I am now net neutral
Posted by aogWednesday, 17 May 2006 at 16:45 TrackBack Ping URL

I have been meaning to comment on “net neutrality” for a while. I was originally an opponent but I have been persuaded by arguments on both sides that net neutrality is something that should be enforced. This has been not only by pro- arguments, but by some of the truly vapid anti- arguments. I still think that this is a debatable issue, with many nuances, but one has to make a decision and I think net neutrality is clearly the least bad alternative (the good alternative would be to eliminate the last mile monopoly, but that’s not going to happen any time soon).

As case of the latter: an editorial in today’s Wall Street Journal by Holman Jenkins, who is usually more sensible. When he uses the phrase “IP fetishism”, you know you’re no longer dealing with logic. Here’s an example:

Your cable operator may sell you one, two, or three megabits [per second? can’t even get that right] of capacity for a broadband connection, but most of his pipe is reserved for his TV offerings.

Yes, but that’s irrelevant, since that capacity was never sold to consumers as IP bandwidth. Moreover, one can (and I do) purchase just bandwidth from a cable company without paying for the TV allocated part of the pipe. The cable is, in fact, net neutral for all IP traffic. I will touch on just one more silliness, because it’s blatant:

it’s obvious that […] they [AT&T, Verizon] will be under competive pressure to keep giving consumers bigger and bigger pipes […]

and

“net neutrality” would result in an increasingly unreliable Internet as more and more high-bandwidth applications contest for space on networks that nobody would have an incentive to expand.

Both of these things cannot be true. Unless one thinks that competitive pressure is no incentive in American business.

But there are other reasons, some of which I realized while reading this post from Right Wing News. Hawkins is normally a sensible kind of guy, but he really bifs it here. For instance he writes “Who are the biggest supporters of net neutrality? Other big corporations like Verizon and AT&T” which is completely backwards — those are the companies opposed to net neutrality. But what’s really wrong is his basic analogy:

Imagine you have a city and a big corporation, we’ll call them Corporation X, builds a plant 30 miles outside of town. Well, Corporation X needs a way for their employees, customers, and suppliers to get to their plant, so, at great expense, they build a highway that runs from the city to their plant.

We’re already off the rails. X didn’t build the plant, other people (like Amazon and Google) did. X built the road in order to charge people to get to the plant. That’s their business model. Now, X wants to charge the plant owner more money to let his customers (who have already paid X to use the road) get to his plant. X wants to sell again something he’s already sold. The essence is that Google doesn’t send traffic through the ISP to me, I use the bandwidth capacity I have purchased to have network traffic with Google. Part of the agreement for that bandwidth is that I get to use it have network traffic with whatever other networked computer I want.

The idea that other companies can “use the network to take their [ISPs’] business” is completely wrong. Those other companies are in a different business and, moreover, without those other companies there would be very little business for the ISPs.

Even in libertarian terms, the ISPs don’t have much of a case. Net neutrality has been the standard from the start and to complain as if they had just noticed that is laughable. Give up the last mile monopolies and then I am ok with dropping net neutrality. Until then, if the government is going to restrict the pipes in to my house, the least bad regulation is to make the pipe content neutral.

Comments — Formatting by Textile
Bink Thursday, 18 May 2006 at 05:49

The AT&T/SBC complaint these days is that if they are not allowed to charge the Amazon’s of the world per packet charges, then they will not find the incentive to invest in the infrastructure to grow capacity beyond a certain level (presumably, that being high margins on depreciated infrastructure investments).

At the same time, AT&T/SBC is moving into video, hoping to offer an alternative to cable. The issue really is not about net neutrality; it is about a core issue in our country: what expense to all will we pay to ensure that the shareholder value of a publicly traded company can continue to drive 20% growth.

I believe in net neutrality as well, but to me it’s more like a stick in the middle of the river. The water/greed continues to pour around it in ever widening and accelerating current, but a bug crawl up on that stick for a breather.

Annoying Old Guy Thursday, 18 May 2006 at 08:06

I find that argument weak. If they can’t charge bandwidth consumers enough to pay for the infrastructure, then it’s a net negative and shouldn’t be built. If they can charge enough, no problem. I do agree that it’s far more about stock prices for everyone involved than any actual principles.

Bink Thursday, 18 May 2006 at 09:54

Oh, it’s a weak argument to be sure. Agog correctly points out that if not for the Amazon’s and eBay’s of the world, there would be no consumer demand. I pointed out the move to video services as a counter to their own argument. Apparently, they do believe there is a reason to upgrade the infrastructure; one that they can profit from.

All of these per packet charge arguments are disturbing; it is just the approach the old Telecom’s plan to profit from whatever solution the FCC imposes, plus they’ll get a leg up on the pricing structure for competing in the service market.

pj Tuesday, 23 May 2006 at 12:33

But Internet provision is a competitive market. We can switch between cable, DSL, and other providers.

This means that: (a) Internet providers won’t be able to get extraordinary profits; otherwise the other parties would switch away to get more of their benefits themselves. Thus, whether suppliers of Internet traffic (e.g. Google) or consumers of Internet traffic (e.g. consumers) pay, the price will be the same. This is about a redistribution of costs between consumers and suppliers. (b) “Net neutrality”, i.e. zero price to suppliers and maximum price to consumers, may not be the optimal pricing scheme. In television, maximum price to suppliers and zero price to consumers had a long run, and in radio this scheme still works. Or a mix may be in order.

My inclination is to favor a free market, and let the parties involved work out the arrangements. If Google doesn’t like paying to be given access to consumers, they can refuse to pay. Then the Internet service provider will face complaints from consumers, many of whom will switch providers. If this is indeed what develops, this will be the same bargaining situation that goes on in cable television, as networks are left in or out.

And if Internet advertising really does become a $100 billion a year industry in a few years, there’s no reason not to let distributors try to catch a piece of the action.

Annoying Old Guy Tuesday, 23 May 2006 at 13:16

I would prefer a free market as well, but I think that it’s the unusual situation where a consumer can switch bandwidth providers. There are a lot of locally enforced monopolies and I would expect many more to arise should net neutrality be violated.

Also, I don’t think this claim is accurate:

Thus, whether suppliers of Internet traffic (e.g. Google) or consumers of Internet traffic (e.g. consumers) pay, the price will be the same

I see no evidence whatsoever that it would be an “or” situation and many indications that it would be an “and” situation. I do not think it is a matter of redistribution of costs, but of extracting monopoly profits (see previous paragraph) either directly or by stifling competition in businesses to which the ISP want to expand.

cjm Saturday, 27 May 2006 at 13:13

or the big content providers can form a consortium, bring in the power companies, and screw at&t into the ground by making their own end-to-end net service. there is only one law in the universe — compete or die.

Annoying Old Guy Saturday, 27 May 2006 at 21:57

Or buy off the regulators.

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