Net Neutrality, Schlocky Salesmen vs Monopolist Plumbers

Andy Kessler has written a short tongue-in-cheek summary of the net neutrality debate over on the Weekly Standard. Kessler identifies the two sides as the 'schlocky ad salesmen' (Google, Yahoo!, etc) and the 'monopolist plumbers' (Verizon, AT&T, etc) and when you add the politicians to the mix it creates a pretty untenable situation. From the article: "But the answer is not regulations imposing net neutrality. You can already smell the mandates and the loopholes once Congress gets involved. Think special, high-speed priority for campaign commercials or educational videos about global warming. Or roadblocks--like requiring emergency 911 service--to try to kill off free Internet telephone services such as Skype. And who knows what else? Network neutrality won't be the laissez-faire sandbox its supporters think, but more like used kitty litter. We all know that regulations beget more lobbyists. I'd rather let the market sort these things out."

Comments

Money

[Anonymous Coward]

Whoever spends the most money on lobbying will win.

I think...

[alfs boner]

...The problem (from the telco's point of view) is that Google is paying only one company for the bandwidth it uses. Wouldn't it be nice if they could all get a share by threatening to throttle Google's traffic on their networks? Not only that, you can squeeze out any small-time competition from the market by threatening to take away a big chunk of Google's users if they sign with a smaller company for bandwidth. Only why stop at Google, you could do it to anyone! Heck, maybe even political parties? (So, probably not but the telcos would love to do it anyways, I'm sure.)

Re:I think...

[greenguy]

Telco: Hey, Google, as of tomorrow, we're going to charge you an extra fee to use our pipes.

Google: Uh, I don't think so. I think we'll just make google.com inaccessible altogether to your pipes, and buy a few ads supporting your competitors who provide full service at normal prices. Take a minute to think about how your customers might react to that before you try to throw your weight around against us.

Re:I think...

[Cleon]

"Heck, maybe even political parties?"

I think you hit something significant there, at least for me. You can talk about the financial aspects of Net Neutrality all up and down the information superhighway (remember that lovely phrase? Now think of a toll booth). In the end, however, we're talking about giving private companies control over the transmission of a giant steaming shitload of information.

So an organization with the sufficient funds could bribe pay someone, say, AT&T, to throttle content to sites they'd like shut down. So let's think beyond political parties...Suppose the Church of Scientology took it into their head to try and slow/stop traffic to, say, Xenu.net. Just a thought--I mean, I'm sure the Church wouldn't do anything so heavyhanded. After all, they've been so upstanding in the past and value open debate. Or suppose conservative organizations decided that adult-oriented content should be as inaccessible as possible. Maybe Microsoft reversing their position and decides that people don't really need to be able to access Slashdot.org, Firefox.org, or even Google.com.

The more I look at the issue, the more I'm concerned that this could open the floodgate of a free-for-all where you don't have a voice unless you've got a bunch of money to be able to pay for it.

Re:I think...

[rossifer]

The problem (from the telco's point of view) is that Google is paying only one company for the bandwidth it uses.

But the fees they pay go towards the provider's upstream bandwidth costs, so Google's fees get split with the upstream provider before you can measure profit. You and I pay into the same sort of a heirarchy, with everyone trying to obtain universal connectivity with everyone else.

What the telcos want is to obtain control over content. But the success of the internet is based on a lack of control over content. Anyone can publish, so (almost) everyone does publish. This results in enormous quantities of useless crap, but also more useful information than has ever been available to the public.

The telcos can get what they say they want already by selling dedicated channels beside the DSL channel. If you want DSL pay-per-view, there's not much preventing them from selling you a channel of that. You'll need some new gear to see your new TV feed, but people are used to that sort of abuse.

But when I agree to lease a 1.5Mbit DSL line, I intend to lease a 1.5Mbit link to the whole internet. If they stop selling me that, I take my business elsewhere. The huge problem arises if there's nowhere else to go.

Regards,
Ross

Re:I think...

[Billosaur]

I don't think it's a question of "hating" America, but more the system that we seem to be developing. It's obvious that money talks -- you don't need Pink Floyd to point that out. Corporations will naturally hold more sway than people (unless those people are Bill Gates or Warren Buffet), although collections of people can certainly bring to bear greater resources (hence special interests).

In the end, our government should not be about who has the money to have their voice heard, but what is in the national interest. The whole net neutrality debate is over what everyone thinks is best, but both sides, rather than having open and honest debate, are simply lining up their resources and preparing for a fight.

I've said it many times: the American people have the capacity and capability to make their voice heard, if they choose to. Vote. Write you Congressman. Write the President. If you are getting no satisfaction from them, find new people who you trust more. The only reason money in Washington, D.C. ever becomes an issue is because eventually, if you are there long enough, the power you wield will bring you suitors and they will court you ruthlessly, to get you to see things their way. That's the way of it, and even the best man will crack under it eventually, given a moment of weakness.

