The Senate version of the economic stimulus package (H.R. 1) winding its way through Congress would provide $9 billion in direct public subsidy for broadband network deployment subject to a “non-discrimination” requirement which, like the “open access” requirement in the House bill, could turn into onerous “network neutrality” regulation.
Meanwhile, Britain has outlined its digital transition plans in “Digital Britain – Interim Report.”
It is interesting to compare the substantially more free-market direction Britain is taking with the silly approach our own Congress is considering. For one thing, Britain is going to let private investors finance network upgrades.
The Government is not persuaded that there is a case now for widespread UK-wide public subsidy for Next Generation Network deployment, since such widespread subsidy could simply duplicate existing private sector investment plans or indeed chill such plans.
Another reason direct public subsidies should be avoided is they distort competition. Over at the Progress & Freedom Foundation blog, Ken Ferree cites a recent U.S. government audit report (analyzing significant problems with the current broadband grant and loan programs of the USDA Rural Utilities Service) which asked the evident question: “What is the government’s responsibility if, due to subsidized competition, a preexisting, unsubsidized broadband provider goes out of business?”
Next, the British report touches on the third rail of broadband policy, by noting that if Internet service providers offer guaranteed service levels to content providers in exchange for increased fees, it could lead to “differentiation of offers and promote investment in higher-speed access networks. Net neutrality regulation might prevent this sort of innovation.” The report adds that
the Government has yet to see a case for legislation in favour of net neutrality. In consequence, unless Ofcom [Britain’s FCC-equivalent] find network operators or ISPs to have Significant Market Power and justify intervention on competition grounds, traffic management will not be prevented.
So the British digital transition is based on some sound free market insights, and keep in mind that Britain has a Labour government! Here in this country we are heading in the other direction due to some muddled thinking, and not just on the Left. A prominent Republican writes that “conservatives should cheer” over the fact the stimulus package will include billions to promote broadband deployment and adoption.
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In the summer of 2000, while I was in college, I moved into a big house with 6 other guys. DSL was just coming on the market, and we were big nerds, so we decided to splurge on fast Internet access. Back then, “fast Internet access” meant a blazing fast (Update: 512k) DSL connection. We had to pay the phone company about $65/month for the line. And we paid our Internet Service Provider $55/month for the connectivity and 8 static IP addresses (thanks to local loop unbundling these were separate services). For $120/month we got to live in the future, enjoying connectivity 10 times faster than the 56k modems that almost everyone had at the time.
Adjusting for inflation, $120 of 2000 money is about $140 of 2009 money. So I was interested to see that St. Louis, MO, where I lived until recently, is about to get 60 mbps Internet service courtesy of Charter, the local cable monopoly. Had I stayed in St. Louis for another year, I would have been able to get 120 times the bandwidth for the same inflation-adjusted cost as the broadband access I had less than a decade ago.
It has almost become a cliche to lament the dismal state of America’s broadband market. There do seem to be countries that are doing better than we are, and we should certainly study what they’ve done and see if there are ideas we could adapt here in the states. But I also think a sense of perspective is important. I can’t get too upset about the possibility that in 2018 Americans might be limping along with 2 gbps broadband connections while the average Japanese family has a 20 gbps connection.
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?
Some sensible thinking here about broadband pork stimulus plans from Saul Hansell of the New York Times. In his piece on the NYT Bits blog this week, “Does Broadband Need a Stimulus?” he argues that people should stop grumbling about the “relatively small sum” of $6 billion that the new administration has proposed for wiring rural areas and urban centers. Hansell argues:
This also seems to be a rather sound policy choice because, as I look at it, the noise about a broadband gap is hooey. With new cable modem technology becoming available, 19 out of 20 American homes eventually will be able to have Internet service that is faster than any available now anywhere in the world. And that’s without one new cable being laid.
That fact hasn’t prevented a lot of folks involved in telecommunications policy from calling for a lot of money to be spent on backhoes and cable riggers. For example, the Communications Workers of America and the Telecommunications Industry Association called for $25 billion in subsidies to network providers as well as tax breaks. The Free Press, a group that advocates for media diversity, recommended spending $44 billion, with an emphasis on subsidizing companies to compete with existing cable and phone companies.
Running a new fiber-optic cable to every American home may well increase competition in broadband providers, but it isn’t needed to deliver high-speed Internet service. Current cable modems use just one of the more than 100 channels on a typical cable system and can often offer speeds of 16 megabits per second or more. The next generation of modems, using a technology called Docsis 3, allows several of those video channels to be combined to offer what ultimately can be Internet service as fast as 1 gigabit per second — 10 times faster than is offered in Japan, which generally is regarded as having the fastest broadband infrastructure.
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FWIW… Just upgraded — at no cost — to Verizon’s 20/5 FIOS plan. Been hitting almost 25 megs pretty consistently today. I was on Verizon’s 10/2 plan beforehand and the 5/2 plan before that. Didn’t notice as much of a difference when I moved from 5 to 10, but jump to 20 is definitely noticeable on big file downloads.
Cox Cable has also been offering nice speed boosts in my neighborhood (McLean, VA) recently, so I suspect that’s why I was offered the free upgrade yesterday when I called Verizon about adding some new HD channels to my FIOS TV package.
Three passages from Obama’s inaugural address stand out as important for the mix of technology policy issues covered here at the TLF. On technology policy (a non-trivial 5.4% of the address by word count):
For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act – not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place, and wield technology’s wonders to raise health care’s quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories…. All this we can do. And all this we will do.
