Battle to retain net neutrality

In a Businessweek interview, he eschewed the usual bland optimism of senior US executives, saying: "Is our revenue growth great? No, it's terrible. But it's a lot better than losing." Even faced with that source of constant optimism - the internet - he had reason to complain: "We and the cable companies have made an investment [ in the net] . . . For a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!"

At first glance, that's a perfectly reasonable statement. SBC "owns the pipes" that connect much of the US internet. Google hasn't paid a cent to SBC to carry its searches, instant messages, and web spiders across those pipes. And Google isn't some neutral traveller. In some ways Google is a direct competitor to SBC. The Google Talk service provides telephony. Google Mail takes away one of the value-added features of its internet service.

Why should Google freeload off companies that own the wires? In his complaint, Whitacre avoids the other side of the equation. SBC obtains what Google has to offer for free, and resells it to his customers.

There wouldn't be much market for an internet service that blocked or filtered away the millions of sites that couldn't - or wouldn't - pay up for transit.

But is it not fair to have some solid negotiation between those two values? Both Google and SBC, after all, operate within a market: perhaps Google's worth to SBC might be less than SBC's worth to Google. Perhaps some sort of deal should be arranged.

The difficulty with such bargaining is that Whitacre wilfully ignores the great benefit of the net. The internet began as a co-operative "net of nets", and one of the reasons it worked so well was that those connecting independent networks chose not to complicate things with an elaborate calculus of costs and benefits. They just plugged their networks together, and agreed to transport each other's data.

Even now, many of the companies that share ownership of those "pipes" have peering arrangements - mutual agreements to carry data - rather than financial contracts. By eliminating the costs of billing and negotiation, the net reduced the overall transaction cost of data flows for everyone, with benefits for the growth of the net and for the majority of its users.

But Whitacre does not need to stay within the unwritten rules of the net. Internet providers increasingly make private contracts with each other. SBC is perfectly free to charge Google what it likes. It seems the only thing holding it back is, like so much on the net, mutual goodwill.

But it's more than just the goodwill of these two behemoths that's at stake. Increasingly, consumer outrage drives them. If Google was cut off tomorrow, who would get the blame - Google for not paying these new bills, or the American network provider that decided to isolate them? Google, then, is safe from Whitacre's bills. But what about smaller sites? Most net users rebel at the idea of SBC filtering and censoring sites or services. A neutrality of the network is as embedded in our modern vision of the internet as the web browser. The net's remarkable resistance to "censorship" comes from most of its users.

Perhaps that's down to the distributed nature, the reciprocity, of the net. If you see one site censored today, you may be the owner of the site that gets censored tomorrow. Internet companies peer because they are, broadly speaking, equals.

But that's not to say that the neutrality of the net might not get nibbled away at the edges. It's easy to spot when a website vanishes. But what if a company like SBC subtly and gradually degraded the Voice-over-IP (Internet telephony) services of other companies, such as Skype and Google Talk? Would anyone put their finger on the problem, or would it just appear that SBC's internet telephone product was better than the competition?

As with so many net principles these days, the time when the law may step in is approaching. In the US, politicians attempting to reform the 1996 telecommunications act are beginning to hum and haw about legislating a specific commitment to net neutrality.

Whitacre's throwaway comments mark more than his intuitive feeling about how much Google should divert to his coffers. It's a rhetorical stalking horse in a long and elaborate game of persuasion.

Regulators and academics will struggle to verbalise what the creators of the net - and its users - understand instinctively. With so much to win and lose, it may be the chief executive who can best impress his common sense explanation on the politicians who will determine the balance sheet of the future net.

Once the issue of who pays online is raised, there's no one who can remain truly neutral.