Terminating Net Neutrality
Unfortunately there is a seemingly growing amount of FUD (Fear, Uncertainty, Doubt) promoted by the net neutrality movement. And as noted in Who Owns the Internet?, the real controversy is not content providers versus service providers, but the role of State intervention.
Over the past week The Wall Street Journal has published a couple of articles examining this issue. The first discusses the role that content lobbyists have taken (cui bono) while the second details the changing business environment that carriers are now faced with. In addition, their editorial entitled "Stuck in Neutral" is a must-read for anyone researching the topic.
Thanks to DJC for the links. See also: The Spectrum Should Be Private Property.
Update: this video is a prime example of how the net neutrality movement is missing the bigger picture of private property, ownership and scarcity. In addition it shows their ignorance of current QoS practices which already involves treating packets differently based upon what they are (voice, data, etc.). See also Multiprotocol Label Switching.
Comments (34)
I don't think everyone involved doesn't care about private property; most people think that government-supported monopolies or oligopolies need to be related, so the counterargument should be, rather than "it's private property stupid," that either the ISPs are not an oligopoly or that the solution is for government to stop making them an oligopoly.
It's hard to argue that there aren't only two companies who bring copper to my house and only one company for many others. Therefore, if I don't have a decent enough choice of wireless providers, it should be fairly easy to show that the reason for that is the FCC's antiquated licensing practices, as you have pointed out :)
Published: May 17, 2006 3:50 PM
Err, I mean "most people think that government-supported monopolies or oligopolies need to be *regulated*," not related :)
Published: May 17, 2006 3:51 PM
The censorship worries may be overblown, but it's kind of a leap to assume that the telephone monopolies want to use this new legislation to actually provide quality of service guarantees and price accordingly. More likely, they want to use their control of the bandwidth pipe in your house to extract the same rents from content providers that the cable television monopolies do now for cable television channels. Notice that packet-switched voice is treated as a "high bandwidth" application by the phone company in one of those WSJ references. It's not high bandwidth relative to other things one does on the internet. It does interfere with telco pricing policies.
All of this may be fine from a property rights point of view, but the technical issues are a smoke screen. It'll be interesting to see if the cable companies use unencumbered access to, say, google and ebay as an advertising point or simply charge those companies rent themselves.
Published: May 17, 2006 4:02 PM
The realities of the implementation of the internet is so far removed form the way most people experience The Internet that they can not really make the connection.
I think that most people see The Internet as a public space, let say like an agora of ancient Greece. A virtual place where they share information, have conversations and engage in business. All in an equal, open and cheap way.
Net neutrality is for most people the only way they know to ensuring that The Internet remains accessible in an equal and open way for all in a world where many don't have a choose of internet provider.
Maybe someone here could comment on The Paradox of the Best Network: "The best network is the hardest to make money running".
Published: May 17, 2006 4:33 PM
gmlk,
that page is a good one that raises many Q's, where did you want to start?
Published: May 17, 2006 5:37 PM
The title seems like a good place to start.
Also, the philosophical question: Who owns the market place?
Then the telecommunication sector and the free market economy:
While I think that open and free markets in theory will develop the best posible solutions, with constant innovation and development just to stay current; We're however faced with the reality that there are no real open and free markets.
Many governments privatize national telecommunication providers to make as much money as posible from the market and this tends to make them sell it as one whole company, which then get a near monopoly. I think it would have been beter if the government would have sold them in parts: Small enough to be dependent on market forces. However, then it would not have generated the same amount of revenue.
The problem isn't only government control, but too much centralized control and isolation from market forces. Per definition, government control will create concentration and centralisation of control, but it's not the only way.
There is here a theme: Often we can not know what the results of our actions are, sometimes we can. What if doing one action will be more profitable for me right now, while the obvious beter action will, over time, be more profitable for all; but be not nearly as profitable for me right now?
Obvious, I can only do this if there was no real competition. If there was competition then someone may offer the beter deal.
While inviting government regulation of the internet is a terrible idea, I can see no other acceptable alternative. If people where able to select any internet provider they wanted then switching to a smaller isp would be a much stronger force; Many people don't have much choice however.
Published: May 17, 2006 11:11 PM
gmlk,
Great comments. A quick note about "The Paradox of the Best Network" -- this reminded me of the old Voltaire quote, "The best is the enemy of the good." We see this empirically play out time and again. In fact, I attribute non-W3C compliant websites and webrowsers out there with unknowingly enshrining this principle (for its time IE 6 wasn't the best, but it was good enough; Google's homepage doesn't even validate properly due to short-cuts at saving bandwidth).
