Net Neutrality, Take 2

NET NEUTRALITY, TAKE 2….Let’s take another crack at the net neutrality debate. Perhaps we can pop a collective gasket on this. Since I’m going to present some arguments both pro and con, though, please read the whole thing before leaving a trail of steaming gasket parts in comments.

This is also a long post, so I’m going to stick the rest of it below the fold.

First, here are some arguments against strict net neutrality and in favor of allowing tiered internet service:

  1. Video-on-Demand is a market I know a little bit about (at least, I did back when I worked for a startup VOD company), and the bandwidth and service issues that face commercial VOD rollouts are quite real. You and I may or may not care about VOD, but a lot of people do, and when telecom companies say that they need to make substantial investments to support large-scale VOD, they’re right. When they further say that these investments will only be worthwhile if they can guarantee VOD service that works reliably and well, they’re right again.

    The question, of course, is whether the only way to provide reliable VOD service over the internet is to offer a tiered service to video providers. I don’t know the answer to that, but it’s not transparently absurd to think that the answer might be yes.

  2. If they’re freed from net neutrality rules, long haul carriers like AT&T and Verizon will have a big incentive to degrade the service of internet phone (VoIP) suppliers like Vonage, since Vonage is a direct competitor for both consumer and commercial telephone service. In fact, Vonage has faced discrimination in the past and suspects that it faces ongoing discrimination in several current cases. Thus, VoIP companies like Vonage have the most to lose from the demise of net neutrality.

    But here’s the thing: Last year Vonage said it was satisfied (though not thrilled) with the net neutrality provisions in the Barton-Rush bill that’s currently working its way through Congress. The bill has been modified since then, but as near as I can tell Vonage hasn’t lobbied against it. When their CEO testified on the bill a few weeks ago, the only subject he brought up was 911 services. He didn’t even mention net neutrality.

    So: if Vonage is satisfied, maybe the bill isn’t all that bad?

  3. There are technical reasons to prefer a packet neutral internet architecture, and Henry Farrell outlines one of them here. The problem is that these arguments are very subtle, to the point where they become nearly religious in nature. I’ve been hanging around network geeks for a couple of decades now, and these kinds of religious wars are pretty familiar to me.

    Will the Barton-Rush bill doom the internet we know and love? Well, back in the early 90s I remember all the wailing and gnashing of teeth about how allowing commercial access to the internet would ruin everyone’s favorite sandbox, but guess what? That experiment turned out pretty well. Bottom line: network purists are constantly arguing that the sky will fall if some proposal they dislike is adopted. I’d take them with a grain of salt.

  4. The key issue in the Barton-Rush bill is adjudication vs. rulemaking. I’m sure everyone else arguing about this issue is an expert in regulatory law, but I’m not and I can’t immediately tell how big a deal this is.

    Basically, the argument is whether Congress should mandate some kind of net neutrality regime and task the FCC with making rules to implement it, or whether they should set out general principles, let things unfold, and allow the FCC to adjudicate complaints if and when they’re submitted. Rules have the virtue of being proactive, but also have the potential to hammer something into place that will turn out not to make sense. Adjudication is more flexible, but it’s also a lot slower. It allows telcos to stretch Barton-Rush’s net neutrality principles far enough to (possibly) put competitors out of business, safe in the knowledge that it will take years for the FCC to tell them to cease and desist.

So there you have it: several good reasons to wonder if the Barton-Rush bill is really as bad as everyone is making it out to be. Now for the other side.

  1. Net neutrality is essentially a “common carrier” requirement, and history has shown that common carrier rules are good things. Take railroads, for example. In the past, before common carrier requirements were adopted, railroads discriminated with abandon, shutting out startups in return for kickbacks from big companies like Standard Oil. This was bad for startups and bad for the economy, and there’s no special reason to think that human nature has become more altruistic in the past century. If phone companies aren’t required to act as common carriers, there’s every reason to think they’ll eventually throttle innovation in return for lucrative kickbacks the same way that railroads did in the 19th century.

  2. Reed Hundt answers my plea to chime in on the net neutrality debate at TPMCafe, but essentially punts. However, he did give a speech at Freedom2Connect a couple of weeks ago in which he made a strong argument in favor of net neutrality and came out pretty clearly in favor of rulemaking vs. adjudication:

    We have the four [net neutrality principles in Barton-Rush], but they are a palsied, weak, shadow compared to rules. They are not in substance addressing the issues. They do not provide guides or signs, they do not provide a program, and they?re issued in the context of the House subcommittee saying no rules, do everything case by case.

    That means all decisions are about what happened 5-7 years ago. They mean any company can avoid an adjudication until it?s irrelevant. That does not impact capital planning, strategy or how networks are built. It?s a rear view window look.

  3. More interesting, I thought, was his primary argument that we should simply make the whole problem go away by writing a check:

    The public ought to create a public thoroughfare to the Internet, by regulation, just like in France, Japan and Korea. It ought to be fast. Every year it ought to be faster….We?re talking about basing our information economy on an investment that is maybe $20 billion, for Fiber to the Home. If you had that it would be the work of a moment to allocate it. I?d write that check in a heartbeat.

    If we did this, he says, the whole issue disappears. When every home has cheap 100 Mbps access to the internet, services like VOD are a no-brainer. They can travel over a neutral internet with no special tiering at all. And $20 billion is a tiny price to guarantee equal access for all to the “public space…where democracy will be defined.”

  4. Finally, here’s probably the most convincing argument in favor of net neutrality: the telecom industry is against it. As near as I can tell, most telecom CEOs would sell their mothers into white slavery if they thought it would help them keep one of their competitors at bay for a year or five longer, and their record of bending, breaking, and twisting the rules in order to maintain their monopoly position ? without which none of this would really matter in the first place ? would fill a phone book. Frankly, you can’t go too far wrong simply taking the opposite side of the telecom industry on every relevant issue.

Bottom line: given the potential for abuse with tiered internet access, ordinary prudence suggests that loosening up on strong net neutrality is probably a bad idea unless someone is keeping a pretty close eye on the consequences ? and with the contemporary Republican Party in charge of oversight, that’s obviously not going to happen. Still, I think Reed Hundt alludes to the real issue here, which, as he says, has been swept under the carpet for too long. The fact is, as long as the long-haul backbone of the internet is in private hands, it’s hard to justify not allowing its owners to pursue whatever pricing schemes they want. It doesn’t mean we can’t regulate them, just that it’s always going to be a rear guard action.

Conversely, if the federal government subsidized the whole thing at the cost of a few billion dollars a year, just as they did with the interstate highway system half a century ago, we could build an internet backbone that would be cheap, universal, public, and a huge boost to the American economy. The feds don’t even have to own it, they just have to pay for it.

I don’t know if that’s the answer, but it’s too bad it’s not at least up for discussion. If Japan can do it, why can’t we?