As I mentioned earlier, I’m attending the pii2010 conference (privacy, identity & innovation) this week in Seattle (18-19)! If you’re at the conference or in the area, I hope you’ll join me and my fellow TLFers Larry Downes and Carl Gipson for an “Alcohol Liberation Front” happy hour (cash bar) after the conference ends tomorrow, Wednesday the 18th at Kells Irish Pub at 1916 Post Alley–just a short walk from the Bell Harbor International Conference Center, where the conference will take place (Google maps walking directions). The conference reception wraps up at 7:30, so we’ll mosey on over to Kells by 7:45 for drinks and food.
Just look for the TLF sticker when you get there (or the conference badges)! Carl, Larry and I should all be there. Please RSVP on Facebook if you’re coming!
Adam recently pointed to Robert Litan and Hal Singer’s new Harvard Business Review essay in which they defend ISPs’ right to offer special handling for certain packets. They write, “The ability to purchase priority delivery from ISPs would spur innovation among businesses, large and small. Priority delivery would enable certain real-time applications to operate free of jitter and generally perform at higher levels.”
I’ve recently begun to see this sort of argument used in the net neutrality debate more frequently. Where once the mantra of the opponents of regulation was that, thanks to competition, there has never been a serious case of discrimination so that government intervention was unnecessary, now we’re hearing more and more that innovation and investment will suffer if ISPs are not allowed to offer priority services over the internet.
What Litan and Singer explain about price discrimination and product differentiation is absolutely correct. What I don’t think they understand is that “priority delivery” of content over the internet is not within ISPs’ technical capability.
First, let’s be clear what we’re talking about here. As far as I understand it, net neutrality regulation would apply to communications over the internet, not simply to communications that happen to use internet protocol (IP). Consider services like ESPN360, or edge-caching a la Akamai, or imagine Google colocating their YouTube servers at Verizon’s offices. These techniques allow users to get packets over the internet quicker, but do nothing to violate neutrality. You can also imagine Comcast offering an IP-based video game service that, much like cable TV, creates a fast direct connection between Comcast and the user. In a sense, this is prioritization of packets, but not over the internet. If I’m not wildly off-base, this would not violate any of the major net neutrality proposals, either.
So if we’re not talking about colocating, edge-caching, or creating separate IP-based networks, how exactly would ISPs offer “priority delivery” of packets over the internet? Continue reading →
I thought I’d add a little addendum to my post below. I just think it’s cute how Google demanding a neutral wired Internet and a non-neutral wireless Internet totally serves its self-interest.
A neutral wired net was fine for them because edge-caching, private back-hauls, and other workarounds were available to them. They look like selfless champions of Internet ideals, but are meanwhile using every instrument at their disposal to gain an edge on the competition (as well they should, being a for-profit company).
Then this whole wireless craze comes along and the wireless Net doesn’t lend itself to those sorts of workarounds, so they need a new strategy. Prioritizing packets is the only way for Google to gain an edge in this space, so they have to “compromise” their “principled” position on neutrality.
Back in 2008 I wrote a lot about the kerfuffle that surrounded Google’s “OpenEdge” program, which was seen as an affront to net neutrality. Here’s a couple of the better posts on the topic:
That debate seems pretty similar to today’s, in that the issue was largely misunderstood, overreactions were plentiful, and semi-socialist nonsense about the Net belonging to “the people” was momentarily viewed as reasonable.
I hope that this blow-up passes just like the 2008 controversy did.
This debate is different in terms of network architecture as Google likely intends to pay Verizon for prioritization of its services over others, making the network decidedly non-neutral. But I think that’s a good thing.
Why? Because in 2008, Google’s dollars flowed into edge caching servers, not into wired networks themselves. While this relieved of some traffic near the core as I’ve outlined in the post linked to above, it didn’t give wired network providers any more resources to build more robust networks.
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?
Wall Street Journal columnist Holman Jenkins has a terrific, wide-ranging interview with Google CEO Eric Schmidt in today’s paper that is well worth reading. One thing worth highlighting is Schmidt’s comments on the “economic disaster that is the American newspaper.” He argues that, “The only way the problem [of insufficient revenue for news gathering] is going to be solved is by increasing monetization, and the only way I know of to increase monetization is through targeted ads.”
The reason for the indispensability of advertising is simple: Information (including news and other forms of “content”) has “public good” characteristics that make it is very difficult (and occasionally impossible) for information-publishers to recoup their investments. Simply put, they quite literally lack pricing power: Whatever they charge, someone else will charge less for a close substitute, inevitably leading to “free” distribution of the content, even though the content is anything but free to produce. Advertising is the one business model that has traditionally saved the day by rewarding publishers for attracting the attention of an audience.
Thus an attack on advertising is an attack on media / news itself. And yet Washington is currently engaged in an all-out assault on advertising, marketing, and data collection efforts / business models.
