Brooke Oberwetter and I have been having an interesting discussion here and here about network neutrality. I want to start by emphasizing that I wholeheartedly agree with Brooke’s broad point that technologies change over time, and so we should be skeptical of proposals to artificially restrain that evolution by giving government bureaucrats the power to second-guess the design decisions of network engineers. Doubtless the Internet will evolve in ways that neither of us can predict today, and we don’t want the law to stand in the way.
But Brooke went beyond that general point and offered some specific examples of ways she thinks the Internet might change. Her main contention seems to be that the end-to-end principle is overrated, and that “the only reason they’re so revered is because they are simply what is.” I think this is fundamentally mistaken: people have good reasons for revering the end-to-end principle, and abandoning it would be a very bad idea. I’ll discuss some of her specific arguments below the fold.
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I’m trying to wrap my head around the scenario I criticized earlier today, where a broadband ISP charges individual sites for faster speeds.
Let’s suppose, for the sake of argument, that Comcast imposes a half-second delay into the loading of any website that doesn’t pay a special high-speed access fee. The fee might be $1 for every 100,000 page views. This website gets roughly 100,000 page views per month, so we’d owe about $1/month to Comcast if we wanted to avoid having our site load slowly for Comcast customers. A site like Techdirt, which gets roughly 100 times as much traffic as we do, would owe Comcast about $100/month if it didn’t want its traffic slowed. Google, which gets 100,000 times as much traffic as us, would have to pay about $100,000 per month. Clearly, such a scheme could bring in tens of millions of dollars in additional revenue each year.
Of course, it would be ridiculous for us to send Comcast a $1 check each month. Especially since we would presumably be expected to do the same thing with Verizon, AT&T, Charter, Sprint, Qwest, and dozens of smaller ISPs. Running a “high speed” web site would require writing dozens of checks to dozens of different network owners.
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Last week, my friend Brooke was kind enough to link approvingly to my post on the phantom threat of network discrimination. Brooke agrees with me that those who think “Verizon is just itching for the opportunity to detect and block every packet of data it carries that mentions the Second Amendment” are nuts.
She goes on to offer an example of a case where network discrimination would be beneficial:
One fear, however, didn’t make Tim’s list; it’s the fear that the ISPs will do exactly what we think they’ll do, which is to introduce tiered pricing for content delivery…
Suppose some new tech-tinkering über-geeks come up with a search engine even better than Google. Because they lack brand recognition, they need to keep expenses at a minimum while word of mouth slowly spreads about their better quality. In net neutrality America, they cannot keep expenses down by opting for lower quality delivery than that offered by Google. Delivery speed is not a viable option for competition; everyone has to ship at the $11 rate. Now imagine that one of the über-geeks is a trust fund baby. He’s so sure that his product is superior, he invests his trust fund in über-geeks, Inc. so they can buy higher speed delivery than Google offers, thus giving Google a serious competitive run for its money. Sadly this too is not an option in net neutrality land.
Prices and price flexibility are essential to competition. The fear that content competition will suffer without regulation is absurd on its face. Indeed, net neutrality regulation will rob new innovators and content creators of the very tools that would make challenging already established businesses possible. It’s little wonder then that the already established businesses–like Amazon, E-bay, and Google, to name a few–are fighting for net neutrality tooth and nail.
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In general, I don’t think elections have a big effect on technology issues, as they don’t tend to break down along partisan lines. One possible exception is network neutrality regulation. It seems that Democratic control of Congress is likely to make it easier for the pro-regulation folks to get their preferred legislation through Congress. On the other hand, the issue probably isn’t at the top of the Democratic agenda, and it’s complicated enough that the Democrats might find it hard to reach a consensus. Personally, I’m still rooting against Congress passing any telecom legislation.
Congress still has the opportunity to come back for a lame duck session, where it might still pass NSA white-washing legislation. I hope the Republicans have enough shame not to do that, but I wouldn’t put it past them. When the new Congress starts, it would be nice if they repealed the gambling bill, but I’m not going to hold my breath.
One race that makes me a little bit sad is Mark Kennedy’s loss in the Minnesota Senate race. Kennedy was a strong supporter of DMCA-reform legislation. I met with one of his staffers back in April, and he struck me as a smart guy genuinely interested in promoting good policies. It would have been nice to have an articulate DMCA critic in the Senate.
