NET LOSSES.(The Talk of the Town)(internet apartheid)

In the first decades of the twentieth century, as a national telephone network spread across the United States, A.T. & T. adopted a policy of "tiered access" for businesses. Companies that paid an extra fee got better service: their customers' calls went through immediately, were rarely disconnected, and sounded crystal-clear. Those who didn't pony up had a harder time making calls out, and people calling them sometimes got an "all circuits busy" response. Over time, customers gravitated toward the higher-tier companies and away from the ones that were more difficult to reach. In effect, A.T. & T.'s policy turned it into a corporate kingmaker.

If you've never heard about this bit of business history, there's a good reason: it never happened. Instead, A.T. & T. had to abide by a "common carriage" rule: it provided the same quality of service to all, and could not favor one customer over another. But, while "tiered access" never influenced the spread of the telephone network, it is becoming a major issue in the evolution of the Internet. Until recently, companies that provided Internet access followed a de-facto commoncarriage rule, usually called "network neutrality," which meant that all Web sites got equal treatment. Network neutrality was considered so fundamental to the success of the Net that Michael Powell, when he was chairman of the F.C.C., described it as one of the basic rules of "Internet freedom." In the past few months, though, companies like A.T. & T. and BellSouth have been trying to scuttle it. In the future, Web sites that pay extra to providers could receive what BellSouth recently called "special treatment," and those that don't could end up in the slow lane. One day, BellSouth customers may find that, say, NBC.com loads a lot faster than YouTube.com, and that the sites BellSouth favors just seem to run more smoothly. Tiered access will turn the providers into Internet gatekeepers.

The logic of the tiered-access approach is simple: broadband companies do the work of providing Internet access, so they should be able to charge what they can for it. Telecom executives say that the revenue from tiered access would let them invest more in adding bandwidth and improving download speeds, and argue that Web sites are parasites taking, as A.T. & T.'s chairman, Edward E. Whitacre, Jr., put it, a "free ride" on the pipes the broadband companies own. But these companies have pipes into people's homes in the first place only because of a long history of government regulation, and people want to use those pipes only because of all the value the so-called parasites have created. And it's that value which tiered access--even if it does improve the Internet's infrastructure--will put in harm's way. The Internet has become a remarkable fount of economic and social innovation largely because it's been an archetypal level playing ...