In order to understand the network neutrality (or net neutrality) debate, the Internet

architecture needs to be reviewed. Network neutrality was a part of Internet design philosophy
that emphasized open systems and decentralization in an effort to foster collaboration and low
cost communication. ARPANET, the original network standard that inspired the modern Internet,
employed the concept of the stupid network where all packets were transmitted on best effort
basis that do not provide quality of service (QoS) assurances. Any message sent through the
network was dissembled into a series of packets, and then reassembled back into the original
message at the destination. All packets are treated equal and as such can be produced, re-created,
distributed and consumed by anyone at any time. This best effort principle allowed the Internet
to efficiently connect computers of varying complexity and systems. By providing capacity,
interconnectivity and speed, the Internet has been characterized as a neutral communications
medium. This model reflects the end-to-end principle, which envisions an Internet of best
efforts networks. Net neutrality allows end-users the freedom to access the content, services,
applications, and devices of their choice [11]. End-users have to pay Internet Service Provider
(ISPs) such as Verizon, Time Warner for access to the Internet, but not faster delivery for a
certain type of content, rather faster delivery for all packets; and content providers such as
Google, Yahoo, newspapers, blog, only pay fees to a single ISP to upload information to the web
[12]. Without net neutrality, ISPs could charge content providers again when users
access content. However, there
is no federal law preventing ISPs from charging content providers different prices for
access to
their subscribers. The Federal Communications Commission (FCC) has favored
nondiscrimination
in its policy statements, and it is now attempting to codify net neutrality principles
to bring clarity
to the bounds of ISP action. Under a legal net neutrality regime, ISPs would be
prevented from price
discriminating against content providers. If ISPs could price discriminate, they would
be able to charge content providers different prices to
reach their subscribers. For example, a company like Time Warner would be able to
charge a
content provider like Yahoo a different price than Wikipedia to reach Time Warners
subscribers.
Or, if Wikipedia could not reach an agreement with Time Warner, then Time
Warners subscribers
would be unable to access the site. This prospect threatens the endtoend
architecture.
TCP/IP allows information packets to be transported across different networks,
despite differences in bandwidth, delay, and error properties associated with different
transport media

The Internet had been widely available and had transformed economic activity and social life. As
the Internet begins
to offer convergent services, such as Voice over the
Internet Protocol (VoIP) telephone services and Internet
Protocol Television (IPTV), some operators may
perceive the opportunity to accrue a fi nancial or competitive
benefi t by deviating from a plain vanilla.

Recently, network neutrality has faced challenges from various parties. The first violation of
network neutrality became in 2005 when Madison River Communications blocked calls by its
competitor Vonage, a Voice over IP (VoIP) provider which allows users to place calls for free
over the Internet, in an effort to encourage greater use of Madisons phone services [2]. In
response, Vonage took legal action at the Federal Communications Commission (FCC). The FCC
reached a consent decree with Madison River Communications under which the company agreed
to pay fine and eventually ended its discrimination against Vonage as well [2]. Although this
was a consent decree and the FCC did not explain its position, it nevertheless represents a
general
commitment to net neutrality principles. This incident did not result in a clear articulation of

network neutrality principles, however, this incident did raise the issue of network neutrality in
the public consciousness. This incident can be seen as a conflict between a well established
telecommunication company and a new telecommunication with innovation. The VoIP blocking
can be understood as discussions of network neutrality as an economic concern and a matter of
innovation.
The FCC typically exercises its broad jurisdiction over communications through case
bycase
adjudications, rather than through rulemakings or regulations. the FCC
formally committed to its net neutrality policy in its wellknown Comcast Order,
issued in August
2008. There, the FCC held that Comcast violated the FCCs Policy Statement and
illegally blocked
access to lawful online content by delaying subscribers downloads and blocking
their uploads. The
Commission found that Comcast failed to exercise reasonable network
management when it
selectively targeted and interfered with BitTorrent, a peertopeer (P2P)
application (a website
with software allowing users to download information uploaded by other users
without central
coordination).10 Specifically, Comcast monitored its connections to identify P2P
connections, and if
it determined that too many customers were uploading P2P, it would drop the P2P
connections
Some Internet Service Providers (ISPs) seek to diversify
the Internet by prioritizing bitstreams and by offering
different quality of service guarantees. To some
observers this strategy constitutes harmful discrimination
that violates a tradition of network neutrality in the
switching, routing and transmission of Internet traffi c.
To others offering different levels of service provides
the means for consumers and carriers to secure and
pay for premium, better than best efforts service if
so desired.

