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Amicus Brief for Venture Capital, No. 11-1355 (D.C. Cir.)

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Released: November 16, 2012
USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 1 of 47
ORAL ARGUMENT NOT YET SCHEDULED
_____________________________________________

Case No. 11-1355

Consolidated with Nos. 11-1356, 11-1403, and 11-1404
____________________________________________

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

____________________________________________
VERIZON,
Appellant,
v.
FEDERAL COMMUNICATIONS COMMISSION,
Appellee.
____________________________________________
On Appeal from an Order of the
Federal Communications Commission
____________________________________________

BRIEF OF AMICI CURIAE

VENTURE CAPITAL INVESTORS

IN SUPPORT OF FCC

____________________________________________
Gabriel M. Ramsey
E. Joshua Rosenkranz*
Thomas J. Gray
Orrick, Herrington & Sutcliffe, LLP
Christina Von der Ahe
51 West 52nd Street
Orrick, Herrington & Sutcliffe, LLP
New York, NY 10019-6142
1000 Marsh Road
(212) 506-5000
Menlo Park, CA 94025-1015
(650) 614-7400
*Counsel of Record
Counsel for Amici Curiae
November 15, 2012

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 2 of 47

CERTIFICATE AS TO PARTIES,

RULINGS, AND RELATED CASES

A)

Parties and Amici

All parties, intervenors, and amici appearing in this Court are listed in the
Joint Brief of Appellants Verizon and MetroPCS, the Brief of Appellee Federal
Communications Commission, and various other amicus curiae briefs, except the
following parties who are appearing as amici herein:
Stewart Alsop, Alsop-Louie- Partner
Brian Ascher, Venrock- General Partner and principal
Brad Burnham, Union Square Ventures- Managing Partner
Bud Colligan, Accel Partners- Venture Partner
Ron Conway, SV Angel- Founder and Angel Investor
Caterina Fake, Founders Collective- Founder Partner
Peter Fenton, Benchmark Capital- General Partner (former Managing Partner)
Mark Gorenberg, Hummer Winbald- Managing Director
Nick Grossman, Union Square Ventures- Visiting Scholar at MIT Media Lab
(working with the USV team on a new advocacy effort focused on networks
and innovation.)
Greg Gretsch, Sigma West- Managing Director
Hemant Taneja, General Catalyst- Managing Director
Eric Hippeau, Lerer Ventures- Partner
Deepak Kamra, Canaan Partners- General Partner
Raj Kapoor, Mayfield Fund- Managing Director
-i-

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 3 of 47
Jed Katz, Javelin Venture Partners- Managing Director
Vinod Khosla, Khosla Ventures- Founder
Kenneth Lerer, Lerer Ventures- Managing Director
Jason Mendelson, Foundry Group- Managing Director and Co-Founder
Venkat Mohan, Norwest Venture Partners- Operating Partner
Kim Polese, ClearStreet, Inc.- Chairman
Pete Sheinbaum, Linksmart, Inc.- Founder and CEO
Ram Shriram, Sherpalo- Founder
David Sze, Greylock Partners- Partner
Steve Westly, Westly Group- Managing Partner
Fred Wilson, Union Square Ventures- Managing Partner.

B)

Ruling Under Review

References to the ruling at issue appear in the Petitioners Brief.

C)

Related Cases

This case has been consolidated with Case Nos. 11-1356, 11-1403, and
11-1404.
Cellco Partnership d/b/a Verizon Wireless v. FCC, No. 11-1135 (D.C. Cir.),
present some legal issues similar to those presented here, but it involves different
factual and regulatory circumstances.
-ii-

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 4 of 47
BY: /s/ E. JOSHUA ROSENKRANZ
E. Joshua Rosenkranz
Orrick, Herrington & Sutcliffe LLP
51 West 52nd Street
New York, NY10019-6142
TEL.: (212) 506-5000
COUNSEL FOR AMICI CURIAE
-iii-

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 5 of 47

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure and D.C.
Circuit Rule 26.1, amici curiae hereby submit the following corporate disclosure
statement:
All amici are individuals.
-iv-

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 6 of 47

TABLE OF CONTENTS

Page

CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES .............i
CORPORATE DISCLOSURE STATEMENT .......................................................iv
TABLE OF CONTENTS..........................................................................................v
TABLE OF AUTHORITIES ...................................................................................vi
GLOSSARY ............................................................................................................xi
RULE 29 STATEMENTS ........................................................................................1
INTEREST OF AMICI CURIAE.............................................................................1
STATUTES AND REGULATIONS........................................................................2
SUMMARY OF THE ARGUMENT .......................................................................2
ARGUMENT............................................................................................................4
A.
The Internet Has Thrived Because It Is An Open System...................4
B.
The Open Internet Is Now Threatened.................................................9
1.
The Identities Of The Internet Providers Have Changed ........10
2.
What People Use The Internet For Has Changed....................10
3.
Broadband Providers Have New Incentives To Interfere
With Edge Providers................................................................11
4.
Broadband Providers Have New Tools To Interfere With
Edge Providers.........................................................................15
5.
Broadband Providers Have Acted To Limit Openness ...........17
6.
Competition Among Broadband Providers Does Not
Alleviate The Dangers .............................................................18
C.
The Commission’s Order Is Proper Because The Order
Removes Barriers To Infrastructure Investment................................20
CONCLUSION.......................................................................................................30
-v-

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 7 of 47

TABLE OF AUTHORITIES

Page(s)

FEDERAL STATUTES

47 U.S.C. § 1302......................................................................................................20

RULES

Fed. R. App. P. 29(c)(5).............................................................................................1
Circuit Rule 29(b) ......................................................................................................1
Circuit Rule 29(d) ......................................................................................................1

ADMINISTRATIVE PROCEEDINGS

1998 Biennial Regulatory Review Spectrum Aggregation Limits for Wireless
Telecommunications Carriers,
Report and Order, 15 FCC Rcd. 9219 (1999) ....................................................27
Comcast Network Management Practices Order, 23 FCC Rcd. 13028 (2008)......18
Madison River Communications, LLC and affiliated companies, File No.
EB-05-IH-0110; Acct. No.; FRN: 0004334082, Consent Decree, 20 FCC
Rcd. 4295 (EB 2005) (Madison River Consent Decree)....................................17
Notice of Proposed Rulemaking, Open Internet,
24 FCC Rcd. 13065 (2009)...................................................................................7
Tel. Number Requirements for IP-Enabled Servs. Providers,
Report and Order, Declaratory Ruling, Order on Remand, and NPRM,
22 FCC Rcd. 19531 (2007).................................................................................11

Telephone Company-Cable Television Cross-Ownership Rules, Sections
63.54-63.58,
Second Report and Order, Recommendation to Congress, and Second
Further Notice of Proposed Rulemaking, 7 FCC Rcd. 5781 (1992) ....................9
SBC Communications Inc. and AT&T Corp. Applications for Approval of
Transfer of Control,
Memorandum Opinion and Order, 20 FCC Rcd. 18290 (2005) ........................26
-vi-

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 8 of 47
Verizon Communications Inc. and MCI, Inc. Applications for Approval of
Transfer of Control,
Memorandum Opinion and Order, 20 FCC Rcd. 18433 (2005) ........................26

OTHER AUTHORITIES

Annual Assessment of the Status of Competition in the Market for the
Delivery of Video Programming, Supplemental Notice of Inquiry, 24
FCC Rcd. 4401(2009).........................................................................................13
AT&T, Statement on Proposed FCC Rules to Preserve an Open Internet,
AT&T Public Policy Blog (Dec. 1, 2010) .........................................................27
B. Carpenter, Internet Engineering Task Force, Architectural Principles of
the Internet, RFC 1958 (June 1996) .................................................................4, 6
Barbara van Schewick, Internet Architecture and Innovation (1st ed. 2010).5, 6, 14
Barbara van Schewick, Opening Statement at the Federal Communications
Commission's Workshop on Innovation, Investment and the Open
Internet,
Federal Communications Commission (2010), available at
http://fjallfoss.fcc.gov/ecfs/document/view?id=7020382126. ...........................22
Barbara van Schewick, Toward an Economic Framework for Network
Neutrality Regulation, 5 J. On Telecomm. & High Tech. L. 329 (2007) ..........28
Cable Executive Continue to Hit 9th Circuit Decision on Modems, Commc’n
Daily (Dec. 5, 2003) ...........................................................................................27
Chetan Sharma, Managing Growth and Profits in the Yottabyte Era (2009),
available at http://www.chetansharma.com/yottabyteera.htm.............................7
Cisco Visual Networking Index: Forecast and Methodology, 2011-2016
(May 30, 2012), available at
http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns7
05/ns827/white_paper_c11-
481360_ns827_Networking_Solutions_White_Paper.html ...............................11
vii

