In Which I Annoy the Liberal Readership
Jason Kuznicki on Jun 10th 2006
I admit I don’t know a lot about the issue of net neutrality. I have read a number of hysterical op-eds, some frankly mystifying articles — and, I suspect, a good deal of nonsense. I have had a hard time seeing what all the fuss is about, in any direction. Worse, the even quasi-technical accounts I’ve read mostly convince me that the pundits themselves don’t understand the issue in the slightest.
The free-marketeer in me wants to ask a very simple question: There are price differentials in everything else — why should there be no price differentials in Internet service? Isn’t competition a good thing? What if I want a meal at the French Laundry rather than McDonald’s? Shouldn’t I be allowed to pay more? And what if McDonald’s is more my thing? Shouldn’t I be allowed to save the difference? If a neutral ISP, that is, one that doesn’t block or charge more for competitors’ signals, really is the optimal ISP, then there is little to fear. Either the sub-optimal ISPs will be forced out of business — or they will attract a clientele of people who didn’t really desire those other types of signals anyway. In which case, they were never sub-optimal to begin with.
Again I say, what’s the big deal?
And please, in the comments, try not to get hysterical.
Filed in The Boardroom
I’m not sure this issue is split down liberal/free-market lines…
First, I believe the issue is primarily considered to be with the major internet-backbone service providers, not customer-facing ISPs.
The basis of the concern initially stemmed from ISPs that are also telephone providers who wanted to either block or charge extra for VOIP internet traffic, because it competes with the telephone system.
Similarly, take internet video. First, it competes with television, and many people’s ISPs are also their Cable television provider. The concern is over the conflict-of-interest. Ignoring that though, assume that one of the major internet backbone providers decides to take bidding for quality-of-service from Google Video and YouTube. Google has the bigger pockets and wisn the bidding. Now consumers who are connected through this ISP (but indirectly, because this is the backbone their actual ISP connects to) get Google Video very fast, but YouTube very slowly. Will they get upset at their ISP and try to get one that uses a different backbone provider? Or will they just not use YouTube because it’s slow?
I think there’s a number of reasons that the free-market won’t work so easily. If you think it will, I think a more detailed explanation of how is order.
The reasons mostly come down to:
1) Transparency. It will be impossible for consumers to know if the problems are with their ISP or with the internet application.
2) Monopolistic issues. Unfortunately, we already live so far from a free-market in the telecom industry, it seems to be head-in-sand syndrome to pretend the free-market will prevail here. ISP choice to end-users is very limited in many places, & internet-backbone-wise, is even more limited. This is mostly due to existing levels of government regulation.
3) Anti-competitive behavior concerns. Based on 2). If companies are in a monopolistic position, the potential for abuse is high.
I’m not saying I know for sure that a law enforcing net-neutrality is necessary, but I just don’t think your McDonald’s analogy fits.
Jason,
The short answer on “What’s all the fuss about?” is that two corporate coalitions are crashing into each other in the regulatory arena. Big Internet providers — the telcos and the cable companies mainly — want the ability to ration or charge extra for access to their bandwidth. Big Internet content companies, especially those such as Google, Yahoo, and Vonage, who are rolling out bandwidth-intensive products — want to be able to force the bandwidth providers to carry their services. Since they’re both pouring a lot of money into their P.R. fronts, and the “Net Neutrality” types can enlist the aid of a lot of the trade press, it’s resulted in a lot of noise over what’s really a pretty sordid tussle over just who gets to hold the captured agency.
Stephen,
Carriers could in theory cut all kinds of crazy deals with providers. What if Comcast cut a deal to replace half the normal channels with Animal Planet for a week? What if the USPS had Netflix and WalMart offer bids and did faster deliveries for all the DVDs from the higher bidder? What if UPS cut a deal with Amazon to deliver all their packages twice as fast as their competitors’? I don’t know, but there are pretty strong incentives not to engage in this kind of dickery. Of course, most carrier services that are able to, do have tiered cost structures for different levels of service (first-class/coach; Express/Priority/first-class/media/bulk, etc.). But the tiers are generally based on how much you’re willing to pay for the premium carriage, not who you are or where you’re coming from.
You’re right that we’re very far from a free market in the telecom industry, and that as a result broadband Internet is clutched in the fists of a corporate oligopoly. But since government-granted monopolies and FCC regulation are what created the oligopoly in the first place, it seems like the obvious solution is to stop protecting the monopolies and roll back the regulation, not to add more regulation in the attempt to calculate the “right” level of Internet service. If providers are damaging the network, the thing to do is to let entrepreneurs get in there and route around the damage.
