I continue to be mystified by the contention of some Net neutrality advocates that it is not a form of economic regulation. The reality, of course, is that Net neutrality would ban business models and necessitate price controls. If that ain’t regulation, I don’t know what is. As Robert Litan and Hal Singer note in their new Harvard Business Review essay, “Why Business Should Oppose Net Neutrality,” “Non-discrimination under the FCC’s net neutrality proposal means that ISPs cannot offer enhanced services beyond the plain-vanilla access service to content providers at any price.” Thus, any type of service prioritization or price discrimination would be prohibited under the FCC’s Net neutrality regulatory regime.
As I explained in this earlier essay and in the video below, this would be a disaster for investment, innovation, and consumer welfare. Differentiated and prioritized services and pricing are part of almost every industrial sector in a capitalistic economy, and there’s no reason things should it be any different for broadband. As Litan and Singer note, “The concept of premium services and upgrades should be second-nature to businesses. From next-day delivery of packages to airport lounges, businesses value the option of upgrading when necessary. That one customer chooses to purchase the upgrade while the next opts out would never be considered ‘discriminatory.'”
And let’s not forget, something has to pay for Internet access and investment in new facilities. Differentiated services can help by allowing carriers to price more intensive or specialized users and uses to ensure that carriers don’t have to hit everyone – including average household users – with the same bill for service. Why would we want to make that illegal through Net neutrality regulation and the misguided price control schemes of a bygone regulatory era?
http://www.youtube.com/v/AgxzFwqqFGw?fs=1&hl=en_US
Today I appeared on CNBC’s “Power Lunch” to debate Net neutrality issues and the specific role of pricing in this debate. Specifically, the producers wanted to know whether websites should be allowed to pay a higher fee to allow consumers faster access to their sites or should it be equal for every website. The show was partially a response to the rumors that the may be some sort of deal pending between Verizon and Google about prioritized services. On the program, I was up against Craig Aaron of Free Press. During the discussion I made several points, many of which first appeared in my 2005 essay on “The Real Net Neutrality Debate: Pricing Flexibility Versus Pricing Regulation.” Here are the key points I tried to get across:
- In a free-market economy, companies should be able to freely set prices for goods and services without fear of government price controls.
- This isn’t about consumers paying more for basic Internet access or having their connections “slowed down”? This is about whether the government will allow some broadband services to be differentiated or specialized for unique needs, such as online gaming, live event telecasts, secure telepresence conferences, telemedicine, etc.
- Differentiated and prioritized services and pricing are part of almost every industrial sector in a capitalistic economy. (ex: airlines, package shipping, hotels, amusement parks, grades of gasoline, etc.) Why should it be any different for broadband?
- It’s always important to remember that there is no such thing as a free lunch. Something has to pay for Internet access. It doesn’t just fall like manna from heaven. Differentiated services may help in this regard by allowing carriers to price more intensive or specialized users and uses to ensure that carriers don’t have to hit everyone – including average household users – with the same bill for service. Why should the government make that illegal through Net neutrality regulation?
- Heavy-handing tech mandates – especially Internet price controls – could have a profoundly deleterious impact on investment, innovation, and competition. After all, there can be no innovation or investment without a company first turning a profit. We don’t want to return to the era of rotary-dial regulated monopoly, in which our choices were few and our services were standardized and rudimentary. We should let our current experiment with facilities-based, head-to-head competition continue.
http://plus.cnbc.com/rssvideosearch/action/player/id/1559985749/code/cnbcplayershare
Google has—as I noted it would last June—finally released (PCWorld, Google’s policy blog) its eagerly-awaited suite of tools available for free (of course) at MeasurementLab.net that allow users to monitor how their ISP might be tweaking (degrading, deprioritizing, etc.) their traffic—among other handy features. Huzzah!
So, now that we have visibility into traffic management practices on a large scale, remind me again why the FCC would need to
mandate “net neutrality” requirements? Why not just leave the matter up to the FTC to enforce each ISP’s terms of use under the agency’s existing authority to punish unfair and deceptive trade practices? Won’t the threat of users switching to another broadband provider discipline ISPs’ traffic management? (As long as ISPs have traffic nationwide traffic management policies, even those users in areas lacking meaningful broadband competition will be protected from discriminatory network management practices by pressure in other markets.)
“If you believe that network neutrality government regulation is not needed, if you believe that the market will handle this … then you should also welcome Measurement Labs,” [Princeton Center for Information Technology Policy director Ed] Felten said. “What you are appealing to is a process of public discussion … in which consumers move to the ISP [Internet service provider] that gives them the best performance. It’s a market that’s facilitated by better information.”
Yes, it’s true (as PCWorld article linked to above points out) that a consumer might not be able to discern whether apparent degradation of their traffic was actually caused by the ISP or whether it might be the result of, say, spyware or simple Internet congestion. But they don’t
need to figure that out for themselves. Although the relatively small percentage of users who install this tool are likely to be highly sophisticated (at least the early adopters), all they need to is “sound the alarm” about what they think might be a serious violation of “net neutrality” principles, and a small cadre of technical experts can do the rest: examining these allegations to determine what ISPs are actually doing.
Sure, there will be false alarms and of course many advocates of “net neutrality” regulation will still insist that ISPs shouldn’t be allowed to practice certain kinds of network management, no matter how transparently the ISPs might disclose their practices. But the truth
will emerge, and in the ongoing tug-of-war between public pressure and ISPs’ practical needs to manage their networks smartly, between the desire of some to have practices disclosed very specifically and the ISPs’ desire to maintain operational flexibility, I suspect we’ll find a relatively stable (if constantly-evolving) equilibrium. It won’t be perfect, but do we really think government bureaucrats will do a better job of finding that happy medium?
Google has begun including the “load time factor” into the quality score for ads on its AdWords program. This means that “Keywords with landing pages that load slowly may get lower Quality Scores (and thus higher minimum bids). Conversely, keywords with landing pages that load very quickly may get higher Quality Scores and lower minimum bids.”
Google provides two reasons for the change: “First, users have the best experience when they don’t have to wait a long time for landing pages to load. Interstitial pages, multiple redirects, excessively slow servers, and other things that can increase load times only keep users from getting what they want: information about your business. Second, users are more likely to abandon landing pages that load slowly, which can hurt your conversion rate [and thus lower profits for both the advertiser].”
One could easily imagine that some might complain that Google is “discriminating” against slower-to-load pages, and even hypothesize that this would introduce a systemic bias towards sites that can afford faster server throughput. True, this change makes the AdWords system non-“neutral” in ways that will benefit some advertisers over others.
But so what? Google is simply engaging in smart management of their network: Giving priority to ads that load faster introduces a strong incentive for all advertisers to speed up their pages in any manner possible. This small change in pricing structure could have broader effects on the efficiency of Internet browsing for all users–at least in terms of building home pages that load faster–particularly if other advertising platforms follow suit. Continue reading →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.