Broadband & Neutrality Regulation

I want to associate myself with Cord’s excellent post about whether Google pays its fair share for bandwidth. Let me also add a more theoretical observation: we know Google is paying its fair share because if it weren’t, the companies that provide it with bandwidth would raise their rates. That may sound like a tautology, but I think it’s actually an important point that tends to get lost in these discussions. Nobody forces ISPs to interconnect, so we can be confident that each party to the web of interconnection agreements we call the Internet is getting at least as much value out as he puts in.

The obsession with whether Google is paying its “fair share” for bandwidth is nonsense for precisely the same reasons it’s silly to fret over trade deficits and “unfair” trade deals. In both cases, people fail to appreciate that we’re talking about positive-sum interactions: interactions in which both parties are made better off and no one is made worse off. Just as the buyer and seller in any given international transaction values what he’s getting more than what he’s giving up, so too does everyone in the chain of contracts between me and Google get more from carrying our traffic than the cost of doing so. Each is making a profit, or at least expected to make a profit ex ante when they agreed to carry it. Which means that in both cases, interfering is likely to only reduce

This means that if you add up all the value Google gets from the Internet and subtract Google’s costs, of course the number you get would be positive. The fact that Google benefits more from the Internet than it pays isn’t an indictment of Google, it’s a reflection of basic economics. I’ve written before that the commonplace idea that there’s no such thing as a free lunch is actually nonsense. To the contrary, a market economy is a free lunch for everyone who participates: almost everybody gets dramatically more value from their participation in the economy than their cost of participation. The same is true of the Internet. Google, Google’s users, Google’s customers, and various network owners are all “free riding” on each other. And this isn’t a problem, it’s the whole point of having positive-sum social institutions like the Internet.

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Kevin Donovan has a thoughtful post about “The Durable Internet.” He asks:

Now, there are examples of trickle down and mass rebellion. Tim does a nice job in “The Durable Net” of exploring these and does the most to bring me closer to faith in lay users. He cites the Digg rebellion against censorship and the fight for open IM protocols. But in my observation, very few non-technical folks use Adium or the other IM unifiers. In fact, iChat and AIM are dominant defaults. As for the Digg example, the users of Digg tend to be technically inclined and the cost of posting a hex code and pushing “Digg” are so minimal that, yes, even my mother could do it (though I doubt she would). It is possible that the select few will be motivated enough to free their own iPhone or create tools to detect violations of the end-to-end principle, but I worry that the critical mass will not be reached. Although 40% of Saudis are disturbed by Internet censorship, I’d be willing to bet that 40% do not nor can they make use of Tor or Psiphon or the other anti-censorship technologies. These are the people who would suffer from a non-generative, non-neutral future if the technical few do not successfully defend their interests. I’m mostly thinking out loud, so I’d love to hear your thoughts: are users capable of protecting their interests?

In my paper, I go into a lot of detail with specific examples in which open technologies persevered in the face of organized resistance. But let me step back and make a more general point about the underlying argument of that section of the paper: In a nutshell, we should be optimistic about the future of open platforms for the same reason we’re in favor of open platforms in the first place. Put simply, they work better. Open platforms harness the distributed knowledge of millions of people and produce ecosystems that is greater than the sum of their parts. Closed platforms are hampered by the limitations of central planning, and as a result they tend to be sterile, inflexible, and incapable of keeping up with developments on more open platforms. Continue reading →

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Brian Boyko at Network Performance Daily has a thorough interview with yours truly about The Durable Internet. Brian asked some really sharp questions and helped to flesh out some of the thornier aspects of my argument. Check it out.

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