McNealy Discusses "Network Neutrality"

Tuesday, May 2, 2006; 7:36 PM

Following are excerpts from Washington Post Staff Writer Arshad Mohammed's interview with Sun Microsystems Inc. Chairman Scott G. McNealy on Tuesday.

McNealy, who last week announced his decision to give up the title of chief executive, spoke about a number of technology policy issues facing Washington, including "network neutrality."

Q: What is your view on the issue of trying to prevent network operators from discriminating against (content providers)?

A: "It's kind of like patents as an issue. People say, are you for a patent? I am for appropriate patents. If there were no patents on drugs, then nobody would spend the $5 billion it takes to bring a drug to market. . . If you don't have X number of years of exclusivity on your invention, then you are not going to make the big investments. If you don't make the investments, you don't get the R&D. If you don't get the R&D, you don't get the drugs. If you don't get the drugs, we all die sooner. So we all probably want to maintain some level of motivation for people to do drug R&D. Well, the same is probably true on network investments. We probably want those who are making the big multibillion dollar network investments to have a way to monetize their investments. If they don't, who is going to build the networks? People aren't just going to build them to let everybody else use them and to not make money. So I certainly can appreciate the network operators' view that they want to be able to make money on the many tens of billions of dollars that they are putting into capital and the more money they make, the bigger and better the networks they will build. Now, on the other side, folks clearly want to make sure that you have choices for delivering content so that there just isn't one pipe into the home. Right now, you have got cable, you have got the satellite, you have got wireless . . . and the telco, telephone DSL kinds of lines coming in. So that there is a lot more choice than there was in terms of how you get there. So, am I nervous about the issue? Absolutely. Whenever the legislators are involved, I think we all ought to pay attention. Do I think that there is a good common ground that can provide the choice and business opportunity for all of the content providers while still providing an opportunity for return on investment for the network operators? Surely there has got to be a common ground there. It shouldn't be that hard. Now, each side will negotiate very hard because there is a lot at stake here so I think as long as the government enforces antitrust policy aggressively, which basically ensures that consumers have a choice, we don't have a real net neutrality issue.

Q: But most ordinary Americans have at best two choices right now. I wonder whether you think that is adequate. I wonder whether you think the pie is big enough to attract other people into it in a genuinely competitive way?

A: You know, sometimes a choice of two seems better than a choice of one. . . . I couldn't weigh in and say that for sure. I think that's where the rub is. If there were six (networks), there wouldn't be a big issue. Of course, if there were six it's probably not economic. I think three is a good number.

Q: It sounds like you lean toward the perspective of the network operators, that if you don't give them an adequate return . . .

A: I don't think the network is anywhere near built out to the capability that we need it to be built. And when you start wanting to do full-motion video, and do the kinds of simulations in real-time market places, and all the things that we want to go do, do the surveillance and the audit trail and all the other things we want to do, the network ain't there yet. And it's going to require lots of R&D and anything that kind of blows up the movement forward of the network, I think, takes out not only the network service providers but also the content creators. So if I had to err in the short run, I would probably say, let's just make sure we don't screw up the investment in the network. The U.S. is not what I would call leading the world in network investments and broadband and ubiquity and that sort of thing . . . I haven't done enough of an analysis to know exactly where everybody's position is but if I was a legislator I would just want to make sure that I maintained the ROI (return on investment) economics for the people who are putting the billions of dollars into (building the networks).

Q: Do you think, as a matter of probability, that a network operator is likely to act in a discriminatory manner?

A: If there is only two, you have a chance for the market not to be as clean and pure . . . I would agree there is some tension and I would understand why Google, for instance, might be a little nervous about this.

Q: Explain that to me:

A: I think you did with your question . . . I am not going to go there, if you will, but a choice of two is choice but in its most limited way . . . I think is probably the best way to put that. So if one (network) locks up with one -- if Yahoo gets one, Google gets the other, who does Microsoft get?

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