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It's up to Silicon Valley to choose
February 9, 2006 -
Without 'Net neutrality,' will consumers pay twice?
February 7, 2006 -
Tech firms assail proposed broadband rules
November 9, 2005
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So the Wyden bill and others containing specific Net neutrality provisions are a bad idea. There is a better approach that should go far to assuage the Net neutrality advocates' fears. This is to adopt a regulatory framework under which specific Net neutrality complaints are adjudicated on a case-by-case basis under an "unfair competition" standard that is tied closely to real-world marketplace developments.
At the Progress and Freedom Foundation, we have proposed just such a framework, and Sen. Jim DeMint, a Republican from South Carolina and member of the Senate Commerce Committee, has embodied it in a bill (S. 2113) introduced in December 2005 called "The Digital Age Communications Act." Under S. 2113, network operators would be prohibited from engaging in unfair competitive practices that present a threat of abuse of significant market power.
When Net neutrality-like complaints alleging anticompetitive abuse are filed with the Federal Communications Commission, it would be required to resolve them quickly, applying a rigorous economically driven analysis of the marketplace circumstances that exist at the time. This would include examination of factors such as the number of existing and potential competitors in the market, whether barriers to entry exist, the likely impact on investment and innovation, and, foremost, on consumer welfare of the alleged abusive practice.
At a hearing last month, Sen. Ted Stevens, the Alaska Republican who is chairman of the Senate Commerce Committee, remarked that trying to define Net neutrality is like "defining a vacuum," definitely "not easy to do." Adopting legislation to prohibit something akin to defining a vacuum represents unsound policy, especially in an environment characterized by fast-changing technological developments and marketplace evolution. Such legislation is likely to freeze in place, or at least substantially retard, further development of new broadband networks and Internet service applications.
This case-by-case approach at the heart of DeMint's competition-based Digital Age Communications Act bill is preferable to adoption of legislative provisions that include vague definitions of prohibited conduct that sweep overly broadly. It's far better to consider Net neutrality claims in the context of a specific set of marketplace circumstances.
In today's environment it is unlikely there will be many instances when government intervention is necessary, because if one operator favors certain content providers in a way that consumers dislike, they will flock to another provider that doesn't. In any event, if regulatory intervention is necessary, under the DACA proposal the remedy can be tailored to rectify the abuse while at the same time not prohibiting in a scattershot fashion a wide range of other pro-competitive conduct that might enhance consumer welfare.
Net neutrality advocates should step back from the precipice. They should support a regime, like DeMint's Digital Age Communications Act, that offers a forum for resolving claims of abuse without neutering the Net in the name of neutrality.
Biography
Randolph J. May is president of the Free State Foundation, a Maryland-based think tank. The views expressed here are his own.
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38 comments
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In your article, you write "Thus far, there have been virtually no complaints that any network operator has actually engaged in any discriminatory conduct." I beg to differ. Simply search Google for "blocking VOIP" or "blocking ports e-mail" to identify actual or alleged instances of port blocking by ISPs. For example, see the March 3rd C|Net article describing a statement from the FCC holding that Madison River Communication will "refrain from blocking" VoIP, or voice over Internet Protocol, calls and will pay a $15,000 fine to the government.
Your proposal to require case-by-case intervention is inefficient. The costs associated with any case-by-case challenge will leave small net application service providers at a disadvantage against large, well-funded cable companies and other network providers. For example, a startup business that offers to provide value added e-mail services using Port 143 could find its services blocked by a cable company that wants to offer similar services at a lower cost.
Your proposal requires a David versus Goliath fight that may impose greater costs on the network community than the propose network neutrality legislation.
Someone at the Telcos got smart, they realized that the internet is the new media for broadcasting and communicating in real-time, so to position themselves to exploit this coming boom of real-time services voice and video, they are building a business model to get a piece of all the action even though, those packet streams have already been paid for by the end DSL user through a monthly subscription and by the content provider through their payments to their ISP for their bandwidth.