Opponents of network neutrality argue that broadband provider must be able to control the pipes
in which the packets are transmitted. Broadband providers argue that to ensure efficient network
use, they need increased flexibility in prioritization or otherwise managing Internet traffic as well
as in pricing such arrangements. Prioritization of bandwidth is necessary for innovation and
investment. Without the possibility to introduce new price structures, for example, by giving
online companies willing to pay the ability to transfer their data packets faster than other Internet
traffic, their incentives to invest and innovate could be undermined. Van Schewick [3] has
demonstrated in the context of the Internet, network providers may have
economic incentives to discriminate in welfare-reducing ways .
Defining network neutrality
Popular online content providers such as Microsoft, Google would like to maintain the status
quo, which they claim would preserve the egalitarian philosophy. Other supporters of the concept
include online start-ups, that claim it would be almost
impossible for them to pay these proposed fees when their revenue streams are almost nonexistent, since
they have to give away most of their content in order to build a loyal customer base [7]. Some
venture capitalists have even argued that abandoning net neutrality would result in would-be
entrepreneurs becoming more hesitant to start a business, which might hurt the competitiveness
of
American online firms in the long run [6,7].
The Internet service providers have argued that they have put their resources to maintain and
upgrade the physical infrastructure to provide the services to consumers, while the popular web
sites have
thus far gotten a free ride on their resources1 (Waldmeir 2006), and that the Internet service
providers
should be allowed to strike deals to give certain Web sites or services priority in reaching
computer users
(Krim 2005, p. D05). With online content increasing exponentially over the years, and
consumers
increasingly becoming used to broadband access, it will be necessary to meet the rising costs of
increasing capacity and serving an expanded consumer base. Not having these sources of
revenue might
act as a disincentive to upgrade the service providers infrastructure and affect their plans of
increasing
existing capacities. That, in turn, would affect many emerging online services such as real-time
broadband video, which by design require preferential treatment of their packets. In some ways,
the ISPs
contend, the new payment mechanisms might herald the beginning of new business models that
demand
preferential treatment of their packets, and that the vertical integration of new features and
services by
broadband network operators is an essential part of the innovation strategy companies will need
to use to
compete and offer customers the services they demand (Thierer 2004, p. 1).

The proper usage and context of the term net neutrality itself has been subject to
confusion [8]; an extensive discussion of the issues can be found in [8,9]. network
neutrality aims to address concerns raised by some specific behavior of the
broadband
service providers: (a) blocking of some content providers; (b) preferential treatment
of one content
provider over another; and (c) transparency failures, whereby a broadband provider
fails to notify its
customers and content providers what service they offer in terms of estimated
bandwidth, latency, etc.
(Wu 2006b). The current proposals by the broadband service providers (i.e., the
ISPs) have raised
concerns around the second issue i.e., the possibility that one content or
application provider pays the
broadband service provider for preferential treatment of its packets, as the ISP acts
effectively as a
gatekeeper between the content providers and the customers it serves.
Both proponents and opponents of net neutrality employ economic arguments to
advance their
positions. Unfortunately, the necessary data to precisely estimate the value of the
Internet, or the
costs and benefits of net neutrality rules is not available. A full analysis of the impact
of net neutrality on the value of the Internet would require information
on the value of the Internet under net neutrality and the value of the Internet under a price
discrimination
regime. The Internet currently operates under a de facto net neutrality regime, and its costs
and benefits
could be valued. However, estimating the value of the Internet under price discrimination
would require a
series of heroic assumptions about how ISPs and content providers would respond to price
discrimination. A
specific estimate of the value of the Internet under price discrimination would be
speculative. It would
therefore be difficult to compare the benefit and cost ratios of both regimes.

