovation. Google is a company that was born and raised on the internet, we wouldn't be here without it, so we very much believe in the principle of innovation without permission. We want to see the next Google come out and be successful in that environment. One of the ironies is that Google could do quite well in a non-neutral environment. We could probably afford to go out and pay off the broadband companies… but the end result is that the internet itself would be threatened, or at least the way we have come to know it. We'd like to see it stay the way it is or get better and that wouldn't be the case if the broadband providers get to be the gatekeepers or toll keepers.
CBCNews.ca: The CRTC is currently holding a net neutrality review. Is Google planning to make a submission to that process?
We have the Google filing under way and there is definitely an Open Internet Coalition filing that we're working on. It's a group of companies [including Amazon, eBay and Skype] and public interest groups here in the U.S. who focus on network neutrality.