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 9 of 47
David L. Cohen, FCC Proposes Rules to Preserve an Open Internet,
Comcast Voices ( Dec. 1, 2010) available at
http://blog.comcast.com/2010/12/fcc-proposes-rules-to-preserve-an-
open-internet.html...............................................................................................28
J.H. Saltzer et al., End to End Arguments in System Design, Second Int’l
Conf. on Distributed Computing Systems (1981) ................................................6
J. Kempf & R. Austein, IETF, The Rise of the Middle and the Future of End-
to-End: Reflections on the Evolution of the Internet Architecture, RFC
3724 (March 2004) ...............................................................................................6
Jay Pil Choi & Byung-Cheol Kim, Net Neutrality and Investment Incentives,
41 RAND J. OF ECON. 3 (Autumn 2010)..............................................................29
Jerry Hausman et al., Residential Demand for Broadband
Telecommunications and Consumer Access to Unaffiliated Internet
Content Providers
, 18 Yale J. on Reg. 129 (2001).............................................15
John Eggerton, Cohen: Clear Internet Rules Would be Better than
Confusion, Broadcasting & Cable (Jan. 11, 2010), available at
http://www.broadcastingcable.com/article/443396-
Cohen_Clear_Internet_Rules_Would_Be_Better_Than_Confusion.php ..........27
Joseph Farrell & Philip J. Weiser, Modularity, Vertical Integration, and
Open Access Policies: Toward a Convergence of Antitrust and
Regulation in the Internet Age
, 17 Harv. J. L. & Tech. 85 (2003).....................20
Joseph Farrell, Open Access Arguments: Why Confidence is Misplaced, in
Net Neutrality or Net Neutering: Should Broadband Internet Services Be
Regulated 195 (Thomas M. Lenard & Randolph J. May eds., 2006) ................28
Link Hoewing, Twitter, Broadband and Innovation, PolicyBlog (Dec. 4,
2010) http://policyblog.verizon.com/BlogPost/626/TwitterBroadbandand
Innovation.aspx.....................................................................................................8
Laying a Foundation for Future Growth, Presentation at AT & T Analyst
Conference 2012 (Nov. 7, 2012), available at
http://www.att.com/Common/about_us/files/pdf/analyst_presentation_c.p
df. ........................................................................................................................26
viii

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 10 of 47
Marcel Dischinger et al, Detecting BiTorrent Blocking (October 20-22,
2008) available at http://www.mpi-sws.org/~mdischin/#research. ...................18
Marrel Dischinger et al, Glasnost: Results from Tests for BitTorrent Traffic
Blocking, NSDI, April 2010, available at http://www.mpi-
sws.org/~mdischin/#research..............................................................................18
Michael D. Pelcovits and Daniel E. Haar, MICRA, Consumer Benefits from
Cable-Telco Competition (2007) ........................................................................12
Nate Anderson, Deep Packet Inspection Meets ‘Net neutrality, CALEA (Jul.
26, 2007) available at
http://arstechnica.com/hardware/news/2007/07/Deep-packet-inspection-
meets-net-neutrality.ars. .....................................................................................16
Nielson, The Global Online Media Landscape: Identifying Opportunities in
a Challenging Market (Apr. 2009) .....................................................................11
Patrick S. Brogan, The Economic Benefits of Broadband and Information
Technology, 18 Media & Pol’ 65 (2009)..............................................................9
Roy Mark, VOIP Growth Remains Strong Despite Recession, Eweek (Mar.
30, 2009) available at http://www.eweek.com/c/a/VOIP-and-
Telephony/VOIP-Growth-Remains-Strong-Despite-Recession-207028/..........11
Shane Greenstein, Glimmers and Signs of Innovative Health in the
Commercial Internet, 8 J. Telecomm. & High Tech. L. 25 (2010)......................6
Spencer E. Ante, Verizon Wireless Prepares for the iPhone, Bus. Wk. (Dec.
17, 2009) available at
http://www.businessweek.com/technology/content/dec2009/tc20091217_
788391.htm .........................................................................................................26
Susan Harris & Elise Gerich, Retiring the NSFNET Backbone Service:
Chronicling the End of an Era, 10 ConneXions 4 (April 1996), available
at
http://merit.edu/research/nsfnet_article.php.....................................................8
Telus Cuts Subscriber Access To Pro-Union Website, CBCNEWS
(JULY 24, 2005) available at
http://www.cbc.ca/news/canada/story/2005/07/24/telus-sites050724.html. ......18
Tim Berners-Lee, Weaving the Web: The Original Design and Ultimate
Destiny of the World Wide Web 16 (1st ed. 2000)................................................5
ix

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Timothy F. Bresnahan, et al., General purpose technologies ‘ Engines of
growth,’ 65 Journal of Econometrics (1995)......................................................24
TWC, Caution Concerning Forward-Looking Statements (Aug. 2010)
www.timewarnercable.com/Corporate/investor_relations/caution_forwar
d_statements.html ...............................................................................................13
Wireline Competition Bureau, FCC, Internet Access Services: Status as of
December 31, 2009 (Dec. 2010), available at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-303405A1.pdf .........19
**Amici note there is no authority on which we principally rely.
x

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 12 of 47

GLOSSARY OF ABBREVIATIONS

DOCSIS
Data Over Cable Service Interface Specification
DPI
Deep Packet Inspection
FCC
Federal Communications Commission
IETF
Internet Engineering Task Force
VDSL
Very-high-bit-rate digital subscriber line
VoIP
Voice Over Internet Protocol
xi

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RULE 29 STATEMENTS

Pursuant to Fed. R. App. P. 29(c)(5), counsel for amici certifies that no
counsel for any other party authored this brief either in whole or in part, and no
persons other than amicus curiae and counsel for amicus curiae made any
monetary contribution to its preparation or submission.
Pursuant to Circuit Rule 29(b), counsel certifies that all parties consent to
amicus curiae participating in this matter.
Pursuant to Circuit Rule 29(d), counsel certifies that a separate brief is
necessary. Amici include some of the nation’s most preeminent venture capitalists.
As venture capitalists, amici are uniquely qualified to explain: (1) how the open
Internet has encouraged investment in network infrastructure and elsewhere;
(2) how the Internet has changed in ways that are threatening such investment; and
(3) how the Order promotes such investment. To the best of counsel’s knowledge,
other amici are addressing the Order from the legal and technical standpoints. The
implications regarding investment and industry growth have not been fully
developed by the parties, and, to the best of counsel’s knowledge, will not be fully
addressed by other amici.

INTEREST OF AMICI CURIAE

Amici curiae are investors and venture capital executives who want to
promote the development and growth of Internet-based businesses. Amici curiae
1

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 14 of 47
believe that the Order is crucial to maintaining the freedom and openness of the
Internet. Certainty in that freedom and openness is a major part of what drives
amici curiae to invest in new Internet businesses. This investment, in turn, drives
customer demand for the Internet, as well as further investment in network
infrastructure. Amici curiae’s interest is to continue to promote this growth cycle.

STATUTES AND REGULATIONS

All applicable statutes and regulations are contained in the Joint Brief of
Appellants Verizon and MetroPCS and in the Brief of Appellee Federal
Communications Commission.