Anyways, I don't like the solution that either David proposed in that plan, State intervention was all they ultimately wanted -- nothing really new or innovative.
Regarding your last post, a friend noted that AT&T should have been privatized/deregulated in a different manner, instead of simply handing out regional monopolies. I agree and think that many people/pundits forget this fact when attributing the current situation as a creation of the "free-market."
Also, for everyone else, Declan McCullagh published a new wrinkle to this ongoing drama: Hardware firms oppose Net neutrality laws
Published: May 18, 2006 12:43 AM
My view is in line with Sean Lynch's. I would have no problem with them doing whatever with their data networks if they hadn't had massive subsidies and government protection. They've already soaked the taxpayers for several trillion dollars and haven't fulfilled the promises they've already made, why should we allow them to piggyback their monopoly grant into a bigger rent?
The sad thing was, there did indeed used to be competition. I remember having SDSL from Northpoint. Great service at the time, until the Baby Bells got all the independents drubbed out of the business. I live in a high-tech area, and my choices come down to two: the cable company or AT&T. And as long as the government is effectively preventing anyone from being able to compete with them, then I sure don't want either of them to be able to charge a third toll for traffic.
Published: May 18, 2006 8:28 AM
It sounds like the authors of "Paradox" haven't read "The Myth of Natural Monopoly", as they say that even starting from a level playing field the free-market would inevitably result in monopoly.
Published: May 18, 2006 1:13 PM
The idear of a "natural" monopoly assumes that the price is the only factor in a commodity market. The notion of reliability of delivery must be taken into account. Having only one supplier, however cheap, is not without risk.
I often hear that efficiency increases with scale. I don't believe it. In most cases the drive toward efficiency leads to centralisation and concentration, where by diversity, innovation and reliability is lost. Efficiency has a price: It often reduces the longevity and persistence of the business.
Removing buffers (which are per definition inefficiencies) will improve the normal day to day efficiency. It will however also make the system more fragile. Without these inefficiencies it will break instead of bend when the days are not normal.
This resiliency is a value which is often overlooked and seldom properly valued. Its loss is not accounted for in the efficiency statistics, which show therefor only an incompleet and bias picture: A convenient illusion.
(Disclaimer: I'm not a economist. I am a starting entrepreneur, and because I knew nothing about business I started reading around august 2005. It turned out the be an eye opener. I discovered that most economic and business theory was humbug. Until I found this website that is. Finally I found a coherent model of how the market works. Thank you.)
Published: May 18, 2006 2:22 PM
If I understand what the author's are saying about the network, itself: "The best network is open and simple, able to service as many users as possible, therefore."--this, to me, is accurate.
I think their title: "The Paradox of the Best Network"--is used to set-up their conclusion, and is not necessarily a "statement with positive "truth value"". Their conclusion being: the situation "requires" Gov't regulation by enlightened souls with an easy touch.
One of the key arguments they use to bolster their claim of "paradox" is the "fact" of high Financial profits garnered by the "specialized" networks of the incumbent Telcos in an age of hyper-regulation v. the uncertain Financial returns engendered by those firms that were endeavoring to deliver the backbone of the "open" network, fibre, without the "safety net" of virtually guaranteed revenue from a captive group of "rate-payers".
The argument, currently, that either the incumbent Telcos or the CableCos "own" -fee simple- their pipes is, to me, abrogation of the various dispensations they received in exchange for the promise of operation in the "public good"( or the many and various permutations engendered in the quilt of licenses, permits, franchises, and explicit geographic, and other, monopolies they operate under, and, thereby, utilize to raise funding )
Further comparos of then v. now, I'll leave to your imagination or diligent investigation, your choice.
For me, personally, I think that the best solution to this current state would be, to take a page out of both GWB's book, "ownership society", and the former U.S.S.R's, first nationalize, then distribute, per capita, ownership of the Telco/Cable Cos (Telecomm) shares to the people.
This, I know, is frought with problems, but, are there more elegant paths to the hoped for "state of nature" in re: Telecomm ?
