The corporate toll on the Internet

In 2003, when Internet policy experts first began discussing network neutrality, their primary worry was that broadband providers would strike deals with certain Web sites to block people's access to competing sites or services online. For instance, what if Comcast worked with Barnes and Noble so that every time a Comcast Internet user pointed his browser to Amazon.com, he was instead redirected to BN.com? FCC officials have frowned upon the possibility of ISPs blocking certain Web sites, but they have not regulated against it; Paul Misener, the vice president for global public policy at Amazon.com, argues that "under current rules," a company like AT&T "would be able to block us without punishment."

Although such actions are theoretically possible, most experts concede that broadband firms wouldn't do something as brazen as blocking customers from going anywhere on the Web; such actions would probably prompt immediate regulation. Now Amazon, eBay, Google, Yahoo and others argue that broadband firms like AT&T, Verizon and Comcast are looking to institute a more subtle kind of discrimination. They're looking to "prioritize content from some content companies over others," Misener says.

In fact, AT&T is not at all secret about its plans. In an interview with BusinessWeek magazine last year, Edward Whitacre, AT&T's CEO, took a hard line against Web companies that oppose paying for high-speed access to AT&T's customers. "What they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it," he said of Google and Microsoft. "Why should they be allowed to use my pipes? The Internet can't be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo or Vonage or anybody to expect to use these pipes [for] free is nuts!"

The pipes Whitacre is referring to are those his company is building under a plan it calls Project Lightspeed, a multibillion-dollar initiative to install high-capacity fiber-optic Internet lines into thousands of residential neighborhoods across AT&T's service area. The company expects to serve about 18 million households with fiber-optic lines by 2008; Verizon has similar plans to roll out fiber lines. The new pipes will dramatically improve Internet speeds to home customers. Today a typical DSL line downloads data at about 1 or 2 Mbps, and cable modems run about double that rate. Advanced fiber-optic systems will see download speeds of at least 25 to 30 Mbps. Today's DSL can barely download a single standard-quality video stream in real time. In tests AT&T recently ran in San Antonio, Project Lightspeed lines carried three standard-quality streams and one high-definition stream down the line simultaneously.

What will customers do with all this broadband capacity? As the phone companies envision it, we'll use it to watch a lot of TV. Both Verizon and AT&T are betting heavily on a technology called IPTV, a service that delivers television signals into people's homes over the new fiber-optic Internet lines. According to the phone companies, IPTV will be a boon to consumers, delivering high-quality video and advanced services like TV shows "on demand," and providing much-needed competition to cable companies.

What's not clear, though, is what else -- besides watching TV -- customers will be allowed to do with the new lines. This is the heart of the fight over network neutrality. If you subscribe to AT&T's Project Lightspeed service, will you be able to use the 30 Mbps line coming into your house for, say, downloading high-definition movies from Apple, high-definition home videos from YouTube, or some other bandwidth-heavy application we haven't yet dreamed of? Or, instead, will AT&T reserve the line for its own TV service and for data from other companies that pay a fee -- thereby making AT&T the arbiter of content in your home?

At the moment, phone companies are cagey about their plans. What they will say is they're not going to stop their customers from getting to any site or service on the Internet. "Let me be clear: AT&T will not block anyone's access to the public Internet, nor will we degrade anyone's quality of service," Whitacre said in a speech to a trade conference in Las Vegas recently. "Period. End of story." But just because AT&T won't block people from accessing Google's videos doesn't mean it will give Google's videos the same status on the broadband pipe as other content -- meaning that while AT&T's TV service may come in at high-definition quality, those from competing firms might only run at standard-definition.

Indeed, AT&T and other network operators are building their networks in a way that would make it possible to split up network traffic into various lanes -- fast, slow, medium -- and then to decide what kind of data, and whose data, goes where, based on who's paid what. Broadband companies argue that engineering their networks in this way will benefit customers in two ways. First, they say, splitting up the Internet into several lanes will generally improve its efficiency -- the network will simply run better if it's more logically managed.

The phone companies' second argument concerns cost. If AT&T builds a blindingly fast new Internet line to your house but only allows some firms -- firms that pay -- to get the fastest service, it can significantly offset the costs of the build-out. And that's good for you, AT&T says, because if the company can charge the likes of Apple and Google to pay for the line, it doesn't have to charge you. "I think what we're saying is friendly to the consumer," Ciccone says. "If we're building the capacity, what we're doing is trying to defray some of the cost from consumers to the business end of this."

AT&T's critics don't buy this claim. They argue that by slicing up the Internet into different lanes, broadband companies are violating one of the basic network design principles responsible for the Internet's rise and amazing success. They add, too, that there's no proof that AT&T's plan would result in reduced broadband costs for home customers. Instead, consumers could lose out in a big way. If AT&T's plan comes to pass, the dynamic Internet, where innovation rules and where content companies rise and fall on their own merit, would shrivel. By exploiting the weaknesses in current laws, telecom firms would gain an extraordinarily lucrative stake in the new media universe. In the same way that a corporation like Clear Channel controls the radio airwaves, companies like AT&T could become kingmakers in the online world, granting priority to content from which they stand to profit most. Britney Spears, anyone?

Next page: How the broadband giants may trample the underlying architecture of the Internet