Net Neutrality: A Solution in Search of a Problem

 

Looking to regain some political momentum in the wake of the midterm elections, President Obama has opted to make a push for net neutrality, arguing that broadband carriers shouldn’t be allowed to charge higher rates for superior classes of services. The President’s argument is that “an entrepreneur’s fledgling company should have the same chance to succeed as established corporations, and that access to a high school student’s blog shouldn’t be unfairly slowed down to make way for advertisers with more money.” As I explain in my new column for Defining Ideas, Obama has the argument all wrong:

…[W]hy should this be the case when paid prioritization is the norm in virtually all highly competitive markets? A quick trip to the Federal Express website, for example, reveals a wide range of “fast and full of options” like “FedEx Priority Overnight and FedEx Standard Overnight.” There is also two- or three-day shipping and Saturday service for those who want it. The different tiers of services are offered, not surprisingly, at different rates. These differential services are available to all customers. It is simply wrong for the President to assume that any system of paid prioritization entrenches established companies at the expense of new entrants, or greedy advertisers at the expense of high-school bloggers.

Moreover:

It is not preordained that only rich or established companies will take advantage of premium services. Perhaps the new entrant will eagerly take advantage of the higher cost broadband service in order to facilitate its dramatic market entrance. Alternatively, if the mass mailings to particular advertisers are not time sensitive, he may send them out in bulk with slow delivery at low prices. All users of broadband services will try to maximize their expected returns by using the right mix of multiple tiers of service.

That same logic will apply to more aggressive policies whereby a given internet service provider decides that it will block certain content that is available on other networks. Wholly apart from the threat of government intervention, that strategy will provoke a high level of consumer resentment that could lead to customers going elsewhere in droves. So before imposing tough new restrictions, it is better to wait to see how the industry shakes out. The more innovative the market, the less likely these nightmare scenarios are likely to occur.

As is so often the case, the White House would be better off to sit back and wait for evidence of actual problems rather than rushing headlong into a new regulatory policy that will surely cramp investment and innovation.

There are 16 comments.

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  1. Frank Soto Contributor
    Frank Soto
    @FrankSoto

    A Solution in Search of a Problem

    Like that Vepr 12 I keep almost buying.

    • #1
  2. hawk@haakondahl.com Member
    hawk@haakondahl.com
    @BallDiamondBall

    “From each according to his machine, to each according to his speed.”

    • #2
  3. Ross C Member
    Ross C
    @RossC

    Professor you did not link the column!

    • #3
  4. Vance Richards Member
    Vance Richards
    @VanceRichards

    Frank Soto:

    A Solution in Search of a Problem

    Like that Vepr 12 I keep almost buying.

    I have a feeling Net Neutrality would be a lot less fun.

    • #4
  5. user_82762 Thatcher
    user_82762
    @JamesGawron

    Frank Soto:

    A Solution in Search of a Problem

    Like that Vepr 12 I keep almost buying.

    Frank,

    This is the weapon of choice in case of mass zombie attack. Now that wasn’t so hard was it.

    Regards,

    Jim

    • #5
  6. Carey J. Member
    Carey J.
    @CareyJ

    I don’t have a problem with ISPs offering different levels of speed at different prices. I have a big problem with ISPs blocking or throttling services they don’t like. That opens the door to conspiracies in restraint of trade and/or censorship.

    If I’m paying for 50 MB/s service, I expect to get 50 MB/s, no matter whether I’m on Netflix or Joe Nobody’s Weirdo Weblog.

    • #6
  7. user_82762 Thatcher
    user_82762
    @JamesGawron

    Carey J.:I don’t have a problem with ISPs offering different levels of speed at different prices. I have a problem with ISPs blocking or throttling services they don’t like. That opens the door to conspiracies in restraint of trade and/or censorship.

    If I’m paying for 50 MB/s service, I expect to get 50 MB/s, no matter whether I’m on Netflix or Joe Nobody’s Weirdo Weblog.

    Carey,

    Agreed.

    Regards,

    Jim

    • #7
  8. Butters Member
    Butters
    @CommodoreBTC

    Carey J.:I don’t have a problem with ISPs offering different levels of speed at different prices. I have a problem with ISPs blocking or throttling services they don’t like. That opens the door to conspiracies in restraint of trade and/or censorship.

    If I’m paying for 50 MB/s service, I expect to get 50 MB/s, no matter whether I’m on Netflix or Joe Nobody’s Weirdo Weblog.

    Ideally you would be able to choose from providers that would not throttle.

    Problem is physical/geographic constraints limit competitors from easily entering the marketplace.

    Many places have only one or a few ISPs, so there is little incentive to improve service. There is no reason we shouldn’t be getting GB/s in this day and age.

    Net Neutrality is not the answer, but we need to figure out how to eliminate barriers to competition.

    • #8
  9. user_836033 Member
    user_836033
    @WBob

    If net neutrality seeks to solve problems that don’t exist, then what is the downside of passing net neutrality legislation? Other than being an exercise in futility, whom will it harm?