If you thought “net neutrality” is primarily about preventing telephone and cable companies from blocking access to particular web sites or degrading someone else’s services and applications, you would be wrong. AT&T and BellSouth, who are seeking approval from the Federal Communications Commission to complete their merger, will voluntarily commit not to do those things. Consumer groups, however, want the FCC to impose an “additional fifth principle of non-discrimination” on AT&T and BellSouth as a condition of their merger.
If you’re keeping track, here are the four principles that are no longer subject to debate:
(1) consumers are entitled to access the lawful Internet content of their choice;
(2) consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement;
(3) consumers are entitled to connect their choice of legal devices that do not harm the network; and
(4) consumers are entitled to competition among network providers, application and service providers, and content providers.
If the FCC falls for this suggestion, to impose a non-discrimination requirement on network providers, it would outlaw the partnership, bundling and pricing strategies that are the basis for all advertising efforts. That would harm consumers, who benefit the most from advertising.
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I find it frustrating that advocates of network neutrality regulations are always so vague about what, exactly, they think the telecom companies would do if we preserve the status quo. Here’s the closest that Yochai Benkler has come (as of p. 240) in The Wealth of Networks to describing a specific threat:
As long as [broadband access is] open and neutral among uses, and are relatively cheap, the basic economics of nonmarket production described in part I should not change. Under oligopolistic conditions, however, there is a threat that the network will become too expensive to be neutral as among market and nonmarket production. If the basic upstream network connections, server space, and up-to-date reading and writing utilities become so expensive that one needs to adopt a commercial model to sustain them, then the basic economic characteristic that typifies the network information economy–the relatively large role of nonproprietary, nonmarket production–will have been reversed. However, the risk is not focused solely or even primarily on explicit pricing. One of the primary remaining scarce resources in the networked environment is user time and attention. As chapter 5 explained, owners of communications facilities can extract value from their users in ways that are more subtle than increasing price. In particular, they can make some sites and statements easier to reach and see–more prominently displayed on the screen, faster to load–and sell that relative ease to those who are willing to pay. In that environment, nonmarket sites are systematically disadvantaged irrespective of the quality of their content.
I’ve discussed the issue of blocking or slowing down sites here, so I won’t re-hash that discussion. I think the fear is overblown, but I can at least imagine how such a scheme might work. In contrast, his suggestion that a broadband ISP might make favored content “more prominently displayed on the screen” than non-favored content strikes me as fantastically implausible. I’m having trouble imagining an even halfway plausible scenario in which that might happen.
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Venerated deregulator Alfred Kahn weighs in on “‘net neutrality” – the proposal to have Congress and the Federal Communications Commission decide the terms on which ISPs could provide service, and whom they could charge for what. Net neutrality regulation is advanced primarily by the political left. Here’s Kahn on his bona fides:
I consider myself a good liberal Democrat. I played a leading role under President Carter in the deregulation of the airlines (as Chairman of the Civil Aeronautics Board) and trucking (as Advisor to the President on Inflation), against the almost unanimous opposition of the major airlines and trucking companies and–let’s be frank about it–their strongest unions. Among our strongest allies were Senator Ted Kennedy, Stephen (now Supreme Court Justice) Breyer, and such organizations as Common Cause, Public Citizen, the Consumer Federation of America and Southwest Airlines.
On telecommunications competition:
In telecommunications, cable and telephone companies compete increasingly with one another, and while the two largest wireless companies, Cingular and Verizon, are affiliated with AT&T and Verizon, respectively, some 97 percent of the population has at least a third one competing for their business as well; and Sprint and Intel have recently announced their plan to spend 3 billion dollars on mobile Wi-Max facilities nationwide. Scores of municipalities led by Philadelphia and San Francisco, are building their own Wi-Fi networks. And on the horizon are the electric companies, already beginning to use their ubiquitous power lines to offer broadband–to providers of content, on the one side, and consumers, on the other.
His conclusion: “There is nothing ‘liberal’ about the government rushing in to regulate these wonderfully promising turbulent developments.”
After a year of debate, neutrality regulation proponents have singularly failed (Salon.com notwithstanding) to get Congress to enact their proposals. This of course could change, especially if there’s a change in the control of Congress. But, should this front-door approach fail, it now seems proponents have a plan B: sneak regulation in as a condition of AT&T’s merger with Bell South.
