A horizontal leap forward: formulating a new communications public policy framework based on the network layers model.

AuthorWhitt, Richard S.

EXECUTIVE SUMMARY I. OVERVIEW AND SUMMARY II. BACKGROUND A. The Worm of Legacy Communications Regulation B. The Network Engineering Concept of Layered Architecture 1. The Layering and End-to-End Principles 2. Protocol Layer Models C. The Internet Era: Legal Walls Stay Up as Logical Walls Come Down 1. The Communications World 2. The Internet World III. A NEW CONCEPT: REGULATION ALONG HORIZONTAL NETWORK LAYERS A. Sketching the Layers Framework 1. Why Adopt a Layers Approach? 2. What Kind of Layers Model to Adopt? B. Solum's "Layers Principle" C. The Layers Principle and Informed Decisionmaking D. Another Public Interest Aspect: Creating and Preserving the "Innovation Engine" E. Defining and Guarding Against Market Power Abuse in the Layers IV. APPLYING THE LAYERS PRINCIPLE: THE PUBLIC POLICY IMPLICATIONS A. The Layers Principle and ISP Liability 1. Regulations that Fail to Respect the Integrity of the TCP/IP Layers a. Physical Layer Regulation Aimed at Content Layer Problems i. Myanmar's "Cut the Wire" Policy ii. U.S. Proposed to Sever Serbian Internet Access b. IP Layer Regulation Aimed at Content Layer Problems i. French Yahoo! Case ii. Pennsylvania Anti-Child Pornography Law c. Transport Layer Regulation Aimed at Content Layer or Application Layer Problems i. The Blocking of Peer-to-Peer File Sharing by ISPs ii. Panama Blocks VoIP d. IP Layer Regulation Aimed at Transport or ApplicationLayer Problems i. Chinese Government Blocking Access to Search Engines ii. Cable Company Control Over Content and Services as a Way to Prevent Streaming Video iii. VeriSign's "SiteFinder" Service: Competitive Innovation or Deceptive Practice? 2. Regulations that Fail to Respect the Communications System Layers B. The Layers Principle and Traditional Common Carrier Regulation 1. Lower Layer Control a. Last-Mile Regulation and Competition Policy b. Local Competition and Unbundled Network Elements 2. Focused Regulatory Attention a. The Basic/Enhanced Dichotomy b. Broadband Regulation c. IP Communications ("VoIP") d. Other Key Public Policy Issues i. Jurisdiction ii. Interconnection iii. Intercarrier Compensation iv. Universal Service v. Consumer Welfare, Safety, and Accessibility Issues vi. Investment in New Networks vii. Retail Rate Regulation V. CONCLUSION EXECUTIVE SUMMARY

Time for a New Approach

U.S. policymakers face a virtual conundrum: how best to incorporate the new Internet Protocol ("IP")-centric services, applications, and facilities into the nation's pre-existing legal and public policy construct. Over the next several years, legislators and regulators will find themselves increasingly challenged to make the Internet adapt itself to the already well-defined bricks-and-mortar, services-and-technologies environment that exists today under the Communications Act and other statutes.

Some argue that new IP services should be "shoe-horned" into the existing requirements of the legacy system, despite the poor fit. Others believe that new classifications and definitions can be created within the confines of legacy regulations. In this Author's view, however, the optimal solution is to turn the conundrum around on itself, and to begin adapting our legal thinking and institutions to the reality of how the Internet is fundamentally changing the very nature of the business and social world.

In this Article, the Author will explain that trying to impose the current, outmoded legal system onto the Internet and all its IP progeny is a flawed, damaging, and ultimately doomed approach. Instead, policymakers should adopt a new public policy framework that regulates along horizontal network layers, rather than legacy vertical silos.

Market Reality: Horizontal Networks (Layers)

For decades, packet-switched data communications networks have been constructed around several fundamental organizing principles, including the "protocol layering" concept (networks employ different functional rules, or protocols, arranged in layered stacks) and the "end-to-end network" concept (dumb networks support intelligent applications). Together, protocol layering and end-to-end principles have become the building blocks of the Internet. In the resulting layered protocol stack, the IP resides in the "middle" logical layers, with physical network facilities at layers below and user applications and content at layers above.