    • #9
  10. user_199279 Coolidge
    user_199279
    @ChrisCampion

    I guess the post office only offers one price for any mailings, and it gets there when it gets there.

    Y’know, to level the playing field for everybody.

    Why not food neutrality?  Why should rich people pay more for better food?  That seems enormously unequal.

    • #10
  11. user_252791 Member
    user_252791
    @ChuckEnfield

    While I don’t disagree with Richard’s conclusion, I don’t think I agree with how he comes to it.  I have two significant concerns regarding his analysis of the situation.

    First, I don’t think internet access currently qualifies as a highly competitive market.  If you count providers throughout the country, or even in major metropolitan areas, you could be fooled into think it’s competitive, but many regions of the country have no or little competition and significant barriers to entry.  Those barriers are getting less significant all the time, but at a relatively slow pace.

    Second, there’s potential for a conflict of interest between subscribers to an ISP and content providers who pay the ISP for preferential treatment.  As a subscriber, I want to pay for the fastest access I can afford to whatever legal content I care to download.  Content providers are, at a minimum, paying to provide the fastest possible access to their service by their subscribers, and potentially to throttle access to their competitors content.  The latter comes with increased risk when a major ISP is also a content provider because the anti-competitive throttling doesn’t require an explicit contractual arrangement as it would if the content provider isn’t the ISP.

    That said, Netflix pays my ISP for preferential treatment and I’m still satisfied with my ability to listen to Law Talk.

    I also recognize the potential harm that could be caused by inflicting net neutrality on a market that doesn’t need it.  Broadcast TV and Radio wouldn’t exist as we know it without advertising.  Print magazines and newspapers would be extinct, not just on the endangered list.  Similarly, more money spent on internet connectivity has the potential to increase availability and performance while reducing the cost to each individual subscriber.  Also, a content provider being a major ISP has the potential for synergies similar to an oil company owning pipelines, or TV networks owning production studios.

    So I think Richard has it right, and as much as I hate to say it because they’re wrong about so many things, so does the FCC.  They have declined to designate ISPs as common carriers which would force net neutrality and stifle development, while making it clear to providers that they could change their mind if providers behave in an anti-competitive manner.  That strikes me as the best course of action for now.

    • #11
  12. Guruforhire Member
    Guruforhire
    @Guruforhire

    The internet has no future which does not involve a multi-queue QoS strategy.  This is done everywhere in every other context except the public internet.

    As more services are packetized the customer experience is going to vary with the technical requirements of the service being packetized, and frankly voice and video are very different from torrents, and web surfing or even buffered streaming video.

    The internet does more than looking at kitt-eh pictures, and innovation should not be restricted to which color background has a slightly higher activation rate on viewers of said kitt-eh picture.

    • #12
  13. user_252791 Member
    user_252791
    @ChuckEnfield

    I think you’re correct, but I don’t think it’s certain. QoS is only necessary where bandwidth is insufficient. Currently available network technology is sufficient to meet current demand, but the highest performance network technology doesn’t extend far from the core of consumer ISP networks. This is a problem money can solve, but I’m doubtful many consumers will pay what such networks cost.

    But, even assuming you’re right, I’m pretty sure that selling limited bandwidth to select content providers is not a QoS strategy that will satisfy all the competing needs you mention.

    • #13
  14. user_138562 Moderator
    user_138562
    @RandyWeivoda

    Carey J.:I don’t have a problem with ISPs offering different levels of speed at different prices. I have a problem with ISPs blocking or throttling services they don’t like. That opens the door to conspiracies in restraint of trade and/or censorship.

    Have there been many cases of an ISP blocking content they don’t want their customers to see?  I often see this argument but none of the articles I’ve read has ever given examples of it actually happening.  I’m not saying it’s never happened, I just have never heard of specific cases.

    • #14
  15. Carey J. Member
    Carey J.
    @CareyJ

    Randy Weivoda:

    Carey J.:I don’t have a problem with ISPs offering different levels of speed at different prices. I have a problem with ISPs blocking or throttling services they don’t like. That opens the door to conspiracies in restraint of trade and/or censorship.

    Have there been many cases of an ISP blocking content they don’t want their customers to see? I often see this argument but none of the articles I’ve read has ever given examples of it actually happening. I’m not saying it’s never happened, I just have never heard of specific cases.

    I don’t know of an instance where it can be proven to have happened, but if ISPs are allowed pick and choose which sites they can block (or throttle), it’s only a matter of time until an ISP starts demanding payments from websites on pain of having access to the site restricted. And if you believe users will ever see a dime of that digital danegeld, I have some bottom land to sell you. Just don’t ask what it’s on the bottom of.

    • #15
  16. user_138562 Moderator
    user_138562
    @RandyWeivoda

    Well, Carey, I guess it comes down to this: Who do you trust more not to screw you?  Your ISP or the federal government?

    • #16

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