As far as transparency goes, it’s pretty easy, actually, to find out where the problem is: just give a ring to a buddy of yours who doesn’t use the same ISP and see if she is having the same problem. If behind-the-scenes dickery becomes a common practice from ISPs, it would not be hard to create services that automate this process and aggregate the results, so that people can find out which providers are being dicks and which aren’t. If a noisy enough minority of customers make it clear that this kind of behavior is unacceptable then companies will, by and large, not do it, or will provide ways around it. If customers don’t care enough about it to do anything about it, well, it’s probably not much of a problem to begin with.
Forgive me for linking hysterically to Tyler Cowen.
Firstly, let me state that I worked for the internet division of a statewide ILEC (Incumbent Local Exchange Carrier — the local phone company) that was acquired by one of the Very Big Remaining Players while I was there. I was offered a directorship after the acquisition as an incentive to stay, but I left for other reasons. So, I wasn’t a big-wig but I did have some insight into the telco internet business.
For my part, my primary concern regarding Net Neutrality is for non-discrimination. That is, I do not think that the telecomms should be allowed to discrimiate based on the protocol, source or destination of a packet (this is an over simplification, but is a good to-a-first-approximation statement ofmy views.)
This is the telecom companies framing. It is not accurate. The telecom companies are seeking to charge content providers for access to the customers (you know, the people who are paying the telcomm companies for access to content,) not for access to bandwidth. Google and other content providers already pay for the bandwidth to get their content upstream, either by paying their own ISPs or laying their own infrastructure to a peering point. (Not to mention the fact that it is not just Big Corporate Content providers who support the concept of Network Neutrality.) The telcomm companies want to double dip.
An analogy using the Public Switched Telephone Network: Imagine a call-center that buys their phone service from AT&T on the West Coast and a group of that call-center’s customers who get their phone service from Verizon on the East Coast. Verizon wants a slice of the pie, but instead of re-negotiating their peering arrangement with AT&T (which is what they should do,) they go straight to the call-center with this: pay us in addition to paying AT&T and we’ll guarantee that more than one call at a time gets through to your call-center from our network.
Network neutrailty (non-discrimination) removes the ability of Verizon to discriminate based on the endpoint (or contents) of the call — lines from Verizon’s network to AT&T’s network are used as needed. Without neutrality, the cost of starting a call-center is more than just the connection to the network, it is also the bribe to every little feifdom where you’d like to to business. Dropping neutrality also adds technical complexity to the network while lowering the value of the network to the consumer.
It is interesting that the Telcos are all for dropping the regulation that prevent them from doing what they want. But who do you think screams the loudest when it’s their infrastructure monopoly on the line? No, the telcos are fine with regulation that keeps them from having to compete. When I can lay cable in my neighborhood easements, then we’ll have competition. If the telcos had implemented the Telcomm Act of 1996 in good faith (and my old employer seemed to me to be going down that path until they were bought,) by splitting into regulated infrastructure companies and unregulated competative service companies, I’d be a lot more sympathetic to the deregulation argument. But what I see is attempts to deregulate the big telcos without any attempt to deregulate the market.
Craig:
I’m just a caveman. I fell on some ice and later got thawed out by some of your scientists. Your technology frightens and confuses me! So help out my primitive mind here: how, exactly, does a content provider pay a carrier company for “access to the customers,” except by paying the carrier company for the use of its bandwidth? Isn’t the use of their bandwidth precisely how Internet providers provide “access to their customers”?
Also, suppose you have the following network path:
Craig pays Nicenet for Internet access. Rad pays Scumnet for Internet access. Nicenet and Scumnet have a contractual agreement to exchange data with each other, but the agreement doesn’t specify any particular “neutrality” requirement on what each does with the packets from the other.
Now, suppose Craig wants to send data to Rad. The data goes onto Nicenet’s lines, and thence to the exchange with Scumnet. Nicenet is providing the use of its pipes to Craig, which is what Craig’s paid them to do. Craig, however, has not paid anything to Scumnet for the use of their pipes. So, Scumnet, for whatever reason, says that they won’t deliver the packets to Rad unless Craig pays them for the use of their pipes.
Now, this may very well be a foolish demand by Scumnet. But since Craig never paid them for the use of their pipes, and since Nicenet and Scumnet never made an agreement about Craig’s packets in particular, I can’t see where the “double-dipping” occurs. Where was the first “dip”? Help me out here.
Incidentally, just to be clear, I think that nearly every proposed application of non-neutrality, with the possible exception of simple tiered service, is a foolish and destructive way to run a network, and I agree with you that “Dropping neutrality also adds technical complexity to the network while lowering the value of the network to the consumer.” What I disagree with is the suggestion that it’s the government’s job to make sure that computer networks are run well. They have neither the knowledge, the virtue, nor — most importantly — the right to make those decisions.
