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I wrote this commentary on a paper by Jonathan Zittrain -- Here is his response.

Tim, Thanks for your thoughtful comments on my piece. I appreciate your call for outright warfare rather than compromise in many instances ­ that the forces arrayed economically against an open internet are not much interested in balance except as it might be found in balance sheets. But I resist your call to reframe my argument in terms of the prevailing debate. As you point out, there are already well-developed arguments in now-familiar patterns about network neutrality.

For me, security issues on the Net are much larger than the label suggests. They are part of several seemingly unrelated debates. The rational consumer desire for reliability in technical architecture is mirrored by the rational consumer desire for encyclopedia entries that do not lie, and the generativity of the Net and of Wikipedia both can fall prey to these problems precisely because their openness has led to popularity ­ and a reason to subvert them. At the technical layer, the economic interests of the broadband carriers and content publishers are not the only ones large enough to push the ball in one direction or another. There is also the economic interests of those who gain from subverting the whole system: spammers and botnet masters, themselves a subset of anyone who wants to command someone’s eyeballs, processor, or bandwidth. And there are the movements of consumers: what they think they want will exert a powerful force on the market.

We agree that the broadband carriers are not calling for the “freedom” to build security ­ they already have that freedom, and they’re uninterested in exercising it. This isn’t because they’re not necessarily well adapted to do it ­ they can and do bundle other worthwhile services in a heartbeat, cutting deals with third parties if they don’t have the in-house expertise to do it themselves. Rather, it’s because the most important contributions they can make are not on the *receiving* side of network problems, but in the origination. Tens of thousands of web sites have been compromised and are dealing out malware; tens of millions of PCs are hijacked and are sending spam or helping to bring down Estonian servers. Web site operators and their hosting providers are uninterested in doing anything about it, just as ISPs have little interest in dealing with zombie PCs on their own networks. They gain nothing economically from taking care of the problem, and it’s an expensive problem to deal with ­ webmasters and PC owners care little and know less about reining in their respective zombies. But it’s exactly on the supply side where the problem could be attacked to buy us a little more time.

Without that, we see gated communities arising not just in endpoints ­ as PCs in cybercafes, libraries, schools and corporate environments are locked down to new apps ­ but in web services. Email is one of the great last “shared hallucination” common applications of the Internet era. Online life without an email address in 1995 or even 2000 would have been very difficult to live. Email was one’s central identity. Now email is becoming an afterthought, and today’s generation of teenagers rarely use it ­ except to communicate with adults. Instead it’s Facebook messaging, IM, Dopplr, Twitter. Each of these services are in the proprietary mode of Bell, IBM, CompuServe: accounts are managed by a central provider who can determine what gets sent and who gets access and interoperability all the way from one end to the other. There’s much less spam on these services because they’re so managed ­ but there’s also much less generativity, or what’s there is more contingent, since the service provider can pull the plug at any moment. Email is dying, along with IRC, usenet newsgroups, and the many other artifacts applications built for openness among any number of providers.

So the market is moving ­ and my aim is to move it in a different direction. The sense in which I advocate compromise is that I don’t begrudge a diverse ecosystem of open and closed. Let there be smartphones and iPods, which distill and bottle the most popular Internet applications and sand off all the rough edges. But if that’s all there is ­ if the PC or another generative instrumentality ceases to be at the heart of our information ecosystem ­ we’ll end up locking in the gains that came from an open system in a way that prevents the next round from happening. I know that’s something neither of us wants.

The article is now a book, with much more detail on these issues. It's parked at two old fashioned publishers ­ but it should be out early next year, and under a creative commons license as well. …JZ

This article on Cellular Carterfone is a humdinger! In Information Week. Meanwhile, I've noticed several well-done criticisms of my wireless paper, along with a few funded attacks. All will be answered in version 2.0 of the Cellular Carterfone paper (also known as Wireless Net Neutrality).

A note on Net Neutrality in Europe. Europe, unlike the US, has largely maintained open access policies -- that is, linesharing rules -- for DSL. It also has general anti-discrimination rules for telecom, though their operation is complex. For that reason there is much less temptation to adopt new or separate NN rules, since such rules indirectly accomplish the same purposes, using competition to fight discrimination, instead of just a rule. However there is some chance that Europe's approach may backfire, as compared to the combo of no linesharing plus NN rules which is the de facto and partially de jure state of affairs in america. Europe may end up with limited fiber buildouts, limited cable internet yet STILL have certain forms of discrimination resulting from reliance on linesharing as a bulwark against discrimination. This is just a blog post, though a well thought through point. But it is a possibility. Ten years hence we'll know.