On how to determine whether government intervention is warranted:
The question we ask today is not whether our government is too big or too small, but whether it works…. Where the answer is yes, we intend to move forward.
On regulatory policy:
Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control….
So what does all this mean for tech policy? Continue reading →
As Berin and I have noted here before (here and here), there seems to be no shortage of competition and innovation in the mobile operating system (OS) space. We’ve got:
- Apple’s iPhone platform,
- Microsoft’s Windows Mobile,
- Symbian,
- Google’s Android,
- BlackBerry,
- Palm OS (+ Palm’s new WebOS),
- the LiMo platform, and
- OpenMoko.
I am missing any? I don’t think so. Even if I have, this is really an astonishing degree of platform competition for a network-based industry. Network industries are typically characterized by platform consolidation over time as both application developers and consumers flock to just a couple of standards — and sometimes just one — while others gradually fade away. But that has not yet been the case for mobile operating systems. I just can’t see it lasting, however. As I argued in my essay on “Too Much Platform Competition?,” I would think that many application providers would be clamoring for consolidation to make it easier to develop and roll out new services. Some are, and yet we still have more than a half-dozen mobile OS platforms on the market.
Regardless, the currently level of platform competition also seems to run counter to the thesis set forth by Jonathan Zittrain and others who fear the impending decline or death of digital “generativity.” That is, technologies or networks that invite or allow tinkering and all sorts of creative uses are supposedly “dying” or on the decline because companies are trying to exert more control over proprietary or closed systems.
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If you’re in the DC area (and not at Cato’s important counter-terrorism conference that starts this morning) I hope you’ll consider attending two DC-area events I’ll be participating in. First, tomorrow I’ll be tag-teaming with fellow TLFer Jerry Brito to give a Hill Briefing on network neutrality. The talk will be designed for Hill staffers, but it’s open to the public and you’re encouraged to come and ask us softball questions.
Then on Wednesday, I’m going to be a panelist at a Brookings Institution conference on the limits of abstract patents. Also on panels will be some of my favorite patent law scholars, including Ben Klemens (an organizer of the conference whose excellent book I discussed here), Jim Bessen (whose book I reviewed here), Peter Menell (whose Regulation article I discussed here), and John Duffy (with whom I often disagree: I criticized him here but loved his work on appellate competition). It promises to be a great conference on an important topic.
Continuing the “Cutting the (Video) Cord” series started by my PFF colleague Adam Thierer: The WSJ had two great pieces yesterday about the increasing competitive relevance of television distributed by Internet—a trend that was at the heart of an amicus
brief PFF recently filed in support of C omcast’s challenge of the FCC’s 30% cap on cable ownership. The first WSJ piece declares that:
After more than a decade of disappointment, the goal of marrying television and the Internet seems finally to be picking up steam. A key factor in the push are new TV sets that have networking connections built directly into them, requiring no additional set-top boxes for getting online. Meanwhile, many consumers are finding more attractive entertainment and information choices on the Internet — and have already set up data networks for their PCs and laptops that can also help move that content to their TV sets.
The easier it is for consumers to receive traditional television programming (in addition to other kinds of video content) distributed over the Internet on their television, the less “gatekeeper” or “bottleneck” power cable distributors have over programming. So the Netflix-capable
and Yahoo-widget-capable televisions described by the WSJ piece go a long way to increasing the substitutability of what we call Internet Video Programming Distributors (IVPDs) for Multichannel Video Programming Distributors (MVPDs), such as cable, satellite television and fiber services offered by telcos such as Verizon’s FiOS.
While such televisions are only expected to reach 14% of all TV sales by 2012, one must remember that a growing number of set-top boxes (
e.g., the Roku Digitial Video Player, game consoles like the Microsoft XBox 360 and Sony PlayStation 3, and TiVo DVRs) allow users to users to receive IVPD programming on their existing televisions.
As we argued in our amicus brief, the immense competitive importance of IVPDs lies not in the potential for some users to “cut the cord” to cable and other MVPDs (though that will surely happen), but in the immediate impact IVPDs have as an alternative distribution channel for programmers. In the pending D.C. Circuit case, we argue that both the FCC’s 30% cap, issued in December 2007, and the underlying portions of the 1992 Cable Act authorizing such a cap should be struck down as unconstitutional because the ready availability of IVPDs as an alternative distribution channel means that cable no longer has the “special characteristic” of gatekeeper/bottleneck power that would justify imposing such a unique burden on the audience size of cable operators. (Of course, Direct Broadcast Satellite and Telco Fiber are also eating away at cable’s share of the MVPD marketplace.)
The second WSJ piece, an op/ed, illustrates beautifully how cable operators are already losing “market power” (or at least negotiating leverage) in a very tangible way: they’re having to pay more for programming. Specifically, the Journal describes how Viacom plaid chicken with Time Warner—and won. Continue reading →
I’m in the mood for making bold predictions, so I predict (with fingers crossed) that we won’t see neutrality regulation passed in 2009. I want to say right away that this is more of a hope than a assessment of the regulation’s political chances, but it’s a hope worth sharing.
Over at OpenMarket.org, the blog of the Competitive Enterprise Institute, I have spelled out my reasons for thinking that neutrality regulation won’t pass and why I think market-enforced neutrality would be a much more robust system for keeping the Net thriving.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.