Is Network Neutrality Permanently Stalled at the Finish Line?

The long-running network neutrality debate is once again front and center after another flare-up, this one stoked by a policy proposal jointly developed by Google and Verizon. The seven-point plan was panned by net neutrality advocates but cheered by industry players, making it unclear whether regulators, legislators and private industry can forge a deal.

Network neutrality has been a thorny issue for years. Generally speaking, network neutrality dictates that Internet service providers cannot discriminate against content, applications and other web traffic. Advocacy groups are seeking 100% network neutrality. Broadband providers, however, want the ability to control traffic in order to manage their networks and generate enough cash flow to continue to invest in infrastructure. In the middle sit players ranging from Google to Apple to Facebook. Meanwhile, many experts and industry participants fear the unintended consequences of government regulation and the potential fallout of political interplay between Congress, lobbying groups and the Federal Communications Commission.

Verizon and Google, partners on Droid-branded smartphones, proposed in an August 9 blog post that all consumers should have access to legal Internet content and applications without discrimination or the prioritization of network traffic. In addition, the proposal stated that Internet players need to be transparent about their network management practices. The companies also spelled out the FCC’s potential role as an enforcement agency, argued that broadband providers should be able to offer differentiated online services and supported universal broadband access.

However, Google and Verizon also maintain that wireless broadband shouldn’t fall under net neutrality rules for now because “wireless broadband is different from the traditional wireline world, in part because the mobile marketplace is more competitive and changing rapidly.”

Some industry observers suggest that the Google/Verizon proposal reflects broad compromise between many key Internet players. Indeed, David Cohen, executive vice president of broadband at Comcast, said at the recent Supernova conference at Wharton that the ecosystem of industry stakeholders “is more in agreement over regulation than at any other time.” Despite all the seemingly disparate viewpoints, “there is actually much more agreement on network neutrality than most people realize,” notes Kevin Werbach, a legal studies and business ethics professor at Wharton. “There is a zone of compromise on the major issues that is fairly well defined. The Google-Verizon proposal was one possible deal within this zone of compromise. There are still many points of contention, but they are on smaller issues than ever before.” Until recently, Werbach served as a consultant to the FCC, and co-led the FCC Agency Review for the Obama Transition Team. He currently does not have a formal engagement with the government.

‘The Devil Will Be in the Details’

Reaction to the Google-Verizon announcement by net neutrality advocacy groups — especially to the portions pertaining to wireless broadband — was swift and largely negative, however. Groups like Free Press, a media reform advocacy group, predicted that, if implemented, the Google-Verizon proposal would “mark the end of the open Internet era” and was “far worse” than the net neutrality framework offered by FCC Chairman Julius Genachowski in September 2009. The FCC’s four principles for an open Internet prohibited broadband providers from discriminating against content, limiting applications and banning legal devices from a network, and also advocated for choice in access services. However, a court in April ruled that the FCC had no regulatory authority over Internet service providers.

Public Knowledge, another advocacy group, expressed “alarm at the extraordinary loopholes in Verizon and Google’s proposal.” FCC commissioner Michael Copps called the plan dangerous and suggested that it would “build a world of private Internets.” Other groups like the Electronic Frontier Foundation were more neutral about the proposal, but had problems with certain provisions.

The negative feedback led to another blog post from Google and Verizon. On August 12, Richard Whitt, Google’s Washington telecom and media counsel, defended the net neutrality proposal. Whitt responded to what he described as “myths,” including accusations that Google sold out on net neutrality. “Given political realities, this particular issue has been intractable in Washington for several years now. At this time, there are no enforceable protections against even the worst forms of carrier discrimination against Internet traffic,” Whitt wrote. “With that in mind, we decided to partner with a major broadband provider on the best policy solution we could devise together. We’re not saying this solution is perfect, but we believe that a proposal that locks in key enforceable protections for consumers is preferable to no protection at all.”

Despite the debate among different stakeholders, Wharton business and public policy professor emeritus Gerald Faulhaber described the Google-Verizon proposal as a good start to address a sticky issue, and one that “makes a lot of sense and represents some give on both sides.”

What happens next is unclear, however. Experts at Wharton say that Congress could push the net neutrality legislation advocated by the two tech giants. Conversely, the FCC could fashion an order that would adopt the Google-Verizon proposal but make it voluntary. That move, experts predict, would effectively provide some net neutrality framework and buy more time for comprehensive legislation.

Indeed, time might be an important component of finding a proposal with broad stakeholder buy-in, observers say, because arguments for net neutrality are likely to become more fervent the closer the debate comes to a consensus. “Net neutrality is a religious issue for some,” Faulhaber notes. “Net neutrality fundamentalism is extremely strong. There will have to be some solution to it [that requires compromise].” The risk, however, is that those compromises will create loopholes that would ultimately weaken any regulations that are adopted. “The success of network neutrality efforts will depend on the implementation of various proposals,” Andrea Matwyshyn, a legal studies and business ethics professor at Wharton, points out. “The devil will be in the details.”

Matwyshyn says there are solid parts to the Google-Verizon proposal. For instance, most stakeholder groups seem to agree that transparency of network practices is important. However, Matwyshyn states that wireless and wired broadband access shouldn’t be treated differently under network neutrality. “The consumer doesn’t view these types of services as fundamentally different.” She adds that the FCC, along with the Federal Trade Commission, has to adopt a regulatory framework that puts consumer protection first. “All consumers care about is that [information] arrives in a timely way with the feeling they have some control.”

Other experts at Wharton say it’s hard to push the technical details to the side. Net neutrality is a tough topic to debate, Faulhaber notes, because it encompasses consumer protection, engineering and politics. The risk is that the government ends up doing more harm than good with regulations. Werbach agrees that net neutrality is a sticky issue and sees the Google-Verizon proposal “as an attempt to break the logjam…. It has many flaws, but it demonstrates that a major network operator and a major network-based provider can find common ground.”