Finally, nothing in my remarks is intended to defend the telcos, cable companies, and other government-backed oligopolists in the Internet business. They can all go hang for all I care. All that I’m suggesting is that the right way to deal with this problem is to lobby against government-imposed barriers to entry in telecommunications infrastructure, not to add yet one more government regulation in the attempt to calculate the “right” way to run an Internet service.
Rad, I’m puzzled by your hypothetical here:
“and since Nicenet and Scumnet never made an agreement about Craig’s packets in particular…”
because previously you wrote
“Nicenet and Scumnet have a contractual agreement to exchange data with each other, but the agreement doesn’t specify any particular “neutrality” requirement on what each does with the packets from the other.”
It’s almost inconceivable that a contract to exchange data would fail to cover, um, deciding unilaterally not to exchange data.
Does the whole thing boil down to a flaw in most contracts about packet exchange? Is that all there is?
Blar –
Ordinarily I have nothing but respect for Tyler Cowen. I’ll have to do a lot more reading before he will convince me, though, that the answer to a bad regulation is to add another layer of regulation. It might happen, but I don’t know that it will. Stay tuned.
The customers have already payed for the bandwidth. What in the hell am I paying Verizon for if not access to content? Their service is useless without content. The telecomms want to artificially degrade that already paid for service so they can charge content providers for restoring it.
Not so much a flaw as a change in regulation since the contracts were written. Non-discrimination was an FCC rule prior to 2002, and attempts by the FCC to lift that rule were thwarted by the courts until last year when NCTA v. Brand X settled it. Prior to this, non-discrimination was the rule.
And lets be clear, Google will have no problem paying the extra charges. It’s the next Google that may not get out of the chute than inclines me against the telecomms on this issue. That’s why many who are not “big corporate” content providers came out for net neutrality.
And let me also say that while I am sympathetic to the general deregulation arguments, I am not sympathetic to those arguments when they come from industry players who are quite happy with regulation that creates artificial barriers to entry in their market — exactly like the telecomms. Think the telecomms don’t like the FCC? You are dreaming.
Craig –
I am quite sure that many of the telecoms do like the FCC; it is their chief source of economic rent in the form of favorable regulations. The question I’m trying to have answered is the best way to fight this situation. Will adding a layer of regulation do it? Or should we push for removing the regulations that now exist?
All other things being equal, I favor the latter. It’s fascinating to me, though, how so much of this debate is framed in terms so far removed from my own. It’s so bad that I can barely tell what’s going on, and I find it disarming to say the least that everyone else seems so certain about it.
While I think the telecomms framing of the issue is BS, I am of somewhat mixed feelings on this. I am not too upset by the failure of the House to pass their legislation — the congressional track record on the regulation of tech is bad, IMO. But I do trust Boucher on this subject. He’s got more clue on this and related topics than just about anyone else in the House or Senate.
Regarding the principle of non-discrimination in general, I think that it is a Very Good Idea. What the telecomms are seeking to do is to reduce the value of the network to their customers in order to charge someone else for restoring that value. I hate that artificial reduction in value — especially on an infrastructure that was built on subsidies. There is value in the infrastructure — but not in the artificial limits and the related added complexity that the telecomms seek to implement.
I’d feel a whole lot better if the FCC had just kept the peering rules the way they were. I’d feel a whole lot better if there were real ISP competition and consumers had a real ability to vote with their custom. I’d feel a whole lot better if every freaking media outlet didn’t use the language of the telecomms when talking about this issue (that is, every story I’ve heard, from Fox News to NPR, has completely ignored the fact that both the content consumers and the content providers already pay their respective ISPs for their bandwith usage.)
This makes me feel somewhat better, and it’s where I’m pinning my hopes regarding competition.
Jason:
Peering agreements often do not, currently, require the various sorts of “neutrality” rules in how the packets are delivered once they are handed over at the peering point. get dropped for all kinds of reasons all the time, and nobody guarantees that every packet handed over to it will be delivered to its intended destination. Currently a lot of agreements offer a lot of leeway as to why packets might get dropped, or slowed down, or whatever. Craig is right that part of the reason for this is that FCC regulations controlled these agreements more tightly in the past. On the other hand, it has been years since those regulations were dropped and the companies have had plenty of time to renegotiate the arrangements if they didn’t like their network peers having that kind of leeway.
Personally, I would like it if non-slimy infrastructure providers would demand a fairly robust set of neutrality policies in their peering agreements. If such contracts were made, there would be no regulatory issue at all, since violating those neutrality policies would be a civilly actionable breach of contract. But until such a time as they do, I think there’s no justification for having the government force the kinds of peering agreements that I’d like to see on carriers that aren’t yet willing to make them. I wish I could change Comcast’s idiotic Acceptable Use Policy, too, but since I don’t own Comcast or their cable I’ve got no right to force them to provide better service.