Kennth Cheung at the University of Florida has released an interesting paper about whether carriers have an incentive to build more bandwidth in a non-net neutral situation.

His paper, which he sent me a few months ago, uses game theory to suggest that outcome. Unfortunately, Cheung has not done such a good job of making the paper available -- I only heard it was released through the press release, and the SSRN link on the press release is dead. So Prof. Cheung, if you're reading this, put the paper up somewhere. In a different draft paper I've suggested another, fairly obvious possibility (my point is not original).

Consider this. If a network operator makes its income from its direct and immediate customer (Bill & Keep), it has an incentive to maximize bandwidth, so as to be able to charge more to that customer.

However, if an ISP earns money from charging termination fees to content providers (or, gatekeeper fees), its incentives become more complex. It may have an incentive to keep the gate relatively narrow -- keep a control on the supply.

These are among the reasons that termination-fee based systems strike me as likely to lead in suspect directions

A new firm is trying to encourage the FCC to let at least some of the forthcoming 700 mHz auction be auctioned to open access bidders --

Who cares? In more normal language, the spectrum would be licensed on the condition that the carrier adopt, effectively, cellular carterfone rules. That may seem hard to understand, but to get a handle on it try their website.

I am absolutely not the first person to make this point. Let me repeat that. This is not my idea. However, for telecom people, I think it can yield alot to look at the whole NN debate as a debate over termination pricing. In brief, the internet has a natural-born "bill and keep" system -- and there's alot about that which is attractive. I have written a short paper explaining this point, which is here: NN As Pricing

I am finished the beta draft of Wireless Net Neutrality.

The paper examines the practices of wireless carriers with an eye toward their effects on consumers and innovation. The intro is posted after the jump.   This paper is being published by the New America Foundation, and we will release the paper next Wednesday, Feb. 14, in Washington DC, at the FTC hearings.

Get the full text here.

Wireless Net Neutrality

Tim Wu†

Over the next decade, regulators will spend increasing time on the conflicts between the private interests of the wireless industry and the public’s interest in the best uses of its spectrum. This report examines the practices of the wireless industry with an eye toward understanding their influence on innovation and consumer welfare.

In many respects the mobile wireless market is and remains a wonder. Thanks to both policy and technological innovations, devices that were science fiction thirty years ago are now widely available. Over the last decade, wireless mobile has been an “infant industry,” attempting to achieve economies of scale. That period is over: today, in the United States, there are over 200 million mobile subscribers, and mobile revenues are over $100 billion. As the industry and platform mature, the wireless industry warrants a new look.

This report finds a mixed picture. The wireless industry, over the last decade, has succeeded in bringing wireless telephony at competitive prices to the American public. Yet at the same time we also find the wireless carriers aggressively controlling product design and innovation in the equipment and application markets, to the detriment of consumers. Their policies, in the wired world, would be considered outrageous, in some cases illegal, and in some cases simply misguided.

Four areas warrant particular attention:

1. Network Attachments. Carriers exercise excessive control over what devices may be used on the public’s wireless spectrum. The carriers place strong controls over “foreign attachments,” like the AT&T of the 1950s. These controls continue to affect the innovation and development of new devices for wireless networks.

2. Product Design and Feature Crippling. By controlling entry, carriers are in a position to exercise strong control over the design of mobile equipment. They have used that power to force equipment developers to omit or cripple many consumer-friendly features, and also forced manufacturers to include technologies, like “walled garden” internet access, that neither equipment developers nor consumers want. Finally, through under-disclosed “phone-locking,” the U.S. carriers disable the ability of phones to work on more than one network. A list of features that carriers have blocked, crippled, modified or made difficult to use, at one time or another include:

* Call timers on telephones * WiFi technology * Bluetooth technology * GPS Services * Advanced SMS services * Internet Browsers * Easy Photo file transfer capabilities * Easy Sound file transfer capabilities * Email clients * SIM Card Mobility

3. Discriminatory Broadband Services – In recent years, under the banner of “3G,” carriers have begun to offer wireless broadband services that compete with WiFi services and may competee with cable and DSL broadband services. However, the services are offered pursuant to usage restrictions that violate basic network neutrality rules, and pursuant to undisclosed bandwidth limits.