SUMMARY OF THE ARGUMENT

The freedom and openness of the Internet are what allowed it to quickly and
dynamically grow into the powerful and valuable economic phenomenon it is
today. The Order rightly seeks to preserve that freedom and openness in order to
promote, economic growth and further investment in network infrastructure.
Specifically, the freedom and openness of the Internet are responsible for a
positive and iterative cycle of growth and investment. The openness of the Internet
inspires individuals and companies to develop new Internet content and
applications. It also inspires investors, like amici curiae, to invest in those
individuals and companies, which spurs better and faster development than would
happen otherwise. The newly developed Internet content and applications, in turn,
2

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 15 of 47
drive up customer demand for faster Internet access (bigger “pipes”). This
customer demand, encourages Internet providers to invest money into bigger and
better pipes. And bigger pipes encourage new developments in content and
applications, which restart the cycle of growth and investment.
Because the Rules set forth in the Order encourage this cycle of growth and
investment, the Order is a positive and necessary step, and is well within the
Commission’s authority.
Opponents of the Order argue that the Order is not necessary because the
Internet isn’t broken. They are wrong. The freedom and openness of the Internet
are now being threatened in unprecedented ways, because of structural changes in
the way the Internet is being offered to consumers. The providers of the Internet
today―the cable and telephone companies―are now motivated, like never before,
to interfere with the content that passes through their pipes. They have also
acquired the technology that allows them to do just that – technology that wasn’t
available before.
In a world without network neutrality rules, network providers are allowed
to discriminate against applications. If a network provider blocks an application,
that application will not reach its users, and the application provider will not profit.
Because application discrimination threatens application providers’ profits, it also
3

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 16 of 47
reduces application providers’ incentives to innovate. Finally, it reduces the
incentives of investors like amici curiae to invest in new technologies.
If investors and venture capitalists are hesitant to put money behind new
technologies, the beneficial cycle of growth and development will break down.
With fewer developments in applications, content, and services, there will be less
consumer demand for new technologies, and less incentive for network providers
to invest in infrastructure. Accordingly, the Commission’s Order is necessary to
maintain the same open Internet that enabled the immense growth we have seen to
date.

ARGUMENT

A.

The Internet Has Thrived Because It Is An Open System.

The Internet is, at its architectural core, an open system. And this open
architecture has historically fostered innovation for three reasons. First, the
original Internet had no “gatekeepers.” Innovators on the Internet did not need to
gain permission from anyone in order to test new ideas with Internet users. To the
contrary, any person with an idea could build a Web site and have an instant
audience. As stated in a 1996 IETF document: “[f]ortunately, nobody owns the
Internet, there is no centralized control, and nobody can turn it off.” B. Carpenter,
Internet Engineering Task Force, Architectural Principles of the Internet, RFC
1958, at 3, § 2.4 (June 1996) (JA ); see also Letter from Wireless Founders
4

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 17 of 47
Coalition for Innovation to Chairman Kevin Martin, WT Docket Nos. 06-150, 96-
86, PS Docket No. 06-229, at 3 (June 7, 2007) (“What makes the wireline Internet
so friendly from an entrepreneur’s perspective is its Openness. One does not have
to ask Comcast or Time Warner Cable or even Verizon’s DSL division for
permission to launch a new product, service, or device. To borrow the Nike
slogan, you can ‘just do it.’”). As an example, Tim Berners-Lee was able to invent
the World Wide Web—a system of interlinked hypertext documents accessible
over the Internet—nearly two decades after engineers developed the Internet’s
original protocols, without needing changes to those protocols or to obtain any
approval from network operators.1
Second, the Internet was built to be “application-blind.” The technical idea
has always been that network nodes supporting the flow of traffic are generally
agnostic to the substance, functionality, and content of that traffic. This is by
design. To allow the Internet to be open to new applications in the future, the
network was designed to be as general as possible—the network was not to provide
any application-specific functionality.2 In line with this principle, the devices that
enabled connectivity did not “look inside” the information that was sent across the
Internet—they were just supposed to look at the information’s forwarding address

1 See Tim Berners-Lee, Weaving the Web: The Original Design and Ultimate
Destiny of the World Wide Web
16 (1st ed. 2000) (JA ).
2 Barbara van Schewick, Internet Architecture and Innovation, 67-75 (1st ed.
2010).
5

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and send it along. That design effectively rendered the network agnostic to
applications and content at the network “edge.”3 See Carpenter, supra, at 2, § 2.3
(“The network’s job is to transmit datagrams as efficiently and flexibly as possible.
Everything else should be done at the fringes.”) (JA ). And since early Internet
providers couldn’t distinguish among the applications passing through their pipes,
they were unable to single out specific applications for special treatment, such as
blocking or discrimination.
Third, the network itself was built as a general purpose resource, equally
available to all. This has cultivated an ecosystem in which anyone can build upon
the existing infrastructure, experiment, and innovate in applications and content.
This open ecosystem to an explosion in Internet software and services. In the
1990s, simple, affordable, and ubiquitous dial-up infrastructure and access drove
an enormous array of applications and services, including e-mail, Web services,
instant messaging, and similar interactive services.4 Simply put, the Internet would

3 See, e.g. J.H. Saltzer et al., End to End Arguments in System Design, Second Int’l
Conf. on Distributed Computing Systems, 509-12 (1981)(JA ); Carpenter, supra,
at 1-8 (JA ); J. Kempf & R. Austein, IETF, The Rise of the Middle and the Future
of End-to-End: Reflections on the Evolution of the Internet Architecture
, RFC
3724, 1-14 (March 2004) (JA ); Google Comments at 13 GN Docket No. 09-191
(Jan 14, 2010)(JA ); van Schewick, supra, at 72-74.
4 See Google Reply App. A at n. 39 (April 26, 2010) (citing Shane Greenstein,
Glimmers and Signs of Innovative Health in the Commercial Internet, 8 J.
Telecomm. & High Tech. L. 25, 30-31 (2010) (JA )
6

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 19 of 47
not resemble anything remotely like the breathtaking economic phenomenon that it
has become, had it been a closed and controlled system.
The Internet’s openness has been critical to its unparalleled success.5 Its
technological environment has enabled robust competition among many thousands
of Internet application developers and content providers offering increasingly
sophisticated software and content. No longer did consumers have to settle for
simple static HTML pages cobbled crudely to a database. Rather, as content
providers and software developers showed users what was possible with the
network, users’ expectations of the network grew. Once consumers were shown
that they could expect to access high-resolution film or computationally complex
enterprise software over the Internet, they demanded the bigger and better “pipes”
required for these offerings. In response to this consumer demand, infrastructure
providers invested in and developed faster and more ubiquitous networks.
For example, the increasing availability of multimedia applications on the
World Wide Web during the 1990s drove demand for residential broadband
services. This, in turn, drove Internet service providers to invest in new network
infrastructure, modem technologies, and network protocols, and to market
broadband to residential customers.6 By the late 1990s, a residential end user

5 Notice of Proposed Rulemaking, Open Internet, 24 FCC Rcd. 13065, 13069-71,
¶¶ 3, 17-23(2009) (JA ).
6 See, e.g. Chetan Sharma, Managing Growth and Profits in the Yottabyte Era
7

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 20 of 47
could download content at speeds not achievable even on the Internet backbone
during the 1980s.7 Higher speeds and broadband’s “always on” capability
stimulated innovation in applications and content, which encouraged broadband
providers to increase network speeds even further.8 Similarly, the development of
streaming video and e-commerce applications, and consumer demand for those
applications, were responsible for major network improvements, such as fiber to
the premises, VDSL, and DOCSIS 3.0.9 As an example, VDSL (Very-high-bit-rate
Digital Subscriber Line) provides data transmission speeds of up to 85 Mbit/second
downstream and upstream. That is over 1,000 times faster than the average
download speeds of dial-up Internet.
Notably, without such market forces driving infrastructure investment,
historical evidence indicates that network providers would be slow to innovate or
upgrade their networks. For example, telephone companies were sluggish to
deploy DSL because it would “cannibalize” T1 connectivity services. See e.g.,
Telephone Company-Cable Television Cross-Ownership Rules, Sections 63.54-

(2009), available at http://www.chetansharma.com/yottabyteera.htm.
7See, e.g., Susan Harris & Elise Gerich, Retiring the NSFNET Backbone Service:
Chronicling the End of an Era
, 10 ConneXions 4 (April 1996), available at
http://merit.edu/research/nsfnet_article.php. (JA ).
8 Link Hoewing, Twitter, Broadband and Innovation, PolicyBlog, Dec. 4, 2010,
policyblog.verizon.com/BlogPost/626/TwitterBroadbandandInnovation.aspx.
9 See, e.g., Comcast at 2, 8 (Jan. 2010) (JA ); MetroPCS Comments at 16
(October 12, 2010) (JA ); SONY Comments at 5 (Jan. 14, 2010) (JA ); Qwest
Comments, Factual Record Appendix at 6-10 (Jan. 14. 2010) (JA ); Bright House
Networks PN Comments at 7 (Oct. 12, 2010) (JA ).
8

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63.58, Second Report and Order, Recommendation to Congress, and Second
Further Notice of Proposed Rulemaking, 7 FCC Rcd. 5781, n. 50 (1992) (JA ).
Accordingly, the staggering array of applications and content enabled by an open
Internet has, historically, directly and indirectly driven investment in network
infrastructure.10

B.

