A Simple Solution to the Network Neutrality Problem

The central argument in the current network neutrality debate is whether there should be laws or regulations forcing Internet service providers (ISPs) to treat all traffic equally – in practical terms, it means not delaying or degrading the performance of services that compete with the ISPs' own services. There are actually two parts to this argument. One is the question of whether ISPs should treat all traffic equally. The other is whether the government should be telling ISPs how to run their networks, a complex task requiring enormous understanding of subtle technical and commercial issues. Network neutrality proponents focus on the first argument, ISPs on the second.

Focusing on the combined argument -- whether the government should actually mandate network neutrality -- is in fact a formula for frustration. It almost guarantees that the debate get bogged down in ideological battles. It also ensures that every technical advance necessitates a redefinition of what should and shouldn't be allowed. But there's a much simpler solution that would ultimately work better: to require the separation of the ISPs' transport and services functions. 

Such separation would make one part of ISPs into "dumb pipes," simply transporting any and all traffic to its destination. The other part would sell services that ran through the pipes, which could include voice, Web services, video and anything else the companies could think up. The pipe side would sell transport to anyone and everyone, including the services side. The two sides would be completely separate financially. Thus the pipe side would have no reason – and would be forbidden – to favor the services side over other services companies.

The pipe side would essentially be a utility, with all the characteristics of such entities. It would require major long-term infrastructure investment and likely produce lower margins. Unlike with current ISPs and phone companies, it would be unable to rely on high-profit services to compensate for losses. And as with phone companies today, it would likely be subject to some regulation aimed at ensuring universal access to pipes, particularly in rural areas. In short, pipe companies would be hard businesses to run. But that's why executives make the big bucks.

The services side would function like any other services company. It would require less investment and have potentially much higher margins. It would have to succeed based solely on the attractiveness of its products and the competence of its customer service. Unlike with current ISPs and phone companies, it couldn't rely on ownership of pipes to provide a competitive advantage. In short, it too would make executives earn their pay.

Such mandated split-up of ISPs would turn the telecommunications and Internet landscape on its head. Thus ISPs and their political allies would fight any such mandate so ferociously as to make its passage nearly impossible. But if it did happen, such change would in fact increase competition and reliance on market forces to improve the quality and lower the cost of services. So even if it never happens, it's worth keeping in mind that it could and probably should. And that could in turn help keep the arguments over network neutrality in perspective.