Net Neutrality Debate

The FCC has opened up an online blog and comment system (http://blog.openinternet.gov/?p=1) for debate on Net Neutrality, which I think is a good thing, whether you agree or not. The problem is that after reading a few pages of comments there are some bad/scary trends:

1. F.U.D. – Fear Uncertainty and Doubt. This is an old technique with a newish name. It’s people stating the sky will fall if something happens or doesn’t happen. There is rarely an argument even made. The statements are made to elicit an emotional reaction. The problem with this is that people who do not understand the topic at hand are whipped up into a froth and they get loud and visible. There is no debate, there is no reason. It doesn’t matter what you say to them at that point, they are ‘right’ and you are wrong, even if the opposite is true.
   
   
2. Censorship/Government control – This was mixed in with the FUD. What the FCC proposes are rules that govern all Internet providers (ISPs), big or small. It makes sure that no one uses their power to restrict or censor Internet traffic. The rules are specifically designed to minimize interference, not create it. It doesn’t give the government special access to the Internet to censor information they don’t want the people to see, as some of the commenter’s suggested. We geeks keep a pretty close watch on the pulse of the Internet and any kind of censorship like that would be detected and called out immediately. That is the greatness of the Internet.
   
   
3. It’s not broke, so don’t fix it! – Sorry folks but it IS broke. Things change; it’s the way of the world. The record industry finally figured that out. They didn’t want it to change, but it did anyway. This is the case with ISPs. There are some real problems with our current system. Only because of past intervention by the FCC and the vocalizations of many geeks have we remained OK. Sure most end users don’t see this, but the battles have already been happening.
   
   
4. Innovation and Investment will be stifled – I can see these things being stifled perhaps for the large ISP companies, but certainly not for the Internet as a whole. If Comcast (as an example) decided to throttle or block sites like Hulu or Netflix because they wanted to promote the usage of their own ‘on-demand’ product, how is that good for innovation or investment? Oh sure it’s good for Comcast’s share holders, but it’s certainly not innovative. They just took what was working for someone else and used their network to give their product an unfair advantage. That’s not competition. That’s not a fair market. That’s what Net Neutrality is about. Make sure the playing field is level. If Comcast’s product is superior on its own merits then great, it deserves that market share it takes from Hulu and/or Netflix. If not Comcast shouldn’t be able to artificially weaken its competitors.
   
   (UPDATE- 10/23) It needs to be clarified that there is an important distinction between Internet Providers and Content Providers. Without the content providers the Internet is just an empty network. It wasn't build like the phone networks with one task in mind. It was specifically designed to allow for the innovations and businesses that we currently see (as content providers). The ISPs (the Internet providers) want a piece of that lucrative pie, which is fair and reasonable. However without regulation what prevents them from abusing their advantage (owning the networks) over the established content providers?
   
   
5. Ignorance – This is forgivable. This is a complex subject and there is a lot of misinformation. Below I’ll cover some important details that everyone who wants to participate in this debate should know.

For consumers frustrated with higher cable rates, there are not many direct alternatives. 95 percent of American homes have only one cable company, while the 5 percent who have choice between two cable companies that compete head-to-head pay about 17 percent less on average. [i]

While that quote is referring to Cable television pricing the point is still valid in this argument. If 95% of the country does not have access to a competitive market for their Internet what power do we as consumers have? The whole point of a market is supply and demand. If our supply is artificially limited (as ISPs would like to do under certain situations) and there is no other supplier that we can call on, we have no choice.

The cable companies have a monopoly on our local markets, so open them up! Not so quick.

"The theory of natural monopoly holds that "because of structural conditions that exist in certain industries, competition between firms cannot endure; and whenever these conditions exist, it is inevitable that only one firm will survive." "Thus, regulation is necessary to dilute the ill-effects of the monopoly." "Those who assert that cable television is a natural monopoly focus on its economies of scale; that is, its large fixed costs whose duplication by multiple companies would be inefficient and wasteful." "Thus, competitive entry into the market should be proscribed because it is bound to be destructive." [ii]

While I don’t particularly like this situation as a consumer, I can understand it. If there were two or three more cable companies in town they’d either have to lease access from the incumbent cable provider or go through out town burying their own cable. Neither of which would be cheap or necessarily a slam dunk win for consumers.

If ISPs, cable or otherwise, strictly provided Internet access, much like a utility, this would not really be a problem. That is not the way our ISPs are structured today. When we all had dial-up there were lots of competitors to the market because they could piggy-back on the phone lines without the phone company being directly involved. Dial-up modem traffic over phone lines is just audio noise. Those squeeks and squacks when a connection was made continued until you disconnected.

While there are still a great many individuals on dial-up still, who frankly will not be affected much by Net Neutrality one way or the other, those of us using DSL or Cable Internet do so through our local cable or phone monopoly. These are the same companies that are seeing their phone and cable TV subscriptions drop in number because consumers are finding better and cheaper alternatives on the Internet. Phone and TV makes these companies a lot more money than Internet access, so they are trying to find ways to keep making money, to reduce their attrition rates.

Numerous cities and municipalities throughout the country have tried to implement local wireless Internet access, for ‘free’, only to run into ‘bought’ politicians and legislation designed to protect the existing ISPs.