Re:I think...

[Schraegstrichpunkt]

Market forces? In the US telecom industry? Surely, you jest.

Re:I think...

[Mr. Slippery]

No forced neutrality, no forced billing - just get the FSCK out of the way and let things progress via market forces like they have been for the last 15 years now.

The reason we have had network neutrality is not because of "market forces" but because of regulation that made telephone lines "common carriers".

The question before us is whether cable, fiber-optic, etcetera networks should be regulated in the same way, or whether the common carrier requirements should be droppped from telephone (DSL) lines.

Market forces can't do dick when there's no competition; few consumer have meaningful choice between several broadband providers.

Re:I think...

[Onan]

And the funny thing is, this is actually most of the problem.

Telcos and cable companies have been so mad for market share that they've continued to cut prices until offering residential data service is actually not profitable for them.

And suddenly now they've noticed that they've got million of subscribers, and they're losing money on every one of them. They "can't" raise prices, because then those unprofitable customers would go somewhere else, which would retroactively invalidate the war they've been waging for years for market share at any cost.

So they've found a third option: charge on the other side as well! Keep losing money on every customer, but make it back up by using that huge customer base as a hammer with which to extort content providers.

This seems like a stunningly clear example of the problematic behaviour of unregulated monopoly. (Okay, duopoly, between your local telco and your local cable co.) It certainly does nothing to change my opinion that completely free-reign capitalism is as problematic as total socialism, and that they right mix is about five parts laissez faire to one part regulation.

Re:I think...

[sterno]

My understanding is that they can do that right now, but they wouldn't dare - because google could tell them to go to hell and all their customers would eventually too when they turn on the throttle. What the telcos want is the ability to not throttle, but the ability to let google use up whatever google will use and have the law force google to pay them and not give google the option of telling them to go to hell. So then google turned arround and tried to get the law to "force" net neutrality, and not let them tier service at all.

Actually no. What it is, is that the telcos want to be able to give preferential service to their own content. So you can get VOIP through some third party but the service will be better through your local telco's service. You can get Internet TV through anybody, but it will be choppier than through your local telco. Then the next step is permitting third parties to take advantage of that but then charging them a fee to do it.

They aren't going to cut google, or anybody else, they are going to boost other things. This sounds okay on it's face, but it has the same result: multiple tiers of Internet service. It puts anybody who doesn't own pipes at an innate competitive disadvantage when selling services. Worse, the companies that own the pipes are usually a monpology or at best have a single competitor. So there's no way to bypass whatever fees they want to extract.

Re:I think...

[blighter]

You realize, of course, that there is no such thing as a multi-billion dollar company footing the bill for anything.

They'll just pass that cost right along to thier consumers.

Re:I think...

[Onan]

Actually, I'm not concerned about the Googles, the Yahoos, or the Microsofts of the world. You're right, they can afford to grease the telcos' palms without batting an eye.

I'm concerned about the next Google or Yahoo. (Okay, screw the next Microsoft.) What about that great new company that will have an idea for a fantastic new service a couple years from now, but can't afford to pay for the phone and cable companies' protection racket to make it available to users?

Re:I think...

[colmore]

It would take a good chunk of a decade for that to actually happen. We'd all be screwed for quite some time.

This is the problem with a lot of libertarian thought. Yes markets eventually optimise themselves, but depending on the situation this process can be slow. So slow that the unhappy situation in question might have changed shape completely by the time that market forces come in to save the day.

Also markets optimize along the parameters that are actually used by the players in markets. Modern corporate structure places little value on long-term investment. Large publicly held corporations give little incentive to avoid failure to top executives, and the stock holders themselves are frequently invested in competitors or are only invested short term (that is, they'd rather see a spike that gets them $10 million this year than steady growth that gets them $100 over ten years).

Lastly there is not nor has there ever been such thing as a free marktet in the United States. The founding fathers wrote the commerce clause into the constitution: the market has always been intended to be second to the General Will (as understood by enlightenment political thinkers).

What sucks is that there's basically no solution. Regulation begins a slippery slope of congressional involvement, and in the end that will mean special services going to the highest bidder (for every liberal "socialist" regulation enacted by congress there are 100 pieces of appropriations bill pork handed out to well connected and deep pocketed interests, and THESE do far more damage to the free market than even overly restrictive regulations that apply equally to all market players). But no regulation means that ATT is free to triple bill up until the point where real competition comes about, which is only comforting in the abstract. The reality of scale pricing is that any realistic competition is going to be unlikely to compete on billing at two points on the connection when ATT is billing on three, and they would sell more on outbidding ATT where their nonneutrality is particularly exploitative, but not on restoring neutrality.