Most striking is Verizon Wireless, which prominently advertises “unlimited” data services. However it and other carriers offer broadband service pursuant to both bandwidth limits, and contractual limits that bar routine uses of the internet, including bans on downloading music from legitimate sites like iTunes, the use of Voice over IP, and on the use of sites like YouTube.

4. Application Stall – Mobile application development is by nature technically challenging. However, the carriers have not helped. They have imposed excessive burdens and conditions on application entry in the wireless application market, stalling what might otherwise be a powerful input into the U.S. economy. In the words of one developer, “there is really no way to write applications for these things.” The mobile application environment is today, in the words of one developer, “a tarpit of misery, pain and destruction.”

Most of the carriers adopt similar practices. However, in each area, there are variations between the four largest carriers: AT&T, Verizon Wireless, Sprint-Nextel, and T-Mobile. Speaking generally, Verizon Wireless and AT&T offer the most restrictive policies; Sprint is slightly less restrictive. The fourth and smallest competitor, T-Mobile, tends to be the least restrictive of consumers and application developers. The reliance on a fourth competitor for serious variation in industry practice must be kept in mind when considering any future consolidation.

The report makes four major recommendations:

1. Carterfone for the wireless world. The basic, and highly successful Carterfone rules in the wired world allow any consumer to attach any safe device to his or her phone line through a standardized jack. The same rule for wireless networks would liberate device innovation in the wireless world, and free equipment designers.

2. Basic Network Neutrality Rules. Today, the FCC has ordered broadband carriers to respect basic principles of network neutrality. Consumers have the basic right to use the applications of their choice and view the content of their choice. Wireless carriers who offer broadband services should respect the same basic freedoms.

3. Disclosure. Consumer disclosure is a major problem in the wireless world, and better choices come from more information. Carriers should disclose, fully, prominently, and in plain English, the following information:

* Limits on bandwidth usage; * Devices that are locked to a single network; * Important limitations placed on features;

In addition to the disclosure of areas lacking coverage and rate-plan information.

3. Standardize Application Platforms. The industry should re-evaluate its “walled garden” approach to application development, and work together to create clear and unified standards to which developers can work. Application development for mobile devices is stalled, and it is in the carriers’ own interest to try and improve the development environment.

* * *

In Washington D.C., the wireless world is sometimes described as a nirvana for consumers bought on by competition and enlightened government policy. Some consumers and groups depict a very different story: a “cell hell” of “dropped calls, dead zones, billing errors, and unexpected fees and charges.” The truth lies somewhere in the middle. Relative to its history, the state of the wireless industry is greatly improved. Since the 1990s, when the Federal Communications Commission began to auction wireless spectrum suitable for telephones and other devices, wireless telephony has taken off. But now, in the late 00s, the industry is no longer an infant. As mobile platforms mature, and as consumer markets reach saturation, the state of the wireless world warrants greater scrutiny.

The later parts of this paper addresses several economic puzzles raised by this study of the mobile wireless industry. One puzzle is this: why would a carrier want to cripple products in the first place? Companies usually like to sell the best product possible. If a phone with WiFi is a better phone, why not sell that?

This paper introduces three possible explanations. The first is that the carriers are engaging in a form of price discrimination—crippling products so that they might sell the crippled product at a cheaper price to poorer customers. Crippling so practiced can be defended as a matter of social welfare. The problem with this explanation is that the carriers do not also make available a fully capable product for a higher price. Instead, we see half a price-discrimination strategy: the cripple, but no superman.

That suggests two other explanations. First, the carriers may be acting to protect existing revenue streams. If a feature like WiFi might endanger 3G or voice revenue, the carrier may block it to protect its income. That behavior is an example of a negative spillover or externality: behavior that helps the carrier, but hurts society.

Second, in some instances the carriers may simply be making the wrong decisions. For example, when it comes to software development, the carriers and some equipment manufacturers have pursued a quixotic strategy. They have failed to standardize, and have placed controls on software development that reflect an interest in maximizing control over any services that arise. That strategy, according to many developers, has inhibited the development of a strong mobile software market. Companies and industries do make mistakes, and the current application strategy may simply be an error.

Next, some observers argue that the oligopoly structure of the wireless market makes scrutiny of the industry unnecessary, because any anti-competitive or anti-consumer behavior will be quickly self-correcting. Boiled down: there is no cell phone monopoly, and therefore attention to these issues is unwarranted. Part III of the paper addresses these issues directly. In short, the carrier market simply not an open market. Entry is not impossible, but under current conditions requires multi-billion investments. The consequence is a spectrum-based oligopoly, not the highly competitive market that is sometimes portrayed. The wireless market may be competitive by the standards of the telecommunications industry and other regulated industries. But it is not like the market for blue jeans or vodka, and it is a mistake to so pretend.