Its already been demonstrated what not having net neutrality laws will allow, a few unscrupulous ISPs have tried to interfere with competing services (mainly degrading or even blocking packets to Vonage) but let me take it a step further to a very possible hypothetical. Mr. DSL customer signs up and pays for ESPN live webcasts, everything is great for a time, video is good, audio is clear. Then come one game day you web cast video basically sucks, there are no net neutrality laws, and since ESPN did not pay the ransom and now every other packet is being dropped, because of network congestion . Even though it worked fine the day or week before. (and yes I aware of lack of QoS over the internet, but lets assume thats not the cause here). So the next day Mr. DSL customer gets an email suggesting that they should try Telcos Live sports channel for free, and amazingly it works perfectly. Mr. DSL customer cancels his ESPN subscription and signs up with the Telcos paid video service. The Telcos already have an advantage in that they can position their content and services servers physically closer to their end users than any competitors (which should lead to a better service) so why then do they also want the right to artificially degrade the services of others?
You want to take about stifle new services&.suddenly any content or service provider that does not pay the Telcos ransom will not be able to compete, plain and simple. Basically we would probably not have Yahoo, Vonage, YouTube, Google or Amazon, (to name a few) and everyone would still be using CompuCom and AOL as their only source for content.
I am not a big fan of government regulations but in this case when the very nature of the internet under siege by greedy network operators, I say we need it, and I will cast my vote in November accordingly.
2. Even if this was a real opinion, which it is not, it would be easy to discredit anyway. People like Randolph May have no concept of reality. And when I say reality, I am talking about the reality of the day-to-day operation of the Internet. People like May sit in isolated "thinktanks" and dream up idealistic nonsense. None of their "ideas" makes a difference in the real world. His whole argument that just because there isn't a problem, yet, means that we shouldn't do anything. Ok, does that mean that just because Iran hasn't detonated an atomic weapon that we should go ahead and allow them to build one? Everyone knows what Iran is going to do the minute they get their hands on an atomic weapon. USE IT. And probably against Isreal, but that is another topic.
Look, people like May have no concept of what the Internet is all about. The Internet was created to be a medium for the free and unfettered exchange of information and ideas. Allowing the telecommunist companies to change the rules is just plain wrong. We as consumers already pay the telecommunist companies a fee for our access. And those that want faster speeds pay more. That I agree with. But allowing the telecommunist companies to charge content companies a fee for delivery on "their" network is allowing the telecommunist companies to charge twice for the same thing! We as consumers paid for that expansive highway for information (both in the form of taxes in the early years and then in the form of network access fees when the Internet became mainstream) and now they want to change the rules?
I urge every consumer to contact their telecommunist companies and tell them to back off. Further, I urge every network operator to contact their upstream provider and let them know that if this goes ahead, you will be only too happy to find a provider that is not a communist. The threat of losing customers is the only thing that will make these people wake up and see that the real world is more than their offices at 5,000 feet and their gated communities.
My Point is that simply changing from Verizon DSL to Comcast Broadband, or Netzero Dial up will not be the solution to the problem, the problem is accessing google over the internet backbone because an upstream provider wants to charge a premium for users to access google (or microsoft, or vonage, or [insert favorite web site here].
<a class="jive-link-external" href="http://gigaom.com/2006/02/06/net-neutrality-not-an-optional-feature-of-internet/" target="_newWindow">http://gigaom.com/2006/02/06/net-neutrality-not-an-optional-feature-of-internet/</a>
So how is this different to the Russian criminal groups that specialise in blackmailing online gambling sites (along with other internet companies)? They demand that the site pay up an amount of money, and in return they won't launch a DDOS attack against the server.
I don't see how there's any difference there whatsoever. Any telco that tries this should be subject to criminal proceedings.
artificial energy shortages in California, Worldcom etc.
Net neutrality is not about regulatory regimes - it is about
ensuring a level playing field between service providers. This is
never possible when one of the service providers also has an
unfair competitive advantage (in this case control over high
speed backbone infrastructure) gained in a previous monopoly
period.