The “It’s Our Net Coalition” asked the FCC to do just that in a petition filed with the agency yesterday. Specifically, the group asks the Commission to impose the net neutrality rules contained in the amendment by Senators Snowe and Dorgan now pending in the Senate.
This legislation has been the subject of, to put it mildly, considerable controversy. It hasn’t been voted on–in this Congress it would likely fail if it were. And similar proposals were repeatedly defeated in the House. But the “It’s Our Net Coalition” would save us all the inconveniences of this congressional debate, and simply have the FCC impose the Snowe-Dorgan rules (at least as to AT&T) on its own, without even the bother of a separate rulemaking proceeding.
The idea of imposing conditions on mergers isn’t new–or by itself controversial. But such conditions should be aimed at alleviating a reduction in competition caused by a merger. The Department of Justice, however, has already found that the merger is not likely to substantially reduce competition in any market. BellSouth and AT&T’s businesses simply don’t overlap much.
Strangely, the Coalition, in it’s eight-page petition devotes only a single paragraph to the merger’s effect on competition. broadly asserting that the merger would solidify the market power of broadband firms. Most of the petition is instead devoted to rehashing general arguments for neutrality regulation.
Former FCC Commissioner Harold Furchtgott-Roth often complained about the FCC merger reviews, and the conditions imposed on approvals, called the process “lawless, standardless, and endless.” He was right. Mergers should be approved or rejected based on their specific effect on competition. The process should not be used to impose regulation through the back door.
I am shocked (shocked!) to hear that politics is interfering with Google and EarthLink’s muni wi-fi plans in San Fran. On his blog, Davis Freeberg discusses how a bunch of San Fran “nuts and fruits” (his term, not mine) have turned out at planning meetings to make silly demands of Google and EarthLink before they are allowed to launch service:
“Some of the crazier demands that were suggested at the meeting included a “requirement” for every San Francisco renter to sign a lease addendum with their landlords before being allowed to install a WiFi card in their PC, forcing Google to agree to transport kids back and forth to the Zoo in their Google busses and a requirement for EarthLink to pay the electrical costs for running computers in order to prevent brownouts.
… Despite the announcement made last April free WiFi instead has turned out to be vaporware thus far with Google and Earthlink discovering that dealing with the local San Francisco political scene is about as fun as being set up on a blind date with Mike Tyson after being rubbed down in meat sauce.”
Over at TechDirt, Mike has more coverage of the unfolding fiasco. And the latest issue of MIT Technology Review includes a story by Mark Williams on the San Fran wi-fi follies entitled “Golden Gate Lark.” I found the concluding paragraph of his report particularly interesting because it goes beyond politics and gets to the real reason I think most muni wi-fi projects are doomed to fail–they will probably be obsolete before they are even launched:
“In January 2005, the city of Orlando pulled the plug on its free downtown Wi-Fi service because only 27 people a day were accessing it, at a cost to the city of $1,800 a month, according to the Orlando Sentinel. Though San Francisco’s potential network might be larger, that only makes questions of design more urgent: the city could discover too late that its network was too expensive, too spotty, or already dated.”
Perhaps the most important misleading claim made in Bill Moyers’s informercial for Internet regulation is the notion that we’re in imminent danger of telcos using their control over the “last mile” to influence the direction of political debates. Moyers’s format didn’t allow him to go into the argument in much detail, but fortunately Yochai Benkler does on page 156:
[The network owner, D, has] the power to shape A’s information environment by selectively exposing A to information in the form of communications from others. Most commonly, we might see this where D decides that B will pay more if all infrastructure is devoted to permitting B to communicate her information to A and C, rather than any of it used to convey As message to C. D might then refuse to carry A’s message to C and permit only B to communicate to A and C. The point is that from A’s perspective, A is dependent on D’s decisions as to what information can be carried on the infrastructure, among whom, and in what directions. To the extent of that dependence, A’s autonomy is compromised. We might call the requirement that D can place on A as a precondition to using the infrastructure an “influence exaction.”
Sometimes, highly styized examples like this can illuminate important points by removing extraneous details. In this case, Benkler has done just the opposite: he’s abstracted away all the real-world characteristics of the web that are relevant to this issue. When we add them back in, it becomes obvious that this argument doesn’t work.
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