the core of the net neutrality debate is about a tradeoff of wealth: eliminating net
neutrality would
allow ISPs to implement new technologies to institute pricing practices that would
transfer wealth
from content providers to ISPs.
how this wealth transfer affects incentives to invest in different parts of the
Internet: giving more wealth to ISPs would allow them to use some of that revenue
to make

additional investments in the Internet infrastructure; but that would come at the
expense of
content providers, who would have less incentive to invest in Internet content.
Further, most of the
additional revenue generated by ISPs widespread use of price discrimination or
traffic
prioritization would compensate for ISPs past investments, and ISPs would probably
transfer that
revenue to their shareholders rather than use it to investment in new broadband
infrastructure.
Transferring wealth to ISPs in no way guarantees that ISPs would invest that wealth
in Internet
infrastructure. It is also likely ISPs would not be able to perfectly price discriminate,
leading to inefficiencies that would decrease the value of the Internet.
issue of
prioritization pricing schemes,
such as fast lane architecture.
Like price discrimination, these
prioritization schemes would result in underinvestment in many forms of Internet
content. While
some content providers may see net benefits from this type of architecture, forms of
content that
are not easily monetized would be especially harmed by the creation of a feebased
fast lane access
to ISP customers
In our current de facto system of net neutrality, content providers enjoy
large portions of the surplus, and thus, receive increased revenue and rates of
return on
investment. If we were to change over to a system of price discrimination, revenue
currently in the
hands of content providers would be transferred into the hands of ISPs. Currently,
ISPs do not
charge content providers to reach the ISPs subscribers. Under a system of price
discrimination,
ISPs would begin charging content providers to reach their subscribers and could
charge different
content providers different amountseither for the same service or for priority
service (namely, a
faster connection to subscribers). Because content providers would have to pay ISPs
for this
service, part of the revenue generated by content providers would be transferred to
ISPs. This
wealth transfer will put more money in the hands of ISPs, increasing the rate of
return on
infrastructure investment, but lowering the rate of return on content investment.

The net neutrality debate most directly affects the prices that
ISPs charge content providers to use the ISPs last mile.
Currently, all subscribers (including Internet users, content providers, and
businesses) pay to
connect to the Internet usually using ISPs broadband networks. Household fees are
typically
structured as a monthly charge for unlimited access to the Internet. Large
businesses typically pay
fees based on the quantity of data they upload and download from the network. 46
Internet content
providers contract with ISPs or backbone companies based on the quantity of data
uploaded. The
market for uploading content is relatively competitive; there are multiple backbone
companies and
content providers can choose between ISPs and backbone companies . Internet
content
providers contract with ISPs or backbone companies based on the quantity of data
uploaded. The
market for uploading content is relatively competitive; there are multiple backbone
companies and
content providers can choose between ISPs and backbone companies [13]. The
current pricing scheme has raised concerns that content providers are taking
advantage of
ISPs property for free. [14]. ISPs now have technology that would allow them to
change this pricing structure and actually charge content providers both on the way
in and the way
out. The main technology that gives broadband providers the ability to price
discriminate is Deep
Packet Inspection (DPI) technology, which was introduced only in the last decade.
Information that
passes through the Internet consists of units of information called packets. These
packets are
comprised of a header, which contains processing information (such as the source
and destination
address), and a data field, which contains all other information. 55
Before DPI, networks processed packets using header information, as that field is
instrumental in
getting information to the correct destination. ISPs were thus unable to determine
the source
applications of the various packets that traveled over their networks. DPI changes
all of this by
enabling broadband providers to monitor the data field, including the source, of all
incoming and
outgoing packets in real time[15]
If an ISP can use DPI to identify and subsequently affect the transfer of individual
packets in real
time, then it functionally has the power to discriminate based on content, source, or
both. When

discriminating based on origination, an ISP could use DPI to identify the origination
of a particular
packet sent over its network, and could then charge different content providers
different prices to
send their information over its broadband lines and reach its subscribers. An ISP
could also tag
packets for prioritized (i.e., faster) treatment or block the packets altogether, based
on what the
packets contain or which application sent them. 63 this means that ISPs could put
packets from YouTube on a fast lane, put packets
from Yahoo on the slow lane, and charge YouTube more for this fast lane treatment.
Or, ISPs could
charge YouTube nothing for this fast lane treatment

Alternatively, an ISP could use DPI to identify the type of packet sent over its
network and
discriminate based on content or application. For example, an ISP like Time Warner
could charge
content providers more for videos than for standard website pages to reach
subscribers. It could
also place videos on the fast lane, and standard web pages on the slow lane. This
would mean that a
company like Time Warner could
charge a content provider like
YouTube to place its packets in
the fast lane, but not offer fast
lane service to the text and
images on Wikipedia. Or, a Time
Warner could charge content
providers more to send Peerto
Peer (P2P) applications65 over
its last mile than other
applications.