All of this is why I have very mixed feelings on market capitalism. On the one hand, if you ignore it, or try to go against it too strongly, it eats you alive, or you become some kind of totalitarian state. But on the other hand, it seems that cases where competition creates symbiosis and beneficial growth don't really outnumber the cases that look like degenerate instances of the "prisoners dillema" problem.

Will the market really sort itself out?

[gbulmash]

Can the market really sort things out?

Long ago, in a humor column on religion, I wrote: "Humanity, by nature, is an ambivalent animal, given to fits of inertia, and we're more than likely to sit on our noncommittal behinds unless there's a bogeyman to chase us out of our chairs." I was talking about how certain religions use the concept of the Devil to scare us toward God, but it applies to a lot of things.

I'm not so sure that the market will work things out due to a few factors:

• Consumer ambivalence - If your ISP starts slowing down X, Y, and Z sites, how bad will it have to get before you, as a consumer, go to the trouble of switching ISPs?
  
  
• Changing E-mail - While a lot of us have free e-mail accounts through Yahoo, Hotmail, or Google, how many people have just the e-mail address they got from their ISP? People who do not have established freemail accounts that they use as their primary address have an incentive to stay where they are, because if they leave, they lose the address everyone knows to contact them at.
  
  
• Changing ISPs can be a bear just on a technical level - I used to have 6 megabit DSL through speakeasy. When I made some job changes, I decided to downgrade to 3 megabit DSL from Verizon so I could save $700 bucks a year. Problem was that there seemed to be no way for me to cancel the Speakeasy DSL line and have Verizon pick up service on the same day or even the next. Best estimate I could get would be 3 days or more without broadband service as Speakeasy/Covad released the switch and Verizon assumed it. I'd gone with DSL because my house was built without cable running into the room I used as a home office and I didn't want to drill through walls. Finally, I went with 8 megabit cable, coming into another room, then shunted into the office through a Broadband over Power Line (BPL) bridge. With some tweaks in cabling and placement of the bridge units, I was able to get about the same speed I had with the 6 megabit DSL. But it was an adventure in frustration.
  
  
• Lock-in Contracts - The broadband providers have taken a page from the cell phone companies. They're offering free installation and equipment, but to get that, you have to sign up for a 1 or 2 year contract with early termination penalties. So if you have ISP X and you have 6-8 months left on your contract, how slow will your favorite sites have to get before you're willing to pay the early termination fee?
  
  

With all those factors working against switching broadband providers, will the market really work itself out? Things will have to get pretty bad to force the average consumer to vote with their wallets and go to the ISPs that deliver the services they really want. There may be some ripples felt in terms of new entrants to the market, but most of those will be people moving into new homes or new apartments. When it comes to the people in existing residences where broadband is available (excluding people in rural markets who are still waiting for broadband to become available), if they don't have broadband yet, are they really among the technically savvy people who will know enough or care enough to shop wisely?

Re:Will the market really sort itself out?

[One Louder]

I think the market can probably handle this- here's the scenario:

1) Some ISP attempts to extort Google
2) Google responds to all searches from that ISP with simple page explaining what's going on with appropriate contact information
3) ISP wishes they had a time machine so they could undo the damage
4) ISP stops extorting Google

The problem with these ISPs is that they really don't understand where they live in the food chain as far as customers are concerned - Google is an increasingly important tool, and the ISP is someone that sends increasing bills with diminishing quality of service. The music industry is in the same boat with Apple - a label that threatens Apple with removal of their catalog would be playing with fire.

If Google were not available from my ISP for even 24 hours, I would go to a *lot* of trouble to find another ISP.

Re:Will the market really sort itself out?

[gbulmash]

If Google were not available from my ISP for even 24 hours, I would go to a *lot* of trouble to find another ISP.

But what if your ISP offered you Microsoft's new gonzo search engine at full speed? And while it wasn't as good as Google, it was 90% as good?

Remember, that under the best of circumstances, you'd be looking at a couple of days to switch over to a new ISP. If Google slowed to a crawl, would you wait those days until you had a new ISP to do your search on Google? Would your brand loyalty to Google be so complete that you'd do without searching while you waited?

Maybe, maybe not. I think many people would try the alternate search their ISP was pushing. And if they got the results they wanted, the urge to switch might be diminished. They might take a "wait and see" attitude and try a few more searches on Microsoft before committing to switching. And if all those searches got them the results they needed, then it would become a matter of principle to switch, not a matter of utility.

Look at the way our country is today. Look at the people. Give me a ballpark estimate of the percentage of people who fall into one or the other of the following two groups. Group 1: People who get mad about something and do something about it! Group 2: People who get mad about something and merely bitch about it, but never get up the gumption to really do something.