As technology has evolved, existing networks and markets have begun converging to common IP platforms. Key inherent aspects of this IP-centric New World Order include blurred distinctions between services, lack of relevant geographic boundaries, and a mesh of virtual interconnected networks. Moreover, this network architecture tends to shape and drive business fundamentals.

Legal Legacy: Vertical Rules (Silos)

While networks and markets have been evolving towards an all-IP world, the U.S. legal and regulatory framework remains stuck in the past. The Communications Act and implementing rules divide up the landscape based on traditional service, technology, and industry labels, such as wireline telephony service, wireless telephony service, cable television service, broadcast television and radio service, and satellite broadcast service. These divisions assume clear, unwavering distinctions, with different categories defined by the assumed static characteristics of discrete services or networks. The result is an inflexible approach of isolated "buckets" or "silos" governed by black-and-white, all-or-nothing thinking.

Problem: Unworkable Overlays (Gridlock)

The resulting clash between data networks constructed of horizontal protocol layers, and the legal and regulatory artifice of the vertical silos, inevitably leads to uncertainty, confusion, and gridlock on all sides. Our fractured laws and regulations fail to reflect the reality of the converging markets and networks. Policymakers attempting to impose current legal standards on the Internet quickly run afoul of its powerful governing dynamic, which shatters all of the past service, definitional, technological, and geographic limitations.

As a result, legacy distinctions largely lose their meaning in this all-encompassing IP world. More critically, forcing legacy regulations on IP services and networks stifles the creativity and innovation that is the essence of the Internet. Outmoded regulations tend to impose unnecessary legal restrictions in some cases, as well as overlook significant market concentration issues in other cases.

Solution: Rules and Networks Aligned (Layers)

To avoid the risk of further serious damage, policymakers must move away from the increasingly outmoded vertical "silos" that artificially separate communications-related services, networks, and industries from each other. Informed by the way that engineers create layered protocol models, and inspired by the analytical work of noted academics and technology experts, policymakers should adopt a comprehensive legal and regulatory framework founded on the Internet's horizontal network layers. We must build our laws around the Internet, rather than the other way around. By tracking the architectural model of the Internet--with IP at the center--we can develop a powerful analytical tool providing granular market analysis within each layer, which in turn puts public policy on a more sure empirical footing.

The Proposed Layers Model Framework

The Author proposes a robust, yet flexible, set of layering principles built on the sound notion of "respecting the integrity of the layers." (1) This framework encompasses both the "unregulated" e-commerce and e-business space, and the "regulated" telecommunications space. The proposed Network Layers Model conceptualizes four network layers--Physical Layer (with separate Access and Transport components), Logical Layer (IP), Applications Layer, and Content Layer. Such a framework helps achieve important public policy objectives, including: (1) avoiding unsupportable legacy distinctions between services, networks, and industries; (2) separating upper layers (user applications and content) from lower layers (physical and logical networks); (3) grouping and segregating pertinent public policy issues; (4) providing insights about the interdependence of different layers; (5) highlighting interconnection between networks and functional layers; (6) focusing selectively on curtailing pockets of market power within and between individual layers; and (7) preserving the "innovation commons" of the Internet.

In particular, when applied in the telecommunications industry context, the Network Layers Model targets the lower network layers for discrete regulation based on the existence of significant market power, rather than legacy service or industry labels. This framework concomitantly fosters maximum innovation by leaving otherwise competitive content and applications markets unfettered by regulation.

The Network Layers Model can be used to analyze and resolve discrete public policy issues, such as:

* Internet content and transactions--any attempts to limit or curtail Content or Applications Layer activities (legitimate or otherwise) should not result in Logical or Physical Layer regulation;

* Broadband regulation--last-mile Physical Access Layer facilities with significant market power should allow nondiscriminatory wholesale access to other service providers and applications;

* Voice over IP ("VoIP")--IP communications reside as one of many capabilities at the Applications Layer, and should not be saddled with inappropriate Physical Layer regulation;

* Interconnection--any obligations to provide interconnection, including open interfaces between layers and networks, should be imposed at various layers based on the presence and degree of market power;

* Universal service--ultimate responsibility for the Federal Universal Service Fund ("FUSF") requirement and contribution mechanism should reside at the Physical Layer.

Thus, the Network Layers Model can help reveal, clarify, and...

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