The Open Internet Is Now Threatened.

Appellants acknowledge most of the past history. But they draw a different
lesson from it. They interpret the history as proof that the system “ain’t broke.”
That the Internet has thrived without government intervention, they argue, proves
that government intervention is unnecessary. But petitioners’ it-ain’t-broke
position ignores the reality that the times are a-changin’. The providers of Internet
service are very different from what they once were and consumers are using the
Internet in new and different ways. Because of these changes, the businesses that
deliver the Internet to consumers today (the broadband providers) now have
unprecedented incentivizes to limit and control which parts of the Internet they
deliver. New technology has made it possible for broadband providers to act on
those incentives—and they have already begun to exploit their newfound
capabilities. For these reasons, the Commission’s Order is now necessary to allow

10 See Patrick S. Brogan, The Economic Benefits of Broadband and Information
Technology
, 18 Media & Pol’y 65, 74 (2009).
9

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 22 of 47
the Internet to continue to be the dynamic engine of economic growth that it has
become.
1.

The Identities Of The Internet Providers Have Changed.

During the first decade of the public Internet, dial-up was the primary form
of consumer Internet access. Companies such as America Online, CompuServe,
and Prodigy provided access to the Internet over telephone companies’ phone
lines. There were several of these Internet service provider companies, and they
operated independently from the telephone companies or the cable companies.
As broadband has replaced dial-up, however, telephone and cable companies
themselves have become the major providers of Internet access service.
Specifically, the 19 largest providers of broadband Internet access service in the
United States are all cable and telephone companies.11 Those 19 providers account
for approximately 93% of all broadband subscribers.12 There is now less
competition between Internet providers than there was before.
2.

What People Use The Internet For Has Changed.

The improved quality of Internet audio and video has led to significant
increases in consumer use of those features. For example, an April 2009 Nielson

11 See Press Release, Leichtman Research Group, Under 350,000 add Broadband in
the Second Quarter of 2010: Top Telephone Companies Report a Cumulative Net
Loss of Broadband Subscribers (Aug. 11, 2010), available at
http://www.leichtmanresearch.com/press/081110release.html ( JA ).
12 Id.
10

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 23 of 47
report found that: (1) the number of American users frequenting online video
destinations has more than quadrupled since 2003; (2) time spent on video sites has
increased almost 20 times over the same period; and (3) from April 2008 to April
2009, unique viewers of online video grew 10 percent, the number of streams grew
41 percent, the streams per user grew 27 percent, and the total minutes engaged
with online video grew 71 percent.13 Internet video traffic made up 51% of all
consumer Internet traffic in 2011.14 Similarly, consumers are increasingly using
the Internet as their telephone.15 For example, in 2009, in the midst of a recession,
Internet voice services projected a revenue growth of 20.1 percent.16 As another
example, Skype is now “the largest provider of cross-border communications in
the world, by far.”17

13 Nielson, The Global Online Media Landscape: Identifying Opportunities in a
Challenging Market
, 6-7 (Apr. 2009).
14 See Cisco Visual Networking Index: Forecast and Methodology, 2011-2016
(May 30, 2012), available at
http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/
white_paper_c11-481360_ns827_Networking_Solutions_White_Paper.html,
15 Tel. Number Requirements for IP-Enabled Servs. Providers, Report and Order,
Declaratory Ruling, Order on Remand, and NPRM, 22 FCC Rcd 19531, 19547,
para. 28 (2007).
16 See Roy Mark, VOIP Growth Remains Strong Despite Recession, EWEEK,
Mar. 30, 2009, available at http://www.eweek.com/c/a/VOIP-and-
Telephony/VOIP-Growth-Remains-Strong-Despite-Recession-207028/.
17 PriMetrica, Inc., Executive Summary to TeleGeography Report 3 (2009) (JA ).
11

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3.

Broadband Providers Have New Incentives To Interfere With
Edge Providers.

Today, the companies that supply our Internet are cable and telephone
companies such as Comcast, Time Warner, Verizon, and AT&T. These companies
are the same companies that we are replacing when we use the Internet for our
video-viewing and telephonic needs.18 The conflict of interest is stark and
irresistible. A consumer who shuns her Time Warner subscription to watch a
movie on Netflix or a TV show on Hulu is hurting Time Warner’s bottom line. A
consumer who shuns her AT&T landline or Verizon wireless line to Skype her
mother is hurting AT&T’s and Verizon’s bottom lines. These companies thus have
a clear financial motivation to interfere with consumers’ use of Internet services,
such as Netflix, Hulu, and Skype.
In the video context, the competition between providers of broadband
Internet access and providers of online video is especially clear. As shown in
Figure 1, below, the major providers of broadband Internet access also offer both
paid television offerings and online video services.

18 See Michael D. Pelcovits and Daniel E. Haar, MICRA, Consumer Benefits from
Cable-Telco Competition
15-16, 21 (2007) (JA ); PriMetrica, Inc., supra, at 6-8
(JA ) (“[I]t’s difficult not to conclude that at least some of Skype’s growth is
coming at the expense of traditional carriers.”).
12

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 25 of 47

Figure 1: Survey of Online Video Services Offered by Pay-TV Companies

19

Vertically Integrated

Pay-TV Company

Online Video Service

Broadband Providers

AT&T U-Verse
AT&T Entertainment

Cablevision
PC to TV Media Relay

Comcast
Fancast Xfinity

Time Warner Cable
Twondemand

Verizon
FiOS TV Online

Third-party providers of online video pose a threat to these offerings. In
fact, the broadband providers themselves have acknowledged that third-party
providers of online video programming are a competitive threat.20 They publicly
fret about “cord cutting where people, particularly young people, are saying all I
need is broadband, I don’t need video.” Annual Assessment of the Status of
Competition in the Market for the Delivery of Video Programming, Supplemental
Notice of Inquiry, 24 FCC RCD 4401, 4417 n. 82 (2009) (recounting statement of

19 See DISH Reply Comments at 7 (Apr. 26, 2010) (JA ).
20 See, e.g. AT&T PM Comments at 55-56 and 56, n. 114 (Oct. 12. 2010) (noting
that Hulu, YouTube, and other applications “compete” with their video services);
TWC, Caution Concerning Forward-Looking Statements (Aug. 2010)
www.timewarnercable.com/Corporate/investor_relations/caution_forward_stateme
nts.html (“companies that deliver programming over broadband Internet
connections” identified as a source of “increased competition”) (JA ); DirecTV,
Inc. SEC Form 10-K, filed Feb. 26, 2010, at 10-11 (stating that “[w]e face
substantial competition in the MVPD industry from emerging digital media
distribution providers” and listing Hulu, Apple, AOL, Amazon, and Netflix among
its “Video via the Internet” competitors) (JA ).
13

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 26 of 47
TimeWarner Cable President and CEO Glenn Britt) (JA ). Thus, they necessarily
have incentives to interfere with the operation of third-party (“edge”) providers of
online video content, such as DISH Network, DIRECTV, Hulu, YouTube,
Amazon, and Netflix.
Broadband providers also have other incentives to interfere with edge
providers. For example, broadband providers may be motivated to exclude certain
popular Internet services from their “basic” Internet packages in order to force
consumers to pay more for the ability to use certain Internet applications.21 For
example, Comcast, might tell its customers that they must pay an additional fee to
be able to access Hulu or YouTube.
Providers may also be motivated to discriminate against certain applications
to manage bandwidth on their network. Rather than finding better, application-
agnostic ways to manage or develop bandwidth, broadband providers that are not
held to network neutrality standards may choose to allocate less bandwidth to
certain applications. In the case of applications like streaming video, such a
limited allocation could significantly degrade the quality of the service.22 If an
application is singled out for discriminatory network management, then its users
will not be able to use the application during times of congestion, or will choose to
use other applications that are not affected. This puts the affected application at a

21 van Schewick, supra, at 275-78.
22 Id. at 264-66.
14

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 27 of 47
disadvantage with respect to other applications. Finally, providers may be
motivated for social or political reasons to block unwanted content from passing
through their pipes.23
4.