If it is accepted that the wireless industry warrants attention, several important justifications are usually raised for the industry’s practices. It is often asserted that industry practices are made necessary by spectrum scarcity and the need to maintain network security. These arguments are important—no one wants a world of blocked calls or widespread identity theft practiced through cell networks. Yet, critically, the arguments cannot be accepted as a blanket justification for any and all carrier practices. Just as the network security and quality claims made by AT&T for much of the 20th century, were eventually questioned, the claims today made by the carriers must be examined far more closely.

The historic parallel is instructive. Wired voice telephone networks had more or less reached their full potential under AT&T by the 1960s. To reach the next stage, the most important steps were not technological but deregulatory—destroying impediments created by AT&T that restricted innovation and competition. To reach the “next stage” in wireless communications, the most important step may be opening the networks to true competitive entry. This paper specifies how that could happen.

One point should be clear. This paper is written to examine what carrier practices may be harmful for consumers or society. It is intended to shed light on practices that might, for one thing, be dissipated by consumer pressure and competition, and to raise questions for the carriers themselves. It is absolutely not a call for comprehensive regulation or nationalization of the wireless industry. The perspective is that regulation, if necessary, should be a last resort.

Perhaps I've written enough on AT&T for a while -- but here is my latest slate piece, Bellwhether: Ma Bell is Back, Should you be afraid? School starts tomorrow.

The proposed AT&T merger agreement has attracted some criticism, most prominently from David Burstein and Susan Crawford (check out also the commentary from David Isenberg and Jeff Pulver.) They believe, in short, that the exceptions in the agreement make it not worth the candle.

I respectfully disagree with Susan and Dave and want to explain why. While I don't think the agreement is perfect, I don't think it is flawed in the ways they believe. Let's consider each in turn. Susan argues that leaving "Wireline broadband Internet access service" undefined is dangerous; that AT&T will simply prioritize something different -- what it it calls the "AT&T Yahoo! High Speed Internet U-verse Enabled," which runs over fibre. As she writes:

AT&T is effectively saying, "We'll keep existing 'broadband' access neutral. But when it comes to our new super-duper 'AT&T Yahoo! High Speed Internet U-verse Enabled,' well, that's not up for negotiation. We need to make money there. 'Enabled' and 'broadband' are not the same thing.

Most importantly, prioritizing fiber-based broadband internet access would in fact violate the terms of the agreement. It is true that "wireline broadband internet access" service is undefined. Perhaps in an ideal version of the agreement, it would have been defined as follows: "any service that gives access to content or applications that rely on the internet addresses issued by the IANA" or something of the sort. However, the term is the next best thing: a term with a specific, defined meaning in telecommunications regulation. It is a history that suggests that it means any internet broadband service carried over a copper wire, fiber, or anything else is covered by the agreement. Here is exactly how the FCC has defined the term (on page 8 of the 2005 Wireline classification decision):

Wireline broadband Internet access service, for purposes of this proceeding, is a service that uses existing or future wireline facilities of the telephone network to provide subscribers with Internet access capabilities.[footnote]

The footnote says:

We stress that our actions in this Order are limited to wireline broadband Internet access service and its underlying broadband transmission component, whether that component is provided over all copper loops, hybrid copper-fiber loops, a fiber-to-the-curb or fiber-to-the-premises (FTTP) network, or any other type of wireline facilities, and whether that component is provided using circuit-switched, packet based, or any other technology.

This suggests that getting that defined term in the agreement is not a concession, but perhaps even a coup. The network neutrality rule shall apply to all existing and future wireless facilities. * * *

David Burstein is concerned about the exemption for IPTV in the agreement, and his concerns are related somewhat to Susan's concerns. He argues that AT&T will use the IPTV exemption in the Merger Agreement to create an internet "fast lane," and thereby sidestep the network neutrality rule. David writes:

AT&T has always intended to give paying customers priority by routing them over the “IPTV” part of their network, with Alcatel routers and Microsoft software designed for QOS.

Here is the response. AT&T, as many know, in implementing plans to become a cable television provider. Building a cable television network is an exercise in discrimination; you cannot become, say, channel 60, without getting permission. It is a fundamentally different kind of network than the internet. In practice their networks do not rely on the public internet or its IP addresses -- it is a private facility, like a cable network. The IPTV exemption is intended to allow AT&T to pursue its cable television plans; and necessarily, that will mean AT&T choosing channels (Bravo, Comedy Central, etc.), and not choosing others. So yes, to this extent, the agreement allows AT&T to engage in a form of discrimination.

