Over on Forbes today, I have a very long post inspired by Monday’s oral arguments in Verizon’s challenge of the FCC’s Open Internet rules, passed in 2010
I say “inspired” because the post has nothing to say about the oral arguments which, in any case, I did not attend. Mainstream journalists can’t resist the temptation to try to read into the questions asked or the mood of the judges some indication of how the decision will come out
But as anyone who has ever worked in a court or followed appellate practice well knows, the tone of oral arguments signals nothing about a judge’s point-of-view. Often, the harshest questioning is reserved for the side a judge is leaning towards supporting, perhaps because the briefs filed were inadequate. Bad briefs create more work for the judge and her clerks.
I use the occasion of the hearing to take a fresh look at the net neutrality “debate,” which has been on-going since at least 2005, when I first started paying attention to it. In particular, I try to disentangle the political term “net neutrality” (undefined and, indeed, not even used in the 2010 Open Internet order) from the engineering principles of packet routing. Continue reading →
The Progressive Policy Institute has released a new and remarkable broadband report. In it, PPI explicitly distances itself from the Crawford/Wu wing of the left-of-center telecommunications conversation. A money quote from the introduction:
What should the progressive agenda be? Are our choices either to embrace this aggressive regulatory agenda or to accede to conservative laissez-faire? This essay argues that there is a third, and far more promising, option for such a progressive broadband policy agenda. It balances respect for the private investment that has built the nation’s broadband infrastructure with the need to realize the Internet’s full promise as a form of social infrastructure and a tool for individual empowerment. It turns away from problems we may reasonably fear but that simply do not exist—most importantly, the idea that the provision of broadband services is dominated by an anti-competitive “duopoly” that stifles the broad dissemination of content.
On “cage match” competition in the telecom sector:
So perhaps the greatest paradox inherent in “cage match” competition is that, while advocates champion more intrusive regulation, the signal providers are in the fight of their business lives. The benefits of their innovation and investment are being appropriated by the devices and services that use the signal; their stock values and capitalizations are listless compared to the companies that make devices and applications; they have made commitments in the tens of billions to build infrastructure that cannot be reversed. And they are trapped in a vicious circle: they innovate to improve signal quality and availability, these innovations make possible new devices, applications, and services that capture consumer allegiance, these other aspects of the broadband experience appropriate value and make signal more commodity-like in the eyes of consumers, which forces the providers to further improve their product, perpetuating the cycle. They are the economy’s front line for investing in and innovating for our broadband infrastructure, and perhaps they benefit from that investment and innovation the least.
From the section entitled “Neutrality,” “Unbundling,” and other progressive policy failures:
The weight of the evidence, therefore, suggests the activist agenda leads progressives to a dead end. It addresses a problem that doesn’t exist—the absence of competition in broadband—and compromises another and more important objective—investment in broadband leading to ubiquitous broadband access. In reality, access providers have made massive investments in high-fixed cost broadband wired and wireless capacity that they can only justify by competing for market share and that are continually improving. The case that they are suppressing or might suppress content—either editorially or competitively—is virtually nonexistent.
This analysis is spot on. While I don’t agree with every policy proposal in the report (though I do agree with some, such as liberating spectrum from the broadcasters and DoD), PPI deserves a lot of credit for its excellent study of the state of telecommunications competition.
Adam Thierer, Senior Research Fellow at the Mercatus Center discusses his recent working paper with coauthor Brent Skorup, A History of Cronyism and Capture in the Information Technology Sector. Thierer takes a look at how cronyism has manifested itself in technology and media markets — whether it be in the form of regulatory favoritism or tax privileges. Which tech companies are the worst offenders? What are the consequences for consumers? And, how does cronyism affect entrepreneurship over the long term?
Gina Keating, author of Netflixed: The Epic Battle for America’s Eyeballs, discusses the startup of Netflix and their competition with Blockbuster.
Keating begins with the history of the company and their innovative improvements to the movie rental experience. She discusses their use of new technology and marketing strategies in DVD rental, which inspired Blockbuster to adapt to the changing market.
Keating goes on to describe Netflix’s transition to internet streaming and Blockbuster’s attempts to retain their market share.
The Information Economy Project at the George Mason University School of Law is hosting a conference tomorrow, Friday, April 19. The conference title is From Monopoly to Competition or Competition to Monopoly? U.S. Broadband Markets in 2013. There will be two morning panels featuring discussion of competition in the broadband marketplace and the social value of “ultra-fast” broadband speeds.
We have a great lineup, including keynote addresses from Commissioner Joshua Wright, Federal Trade Commission and from Dr. Robert Crandall, Brookings Institution.
The panelists include:
Eli Noam, Columbia Business School
Marius Schwartz, Georgetown University, former FCC Chief Economist
Babette Boliek, Pepperdine University School of Law
Robert Kenny, Communications Chambers (U.K.)