If AT&T, Comcast and the other network operators wish to offer
services they should compete in the same game as other
providers. This would include equal access to network
backbone (regardless of who actually owns that backbone).
Anything else smacks of the US telecom landscape prior to Judge
Harold Green.
History is very clear that premium services drive the market forward and improve service for everyone.
Even if you agree that "net neutrality" is desirable as a concept, the likelihood of government getting it right is very low. Think about their attempts to legislate "decency".
Let the network providers build out a better network, and let them experiment with business models.
Should Google ask government permission to improve it search performance? Should Apple be prohibited from charging more for a superior offering?
Remember where the advances of the past 10 years have come from: experimentation and minimal regulation. Are we willing to give those up so soon?
"Whitacre Tiering" is nothing more than the imposition of artificial scarcity on the pipeline business in order to move from a commodity market to a market-power market.
Net neutrality is easily defined: protect the open-end-to-end architecture of the Internet. Just like circuit-switched telephone calls, where the telco does not have the right to filter your conversations on the basis of what you are saying, the packet-switched Internet should remain a blind "dumb" pipe.
Whitacre Tiering creates incentives for *slower* bandwidth, in order to creeate a market for artificial premium pricing. It does the opposite of what May and Whitacre claim -- it creates a less competitive market, in an industry that is already important enough to be treated as a public utility (network neutrality protects competition in the information market, letting it go would create more monoipolistic market forces).
These companies are not satisfied operating in a market that is already at commodity levels of competition -- they want to create leverage in order to extract excess profits above the level of economic equilibrium. They would not pass on cost savings to customers, but would keep the producer surplus for themselves (there is no incentive to do otherwise).
Whitacre Tiering is nothing but a bald grab for market power. There is nothing competitive about it whatsoever. It is an abject fallacy to suggest that all government regulation of public utilities creates monopolies. Net neutrality is a form of regulation that is specifically designed to maintain competition and forestall the converghence of monopolies. Common anti-trust law will not do the trick, and these guys know full well that it won't. That's why they're suggesting it: as a finesse to make us think they care about competition while really moving in a distinctly anti-competitive direction.
"Free market" capitalism and "fair market" capitalism are not identical, because non-regulated markets are not guaranteed to be the most competitive markets. What we want is a fair market, and net neutrality guarantees exactly that.
The Internet is just like the telephone, and should be maintained as a universally open and standardized system, not a set of proprietary walled gardens. AOL is not the Internet, Prodigy and CompuServe were not the Internet. These giuys want to turn the Internet, the telephone of the future and present, into that sort of thing.
We cannot let that happen.
If you believe that the 'net is at the end of its innovation, "neutrality" legislation is a great way to lock it in its current state.
If one of the telco's tries the "artificial scarcity" approach and it alienates customers, they lose business. The top 3 firms comprise under half of the market, which means it is quite competitive. The advent of wireless offerings makes it even more so.
I would rather have them building networks instead of legal teams.
A "free market" is not necessrily a "fair market" and what we want is the fair market, not the wild unregulated market.
Anti-trust regulation is all about protecting competition and innovation. Consumer information regulation is about exactly the same thing.
Net neutrality is all about preserving innovation on the Internet, and not allowing artificial barriers to entry to be erected by operators of what should be a common carrier information transport platform.
Whitacre Tiering takes innovatin out of the hands of end users and collects it in the hands of the pipe operators. It creates incentives not to build networks (customer pricing at the ISP already does that by passing through costs from the pipelines) but rather to create spurious scarcity of bandwidth to extract premium pricing.
There is no need to create a spurious pricing level that does nothing but create unnecessary concentrations of market power and reduce competition in the information market.
Whatever the FCC may say about "information services" the pipe operations should be separate from the content services, and the pipes should be treated as common carriers.
Anything else will create a disaster for American information networks, by disincentivizing high bandwidth (there's no incentive for pipe operators to pass along any additional revenues to customers as savings -- they'll keep it all, you can sure).