Broadband Providers Have New Tools To Interfere With Edge
Providers.

Broadband providers would have the incentive to interfere with edge
providers even if it were hard to do. But technological developments have made it
exceedingly easy. The simplest way for a broadband provider to interfere with an
edge provider is to block or slow the packets that the edge provider sends to
consumers.24 For example, Comcast, a broadband provider that also provides
online video services, could interfere with the packets sent by Netflix, which
delivers online video content over the Internet. Consumers trying to access videos
on Netflix would be unable to do so, or would have a bad experience with Netflix,
because its video delivery would be slow. Those consumers would then be more
likely to use Comcast for their online video viewing.

23 Id. at 266-70.
24 See Jerry Hausman et al., Residential Demand for Broadband
Telecommunications and Consumer Access to Unaffiliated Internet Content
Providers
, 18 Yale J. on Reg. 129, 158 (2001) (“an integrated provider could
engage in content discrimination. . . . [I]nsulating its own affiliated content from
competition by blocking or degrading the quality of outside content. Content
discrimination could involve a range of strategies, from blocking outside content
entirely, to affording affiliated content preferential caching treatment.”)
15

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 28 of 47
In the early days of the Internet, network providers were not able to interfere
with edge providers in this way. This is because, as stated above, the Internet was
built to be application-blind, and the network nodes that routed Internet traffic
were not built to analyze the traffic that they were routing. Now, however,
broadband providers have acquired specialized tools to identify packets against
which the broadband providers would like to discriminate. Deep Packet Inspection
(“DPI”) is a technology that allows broadband providers to look at the packets that
pass along their networks in order to determine what applications they are
associated with.25 Specifically, DPI “allow[s] highly accurate identification of
network traffic such as BitTorrent, YouTube, Skype, and others.”26 Several
companies, including Packeteer/Bluecoat, Packetlogic, and Arbor Networks, offer
DPI products.27 And broadband providers purchase those products.28 In the words
of one commentator:29
[W]hen major ISPs deploy these products in their
networks, they suddenly know a whole lot more about
their users and their traffic. They also gain the ability to
block, shape, monitor, and prioritize that traffic—in any
direction. That makes it suddenly simple to, say,
prioritize all incoming traffic from any web site that has

25 See Google Comments at 32 (Jan 14, 2010) (JA ).
26 Id. at 33 n. 103.
27 Id. at 33.
28 Id. at 33 ns. 102, 103.
29 Nate Anderson, Deep Packet Inspection Meets ‘Net neutrality, CALEA, Jul. 26,
2007, available at http://arstechnica.com/hardware/news/2007/07/Deep-packet-
inspection-meets-net-neutrality.ars.
16

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 29 of 47
handed over a briefcase stuffed with unmarked bills
while leaving every other site to fight its way through the
tubes as best it can. It also becomes trivial to start
blocking or actively degrading services that a company
dislikes—like VoIP, for example.
Indeed, in Cox Communications’ (“Cox”) Comments to the NPRM, Cox
admitted that, in 2009, Cox acquired the capability to identify packets associated
with: (1) online video streaming; and (2) VoIP (Voice over IP, telephone calls
made over the Internet), in order to treat those packets differently from others.
Cox Communications Comments at 20-30 (Jan. 14, 2010) (JA ). Cox further
admitted that Cox has made use of this technology. Id.
5.

Broadband Providers Have Acted To Limit Openness.

This problem isn’t hypothetical. Broadband providers have in fact used their
unique and powerful position to block the services of competing edge providers or
Web sites that they find objectionable. For example, in 2005, a broadband
provider that was a subsidiary of a telephone company was accused of blocking
Internet ports used for competing VoIP applications.30 That broadband provider
paid $15,000 to settle the Commission’s investigation.31 Similarly, AT&T has
limited consumers’ access to VoIP applications over its 3G mobile wireless

30 See Madison River Communications, LLC and affiliated companies, File No.
EB-05-IH-0110; Acct. No.; FRN: 0004334082, Consent Decree, 20 FCC Rcd.
4295 (EB 2005) (Madison River Consent Decree) (JA ).
31 Id.
17

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network.32 And in 2008, the Commission found that Comcast had disrupted certain
peer-to-peer uploads of its subscribers without a reasonable network management
justification and without disclosing its actions.33 A 2008 study by the Max Planck
Institute revealed that network providers, such as Comcast and Cox, had been
involved in significant blocking of BitTorrent applications in the United States.34
Finally, in 2005, a Canadian Internet Service Provider blocked its Internet
subscribers from accessing a Web site that supported a union that was on strike
against that provider.35 For every example that has been exposed, there
undoubtedly are countless other abuses that have escaped detection.

32 DISH PN Reply at 7 (Nov. 4, 2010) (“In reality, it took nine months of
regulatory scrutiny and pressure from the public and DISH for AT&T to ‘work
with’ DISH so that AT&T subscribers could access their Slingbox offerings over
the wireless network. Other third-party application providers have experienced
similar restrictions. VoIP operators such as Skype have faced significant difficulty
in gaining access across wireless Internet connections.”)(JA ).
33 See Comcast Network Management Practices Order, 23 FCC Rcd. 13028,
13028, 13055–56, paras. 1, 47–48 (2008) (Comcast Order); see also Comcast
Corporation, Description of Current Network Management Practices,
downloads.comcast.net/docs/Attachment_A_Current_Practices.pdf. (JA )
34 See generally Marcel Dischinger et al, Detecting BiTorrent Blocking, INC’08
(October 20-22, 2008) available at http://www.mpi-sws.org/~mdischin/#research.
(JA ); see also Marcel Dischinger et al, Glasnost: Results from Tests for
BitTorrent Traffic Blocking
, NSDI, April 2010, available at http://www.mpi-
sws.org/~mdischin/#research. (JA ).
35 See, e.g., Telus Cuts Subscriber Access To Pro-Union Website, CBCNEWS,
JULY 24, 2005, available at
http://www.cbc.ca/news/canada/story/2005/07/24/telus-sites050724.html.
18

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 31 of 47
6.

Competition Among Broadband Providers Does Not Alleviate The
Dangers.

The broadband providers argue that competition between broadband
providers will keep those providers from engaging in practices that hurt
consumers. See, e.g., Charter Comments at 6-7 (Oct. 12, 2010) (JA ). They argue
that a consumer who consistently experienced a bad connection to Netflix would
switch to another broadband provider. This argument fails for several reasons.
First, it assumes that the consumer knows that the broadband provider is at fault for
her problems with Netflix. Second, it assumes that the consumer would prefer to
undertake the onerous task of switching network providers, instead of simply
trying a different video Web site. Third, and perhaps most important, it assumes
that another broadband provider would offer the consumer an Internet service that
did not interfere with Netflix. This assumes a level of competition among
broadband providers that simply does not exist.
Most residential end users today have only one or two choices for wireline
broadband Internet access service.36 As of December 2009, nearly 70 percent of

36 See, e.g., Wireline Competition Bureau, FCC, Internet Access Services: Status as
of December 31, 2009
at 49, tbl. 24 (Dec. 2010), available at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-303405A1.pdf (JA );
FCC, National Broadband Plan at 37; Google Comments at 19-20 (Jan. 14, 2010)
(JA ); IFTA Comments at 10-11 (Jan. 2010), Netflix Comments at 5 (Jan. 2010);
Vonage Comments at 7-8 (JA ); Broadband Institute of California (BBIC) Reply
at 21 (Apr. 2010); Google Reply at 3-7 (JA ), IPI Reply at 14 (Jan. 2010); OIC
Reply at 14-15 (Apr. 26, 2010).
19

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 32 of 47
households lived in census tracts where only one or two wireline or fixed wireless
firms provided advertised download speeds of at least 3 MBPS.37 For Internet
service with advertised download speeds of at least 10 MBPS, nearly 60 percent of
households lived in census tracts served by only one wireline or fixed wireless
broadband provider.38 These numbers are not likely to change any time soon, as
the fundamental economics of broadband networks include extremely high barriers
to entry.39
Competition does not solve the problem that has arisen here.40 The
Commission needed to take action, and properly did so, in order to preserve the
cycle of growth and investment that the free and open Internet has created.

