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 →
Are you a tech policy geek who just can’t get enough Internet policy & cyberlaw books in your life? Alternatively, would you just like to hear two such geeks talk about some of the most important tech policy books out there so you don’t have to read them yourself?!
Either way, you might want to join TLF-alum Tim Lee and me for a book chat over at his blog on Wednesday night at 9:00 pm EST. Tim is experimenting with a new tool that his brother has developed called Envolve, which allows real-time user chat within a website or blog. Pretty cool tool, although I hope my increasingly arthritic fingers don’t fail me while I am trying to post rapid-fire responses to Tim or other participants! [Seriously, I am 41 and my fingers already feel like rusty hinges. Sucks.]
Anyway, if you are interested, join us for the chat and let us know what you think. I’ll be discussing some of my early picks for most important info-tech policy book of 2010 and relating them them to previous choices from 2008 and 2009. I’ll also be placing some of them along my Internet “optimist v. pessimist” spectrum.
But after going through the framework and comparing it more-or-less line for line with what the FCC proposed back in October, I found there were very few significant differences. Surprisingly, much of the outrage being unleashed against the framework relates to provisions and features that are identical to the FCC’s Notice of Proposed Rulemaking (NPRM), which of course many of those yelling the loudest ardently support.
In a 3-2 vote, the Federal Communications Commission recently decided to jack up its official definition of “broadband” from 200 kbps download to the 4 mbps dpwnload/1 mbps upload used as a benchmark in Our Big Fat National Broadband Plan. The three commissioners in the majority also declared that the definition of broadband will continue to evolve as consumers purchase faster connections to utilize new applications.
Several months earlier, the FCC launched a proceeding to figure out how to convert universal service subsidies for rural telephone service into universal service subsidies for rural broadband service. Put these two decisions together, and it looks like the majority on the FCC is hell-bent on establishing rural broadband subsidies as a perpetual entitlement program that will never “solve” the rural availability problem because the goalposts will keep moving.
The current USF program taxes price-sensitive services (long distance and wireless) to subsidize a service that is not very price sensitive (local phone connections). If the FCC takes a further step on the funding side and starts collecting universal service assessments from broadband, it will diminish broadband subscribership by taxing a service that is even more price sensitive: broadband connections. (I explained this a few months ago here.)
It’s time to get off this merry-go-round. The solution was suggested by MIT economist Jerry Hausman back when the FCC first started creating the current universal service programs in response to the Telecom Act of 1996: use revenues from spectrum auctions.
Instead of having the FCC perpetually collect assessments from broadband or telephone services to subsidize broadband buildout in rural areas, Congress should earmark revenues from the next spectrum auction for one-time buildout grants in high-cost areas. The grants should be awarded via a competitive procurement auction that would force subsidy-seekers in different locations to compete with each other for the federal dollars. And Congress should explicitly wind down the universal service telephone subsidies in high cost areas and prohibit the FCC from using universal service assessments to fund broadband deployment in these places.
Using revenues from spectrum auctions would avoid the distortions and perverse consequences caused by ongoing universal service assessments on broadband or telephone services. One-shot deployment grants would ensure that the availability problem gets solved, so the federal government can declare victory and get out of the perpetual subsidy business.
Of course, some locations in the US are so expensive to serve that the potential revenues might not even cover the operating costs of broadband. But it does not follow that operators in these places need an ongoing stream of subsidies. When preparing their subsidy bids, they will have to calculate how large the one-shot payment needs to be to induce them to take on the capital costs and the ongoing operating costs. In other words, they can bank some of the one-shot subsidy and use it to cover the difference between revenues and operating costs.
This modest proposal does not address all aspects of the universal service fund. But it would achieve a clear objective — bringing broadband to rural areas — while allowing the FCC to extricate itself from the business of distributing $4.6 billion a year in subsidies. Let’s see a timetable for withdrawal!
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology. Learn more about TLF →
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.