Group 2 is huge and Group 1 is a minority. While you may be in Group 1, you've probably got lots of elbow room at the meetings. And because Group 2 is willing to settle for "almost as good" because it's easier than doing something about it, the market is not as efficient a regulator as some would have us believe.

- G

Re:Will the market really sort itself out?

[DragonWriter]

With all those factors working against switching broadband providers, will the market really work itself out?

You leave out a bigger factor -- many people have very limited choices of broadband providers to start with, and no one to change too.

Like how GM bought up and destroyed the Trolleys?

[FatSean]

You know, in order to increase demand for their automobiles in Cali? I dunno...that analogy and the article's tone as a whole is kind of disturbing.

Indeed

[Anonymous Coward]

The Great God The Free Market will solve all ills. We must only have faith. If we regulate, we will be cast down in the eyes of our God The Free Market, and he will be much displeased, and cast us down for defying His will. Since it is impossible that a piece of legislation designed to solve a problem could ever actually solve the problem it is intended to solve, we must simply continue to pray that The Free Market shall turn His eyes kindly upon us, and accept His just decision when it comes.

Re:we only have the internet because of forced neu

[iminplaya]

What's even more disheartening is that there's a good share of Reps and Senators that were in Congress when we Made THAT rule... and when we broke up Ma Bell... and they STILL don't get it!!!

They're still in Congress? What didn't they get? Seems to me that the people who continue to re-elect them are the ones who don't get it. Oh, and by the way, We are still under Ma Bell's thumb. It's just that she's been divorced and remarried so many times nobody remembers her name(s). But she's still the same old whore.

Re:Finally, some sense

[DragonWriter]

If you like the Intarwebs and want to see a neutral web, the best way NOT to have either is to promote their regulation. Legislation solves nothing - a free market would sort it out quite nicely.

A nice, concise expression of the religious doctrine I like to call "free market fundamentalism", the faith, completely without support, that in the absence of regulation, every market will function ideally, born, apparently, of the naive belief that every real world market is an Econ 101 perfectly competitive market with no substantial barriers to entry.

EXACTLY!!!

[mrchaotica]

If these shills want a "market solution" to the problem, then the first thing that needs to happen is that all the entitlements, sweetheart deals, and monopoly enforcement that the telcos currently enjoy needs to be taken away!

That would be a fucking "market solution!"

Re:Finally, some sense

[mrchaotica]

The way I see it is this: the telcos and cable companies should have a choice:

• Provide equal access to content from all providers without preference, or
• Open their lines to CLECs (INCLUDING remote terminals) at a reasonable cost AND provide universal service to anyone without regards to distance.

You know what would be both simpler and better? Ban all "common carriers" from serving content themselves, and only allow "common carriers" to own infrastructure. Now that's a solution!

A possible solution - Strip common carrier status

[jeffc128ca]

I can't remember where I saw this before but some one had an intelligent solution to this debate. If telco's want net nuetrality, give it to them but on the condition they no longer have "common carrier" status.

As I understand it, "Common Carrier" status ensures the ISP's don't get sued for people who download child porn or arrange drug deals via email. You could add a provision to the bill saying any ISP that chooses a non neutral way of handling traffic looses the this common carrier status. If any of their users downloads at lease one child porn pic, or email through there system that facilitates a crime, they are held responsible in both criminal and civil court. Politicians would love it as they can show they are cracking down on crime on the internet, and it would pretty much garuntee that every ISP would be net neutral for fear that one users downloads something they aren't suppose to.

Naive Libertarianism

[Angst Badger]

I'd rather let the market sort these things out.

If the market was sorting things out alone, there would be one telecommunications monopoly, you'd be paying whatever the hell it felt like charging, and there wouldn't be any competition.

Laissez faire economic fantasies always depend on willful ignorance of the fact that wealth is a competitive advantage. Sooner or later, especially in fields like telecom where the barrier to entry is high by nature, one player gets far enough ahead to either buy out or squeeze out the competition. Excessive or ill-considered regulation is always a bad thing, of course, but some degree of regulation is necessary to ensure that competition exists in the first place. Mature markets do not have spontaneously occurring competition in most cases.

Re:How Access Tiering will come to be

[aaarrrgggh]

If it is advertised this way, it is reasonably fair. The reality will be that the service is 256k UP, 5M DOWN, and 20M "Preferred Partner" access. As long as your needs fit in the 256/5 area, the 20M is just a bonus... a legitimate "value add." This is a speculative service that the telco provides, and is subsidized by their partners.

Unfortunately, the telcos need you to consume all of that 5M before the 20M has any value... Unless... they play with QOS and add latency to the 5M side, and maybe even limit that 5M by specific ports. Then, your games won't work on the 5M side, and maybe your company's VPN starts to act strange. Past experience suggests that the telcos will mess with the "common carrier" portion to create a need for the "preferred partner" portion.

Better Partner Up!