But as soon as AT&T attempts to justify doing anything other than television using the IPTV exemption, it will begin to violate the agreement. The IPTV exemption, in full, reads as follows:

This commitment also does not apply to AT&T/BellSouth's Internet Protocol television (IPTV) service. These exclusions shall not result in the privileging, degradation, or prioritization of packets transmitted or received by AT&T/BellSouth's non-enterprise customers' wireline broadband Internet access service from the network side of the customer premise equipment up to and including the Internet Exchange Point closest to the customer's premise, as defined above.

As you can see, the exemption is itself limited. Here again the definintion of "wireline broadband Internet access service" is important. The language above suggests that the IPTV exemption cannot be used in any way that constitutes offering a discriminatory broadband internet service.

In effect, the structure of the IPTV exemption draws a line, reflecting existing reality, between the open networks of the world (the internet) and the closed, highly discriminatory networks (cable). You can offer one, or both, but the discrimination isn't allowed to bleed away from one and into the other. Here's the essence: so long as customers demand internet service, access to the IP address defined internet, it will be neutral under this agreement. Finally, it is arguably good for everyone that the Bells want to offer TV service. Cable could use the competition.

As a condition of its merger with BellSouth, AT&T has agreed to an important network neutrality provision for its network.

The agreement is here.

My commentary, written somewhat formally, follows here:

The AT&T Merger Agreement: A Commentary

Introduction

To the lay reader the AT&T merger agreement may appear highly technical. It is, however, a milestone, and may even be remembered in internet history. Most notable is the agreement’s striking inclusion of the first strong Network Neutrality language yet seen in any broadband regulatory device.

The language in the agreement is written for a purpose: to preserve the most attractive features of the internet as it now exists. Some perspective may be useful. In the 20th century, at crucial points, technologies like radio and the recording industry moved from being lively and vital decentralized industries toward much more centralized control, often due to misguided government policy and industry consolidation. Stated simply, the agreement forms part of a general movement to prevent a similar fate for the internet.

At a level of theory, the language in the agreement is premised on a belief in the merits of a neutral networks, and in particular its cultural, political, and economic spillovers. The preservation of role of the network as a catalyst for these sectors, without unfairly restricting AT&T’s business, appears to be the motivating force behind the agreed upon language.

Analysis of the Network Neutrality Provisions

As stated above, the most striking part of the AT&T agreement is the network neutrality provisions. In them, AT&T commits to a basic set of network neutrality principles that set a baseline of great importance. They do not create a pure “bit-discrimination rule,” and is designed to be a practical implementation. As the first working rule, it may serve as a model and an experiment for what follows, which is why it merits attention.

After a first paragraph affirming Michael Powell’s “Network Freedoms,” the agreement has three crucial paragraphs:

1. An Antidiscrimination Rule, 2. A Statement of Scope, 3. Stated Exclusions, and 4. Duration.

1. The Antidiscrimination Rule.

Network neutrality rules prohibit discrimination on broadband networks. The second paragraph states:

AT&T/BellSouth also commits that it will maintain a neutral network and neutral routing in its wireline broadband Internet access service. This commitment shall be satisfied by AT&T/BellSouth's agreement not to provide or to sell to Internet content, application, or service providers, including those affiliated with AT&T/BellSouth, any service that privileges, degrades or prioritizes any packet transmitted over AT&T/BellSouth's wireline broadband Internet access service based on its source, ownership or destination.

This is one of the stronger, but not the most extreme forms of a basic network neutrality rule (it has similarities to a bill proposed by Senator Olympia Snowe last year). While the agreement does not use the word discrimination, it effectively bars discrimination on the basis of source, ownership, or destination. It forbids AT&T from, for example, selling Yahoo or CNN priority access to its customers over its broadband networks, and favoring those content sources over unaffiliated blogs or search engines.

But the rule does not ban all forms of discrimination. The agreement take the position that (like cholesterol) not all forms of differential treatment are bad. Interestingly, the agreement does not prevent AT&T from treating different media carried on the internet differently, so long as the carrier does not discriminate between who is providing the content. AT&T, under this agreement, may speed all the internet video traffic on its network (to compete, for example, with cable). But it cannot pick and choose whose video traffic to speed up. In short, AT&T must treat like traffic alike--that is the essence of the agreement.