I understand protecting a business from being put out by government, but when the people of the city want that service and when that service is frequently less robust than competitive products, where is the problem? If the people of a town vote to have free wireless broadband and are willing to pay the extra taxes to cover the cost, why should the state or federal government have the OK to step in and say, “No, you can’t do that because you are taking money away from X Internet provider.” Why doesn’t that provider just step up and compete instead of crying to their lobbyists? In large part because these local ISPs are all part of the larger ISP oligopoly. We all know the names; Time Warner Cable, Comcast, AT&T, Verizon, Charter, Cox, and a few others. They know very well that if one small town does it, others will follow. They don’t want that to be a trend. In some cases they have competed and rolled out new/better infrastructure, but they had to be forced to do that through competition. We the People had to force that competition by using our government. This is why we have a government in the first place; to protect the people. That doesn’t preclude protecting business, but the government should be protecting people first and foremost.

Ultimately the ISPs are trying to maintain existing business models any way they can.

• AT&T recently has been fighting to keep Google Voice off the iPhone. They claim it’s Apple that is stopping it but at the end of the day what does Google Voice do? It allows users to use the Internet to make phone calls among other related tasks. This takes AT&T out of the loop for services. They only provide the Internet access and that’s it. If a user has WiFi they don’t even need AT&T for Internet! Their conflict of services vs. Internet access is clear. Stop Google Voice and keep users on their networks and on their services.
  
  This plays into the Net Neutrality debate because one of the proposed rules is that a product/service should not be denied access to the network unless it is harmful to the network (not to the business, to the network).
  
  
• Comcast blocking bit-torrent traffic. Bit-Torrent is frequently associated with online piracy and while it can be used for legitimate purposes it has gained its notoriety fairly. That doesn’t mean Comcast or any other ISP should be able to block Internet traffic. Packet sniffing and QOS (Quality of Service) is important to corporate networks to ensure that internal productivity is not diminished. In the public Internet that only leads to censorship. Bit-Torrent is deemed ‘bad’ so it’s blocked. Do they block You Tube next because it has videos that may be copyrighted or there may be videos of illegal activities on there? Who decides? The copyright holder, the content provider, the ISP? Net Neutrality rules state no one does because the traffic shouldn’t be blocked in the first place. ISPs should be conduits for our data, nothing more nothing less.

One area that I do agree with the ISPs on is pricing. One of the common complaints is that users are using more and more bandwidth for streaming video and other such high utilization services and products. The problem is that ISPs have been selling access based on speed not utilization. One of the problems that still occurs is that ISPs are claiming Unlimited Access when in fact there is a cap. So ISPs have suggested tiered pricing, where heavy users pay more than low utilization users. The problem is that we run into that conflict of interest issue again. Heavy utilization users are going to be the ones doing online video streaming. If as a user, I dropped cable TV for Hulu and Netflix, then suddenly I could lose the incentive if the price of my Internet access jumped. The cable company doesn’t want me to go to streaming, they’d rather I stay on their normal TV service. If they make the price prohibitively high then suddenly their cable TV plan doesn’t look so bad any more.

To be fair Comcast, who was piloting such a program in Texas, has backed away from it after consumer protest. Additionally they are now looking to compete with their own streaming video service. I not 100% on the details but as I understand it you have to be a cable TV customer to gain access though, which kind of defeats the purpose.

This conflict of interest is something these companies have to address. A pure ISP is a non-growth market. Profits are funneled back into the Infrastructure. My question is, why is this a bad thing? Why must a business show large returns every quarter to be a healthy one?

Where is the incentive to enter the market or invest in such a company you ask? Consumer demand for faster Internet access is there. It doesn’t require digging lines or running another wire on a utility pole these days. Wireless is getting better and better and could certainly supplement and even replace cable and DSL Internet in a decade or two. Traditional (analog) methods of moving data around on wire is not going to just disappear, but the barrier to entry that it creates will diminish, only if rules are made and adjusted to allow for it rather than allowing the artificial propping up of dying business models.

I respect that there are others out there that are against regulations and are against an ever enlarging government. This is one case where I believe something has to be done. This regulation, success or failure will light the path of the Internet in the USA for the foreseeable future. The threat of regulation has kept the ISPs in check. A failure of this proposal will grant them the courage to abuse consumers for their profits.

[i] AS CABLE RATES RISE AGAIN, CONSUMER GROUPS SAY COMPANIES ARE USING MONOPOLY POWER TO UNFAIR ADVANTAGE, Wednesday, January 8, 2003, Consumers Union, http://www.consumersunion.org/telecom/cable103.htm

[ii] Cable Television: An Unnatural Monopoly, March 13, 1984, CATO Institute, http://www.cato.org/pubs/pas/pa034.html

UPDATE: 10/22/09 The FCC has released their NOTICE OF PROPOSED RULEMAKING (PDF) document. This is a valuable document to read and understand regardless of your opinion of Net Neutrality.

UPDATE 2: 10/22/09 Senator McCain introduces Internet Freedom Act of 2009, "that will keep the Internet free from government control and regulation." This is in direct opposition to what the FCC is attempting to do as well as against Net Neutrality.