The net neutrality conflict stated when in late 2005 the fantastically obtuse AT&T CEO Ed Whitacre (most recently the CEO of Government Motors) said:

How do you think they?re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now 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. So there?s going to have to be some mechanism for these people who use these pipes to pay for the portion they?re using. 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! (YHOO ) or Vonage or anybody to expect to use these pipes [for] free is nuts!

This of course ignores that companies like Google pay big bucks for their Internet access and we pay quite a bit of money to AT&T et. al. to use “his pipes”.

Anyway, the big, very real concern we’ve had is that with all the last mile pipe providers other than Qwest and the small fry (Frontier and other rural area phone providers) delivering some form of cable TV, they’d discriminate against competing Internet video providers.

And now the first warshot has been fired: Netflix has started offering a streaming only option, is switching/has switched their Content Delivery Network (CDN) to L3 and lo and behold we see Comcast demandingand for now getting more money from L3 for video traffic.

(And unfortunately for the cable companies, they do have architectural reasons that *can* make higher broadband use more expensive if they’ve lagged in building out their neighborhood networks (will go into details if anyone desires)).

This area, where real bandwidth is not seriously constrained like it is in wireless networks, is where I expect the real net neutrality action to be. And it doesn’t neatly break down into a Left/Right conflict (which is not to say that those asking for Federal regulation won’t almost inevitably regret the results).

One of the problems here is that due to prior government interference almost everyone in the nation has a duopoly “choice” of providers, either their incumbent local exchange carrier (ILEC) that got a Federal government granted monopoly in phone service (AT&T, Quest, Verizon and small fry) or their cable company, which in almost all localities has been granted a monopoly by the local government. Many people have only one or none of these choices.

We actually have law and regulations covering this sort of thing, e.g. your phone service is under a different set of rules of a common carrier sort and one of the FCC’s net neutrality ideas has been to shift Internet services to this regime … or partly so, which would be problematical.

Some other counties that have followed different telephone and TV evolutionary paths solve this general problem by regulating the “last mile” and providing equal access to all companies that want to provide services on top of that. We started to try something of that sort, look up e.g. CLEC on Wikipedia and look at the end of that article for how it came to an ugly end (and it wasn’t pretty in the middle).

Getting to your original point, who’s paying whom for what? Should a company like Level 3 (L3) charge the local broadband companies like Comcast for the demand their customers are making on it? Comcast’s value to its customers like you and me is selling “Internet service”. Backbone providers like L3 sell companies like Netflix access to customer networks like Comcast’s.

L3 isn’t a content provider (although it does provide special services to content providers that lower the costs to everyone, that’s what a Content Delivery Network (CDN) is about). If it decided to tell Comcast to take a flying leap, would Comcast’s customers, who think they are paying for this thing called “Internet service”, be happy? (In times past, that’s what happened and customer outrage caused things to be sorted out.)

Now there is one truly significant issue here, the growth of Internet video services like Netflix and the peak demand they place on networks (only peak demand matters, the “pipes” are the same size 24×7 but of course people watch the most video in the evening). Expanding the Internet at all levels to handle this demand has cost money (although Moore’s law helps a lot in keeping that down), but video is becoming so ubiquitous that it’s hard to say it’s not part of generic “Internet service” or that it’s “disproportionate” any more.

And anyway, Comcast caps its users at a fairly modest 250GB/month, if they exceed that twice they get disconnected for a year, so it’s handling this “disproportionate” demand at the customer level anyway. It’s also raising its customer’s prices by around $5/month for Internet service ($2 if you are also getting cable from them but of course the cable prices are going up as well).

This is a long predicted event and how it plays out is going to shape the US Internet for a long time. And to bring it back to my original point, it’s hard to avoid noticing that Comcast is selling competing TV service and therefore has a conflict of interest, not to mention that many people are “cutting the cord” and dropping their cable service, 275,000 of Comcast’s customers in the last quarter. Heck, my father, who can’t get cable, is looking into trading one or more of his satellite TV packages that are getting subpar for Netflix streaming through AT&T DSL. Which will require paying AT&T $5 to more likely $10 or even $15 dollars more per month for a fast enough pipe.