“Like-treatment” is not a pure ban on bit-discrimination, and the theory behind the “like-treatment” approach merits discussion. It is, on the one hand, meant to preserve a basic parity and meritocracy as between competing internet application and content providers. For example, the video providers Yahoo-video and Youtube must be accorded like treatment. Yet carriers may improve how they carries all video -- to remedy, for example, for the internet’s historical design bias in favor of data traffic. Whether AT&T will actually do so is unknown, but this rule leaves open the possibility.

2. Scope

Where the Network Neutrality rule applies can be as important as what the rule is. Paragraph 3 says:

This commitment shall apply to AT&T/BellSouth's wireline broadband Internet access service from the network side of the customer premise equipment up to and including the Internet Exchange Point closest to the customer's premise, defined as the point of interconnection that is logically, temporally or physically closest to the customer's premise where public or private Internet backbone networks freely exchange Internet packets.

This language makes it clear that the network neutrality rule applies to both the “last mile” and “metro” or “backhaul” networks, but not to the internet “core” or “backbone.”

Some might argue that excluding the backbone is too favorable to AT&T. The company is, after all, a major Tier 1 provider, and one of the two largest owners of routers on the internet core (see this map.) Arguably an anti-discrimination rule should apply everywhere.

However, there are several defensible reasons to exclude the internet’s backbone at least at the present time. The first is the existence of a working, de facto neutrality scheme. At present, the core managed on a cooperative basis, largely on a “peer” basis by a number of tier 1 and tier 2 carriers, carrying enormous volumes of internet traffic. Maintaining the proper routing of that traffic is a significant technical challenge that both carriers and router manufacturers struggle with. The existing cooperation necessary to back the backbone work leaves less room pernicious discrimination, at least for now.

Second, the agreement is also sensitive to the fact that there may be needs in the core for large scale traffic management just to keep internet traffic moving at a reasonable speed. So far there are few reports of such traffic management techniques being used for pernicious as opposed to salutary purposes.

Third and finally, AT&T’s duty to peer in the backbone are dealt with in a different part of the merger agreement. Generally, AT&T is required to maintain the same level of peering that it maintains today.

3. Exclusions

Some of the most difficult sections of the agreement are the exclusions. There are two enumerated exclusions: for “enterprise managed IP services” and “IPTV.” These two exemptions are themselves limited by a further condition on the exclusions.

“Enterprise managed IP services” are services that most consumers are largely unaware of. They include a wide variety of services that AT&T sells to large or very specialized customers, including connections between different offices, or internet connections to data centers (sites that hosting services) and many others. As matters stand, many of these service offerings are highly managed in ways that violate the network neutrality rule in paragraph two. For example, imagine AT&T were providing connectivity to servers leased by Victoria Secret, Inc., during their popular annual fashion show. It might reserve or increase the bandwidth between the Victoria Secret servers and the network backbone during the course of the fashion show (but, notably, not provide priority over the last mile). The exception would cover such “server-side” traffic management.

Not everyone will agree that the enterprise managed IP services exception is a good idea. A purer and alternative approach would demand neutrality for all services that use the Internet Protocol addressing system and numbers assigned by the Internet Naming and Numbering Authority. However that is not the approach taken by the agreement. The truth is, at this time, not enough is known about the effects and issues surrounding discrimination in enterprise managed IP services to come to any firm conclusions. However, it seems doubtful that these practices, which occur already, will substantially erode the basic service parity on the internet today. So long as YouTube or Yahoo-Video has the same right to reach a consumer through the last-mile as the hypothetical fashion show, the better content should win.

The second exception is for AT&T’s IPTV services. These services, are IP in name only. They are in practice and architecture a direct competitor to cable television services. These services use only the private infrastructure built by AT&T, and do not rely on the public Internet as described by IP addresses. Hence the exclusion of private IPTV services should be considered less controversial. In fact, were the network neutrality rules to apply to IPTV, it is doubtful that AT&T could offer its competing cable television services, leaving the cable market with even less competition.

Both exceptions are limited by an important final sentence designed to prevent the exemptions, however used, from violating the basic network neutrality requirements described above.

4. Duration

The agreement lasts two years or until Congress passes a network neutrality bill. The two-year framework should provide time to assess the impact of the rule, and consider its extension to other carriers or a broader array of wireless networks. One possibility is that AT&T will, in time, find the rule to its liking, as it provides a corporate pre-commitment against ill-advised “value-added” schemes that may prove financially disastrous. However, much remains to be seen.