Scott Wallsten, Technology Policy Institute
The panels will be moderated by Kenneth Heyer, Federal Trade Commission and Gus Hurwitz, University of Pennsylvania, respectively. A continental breakfast will be served at 8:00 am and a buffet lunch is provided. We expect to adjourn at 1:30 pm. You can find an agenda here and can RSVP here. Space is limited and we expect a full house, so those interested are encouraged to register as soon as possible.
Why did the government impose a completely different funding mechanism on the Internet than on the Interstate Highway System? There is no substantive distinction between the shared use of local infrastructure by commercial “edge” providers on the Internet and shared use of the local infrastructure by commercial “edge” providers (e.g., FedEx) on the highways.
In Part 1 of this post, I described the history of government intervention in the funding of the Internet, which has been used to exempt commercial users from paying for the use of local Internet infrastructure. The most recent intervention, known as “net neutrality”, was ostensibly intended to protect consumers, but in practice, requires that consumers bear all the costs of maintaining and upgrading local Internet infrastructure while content and application providers pay nothing. This consumer-funded commercial subsidy model is the opposite of the approach the government took when funding the Interstate Highway System: The federal government makes commercial users pay more for their use of the highways than consumers. This fundamental difference in approach is why net neutrality advocates abandoned the “information superhighway” analogy promoted by the Clinton Administration during the 1990s.Continue reading →
Many net neutrality advocates would prefer that the FCC return to the regulatory regime that existed during the dial-up era of the Internet. They have fond memories of the artificially low prices charged by the dial-up ISPs of that era, but have forgotten that those artificially low prices were funded by consumers through implied subsidies embedded in their monthly telephone bills.
Remember when the Internet was the “information superhighway”? As recently as 2009, the Federal Communications Commission (FCC) still referred to the broadband Internet as, “the interstate highway of the 21st century.” Highways remain a close analogy to the Internet, yet by 2010, net neutrality advocates had replaced Internet highway analogies with analogies to waterworks and the electrical grid. They stopped analogizing the Internet to highways when they realized their approach to Internet regulation is inconsistent with government management of the National Highway System, which has always required commercial users of the highways to pay more for their use than ordinary consumers. In contrast, net neutrality is only the latest in a series of government interventions that have exempted commercial users from paying for the use of local Internet infrastructure.Continue reading →
Free Press is holding its National Conference for Media Reform next week. The conference agenda describes the Internet as “central” to freedom of expression, which is how all mass media technologies have been described since the invention of the printing press ushered in the mass communications era. Despite recognizing that the Internet is a mass media technology, Free Press does not believe the Internet should be accorded the same constitutional protections as other mass media technologies. Like so many others, Free Press has forgotten that the dangers posed by government control of the Internet are similar to those posed by earlier mass media technologies. In a stunning reversal of the concepts embodied in the Bill of Rights, Free Press believes the executive and legislative branches of government are the source of protection for the freedom of expression. In their view, “Internet freedom means net neutrality.” Continue reading →
I hope that you’ve all been watching the terrific videos on “Economics of the Media” that Tyler Cowen and Alex Tabarrok have put together as part of their Marginal Revolution University online courses. They divide their media economics lessons into four groupings: (1) Basic economics of media; (2) Media bias; (3) Media and government; and (4) Media and economic development. Tyler and Alex asked Jerry Brito and me to contribute two videos on Net neutrality for the project. Jerry’s course offers an overview of Net neutrality as a general engineering principle. My video explores Net neutrality as a regulatory proposal and couches it in a broader discussion of network economics. Each video lasts approximately 6-7 minutes. Here they are:
Christopher S. Yoo, the John H. Chestnut Professor of Law, Communication, and Computer & Information Science at the University of Pennsylvania and author of the new book, The Dynamic Internet: How Technology, Users, and Businesses are Transforming the Network, explains that the Internet that we knew in its early days—one with a client-server approach, with a small number of expert users, and a limited set of applications and business cases—has radically changed, and so it may be that the architecture underlying the internet may as well.
According to Yoo, the internet we use today barely resembles the original Defense Department and academic network from which it emerged. The applications that dominated the early Internet—e-mail and web browsing—have been joined by new applications such as video and cloud computing, which place much greater demands on the network. Wireless broadband and fiber optics have emerged as important alternatives to transmission services provided via legacy telephone and cable television systems, and mobile devices are replacing personal computers as the dominant means for accessing the Internet. At the same time, the networks comprising the Internet are interconnecting through a wider variety of locations and economic terms than ever before.
These changes are placing pressure on the Internet’s architecture to evolve in response, Yoo says. The Internet is becoming less standardized, more subject to formal governance, and more reliant on intelligence located in the core of the network. At the same time, Internet pricing is becoming more complex, intermediaries are playing increasingly important roles, and the maturation of the industry is causing the nature of competition to change. Moreover, the total convergence of all forms of communications into a single network predicted by many observers may turn out to be something of a myth. Policymakers, Yoo says, should allow room for this natural evolution of the network to take place.
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 →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.