Some ISPs are currently using Deep Packet Inspection in network management;
however, none are
known to be using the technology to price discriminate. In 2007, Comcast used DPI
to identify P2P
uploads (by determining their origination from other users) and terminate them. 66
However, the
FCC subsequently found that Comcasts actions violated its policy, and Comcast can
no longer use
DPI in this manner

Supporters of price discrimination argue that it will allow ISPs to collect more
revenue, and
therefore allow ISPs to invest in the Internet infrastructure, which they own.

even in the absence of additional network neutrality regulation, end-users have a

variety of strategies available for responding to discriminatory practices from carriers. This
suggests that the appropriate counterfactual case to consider (in the absence of net neutrality
regulation) is a world in which end-users are confronted with discrimination and respond to it.
Second, providers may find it difficult to maintain forms of discrimination or differentiated
treatment that are welfare enhancing. Third, that the availability and effectiveness of responses to
discrimination are likely to vary not only by geography but also by the level of skill and
economic resources available to particular customers, raising potential equity issues. Moreover,
as we explain further below, the effectiveness of end-user responses depends critically on the
mode of discrimination employed by the operator. We conclude that although there are a range
of end-user responses possible, that the concerns that motivated calls for net neutrality regulation
remain valid. Finally, that the Internet is a dynamic system. Behaviors by operators that certain
end-users find undesirable will elicit user responses that will elicit further responses from
operators. This arms race has its own costs associated with it.
Unfortunately, while it is plausible to believe that broadband access providers with
market power may seek to engage in harmful discrimination [3], it is also reasonable and
probable
that there are many contexts in which discrimination is welfare enhancing and differentiation is
consistent with robust competition. For example, end-users are likely to applaud operator efforts
to block malware traffic such as viruses or distributed denial of service (DDoS) attacks or from
malfunctioning devices that may be congesting network resources unintentionally (e.g., a
workstation that has gone haywire). Furthermore, the ability of the Internet to support diverse
applications efficiently is enhanced by the ability of operators to selectively offer differentiated
Quality of Service (QoS) handling on a bit-by-bit, flow-by-flow basis. For example,
packetprioritization
can allow real-time (delay-sensitive) traffic such as voice telephony to be carried
over congestible networks with delay-insensitive traffic (e.g., email). Such QoS is key to
enabling the transition to Voice-over-IP (VoIP) that is viewed as offering benefits in enhancing
convergence and expanding the scope for competition.

end-users (perhaps in
conjunction with upstream providers) may adopt to bypass, counter, or learn to live with
discrimination or differentiation by the network operator. The first of these are attempts by
endusers
to bypass the broadband access bottleneck by taking advantage of alternative infrastructure
that does not differentiate in the same way, including those that may be deployed by end-users,
with little or no involvement of traditional service providers.

These include direct

technical and non-technical countermeasures intended to render the carrier attempts at
differentiation more costly, or equivalently, less effective.
deviations from network neutrality are realized when an
operator uses various forms of information about a traffic stream to provide differentiated
treatment to that traffic. Modern routers contain software modules described as packet classifiers
whose job is to determine the appropriate class to which to assign a packet. Packets within that
class are then given a particular treatment with respect to packet scheduling, routing or packet
dropping from buffer queues. For example, in order to discriminate against or in favor of traffic
from a particular content provider, the stream of packets from that provider may be classified
using the packets IP source address which generally indicates the computer from which the
traffic originated. If that computer can be associated with a particular provider, than traffic so
classified could be prioritized, dropped, or rate limited, by the ISPs routers providing treatment
which is different from that accorded other classes of traffic from different sources, and therefore
not neutral.

Packet length and inter-packet spacing

Packet encryption alone may not be sufficient to disguise the application behind a stream
or flow of packets. A classifier observing a flow of short packets between two addresses might be
able to deduce from packet length and interpacket spacing that the flow is part of a VoIP call.
Several router vendors claim to have such capability.55 In response, VoIP application software
could attempt to disguise a call by padding packets with useless information, or adding null
packets to the flow in order to defeat such a classifier. If all packets are carried across the access
network through an encrypted VPN tunnel, one consequence is to mix packets from multiple
flows within the same tunnel, which can also interfere with attempts to infer application
information from packet length and inter-packet spacing.