The best network is, again, to me, that which can service the greatest number of potential uses and, thereby, users (as the authors state, as well). I'll submit that that is the type of network that a "free-market" in Telecomm, from the drop, would have produced( this, of course, is unknowable ). I'd only point to the types of networks that were created by MCI, and, later, Sprint( both, at the minimum, higher bandwidth ) when they were given the opportunity to compete with the then incumbent Telco Monopoly, Ma Bell.
Also, interesting to note, even pre-MCI, SoNET, and Cincinnati Bell, telcos outside of AT&T, responding to more intimate market signals, had consistantly better service and "newer" products than AT&T, on average, in concurrent timeframes.
To, our friend, the marketplace: Who owns it? Noone, the marketplace is nowhere to be found, as corporeal being or place. Speaking of paradoxes, the marketplace does not physically exist, but, nonetheless, can be harmed and/or limited.
The marketplace, free ones, much like the hypothecated equilibrium that lies within, are ferociously guarded by asymptotes--we can get near, tho, not there.
I'll leave more, if caled for, for later...
Published: May 18, 2006 3:03 PM
M.E. Hoffer, I'm not so sure that the marketplace is as nebulous of a concept as you portray it. For instance the marketplace is inhernetly beholden to the consumer. One of the primary issues of the net neutrality debate (and the issue that has caused companies such as Google to get involved) is whether content providers ought to pay content providers a fee for upgraded service. Without the consumer, such a fee is hardly worth paying. For a "hypothecated equilibrium", that is a pretty concrete result.
Published: May 19, 2006 12:56 AM
One major issue that I don't see addressed is that most technical people are young and educated in government-run public schools.
This means that there is a large and vocal group (I don't want to say majority but who knows?) that have the feeling of "entitlement", combined with the impression that what "is" has always been.
This combination is ripe for regulation. They have no context to understand that liberty and a relatively free market between the NSF throwing open the routing tables in 1992 and the DMCA in 2000 is why they have a 'Net at all.
Several times as a network engineer I had to deal with ignorant managers looking for a "revenue stream" in the peering agreements. QoS, "their users want our data, they should pay for it", "their servers need our users, so they should pay for it", and endless variations on that same theme.
Without regulation, the service providers did eventually realize that without both content providers and content consumers no one makes any money. With each individual paying the cost to connect themselves to the net in general, all costs are covered. Those providers who didn't "play nice with others" fell by the wayside.
So here we are. The same old story. Some ignorant fool makes some noise about how they want to get rich off of others, and the cry-babies want Big Mommy Government to "save them" from the big bad capitalist.
Published: May 19, 2006 4:55 AM
the following thought piece may be useful:
http://people.lulu.com/blogs/view_post.php?post_id=20910
I, for one, don't think the author, Mr. Tripp, is tripping...
Published: May 19, 2006 11:35 AM
M. E. Hoffer, the former USSR is not a great example of how to denationalize. A good description I've heard is "Not enough shock and too much corrupt state "therapy"". Poland and Estonia provide better examples, as they pioneered "shock therapy" succesfully, and it was they that Russia attempted to imitate but failed at doing so.
Published: May 19, 2006 1:30 PM
I don't see how government management of the Interent will serve to benefit anyone in the long run for businesses or consumers. It is my understanding the Internet was developed and continues to run as a free and open space. That means open to competition, innovation and new technologies. If the telecos can bring better service and technology to me, why wouldn't I want that? Seems like other high tech companies agree with me, like 3m and Cisco. Seems like Microsoft and Google should stop wasting their money on lobbying and buying musicians and focus on what they do best - bring innovation to the net!
Published: May 20, 2006 8:13 AM
Since other technology companies are coming out in opposition of net neutrality shows that regulation, at this time, in this format, is not beneficial to all. This doesnt seem very neutral to me. It is Google-favoritism, plain and simple.
Published: May 20, 2006 5:58 PM
Net Neutrality is a very stupid term for the desire to have Net access to be open (for all without discrimination on equal terms) and free (as in free speech and free market).
The basic foundation of the internet is that it is a stupid network. To be precise: The Internet Protocol tries to communicate small packages of data from any source node to any destination node.
The internet offers no Quality of Service (QoS): So you can not know if packages reach the destination node or in which order. That is the whole of the internet… nothing more. A really stupid network.
All the intelligence is in the endpoints (your and my computer), not in the network. The endpoints make the internet work and there the value is created.
We use TCP to make sure that arbitrary data streams are correctly communicated; compleet and in the right order while using the ‘best effort’ Internet Protocol. In practice the fact that IP doesn't offer QoS is a good thing. It makes it faster and much simpler to design, build and maintain.