Markets are creatures of regulation: they are created by regulation (limited liability laws and other "rules of the game" regulations that create competition). The government creates commercial markets in the first place by regulating.
If there were no regulation, there would be no market except for private gangs and mafias exercizing pure coercive force at a private level.
Regulation is required in order to maintain competition in any market. Net neutrality is precisely that sort of regulation: the protection of competition in the information market.
It is as American as Apple Pie. Oppposition to net neutrality is coming from our 21st Century Robber Barons.
Period.
So that would mean the content services have to get into the pipe business, because you know the pipe operators are getting into the content business.
Did somebody say "conflict of interest"?
Government gets involved in protecting competition in markets all the time, and well it should. How would you feel if your long distance phone company were allowed to discriminate between you and other customers on some basis other than pure ability to pay? What if they could just pull the plug on your conversations if you criticized the company?
That's basically what the telcos are proposing here. Your telephone is currently regulated as a common carrier, and may not discriminate according to anything but ability to pay for service.
That's precisely what net neutrality is all about. No more, no less. The network pipes should be treated as a common carrier too. The Internet is important enough to be treated as a public utility these days. It becomes a public trust.
And the whole point of net neutrality is to preserve competition in the information marketplace, by preventing the pipe market from leveraging itself over the information market the way Microsoft leverages its operating system over the applications that run on it.
You can allow the telcos to be regulated by government, or else you can allow the telcos to regulate you directly. But frankly, somebody's gonna regulate you along the way, and there's nothing you can do about it. But, we might have a choice as to *who* regulates us and how.
At least there is *some* process of accountability available in pubic governance (the voting box, communicating with your represeentatives). If all the telcos screw you simultaneously, you have no recourse. And believe me, if they get this, they will signal each other in the market to coordinate their actions even if they don't collude directly.
Oligopolies have developed ways of colluding under the anti-trust radar for many years. Don't think it won't happen here too.
politicians and pontificators forget one thing, where's the
competition? They all assume the vast majority of the
population lives in large metropolitan areas/cities that actually
do have competitive offerings. What about the rural customer
who only has his local telco providing dial-tone and 384kb DSL
and the only TV reception they get is from Dish or Direct-TV.
What about the millions of those people? Who is their advocate
in all this tug-of-war?
/rant
As soon as we put these execs into rest homes where they belong, the sooner we can return the Internet to what it was intended to be. Until then, we will have to humor these idiots.
The fact is that the Internet has two distinct levels of operation (at least) that should be distinguished in terms of regulation: transport and content. The FCC ruling conflated the two incorrectly. The transport layer should be treated like any other common carrier, like the telephone system, as a public utility.
The content layer is where "information services" come in., like walled gardens such as AOL, Prodigy and COmpuServe. AOL is not the Internet, and if if the Internet turns into AOL we are basically screwed, because our phone calls will eventually be transported over the same platforms.
Keep transport and content separate, and make sure the transport layer is protected as a common carrier. Data transport should remain a commodity business, without artificial scarcity imposed on it.
The transport companies want to leverage the transport against content (and get into the content business themselves, creating a conflict of interest). They are all asking for the right to limit content according to discriminatory pricing, so we know it will come if neutrality is not protected somehow. The past does not predict the future in this case.
The reason that the Internet has thrived for so long is because it has been operated as a common carrier from the get-go. It's time to lock in that characteristic for all time, because the market is not capable of responding to that threat under it own power.
And besides, there is already non-discriminatory tiered pricing available at the ISP level, so the investment claims (echoed by Wall Street) are completely vacuous. ISPs pass through backbone costs to their customers already, so there is no investment problem. In fact, there is a lot of "dark fiber" in place that is not even being used, yet, so there cannot be any shortage of badnwidth in the backbone market.
It's like a carpool lane on the freeway: it's fine to limit that lane to cars with at least two passengers, but if you start differentyiating by whether it's a Ford or a Honda, that's no good for anyone except the gatekeepers.