C.

The Commission’s Order Is Proper Because The Order Removes
Barriers To Infrastructure Investment.

As the Commission explains in the Order and in its appeal brief, section 706
of the 1996 Telecommunications Act directs the Commission to remove barriers to
infrastructure investment. See 47 U.S.C. § 1302. The Order is proper because it
removes such barriers by ensuring that the same expansion of Internet applications

37 See FCC Internet States Report at 7, fig. 3(a).
38 Id.
39 Google Comments at 18-19 (JA ).
40 See Ad Hoc Telecommunications Users Comments at 7-8 (Jan. 14, 2010)
(“[T]he notion that there are ‘competitive marketplace forces’ sufficient to force
monopoly or duopoly incumbents to operate in a non-discriminatory and
competitively neutral manner is not borne out by marketplace realities.”) (JA ).
20

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 33 of 47
and services that has driven infrastructure investment in the past will continue into
the future.
The open Internet encourages entrepreneurship and innovation by “edge”
providers that offer Internet applications and services.41 This point is not disputed.
The staggering array of content, applications and online services enabled by the
open Internet, as it has existed to date, is incontrovertible.42 As one economist put
it:
[The Internet’s] open and public standards and the fact
that no one has had to ask permission from network
operators to innovate have resulted in rapid innovation
that contributed to one of the greatest periods of
economic growth in history, unprecedented access to
information, and fostered amazing creative interactions.
The Internet’s tremendous success has also been based
on harnessing and benefiting from network effects. The
Internet exhibits network effects because each user’s
value from connecting to the Internet increases as more
computers and users are added to the network.
Google Comments, App. A at 1 (Jan. 2010) (Nicholas Economides, Why Imposing
New Tolls on Third-Party Content and Applications Threatens Innovation and Will
Not Improve Broadband Providers’ Investment (Jan. 2010)) (JA ).

41 See Joseph Farrell & Philip J. Weiser, Modularity, Vertical Integration, and
Open Access Policies: Toward a Convergence of Antitrust and Regulation in the
Internet Age
, 17 Harv. J. L. & Tech. 85, 95 (2003).
42 See Order, FCC 10-201 at pp. 8-11 (JA ).
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USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 34 of 47
As explained above, and as noted by a wide array of industry leaders,
venture capitalists, and public interest groups, network neutrality promotes
entrepreneurship and innovation by edge providers, because those edge providers
are more likely to develop new technologies when they know that a broadband
provider will not be able to selectively block those technologies. See, e.g., Google
Comments at 12 (Jan. 14, 2010) (“Entrepreneurs will not make steep economic
investments without assurances that broadband network providers will not stymie
their likelihood of achieving commercial success.”) (JA );43 see also Barbara van
Schewick, Opening Statement at the Federal Communications Commission's
Workshop on Innovation, Investment and the Open Internet, Federal
Communications Commission (2010), available at
http://fjallfoss.fcc.gov/ecfs/document/view?id=7020382126. Indeed, the threat of

43 See, e.g., Free Press Comments at 10 ( Jan. 14, 2010); PIC Comments at 28,
Jan 14, 2010; Statement of Ron Conway, founder of SV Angel (Dec. 1, 2010) (JA
); Statement of Craig Newmark, founder of craigslist (Dec. 1, 2010) (JA ); Dec. 8,
2010 letter from Jeremy Liew, Managing Director, Lightspeed Venture Partners to
Julius Genachowski, FCC Chairman (JA ); Dec. 1, 2010 letter from Jed Katz,
Managing Director, Javelin Venture Partners to Julius Genachowski, FCC
Chairman) (JA ); Statement of Ram Shriram, founder of Sherpalo Ventures
(Dec. 1, 2010) (JA ), Statement of John Doerr, Kleiner Perkins Caufield & Byers
(Dec. 1, 2010 (JA ); Statement of CALinnovates.org (Dec. 1, 2010) (JA ),
Statement of Larry Cohen, President of the Communications Workers of America
(Dec. 1, 2010) (JA ); Statement of Dean Garfield, President and CEO of the
Information Technology Industry Council (Dec. 1, 2010) (JA ); Statement of
Gary Shapiro, President and CEO of the Consumer Electronics Association (Dec.
2, 2010) ((JA ); Statement of Rey Ramsey, President and CEO of TechNet (Dec.
1, 2010) (JA );Statement of John Chambers, Chairman and CEO of Cisco ( Dec.
1, 2010) (JA ); XO Reply at 6 (Apr. 26, 2010) (JA ).
22

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 35 of 47
discrimination that is posed by the current system—without network neutrality
rules—is already harming application innovation. See Barbara van Schewick, ,
Oral Testimony at the FCC’s Second Public En Banc Hearing on Broadband
Network Management Practices (Apr. 17, 2008), Dkt. No. 07-52 at 2 (telling the
story of an innovative Stanford graduate with an online video start-up, who did not
receive funding from venture capitalists because of the risk that network providers
would block or degrade his application); Srinivasan, Venky & Vivek Gupta. Dec.
10, 2010, Ex Parte Letter to Federal Communications Commission. GN Docket
No. 09-191(explaining that Zediva, an online DVD Rental company, is “directly
affected by the lack of clarity around Open Internet rules”). Network neutrality, as
enforced by the Commision’s Order, will restore the levels of innovation and
entrepreneurship that made the Internet environment what it is today.
Entrepreneurship and innovation on the edge, in turn, drive investment in
network infrastructure. This is because consumers’ demand for more bandwidth is
driven by consumers’ demand for faster access to attractive services and content:
[C]onsumers don’t buy fat pipes; they buy applications
and content that require fat pipes. As consumer demand
for more bandwidth-intensive applications and content
increases, so does the incentive for network owners to
provide more bandwidth . . . .
Commissioner Robert M. McDowell, Address to the Broadband Policy Summit III,
Arlington, VA, at 13-14 (June 7, 2007) (JA ). Network providers competing for
23

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 36 of 47
customer demand in the open environment mandated by the Order will be
incentivized to put further investment into infrastructure, in order to meet the
consumers’ expectations. This is not surprising. Economists have observed of
many “general purpose technologies”—from steam engines to integrated circuits—
that “the more [applications of such technology] and the larger their demands, the
higher will be the level of investment” in the general purpose technology.44
The Commission’s Order enables this self-reinforcing cycle of investment
and innovation in which new uses of the network lead to increased adoption of
broadband, which drives investment and improvements in the network itself, which
in turn lead to further innovative uses of the network and further investment in
content, applications, services, and devices. See, e.g., Skype Reply at 14 (Apr. 26,
2010) (“a virtuous cycle of innovation among all parts of the broadband ecosystem
benefits consumers. Innovative software applications drive demand for broadband
access, leading to greater deployment.”)(JA ); SONY Reply at 6 (Apr. 26, 2010)
(“the availability of compelling content, applications and services has driven, and
will continue to drive, demand for broadband”) (JA ); Google Comments at 5-8
(Jan. 14, 2010) (“In the current de facto environment of openness, broadband
providers have continued to invest tens of billions of dollars in their networks.”)
(JA ); MetroPCS Comments at 16 (Jan. 14, 2010) (the Internet “is the model of

44 Timothy F. Bresnahan, et al., General purpose technologies ‘Engines of growth,’
65 Journal of Econometrics 83-108, 94 (1995) (JA ).
24

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 37 of 47
the virtuous cycle: innovators are creating content and application products that
customers desire, which drives consumers to purchase from service and equipment
providers, which in turn drives investment in infrastructure and new technology in
response to consumer demand”)(JA ); OIC Comments at 23-27 (Jan. 14, 2010)
(discussing network effects) (JA ).
Internet infrastructure providers themselves have repeatedly recognized that
an open Internet encouraging greater content and applications drives their own
investment in infrastructure. XO Communications observed that adoption of the
proposed rules will increase XO’s incentive “to invest further in its broadband
facilities.”45 Broadband provider PAETEC stated that neutrality rules “more than
likely has a positive effect” on “broadband network investment.”46 Broadband
companies supporting the Order “have committed to network investment even as
they embrace openness.”47
In the FCC’s ongoing National Broadband Plan (NBP) proceeding,
broadband providers acknowledged that the Internet Policy Statement (enacted in
2005, espousing openness) has not deterred their incentives to make network
investments.48 When AT&T and SBC merged, when Verizon and MCI merged,