The Wireless Question

One of the muddier aspects of the Google-Verizon proposal is the suggestion that wireless broadband should not be included in net neutrality regulation initially. Google’s Whitt, looking to defuse criticism that the search engine giant compromised on wireless because of its partnership with Verizon, wrote in his blog post that the omission of mobile from the plan simply reflects the reality that so-called fourth-generation (4G) wireless networks are still being constructed and that the industry is in flux.

Whitt acknowledged that Google had earlier pushed for wireless net neutrality, but said company officials later reached a compromise with Verizon, agreeing that the mobile broadband industry should “remain free from regulation for now, while Congress keeps a watchful eye.” The wireless market is more competitive than the traditional broadband arena because it has multiple carriers, Whitt wrote. In addition, wireless networks are more constrained so they have to be actively managed.

Experts at Wharton, however, were mixed on Google and Verizon’s move to exclude wireless from the net neutrality proposal. Technically, wireless networks are different than their wired, or wireline, counterparts because of the greater capacity constraints of mobile broadband. AT&T’s struggle to build sufficient capacity for the influx of customers using Apple’s iPhone illustrates those constraints, they note. Including wireless in a net neutrality proposal would be “insane,” Faulhaber suggests. “[Wireless] is obviously [a] different technology from wireline. And the wireless business is a competitive market. It’s not like wireline where you have at most two broadband providers [in a given service area].”

In addition, Faulhaber thinks that it’s simply too early to hamper wireless broadband with net neutrality regulation, suggesting that 4G networks have to be built before any such policy can be considered. Even then, capacity will be limited unless the government releases more wireless spectrum. “If the FCC enforced net neutrality on wireless, the industry could collapse,” Faulhaber adds. “If everyone watches high-def movies [simultaneously on their mobile phones], the network will fail.”

University of Pennsylvania law professor Christopher Yoo agrees that excluding wireless from the net neutrality debate makes sense. “There’s a huge difference between wireless and wireline because wireless has much less capacity and is more susceptible to local congestion,” Yoo notes. “And wireless networks are much less reliable. Imposing something like net neutrality on wireless would limit wireless networks’ ability to take these differences into account.”

Werbach, however, acknowledges that wireless is a different animal, but thinks there’s no reason to exclude it entirely from a network neutrality regime. “As a technical matter, certain traffic management techniques may be more appropriate, or even necessary, on a wireless network, but that can be encompassed [in a net neutrality policy] within the concept of ‘reasonable network management.'”

According to Matwyshyn, excluding wireless from the net neutrality debate would make more sense if carriers were more active on network innovation. Matwyshyn maintains that U.S. wireless carriers are behind in improving and expanding their networks when compared to rivals around the world, and shouldn’t get an exemption from net neutrality provisions when they haven’t done enough to build out their capacity.”Are we trying to put a Band-Aid on a weakly-built structure or experimenting with new networks?” asks Matwyshyn, adding that technical limitations shouldn’t be an excuse for opting out of net neutrality.

Falling Victim to Politics

The upcoming midterm elections in November coupled with strong reactions to the Google-Verizon proposal mean the net neutrality debate is as volatile as ever. The policy drafted by the two tech giants shows that private industry appears to have hammered out an agreement on key principles, but comments by FCC commissioner Copps indicate that the regulatory body may have significant problems with the Google-Verizon plan. On September 1, the FCC issued a notice seeking public comment on net neutrality issues, including whether wireless should be excluded.

One significant hurdle to finding a solution to net neutrality is that any policy compromise by industry players and advocacy groups will then be subjected to the political process. “The FCC chairman faces two choices. Find a political compromise or regulate the Internet regime as a telephone system,” Yoo states, noting that putting broadband providers under the same regulations as the telephone companies would likely involve multiple legal challenges and potentially harm innovation within the industry.

Net neutrality is at an interesting juncture, Faulhaber says, suggesting that one reason Google and Verizon were so willing to compromise is that neither party wants to be subjected to potentially heavy-handed policy making at the hands of the federal government. If the FCC regulates Internet service providers, it will likely extend its investigation into applications and content — in other words, directly onto Google’s turf. “When Google started this, it wanted to turn its suppliers into commodity providers. Everybody wants that. But Google woke up when it realized that it could also be regulated,” Faulhaber points out. “Once you open a cage and the wild animal escapes, you’re not sure who will be eaten. That’s where this is going. Private industry is saying, ‘We can settle this.'”

However, it’s unclear whether the Google-Verizon proposal gives the FCC and legislators enough encouragement to finally act on net neutrality, Werbach notes. “What’s important is not whether the details of the proposal are perfect, but whether it gives the FCC or Congress sufficient support to move forward. The largely negative reaction to the proposal doesn’t give one much confidence that that will be the case.”

Yet according to Yoo, the Google-Verizon policy “may have a shot”; he points to an August 26 Washington Post editorial that endorsed the proposal. Experts at Wharton say that the FCC could use some time to mull over net neutrality before the political process runs away with it. Hurried net neutrality legislation is feared by all sides, Yoo notes, and the best outcome may be that the FCC crafts a standstill agreement based on the Google-Verizon proposal.

Indeed, a rushed approach could hurt the FCC as well as Internet innovation. “My greatest fear is that the push for network neutrality will result in new limits on the FCC’s authority and flexibility to address the evolving challenges of Internet policy in the coming years,” Werbach states. “A deal that imposes some nominal prohibitions on broadband discrimination but hamstrings the agency would be short-sighted and ultimately worse than nothing.”

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