Network Neutrality’s Impact on Smartphones

High-tech and cell phone industries have been thriving without government

If you own a BlackBerry or other smartphone, try this experiment. Find a friend who owns an Apple iPhone and try out the same application, say Google Maps. On which device is it faster and easier to use? This experiment is even more profound if your BlackBerry uses AT&T’s wireless network, the same network that supports the iPhone.

In all likelihood, the iPhone will win this little battle. It’s not so much that anything is particularly wrong with the BlackBerry version-it’s just that the iPhone app is less clunky and more intuitive. The BlackBerry is good, but most people believe the iPhone is better.

To Federal Communications Commission (FCC) Chairman Julius Genachowski, this difference, which he refers to as applications discrimination, is a big problem. It’s only made worse, in his view, by the fact that Apple formed an exclusive partnership with AT&T to market the iPhone, thereby giving the service provider a financial incentive to ensure iPhone functionality was superior to competing smartphones. Indeed, AT&T spent millions of dollars modifying its wireless network to ensure the iPhone would meet the performance specs that Apple demanded.

Genachowski, with the apparent blessing of the Obama administration, is pushing for new regulations-so-called “network neutrality”-that would prohibit service providers like AT&T, Verizon, or Comcast from leveraging its ownership of network facilities to favor third-party applications, whether or not that third-party is paying for the privilege and whether or not the third-party is working in partnership with the service provider.

The proposed rules permit “reasonable” network management, but that is a problem in itself, as they do not define what “reasonable” means. Genachowski also wants to extend these regulations to wireless service, where they stand to have a profound effect on the viability of business models that successfully brought popular innovations such as the iPhone and Kindle to market in the first place.

Under the network neutrality rules the FCC is proposing, it is difficult to imagine a product like the iPhone passing the non-discrimination test. The iPhone has applications and interfaces that you can’t get on a BlackBerry or Glide, or from other service providers. And AT&T has optimized its network so that when the same apps are available on more than one smartphone, the quality of iPhone apps is protected. There is no reason to think that under the proposed regulation, the FCC wouldn’t see a future collaboration like this as a neutrality violation.

Neutrality proponents argue that the proposed regulations would not apply to the iPhone. The non-discrimination rule, they say, only applies to the way service providers treat specific Internet applications as they cross the network. That is, it would stop a service provider from offering a special deal to Google to prioritize YouTube video downloads if it did not offer the same deal to a competitor.

AT&T’s tight integration with Apple’s iPhone is at the platform level, they say, which means the carrier does not tinker with specific iPhone apps as they cross the network, as in the YouTube example above. AT&T only optimized its network to support the performance of the iPhone device. This, neutrality proponents say, would exempt the iPhone and devices like it from non-discrimination rules.

That’s wishful thinking. The proposed regulations prohibit applications discrimination. Nowhere do they make a qualification about how a service provider and a third-party accomplish it. Bottom line, AT&T modified its network so it could handle the transmission and processing workload iPhone apps require. More likely, under a regime of network neutrality, the FCC would be obliged to explain why any current or future iPhone/service provider arrangement merits an exception. Even then, such a decision would risk appearing convoluted and arbitrary.

The rationale behind network neutrality is that it protects consumers by preserving a “free and open Internet.” But the freedom and openness of the Internet does not derive from the functional separation of consumer devices, content, software and carrier networks the FCC wants to enforce. The Internet is free and open because the software building blocks developers use are long-established standards. Over time, innovators large and small have used these building blocks to create tighter functional integration among mobility, interactivity, e-commerce and social networking. Their collaboration brought innovations such as the iPhone, and will continue to be consequential to the performance of e-readers like Kindle, and new devices like the iPad. Gearheads call it Web 2.0. For consumers, it’s what makes Facebook, Twitter, Pandora and Google Maps easy and fun to use from virtually anywhere.

It’s hard to imagine Apple or Amazon or any other company approaching a service provider with an innovative idea for a new network device if the FCC is going to reserve the right to review any service provider collaboration as a potential network neutrality violation. Web entrepreneurs will find it hard to win investors when they have to offer a caveat that there might be months or years of regulatory delays before their idea sees market daylight, if it ever does.

Network neutrality will replace a long-admired, creative aspect of the U.S. high-tech industry, the freedom to innovate without permission from an authoritarian, destructive, bureaucratic mechanism of “Mother, may I?” It was bad idea four years ago. It’s a terrible idea today.

Steven Titch is a telecom policy analyst at Reason Foundation.