The power of the Internet is a result of its not being a gatekeeper system. If it becomes closed by gatekeepers, then the power is gone, and the public is screwed, plain and simple.
Net neutrality is nothing more (and nothing less) than protection against gatekeepers on the Internet.
send email from my normal email address to any of their
customers. While I can't prove that no spam has ever been sent
through my very legitimate ISP's server, there seems to be no shred
of due process here. My ISP has been unable to get Comcast and
Charter to lift the block. Where's the neutrality in that? Will
everyone soon have to get email service from a hegemony of
corporations, like we do our mass media?
Anything they write is in support of their funders who include:
Verizon
BellSouth
AT&T
Qwest (that's all 4 baby bells)
Comcast
Time Warner (big cablecos)
Sprint/Nextel
T-mobile (including Verizon above 3 of the 4 big cellcos)
Cellular Telecommunications & Internet Association
National Cable & Telecommunications Association
Telecommunications Industry Association (telco/cableco
lobbying organizations)
reference to utility regulation is apt. Crafting legislation in
anticipation of events that might or might not occur is unwise, and
would make the Internet succeptible to the nefarious interests it
would be seeking to thwart.
Free market forces helped to make the Internet what it is today.
Until we have evidence to the contrary, I fail to see the need for
legislation on the issue.
The telcos want to change that, they've said exactly that.
What more evidence do we need than that? Don't let 'em. It's simple enough to do without changing anything in the nature of the Internet. The common-carrier architecture of the Internet pipes is precisely what has enabled such innovation to take place at the end nodes.
Government is often the answer when faced with the need to maintain a competitive market (anti-trust, cinsumer information, etc.). The givernment would not get invovled in setting prices here, just setting the rules of copetition, to maintain maximum competition.
We need to keep the pipe market a commodity market, because the Internet's telephone-like role is the most important here.
There's nothing that need be vague about the definition of net neutrality: it's non-discrimination plain and simple.
We already set differing priorities for packet transfer according to type (real-time streams can get priority over email messaging or web downloads), that's okay and that not what Whitacre is asking for.
It's like a carpool lane on the freeway: we filter priority to use a special low-clog lane for cars with 2+ passengers. But we don't filter Porches over Yugos or rich people over poor people.
There is already a pricing structure in place to differentiate bandwidth under control of the customer. There is no need to introduce a spurious pricing mechanism under control of the supplier. The market works fine as it is.
Don't break the Internet.
This has not been an issue, nor will be one, because internet service providers have no incentive to prevent their subscribers from viewing desired content. Consumers are more savvy than our tired, old politicians think. If one provider blocks or slows specific sites, that subscriber can easily pick another provider.
Ed Whitacre has described exactly the sort of discriminatory conduct feared as a goal of his company. If his word isn't good enough, whose is?
Consumers have no control over what backbones packets travel over to reach them, or for theirs to reach others, and this is importantly about the backbones as well as the last-mile access points.
The market simply is not in a position to exert demand-side forces when the suppliers are given monopoly rights over the transmission of data.
There is already a pricing scheme that works to differentiate bandwidth according to customer willingness to pay. There4 is no need to impose additional supplier-side control over what should remain a common-carrier platform.
The reason the Internet has worked so well is because it has been operated de facto as a common carrier. It's high time to lock this in by regulation and/or statute. This is like our telephone service: it should be a commodity business, because that reflects the maximum level of competition in a market, which yields maximum social benefit. Whitacre Tiering would erode that competitiveness dramatically -- it would create the tools to form a new oligopoly over all public and private communications.
Don't break the Internet.
Why do telecoms create this "crisis"? Why doesn't the FCC do something about it? Why will we all just sit around and watch them turn the American internet into nothing more than just another way to watch TV...all other service be damned.
Net Neutrality is the only way to ensure America has next Google, the next itunes, the next craiglist...anything less, and we are kissing our ability to innovate goodbye.
"Don't Touch my Bits" ;)