45 XO Comments at 3-5(Jan. 14, 2010) (JA ).
46 PAETEC Comments at 21-22 (JA ).
47 Google Comments at 8 (Jan. 14, 2010) (JA ).
48 See Comments of Comcast at 2, GN Dkt. 09-51 (filed Jun. 8, 2009) (“[t]he cable
industry alone has invested $145 billion in broadband networks” since the mid-
25

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 38 of 47
and when AT&T and BellSouth merged, they had to make commitments to abide
by the Internet Policy Statement.49 There is no evidence that their investments
declined during that period. To the contrary, evidence indicates that network
providers invest more when regulations promote competition. For example,
AT&T’s overall network investment increased by $1.8 billion in a single year after
it consented to operate as a neutral network under the FCC imposed conditions
relating to the BellSouth merger.50 And at a conference in November of this year,
AT&T announced plans to invest billions more in broadband infrastructure.51 In
addition, many commentators have observed that open Internet rules will increase

1990s) (JA ); Comments of AT&T at vii, n. 13, GN Dkt. 09-51 (filed Jun. 8,
2009) (“For its part, AT&T has invested $38 billion over the past two years to
enhance our wireline and wireless networks, and we plan to spend another $17 to
$18 billion in 2009.”) (JA ); Comments of Verizon at 18, GN Dkt. 09-51 (filed
Jun. 8, 2009) (“Verizon has invested more in capital expenditures over the last
several years—more than $80 billion from 2004 through 2008—than any other
company in the United States in any industry.”) (JA ). Verizon also has
announced that it is investing nearly $19 billion in its wireless network and is
ready to support anticipated wireless data growth. See Spencer E. Ante, Verizon
Wireless Prepares for the iPhone
, BUS. WK., Dec. 17, 2009, available at
http://www.businessweek.com/technology/content/dec2009/tc20091217_788391.ht
m.
49 See AT&T-BellSouth Merger Order, Appendix F; SBC Communications Inc. and
AT&T Corp. Applications for Approval of Transfer of Control
, Memorandum
Opinion and Order, 20 FCC Rcd. 18290, Appendix F (2005) (“AT&T-SBC Merger
Order
”); Verizon Communications Inc. and MCI, Inc. Applications for Approval of
Transfer of Control
, Memorandum Opinion and Order, 20 FCC Rcd. 18433,
Appendix G (2005) (“Verizon-MCI Merger Order”).
50 See Google Comments, App. A at 14 (JA ).
51 See Laying a Foundation for Future Growth, Presentation at AT&T Analyst
Conference 2012 (Nov. 7, 2012), available at
http://www.att.com/Common/about_us/files/pdf/analyst_presentation_c.pdf.
26

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incentives to invest in network infrastructure by preserving the virtuous cycle of
innovation.52
The greater regulatory predictability enabled by the Order will, in itself,
encourage investment in infrastructure and provide other benefits.53 Even leading
broadband providers have recognized that the rules would provide such certainty.
For example, AT&T has recognized generally that open Internet rules “would
reduce regulatory uncertainty, and should encourage investment and innovation in
next generation broadband services and technologies.”54 Similarly, Comcast

52 See, e.g., CCIA/CEA Comments at 7(Jan 13, 2010) (“[C]odifying an open
Internet access regime is the best solution for guiding existing market forces in a
manner that encourages investment, innovation, and subscription.”) (JA ); Free
Press Comments at 77 (Jan 14, 2010) (JA ); Google Comments at 5-8, 37-39
(Jan. 14, 2010) (JA ); CDT Reply at 9(April 26, 2010) (JA ); SONY Reply at 5-6
(April 26, 2 010) (JA ).
53 See Google Comments at 37 (JA ). The FCC has long agreed that regulatory
certainty is tied to investment. See, e.g., 1998 Biennial Regulatory Review
Spectrum Aggregation Limits for Wireless Telecommunications Carriers
, Report
and Order, 15 FCC Rcd. 9219, ¶ 51 (1999) (“[r]egulatory certainty is critical to
providing the industry with incentives to make investments, including in new
technologies such as 3G service.”) (JA ).
54 AT&T, Statement on Proposed FCC Rules to Preserve an Open Internet, AT&T
Public Policy Blog (Dec. 1, 2010) (JA ). In general, network infrastructure
providers have repeatedly emphasized the value of regulatory certainty in driving
their investment in infrastructure. See Comments of AT&T—NBP Public Notice
#23 at 1-2, GN Dkt. 09-51 (filed Dec. 4, 2009) (“broadband providers are investing
billions to expand their networks and to bring fast, reliable broadband service to
American households. … the Commission should facilitate those efforts by
providing regulatory certainty and stability.”) (JA ); Cable Executive Continue to
Hit 9th Circuit Decision on Modems
, Commc’n Daily (Dec. 5, 2003) (“Investment
follows regulatory certainty” (quoting Terry Bienstock, Executive Vice President,
Government Affairs, Comcast)); Comments of NCTA at 14, WC Dkt. 09-154
27

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 40 of 47
acknowledged that the proposed rules would strike “a workable balance between
the needs of the marketplace and the certainty that carefully-crafted and limited
rules can provide to ensure that Internet freedom and openness are preserved.”55
Prior to the Order, network providers “may have [had] the ability and
incentive to exclude rival content, applications or portals from its network.”56 As
discussed, allowing network providers to discriminate this way would discourage
entrepreneurship and innovation by edge providers, because they will be uncertain
as to whether their innovations will ever reach the end user. This, in turn, would
reduce the amount of new applications, content and services compared to a world

(filed Sept. 24, 2009) (regulatory certainty “drives broadband investment and
provides customers more meaningful choices among providers.”) (JA ); See also
John Eggerton, Cohen: Clear Internet Rules Would be Better than Confusion,
Broadcasting & Cable (Jan. 11, 2010), available at
http://www.broadcastingcable.com/article/443396-
Cohen_Clear_Internet_Rules_Would_Be_Better_Than_Confusion.php
55 David L. Cohen, FCC Proposes Rules to Preserve an Open Internet, Comcast
Voices (Dec. 1, 2010) available at http://blog.comcast.com/2010/12/fcc-proposes-
rules-to-preserve-an-open-internet.html.
56 Barbara van Schewick, Toward an Economic Framework for Network Neutrality
Regulation
, 5 J. On Telecomm. & High Tech. L. 329, 370 (2007); see also Joseph
Farrell, Open Access Arguments: Why Confidence is Misplaced, in Net Neutrality
or Net Neutering: Should Broadband Internet Services Be Regulated 195 (Thomas
M. Lenard & Randolph J. May eds., 2006) (recognizing the incentives of network
operators to discriminate against unaffiliated applications and content); see also
DISH Comments at 2, Oct. 12, 2010 (JA ); Google Comments at 35 (Jan. 14,
20120) (JA ); The Ad Hoc Telecommunications Users Committee Comments at
8-99 (Jan. 14, 2010) (JA ); ALA Comments at 2, Jan. 2010 (JA ); Free Press
Comments at 3-4, 22-23(JA ); IFTA Comments at 10-12, Jan. 14, 2010 (JA );
Netflix Comments at 3, 5, Jan. 14, 2010 (JA ); Skype Comments at 2, 10-11(JA
); Vonage Comments at 19 (Jan. 14, 2010); Google Reply at 16-17 (Apr. 26, 2010)
(JA ); Vonage Reply at 4 (Apr. 26, 2010) (JA ).
28

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 41 of 47
with network neutrality rules, making the Internet less attractive to consumers.
Lower demand for Internet services would reduce incentives for network providers
to invest in infrastructure.57
Indeed, if network providers were permitted to charge premium rates for
“prioritized” traffic and to discriminate against services that compete with the
network providers’ own services, there would be disincentives for network
providers to further invest in infrastructure. Economic analysis of this situation
suggests that “the ISP’s incentive to invest on capacity under a discriminatory
network is smaller than under a neutral regime” and “content providers’ investment
incentives can be higher under the net neutrality regime.”58 As one economist put
it, “if broadband providers are allowed to charge content providers for prioritized
access, they will have incentives to reduce investments in their networks” for two
reasons: (1) there would be incentives for the networks to create artificial
“congestion” enabling higher rates for prioritized access; and (2) networks would
divert resources from improving the network to monitoring traffic.59
In other words, without the Order, there is a significant risk that investment
in infrastructure would be restrained, resulting in technological stagnation,

57 See e.g. Order, FCC 10-201 at pp. 11-27 (JA ).
58 Jay Pil Choi & Byung-Cheol Kim, Net Neutrality and Investment Incentives, 41
RAND J. OF ECON. 3 448, 464-65 (Autumn 2010) (broadband providers have an
incentive to limit capacity in order to charge a greater premium for priority service)
(JA ).
59 Google Comments, App. A at 12-14 (April 26, 2010) (JA ).
29

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 42 of 47
reduction in incentives to innovate, reduction in consumer offerings and a
fundamental change in the nature of the Internet, harming the public’s interest in
that critical public resource.