Me:
Craig:
Whom have they paid for whose bandwidth? We’re talking about interconnected networks here where not all of the infrastructure is owned by the same group of people.
In the scenario I sketched above, Craig is paying Nicenet for access to their bandwidth, but Craig has no agreement at all with Scumnet which would guarantee him the use of their bandwidth just by paying Nicenet what he pays them. Nicenet and Scumnet have an agreement, but the terms that they agreed to (like many actually existing peering agreements) makes no particular guarantee that Craig can expect any particular quality of service from Scumnet. There’s no apriori mandate that carriers must charge at only one point in transit; that’s often the wise thing to do, and the convenient thing for customers, but it’s not an injustice against drivers that you have to pay to drive on I-90 in Ohio, and then pay again to drive on it in New York.
You’re paying Verizon for access to their network. Paying them for access to their network does not entitle you to also access AT&T’s network unless AT&T has made an independent agreement (either with you or with Verizon) that would guarantee that. If there is such an independent agreement, then this is a civil matter rather than a regulatory one. If there is no such independent agreement, then you’ve done nothing which would entitle you to force one on AT&T.
Of course, it may be that part of the reason you find access to their network useful is that you also get access to AT&T’s network as part of the package, thanks to the current set of agreements between carriers. But so what? AT&T does not owe it to you not to renegotiate those agreements if they see fit. And if AT&T and Verizon agree to different terms, which makes it so that access to Verizon’s network is no longer useful to you, then the thing for you to do is to stop paying Verizon for a service that you no longer find useful.
You’ve paid your telecom for this month’s service, not next month’s, and if they decide to change their service or to scrap the whole damn thing at the end of your next billing cycle then you have no claim against them.
“Artificially degrading service” is, incidentally, a very nearly useless term in this discussion. Every ISP in the world has an Acceptable Use Policy that “artificially degrades service,” in the sense that it imposes restrictions on what you can and cannot do on their network, and to what degree, which have nothing to do with the technical capacity of their networks. Most broandband ISPs, for example, prohibit residential users from running servers on their network, even though the line is perfectly adequate for casual web hosting needs. They do so because they want to sell their business service, which allows for running servers. Is this “artificially degrading service”? In a sense, but so what? It’s their network and they have a right to set the rules — even if those rules turn out to be inconvenient, foolish, avaricious, etc.
Who made this claim? I’m well aware that the telecomm companies are government-backed oligopolists and that they are quite happy with restrictive regulation as long as it comes from an agency they’ve captured. But so what? That doesn’t change the fact that this:
… is a particularly crass example of argumentum ad hominem. The fact that big telcos, cable companies, etc. are hypocritical in putting forward an anti-regulation line does not make that line false, or the arguments for it any less capable of being assessed on their merits.
well, no one likes a hypocrite Rad. political decisions on business matters will by necessity revolve around the hominem, so to speak (and speaking thus would earn a hearty slap from my Latin teacher). being hypocritical isn’t really a good sign of honesty to me, unless the person is an iconoclast. if you’re going to judge the argument on its merits then you should do the same with the people involved as well, since it is these two factors which determine what kind of bill they’ll merit in the end.
Content providers are not getting off scot-free on the bandwidth issue, they pay quite a bit regularly for the network, as they have to host and serve this content.
So obviously the ISP’s aren’t bearing all the costs of the network, and we all have to go through ISP’s and not Content Providers to even get on the network, so they pretty much already control the gateway, no need to impose further gates within the network. Controlling this gateway to the network is how they earn money on their infrastructure investment.
In the end, then, it is the network — the ability for all these open connections — that we want. Imposing more gates within the network will definitely sour this feature, which will simply stymy the rate of growth and encourage more hacking into the gated, AOL-type areas which would spring up. What kind of chaos do we want with the network — that which will encourage fighting against it or that which will encourage all the inspiration which has got us to this point?
It is the connections which are all that matter, and we can’t have connections without Content Providers and ISP’s together, they require each other for growth. You can’t quell the profit motive here without a law which guarantees there will be no packet discrimination. IF this happens, then all we will see is: life going on as normal, and the ISP’s will still turn a profit, but unfortunately it won’t be a very sexy profit. Either way on this issue it seems that we are regulating the delivery of the product of one so that the other can make that much more money. If we want to do best by the public, then we must defer to the Content Providers, for when we talk about the connections it is the Content Providers which give meaning to them — which provide the human touch at a level anyone can see, without discrimination — this is the public good we should protect.