Incidentally, Google recentlysubmitted comments with the Federal Trade Commission in reaction to its Staff Discussion Draft about the future of journalism and laid out their views on many of these issues. More importantly, as summarized on pg. 30 (of the pdf) of this Newspaper Association of America filing to the FTC, Google has proposed an interesting monetization model that utilizes Google Search, Google Checkout and DoubleClick ad server, “to build a premium content system for newspapers.” Worth checking out. Kudos to Google for taking these steps and to Schmidt for again stressing the importance of targeted advertising for the future of media.
The release of a joint policy framework from Google and Verizon this week touched off even more activity in the never-ending saga of Net Neutrality than the rumors about the possibility such an agreement was in the works did the week before.
Op-ed pages, business and technology news programs, and public radio’s precious moments were overrun with anxious talking heads denouncing or praising the latest developments, or even a few of us trying just to explain what was and was not actually being said and done.
That’s not how August is supposed to be in policyland, when Washington reverts to the swamp from which it came. (John Adams left early one summer during his Presidency and refused to return long after the heat had broken.) I had hoped at long last to get around to finalizing last year’s tax return or maybe fixing my perennially-broken irrigation system, but oh well. Continue reading →
The folks at the Pew Research Center’s Internet & American Life Project came out with another installment of their “Home Broadband” survey yesterday. This one, Home Broadband 2010, finds that “adoption of broadband Internet access slowed dramatically over the last year.” “Most demographic groups experienced flat-to-modest broadband adoption growth over the last year,” it reports, although there was 22% growth in broadband adoption by African-Americans. But the takeaway from the survey that is getting the most attention is the finding that:
By a 53%-41% margin, Americans say they do not believe that the spread of affordable broadband should be a major government priority. Contrary to what some might suspect, non-internet users are less likely than current users to say the government should place a high priority on the spread of high-speed connections.
This has a number of Washington tech policy pundits scratching their heads since it seems to cut against the conventional wisdom. Cecilia Kang of The Washington Post penned a story about this today (“Support for Broadband Loses Speed as Nationwide Growth Slows“) and was kind enough to call me for comment about what might be going on here.
I suggested that there might be a number of reasons that respondents downplayed the importance of government actions to spur broadband diffusion, including that: (1) many folks are quite content with the Internet service they get today; (2) others might get their online fix at work or other places and not feel the need for it at home; and (3) some may not care two bits (excuse the pun) about broadband at all. More generally, I noted that, with all the other issues out there to consider, broadband policy just isn’t that important to most folks in the larger scheme of things. As I told Kang, “Let’s face it, when the average family of four is sitting around the dinner table, to the extent they talk about U.S. politics, broadband is not on the list of topics.” Continue reading →
History demonstrates the dangers of regulatory capture, and the costs to consumers of regulation from lost investment and innovation.
These dangers and costs far outweigh the purported benefits of regulation (in addressing a non-existent harm).
Broadband markets are competitive enough to prevent the kinds of abuses advocates of net neutrality regulation fret about.
Government could foster more broadband competition by deregulating spectrum and local wireline franchising.
I’ve been having a lively debate with the commenters on the piece, so feel free to join in! Unfortunately, we don’t seem to be getting much substantive engagement with our argument—just the usual mix of “These guys are just corporate whores!” and “Can’t you see the sky is falling?”
[I’m always amazed by the misuse of language in debates over media and communications policy. Some regulatory advocates, like Free Press and Public Knowledge, seem to contort the meaning of everyday words in such a grotesque way that they are barely recognizable. Luckily, via Wikileaks, Mike Wendy and I stumbled upon a secret copy of the “Free Press-Public Knowledge Stylebook for Public Debate” and now have a better idea of what they mean when they utter these terms. We thought we’d share…]
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“behemoth” – Use this word to refer to any corporation, regardless of actual size, and make them sound more nefarious than the much larger government that will regulate them.
“Big Brother” – See “behemoth,” and be careful not to reference Orwell too much lest people actually read “1984” and discover that Big Brother was actually the government, not industry.
“Censorship”– Refers to efforts by nefarious corporations to control our thoughts and actions since that’s obviously how they make most of their money. Some people say government might be the real threat to freedom of speech, but don’t you believe such silliness!
“Competition” – A centrally-planned system used to prop up free-riders who usually don’t have facilities of their own. (See “Open access.”) Of course, the best forms of competition arise from government ownership.
“the Constitution” – An odd document in that, for some reason, it contains a litany of limitations on the power of government to regulate evil corporations that the people wanted to see crushed. (See “the People.”) However, the addition of the First Amendment partially rectified that by giving us the foundation for industry regulation. (See “First Amendment.”) Continue reading →
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I thought I’d add a little addendum to my post below. I just think it’s cute how Google demanding a neutral wired Internet and a non-neutral wireless Internet totally serves its self-interest.
Back in 2008 I wrote a lot about the kerfuffle that surrounded Google’s “OpenEdge” program, which was seen as an affront to net neutrality. Here’s a couple of the better posts on the topic:
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.