CONCLUSION

For the foregoing reasons, this Court should uphold the Order.
/s/ E. Joshua Rosenkranz
Gabriel M. Ramsey
E. Joshua Rosenkranz*
Thomas J. Gray
Orrick, Herrington & Sutcliffe, LLP
Christina Von der Ahe
51 West 52nd Street
Orrick, Herrington & Sutcliffe, LLP
New York, NY 10019-6142
1000 Marsh Road
(212) 506-5000
Menlo Park, CA 94025-1015
(650) 614-7400
*Counsel of Record
November 15, 2012
30

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 43 of 47

CERTIFICATE OF COMPLIANCE

Pursuant to Rule 32(a)(7)(C) of the Federal Rules of Appellate Procedure, I
certify the following:
This brief complies with the type-volume limitations of Fed. R. App. P.
29(d) because it contains 6972 words, excluding the parts of the brief exempted by
Fed. R. App. P. 32(a)(7)(B)(iii) and D.C. Circuit Rule 32(a)(1).
This brief complies with the typeface requirement of Fed. R. App. P.
32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because it has
been prepared in a proportionally spaced typeface using Microsoft Word 2007 in
Time New Roman 14-point font.
/s/ E. Joshua Rosenkranz
E. Joshua Rosenkranz
Orrick, Herrington & Sutcliffe LLP
51 West 52nd Street
New York, NY
10019-6142
Tel.: (212) 506-5000
Counsel for Amici Curiae
31

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 44 of 47

CERTIFICATE OF SERVICE

I hereby certify that on this 15th day of November, 2012, a true and correct
copy of the foregoing instrument was filed with the Clerk of the United States
Court of Appeals for the D.C. Circuit via the Court’s CM/ECF system, which will
send notice of such filing to all counsel who are registered CM/ECF users. Others,
marked with an asterisk, will receive service by mail unless another attorney for
the same party is receiving service through CM/ECF.
Helgi C. Walker
Michael E. Glover, S. Deputy Chief Counsel
William S. Consovoy
Edward Shakin
Eve Klindera Reed
William H. Johnson. Asst. General Counsel
Brett A. Shumate
Verizon
Wiley Rein LLP
1320 North Courthouse Road, 9th Floor
1776 K Street, NW
Arlington, VA 22201
Washington, DC 20006
Counsel for Verizon
Counsel for Verizon
John T. Scott, III
Walter E. Dellinger
Deputy General Counsel
Brianne Gorod
Verizon Wireless
Anton Metlitsky
1300 Eye Street, NW
O’Melveny & Myers LLP
Suite 400 West
1625 Eye Street, NW
Washington, DC 20005
Washington, DC 20006
Counsel for Verizon
Counsel for Verizon
Samir C. Jain
Wilmer Cutler Pickering, et al.
1875 Pennsylvania Avenue, NW
Washington, DC 20006
Counsel for Verizon
32

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 45 of 47
Stephen B. Kinnard
Carl W. Northrop
Paul, Hastings, Janosfsky &
Michael Lazarus
Walker LLP
*Andrew Morentz
875 15th Street
Telecommunications Law
Washington, DC 20037
Professional PLLC
Counsel for MetroPCS
875 15th Street, NW, Suite 750
Washington, DC 20005
Counsel for MetroPCS
Communications, Inc., et al
.
Mark A. Stachiw
*Sean Lev
General Counsel, Secretary & Vice
Peter Karanjia
Chairman
Joel Marcus
MetroPCS Communications, Inc.
Jacob M. Lewis
2250 Lakeside Blvd.
Richard Kiser Welch
Richardson, TX 75082
Austin C. Schlick
Counsel for MetroPCS
FCC Office of General Counsel
Communications, Inc., et al.
445 12th Street, SW
Washington, DC 20554
Counsel for FCC
Nickolai G. Levin
R. Craig Lawrence
Nancy C. Garrison
U.S. Attorney’s Office
Catherine G. O’Sullivan
555 4th Street, NW
Robert J. Wiggers
Washington, D.C. 20530
U.S. Department of Justice
Counsel for the United States
Antitrust Div., Appellate , Rm. 3224
950 Pennsylvania Avenue, NW
Washington, D.C. 20530-0001
Counsel for the United States
David C. Bergmann
James Bradford Ramsay
Law Office of David C. Bergmann
General Counsel
3293 Noreen Drive
Nat’l Ass’n of Regulatory Utility
Columbus, OH 43221-4568
Commissioners
Counsel for NASUCA
1101 Vermont Avenue
Suite 200
Washington, DC 20005
Counsel for National Association of Regulatory
Utility Commissioners

33

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 46 of 47
Genevieve Morelli
Henry Goldberg
ITTA
Goldberg, Godles, Wiener & Wright
1101 Vermont Avenue, N.W.
1229 Nineteenth Street, NW
Suite 501
Washington, DC 20036
Washington, DC 20005
Counsel for Open Internet Coalition
Counsel for ITTA
Harold J. Feld
Matthew F. Wood
Public Knowledge
Free Press
1818 N Street, NW Ste. 410
501 Third Street, NW
Washington, DC 20036
Suite 875
Counsel for Public Knowledge
Washington, DC 20001
Counsel for Free Press
E. Duncan Getchell, Jr.
Jeffrey J. Binder
*Wesley Glenn Russell, Jr.
Law Office of Jeffrey Binder
Solicitor General for Virginia
The Watergate
Office of the Attorney General
2510 Virginia Avenue, NW Ste. 1107
900 East Main Street
Washington, DC 20036
Richmond, Virginia 23219
Counsel for Vonage Holdings Corp.
Counsel for the Commonwealth
of Virginia

Brendan Daniel Kasper
Russell Hanser
*Kurt Matthew Rogers
*Bryan N. Tramont
Vonage Holdings Corp.
Wilkinson Barker Knauer LLP
23 Main Street
2300 N Street NW
Holmdel, NJ 07733
Suite 700
Counsel for Vonage Holdings Corp.
Washington, DC 20037
Counsel for the National
Association of Manufacturers

34

USCA Case #11-1355 Document #1405449 Filed: 11/16/2012 Page 47 of 47
Quentin Riegel
Kevin Stuart Bankston
Deputy General Counsel
Emma Jornet Llanso
National Association of Manufacturers Center for Democracy and
1331 Pennsylvania Avenue, NW
Technology
North Tower Suite 1500
1634 I Street, NW
Washington, DC 20004
Suite 1100
Counsel for National Association
Washington, DC 20037-1128
of Manufacturers
Counsel for Center for Democracy
and Technology

John P. Elwood
* Sam Kazman
Eric A. White
Competitive Enterprise Institute
Vinson & Elkins LLP
1899 L Street, NW
2200 Pennsylvania Avenue. N.W.,
12th Floor
Suite 500 West
Washington, DC 20036
Washington, DC 20037
Counsel for Competitive Enterprise Institute
Counsel for the Cato Institute,
Competitive Enterprise Institute,
Free State Foundation
And TechFreedom

*Randolph J. May
Illya Shapiro
The Progress & Freedom Foundation
The Cato Institute
1444 Eye Street, NW
1000 Massachusetts Ave., NW
Suite 500
Washington, DC 20001
Washington, DC 20005
Counsel for the Cato Institute
Counsel for Free State Foundation
/s/ E. Joshua Rosenkranz
Counsel for Amici Curiae
35

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