Internet Companies’ Bogus Plea for Regulation

by on October 20, 2009 · 9 comments

Some of the most prominent Internet companies sent a letter yesterday asking for protection from market forces. Among them: Facebook, Google, Amazon, and Twitter.

A Washington Post story summarizes their concerns: “[W]ithout a strong anti-discrimination policy, companies like theirs may not get a fair shot on the Internet because carriers could decide to block them from ever reaching consumers.”

No ISP could block access to these popular services and survive, of course. What they could do is try to charge the most popular services a higher tarriff to get their services through. Thus, weep the helpless, multi-billion-dollar Internet behemoths, we need a “fair shot”!

Plain and simple, these companies want regulation to ensure that ISPs can’t capture a larger share of the profits that the Internet generates. They want it all for themselves. Phrased another way, the goal is to create a subsidy for content creators by blocking ISPs from getting a piece of the action.

It’s all very reminiscent of disputes between coal mines and railroads. The coal mines “produced the coal” and believed that the profitability of the coal-energy ecosystem should accrue only to themselves, with railroads earning the barest minimum. But where is it written that digging coal out of the ground is what creates the value, and getting it were it’s used creates none? Transport may be as valuable as “production” of both commodities and content. The market should decide, not the industry with the best lobbyists.

What happens if ISPs can’t capture the value of providing transport? Of course, less investment flows to transport and we have less of it. Consumers will have to pay more of their dollars out of pocket for broadband, while Facebook’s boy CEO draws an excessive salary from atop a pile of overpriced stock holdings. The irony is thick when opponents of high executive compensation support “net neutrality” regulation.

Another reason why these Internet companies’ concerns are bogus is their size and popularity. They have a direct line to consumers and more than enough capability to convince consumers that any given ISP is wrongly degrading access to their services. As Tim Lee pointed out in his excellent paper, The Durable Internet, ownership of a network service does not equate to control. ISPs can be quickly reined in by the public, as has already happened.

A “net neutrality” subsidy for small start-up services is also unnecessary: They have no profits to share with ISPs. What about mid-size services—heading to profitability, but not there yet? Can ISPs choke them off? Absolutely not.

Large, established companies are not known for being ahead of trends, for one thing, and the anti-authoritarian culture of the Internet is the perfect place to play “beleagured upstart” against the giant, evil ISP. There could be no greater PR gift than for a small service to have access to it degraded by an ISP.

The Internet companies’ plea for regulation is bogus, and these companies are losing their way. The leadership of these companies should fire their government relations staffs, disband their contrived advocacy organization, and get back to innovating and competing.

  • mwendy

    Agreed. The Net Neuts appear to be pushing so-called “fin-syn” like regulations onto largely unregulated ISP facilities and infrastructure. This overly-prohylactic approach will stifle innovation and roll-out of needed transport.

  • scottcleland

    well said! dead on.

  • MikeRT

    Plain and simple, these companies want regulation to ensure that ISPs can’t capture a larger share of the profits that the Internet generates. They want it all for themselves. Phrased another way, the goal is to create a subsidy for content creators by blocking ISPs from getting a piece of the action.

    The ISPs create the perception with the public that they are getting neutral access to these websites with their ISP service plan. If they are secretly jacking these websites, then they are defrauding their customers in a moral, if not legal, sense.

    Metered bandwidth is the answer to most of this, but the FCC should be empowered to force them to advertise these policies to their customers so that they do not give them the perception of neutral access to basic internet services.

    They can't have it both ways.

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  • http://www.facebook.com/george.ou George Ou

    “Large, established companies are not known for being ahead of trends, for one thing, and the anti-authoritarian culture of the Internet is the perfect place to play “beleagured upstart” against the giant, evil ISP. There could be no greater PR gift than for a small service to have access to it degraded by an ISP.”

    Vuze was never a victim in any shape way or form from TCP resets because Vuze has their own BitTorrent seeds (what Vuze refers to as “pre-seeding”), and BitTorrent downloads were never affected. Just like nobody actually tries to distribute copies of the bible over BitTorrent because it works 20 times faster and easier using the free web hosting space Comcast already gives you. The FCC filing was merely a manufactured legal case and PR ploy and it worked.

    The outcome of that case was to force Comcast to fairly throttle users based on heavy usage which ironically DOES slow down Vuze content distribution whereas the old TCP reset system did not. But Vuze values the PR more than they view their ability to service their users.

  • http://www.facebook.com/george.ou George Ou

    “Large, established companies are not known for being ahead of trends, for one thing, and the anti-authoritarian culture of the Internet is the perfect place to play “beleagured upstart” against the giant, evil ISP. There could be no greater PR gift than for a small service to have access to it degraded by an ISP.”

    Vuze was never a victim in any shape way or form from TCP resets because Vuze has their own BitTorrent seeds (what Vuze refers to as “pre-seeding”), and BitTorrent downloads were never affected. Just like nobody actually tries to distribute copies of the bible over BitTorrent because it works 20 times faster and easier using the free web hosting space Comcast already gives you. The FCC filing was merely a manufactured legal case and PR ploy and it worked.

    The outcome of that case was to force Comcast to fairly throttle users based on heavy usage which ironically DOES slow down Vuze content distribution whereas the old TCP reset system did not. But Vuze values the PR more than they view their ability to service their users.

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