We increase the value of the internet by adding new protocols (http, ftp, ssh, smtp, etc) on-top of ip or tcp. All without asking permission to our internet provider.
However it’s nearly imposible to make money from a stupid network. There is no need for fancy equipment or a market for fancy premium “services�.
And with all the fiber optics in the ground we already have nearly limitless bandwidth available, but the owners of these cables now need to get their investment back and they realize they can’t with a stupid network.
So they want to make the internet “smart�. Offer QoS and offer premium services. We don’t need this, so they will have to create a (unnatural) necessity. So the whole QoS talk is about the choice between normal Internet at new premium prices and restricted internet for less.
In a free and open market this would not be posible because real stupid internet is always moet valuable then any limited intelligent digital service. However, we’re faced with near monopolies: Free market rules don’t always apply.
Right now Google is paying for their internet access a fair price, like everyone else who requires so much bandwidth, to their internet provider(s).
What some internet providers want however is that Google is going to pay every internet provider for the privilege to be available to users of that internet provider, or else they are going to throttle the bandwidth (restrict the QoS).
Just like how some internet providers already block some ports (eg. 25, 80) to limit the usefulness and push people to use premium services instead. In the same way some providers now want to get a proportional cut of the action of every service that also runs over their network to their users, or else.
I think this is not unlike a market square where shop keepers need to buy “protection� or else…
Published: May 21, 2006 11:23 AM
who disagrees w/ gmlk's take ?
I, for one, think that he lays out the current state of the affair clearly and coherently.
Published: May 21, 2006 11:40 AM
Yea, at the end of the day, I don't think the guys working on the next big thing in thier garage need to worry about tiered access. But they should be panicked that a bunch of legislators who know very little about the industry want to impose burdensome regulations on it. Good luck trying to navigate those!
Published: May 21, 2006 11:46 AM
Actually, this: "However it’s nearly imposible to make money from a stupid network. There is no need for fancy equipment or a market for fancy premium “services�." in my view, is not necessarily true.
The "stupid network" is probably the easiest network from which to drive revenue, leading to profits. It's about access, leading to volume of traffic. I think we might need to check the level of our conditioning that leads us to assume the enviability of proprietary products.
The "stupid network" wouldn't be perceived to be the threat that it is(to the incumbent Telecosm)if it were un-Economic.
Published: May 21, 2006 12:37 PM
It's really easy to make a profit from a stupid network like the internet because everyone wants access to it for a fair price. The problem is not making fair profit running (a part of) the internet. The problem is that the profit margins are small. Too small for some of the dinosaurs who have adapted to being high profit margin monopolies.
Published: May 21, 2006 5:16 PM
gmlk,
Then, I guess you're implying that the dinosaurs should go away? (and, preferably, the dinosaur that created them, in its own image?)
Published: May 21, 2006 5:41 PM
I'm afraid I cannot agree with gmlks description of the lay of the land. He implies that net neutrality will establish a true free market. However, he is ignoring one of the primary cogs in the free market mechanism. The success of the marketplace is dependent upon the consumer. If companies wnat to downgrade service for sites (such as Google) that are integral to their Intenet experience, consumers will run away. The reason Google is realyl involved is that they might have to pay more. Right or not, there is no reason why government should get involved to prevent this from occuring.
Published: May 21, 2006 8:39 PM
tpwk: Please read all my comments in context.
I do not make a case pro-net neutrality.
I only try to see the dynamics of the current situation, which is not black and white, nor neutral. As I said, unrestricted internet will always be more valuable then any limited digital service.
However: We are already up to our ears in a regulatory swamp which created this parody of a free market where many people don't have an alternative to choose from and laws which create unfair barriers for entry for startups.
Like always: The masses see the regulation and laws that are seen as being always there. So they cry out for more regulation to fix the problem. The masses can not be expected to understand that the real problem is that there is already to much regulation and that the government created this situation in the first place.
Seeing all the shades of gray is a curse. I don't believe in people are very good add this government thing, so maybe they shouldn't do it so much?
Published: May 22, 2006 1:23 AM
Forcing homogeniety on the Internet in a socialistic, let's-all-wait-in-the-bread-line while your email and my hi-def video both download on a "best-effort" basis is NOT the solution to this 'threat'. A better course of action would be to remove whatever blocks currently exist to compentition in ALL of the broadband markets. If we had true competition instead of oligopolies, then the need to protect the bottom line by serving consumers would protect the integrity of the net better than any government regulation. Right?