Costs of countermeasures.
End user efforts to defeat packet or flow classification by carriers are not without their
costs. Encryption chews up processor cycles, may introduce start-up delays while encryption
keys are exchanged, and increases packet size (or reduces usable data per maximum-length
packet). Users may also need to pay service fees to a commercial darknet provider. There is also
the cost in user time to research alternatives and configure encryption capabilities.
Impeding flow classification by padding packets, or introducing null packets, adds to
overall traffic per usable bit of information. VPNs and onion routers cause packets to follow
longer routes, thus increasing bit miles and consumption of network capacity. In short, attempts
by operators to limit some forms of traffic (such as P2P) to reduce network congestion may have
the effect of actually increasing congestion as users adopt countermeasures to disguise their
traffic. User specified routing, as occurs with onion-routing, may also increase an access
providers costs, if it results in greater use of expensive transit networks in place of cheaper

direct peering. Onion routing can also defeat efforts by operators to use local caching to reduce
network traffic. In the absence of distance and volume-based pricing, consumers may have little
disincentive to use these techniques, despite the costs they impose on operators.
[1] Kang, Cecilia. Comcast Defends Role as Internet Traffic Cop. The Washington Post.
February 13, 2008.
[2] Kapustka, Paul. Vonage Being Blocked Again. InformationWeek. March 9, 2005.
http://www.informationweek.com/news/showArticle.jhtml;jsessionid=NHORVSLUVWUSKQS
NDLOSKH0CJUNN2JVN?articleID=159400250&_requestid=424061
[3] See van Schewick, Barbara (2005), "Towards an Economic Framework for Network
Neutrality
Regulation," Paper presented at the 33rd Research Conference on Communication, Information
and Internet Policy
(TPRC 2005), George Mason Law School, Arlington VA, September 2005

[4] Wu, Tim, "Network Neutrality, Broadband Discrimination," Journal of Telecommunications

and High Technology Law, 2, (2003), 141.
[5] "Hearing on Network Neutrality: Competition, Innovation, and Nondiscriminatory Access","
Washington, D.C., House Committee on the Judiciary Telecom & Antitrust Task Force
[7] Sydell, Laura, "Internet Debate - Preserving User Parity," (2006), April 25, All Things
Considered, NPR, USA.
Waldmeir, Patti, "The Net Neutrality Dogfight that is Shaking Up Cyberspace," Financial Times,
March 23, 2006, B12.
Krim, Jonathan, "Executive Wants to Charge for Web Speed," Washington Post, Dec 1, 2005,
2005, D05.
[8] Wu, Tim, "Net Neutrality FAQ," (2006b),
http://www.timwu.org/network_neutrality.html,
[9] Economides, Nicholas and Joacim Tag, "Net Neutrality on the Internet: A Twosided Market
Analysis," (2007), NET Institute Working Paper #07-45, Stern School of Business,
New York
University
[10] Nicholas Economides, Net Neutrality, NonDiscrimination
and Digital Distribution of Content
Through the Internet, 4 I.S.J.L.P. 209, 21112 (2008), available at
http://www.stern.nyu.edu/networks/Economides_Net_Neutrality.pdf.
[11] Trans Atlantic Consumer Dialog, Resolution on Net Neutrality, at 2 (Mar. 2008), available
at

http://www.publicknowledge.org/pdf/tacdnnresolution200803.pdf.
[13] Paolo Buccirossi, Laura Ferrari Bravo & Paolo Sicilani, Competition in the Internet
Backbone Market, 2
WORLD COMPETITION 235, 243345 (2005)
[14] Robert Hahn & Scott Wallsten, The Economics of Net Neutrality, 3 ECONOMISTS VOICE 1
(2006),
available at http://www.bepress.com/ev/vol3/iss6/art8..
[15] M. CHRIS RILEY & BEN SCOTT, FREE PRESS, DEEP PACKET INSPECTION: THE END OF THE INTERNET AS
WE KNOW
IT? 3 (March 2009),
http://www.freepress.net/files/Deep_Packet_Inspection_The_End_of_the_Internet_As_We_Kno
w_It.pdf.