Published: May 22, 2006 8:29 PM
Don't understand the argument you're making but the conclusion I can support.
The internet can not be perfect: So it can only make a "best effort" to serve us. Compare this to the market: Just as that nobody should claim that the market will always come to a perfect solution for all... it wil not, it can not. It will however do a best effort to find the best posible solution given the dynamic conditions in which it operates. In that way it will serve the most people the best.
Also, it maybe my european upbringing that is talking here, but I would not call "Forcing homogeneity" as "socialistic". In general, "Forcing homogeneity" is most often the result of policies which centralize and concentrate power. Yes, many socialists tend to do this in a misguided faith in the wisdom of their leaders. They are however not the only ones.
The solution is however simple: Just extend the internet beyond the reach of both government and the internet providers: Privately owned and operated mesh-networks.
Now, how long will it take before mesh-networking is outlawed? Or am I to cynical?
Published: May 23, 2006 1:34 PM
gmlk,
Municipally-owned, new ones, "mesh-networks" for the delivery of i-net functionality to "consumers" is already verboten in Pennsylvania. The law passed, quickly, in response to Philadelphia announcement to provide "public" i-net access for its denizens. Subsequent, to Philadelphia's, municipal i-net schemas would have had to start( had their first paying customer ) in a timeframe, codified in the law passed, that was typically shorter than one necessary to get a dog license, or not at all.
Published: May 23, 2006 1:49 PM
I've played many roles in the telecommunications industry and I can tell you that whatever the outcome, regulatory intervention causes all players to refrain from acting.
The exceptions prove the rule. When the government created UNE-P (the Unbundled Network Element Platform) many companies did make massive investments to compete with the local Bells. With the stroke of a pen, this regulatory construct went away and many businesses were no longer viable.
So long as this industry is the slave to the will of 5 FCC commissioners, Congress and 50 state regulators it will always fall far short of its potential.
Published: May 23, 2006 2:10 PM
Municipally-owned wasn't really what I had in mind. Think $100 laptop and generalize from there.
Just like on a natural market square ever shop keeper will keep his own part of the market square clean and functional. Sometime a section will come together to do major projects (like repaving and such) but usually everyone just does their fair share.
Imagine 2020 where every computer sold has the hardware for wireless networking build-in and we've figured out routing in a distributed mesh-network. Every computer discovers the local "internet cloud" and extends it a little bit. Every node listen and push packages trough to the next node.
The current internet providers have given up on the 'local loop' or 'the last mile' and now only offer fast long distance (more then 30km) communication for those who need it.
Everyone is running their own servers. All privat communicatie is encrypted so we don't even have to trust our neighbours not to peek. New applications (protocols) are developed wich make use of some of the unique features of this kind of network. Clouds are interconnected mostly though volunteer effort and is payed-for by contributions.
Published: May 24, 2006 7:00 AM
I don't want to get into any conversations over the "last mile" (because frankly I don't understand it), but I do want to mention my opinions on government intervention. As far as I can tell from just about all of my studies of economics, it is almost always a bad idea to get the government involved in a market. They tend to slow growth and innovation by instituted rigid rules that are bad for the system. Unless someone shows me a true and undeniable need, I don't support government intervention when it comes to the internet.
Published: May 24, 2006 7:26 AM
Stevens33, my good man, your instincts are leading you in the right direction. Though, in this context, to say the Gov't is "in bed", would be to understate(pun, not necessarily intended) things.
gmlk, 1.) I was only giving you an example of where/when "mesh networks" were already struck down. Another potential artery, to serve a more freely-flowing market, afflicted with premature atherosclerosis communicated by mere state Fiat.
and 2.) for the type of "mesh network" you are describing above, wait not for 2020, go to www.padcomusa.com.
Published: May 24, 2006 8:06 AM
I taking a wait and see attitude on this net neutrality issue. As some of these articles point out, we don't even know how the ISPs are going to run these new services, what they are gonna cost, etc. To me it just sounds like content providers not wanting to pay for these services that don't even exist yet. I don't think we should stop internet expansion based on hunches.
Published: May 24, 2006 2:39 PM
great post
thx for sharing,i bookmarked your blog
Published: June 2, 2008 5:45 AM