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July 05, 2006

Net Neutrality: An opposing view

Recently Paul asked for the adoption of the movement titled "Net Neutrality." Some of its advocates are calling the abuses it is supposed to prevent a violation of the first amendment. However, the Net Neutrality issue, as I understand it, has nothing at all to do with 1st Amendment, but it does make a spurious claim that it protects the marketplace from the violation of antitrust laws.

Unfortunately, explaining why this is so requires a bit of a history lesson, so if you’re inclined to fall asleep when reading history lessons, please do not operate any heavy machinery while reading.

The first amendment guarantees that the federal government will not pass any law that prohibits free speech. However, the offending parties being scrutinized are not government entities (so long as Internet access is not being run by the State). Also, the so-called “abuses” that the Net Neutrality Act are supposed to prevent have nothing to do with prohibiting speech--but access. People still have the choice as to whether or not they will pay for this access. That’s freedom.

There is nothing in the Constitution that declares that any company, Internet or otherwise, must make wise business decisions. Scores of companies go out of business every day, and unless they are being unfairly treated by any of the controlling governments, there is nothing in the Constitution that will save these companies from themselves. Nor should there be. Capitalism requires that companies continue to try to outmaneuver one another for superior position in a particular marketplace. If a company thinks that making their consumers angry is a good business decision, let them roll the dice.

Imagine a theater being forced by the “Talent Neutrality Act” to give anyone who wants it access to the microphone. Or a radio station being forced to give airtime in equal parts to hosts with conservative and liberal ideologies (something like this actually has been attempted). Disregard whether or not the either instance is a good business idea. Consider instead the undue infringement on the freedom of the business to create a business model that seems to them most likely to generate revenue sufficient to cover their costs. It is their money at stake, after all, and it is thus their responsibility to make good decisions that will benefit, rather than enrage, the consumer.

Demanding government get involved in how ISPs provide their services would be a big mistake that could, in fact, lead to more limitations on access or increase the cost of entry for start ups in the form of additional lawyers and service fees that will stifle competition. And limited competition almost always leads to higher prices and decreased innovation.

AT MOST, government could do three things:

  1. Demand full disclosure as to whether or not the ISP engages in this practice and to what extent.
  2. Forbid any ISP from preventing or hindering access to government services or information.
  3. Reserve the domain, netneutrality.gov, and disclose which companies prevent access, and which do not.

I predict that, with this disclosure in place, those ISPs that limit access will find that it is not a good business decision, as people will take their business elsewhere. Thus, whatever benefit they achieve through holding speedy access at ransom will be negated by the loss of paying subscribers.

So what if AT&T, Verizon, or any other ISP wants to limit access by slowing down how browsers view competing sites? Let them! As long as there is full disclosure, people will be free to determine whether or not they are willing to pay for unfettered access, and business managers will be free to make all the unwise business decisions they want—which will pave the way for competing companies to shift the balance of power in the ISP market.

Tying up the Internet with needless regulations will only increase the costs of doing business and decrease accessibility. Requiring disclosure and providing the means for consumers to inform their choices without impediment should be enough to either keep the limitation forces at bay or run them out of the marketplace on the weakness of their own self-indulgent business models. - Cam Beck

Update: After I posted this, I decided to try to give you some links to other sites that agree or disagree with the Net Neutrality legislation. I have found that, at the surface, I'm in the distinct minority among those posting on the blogosphere. However, I did find some people who agree with me.

Also, I found a speech given by Assistant Secretary of Commerce Nancy J. Victory that was particularly interesting. Among her more salient points:

  1. Government mandates may not only be unnecessary, but harmful.
  2. Businesses may have sound strategic reasons for providing unrestricted access.
  3. Businesses may have sound strategic reasons to restrict access.
  4. The proposed legislation robs companies of the freedom to make decisions that may best suit the business and the marketplace.
  5. "Without solid evidence of market failure, the government should resist the temptation to regulate an industry that is struggling to find the right business arrangements to attract customers."

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Comments

I think dialogue on this issue is great.
My main issue here is not one of free speech. The telcos and cable companies built their infrastructures while they were monopolies, providing telephone and cable services before the internet was even around. The government legislated competitors out because these companies had to pay the high fixed cost of their infrastructure. The infrastructure costs were paid for by you and I through phone bills and cable bills while they were monopolies. These same telcos and cable companies also participated early on in providing internet service, mostly as a side product. With their control of the browsers and home pages of so many customers early on, they could have created search engines and content sites that would still be used today. They had first mover advantage but they chose not to invest in those sites because, at the time, they did not see potential in them. Today, they are attempting (they've already stated they will do this) to charge sites that have earned traffic because they provide customers a better experience. They want to charge web companies (like Google and YouTube) to use a network paid for while they were monopolies. In my mind, this is wrong and shouldn't be allowed.
- Paul Herring

Adam Curry had a great explanation of Net Neutratilty on DSC #7950 - 06-23-06. He made a lot of sense out of it.

It is immoral to punish independent companies for things that government has done wrong in the past. If you want to punish government, vote those who created the monopolies out of power.

That, it appears, has already happened, because since deregulation in the 1990s, the monopolies have already been broken up, and in many cases, competitors have been given an artificial advantage over the big companies to allow them to catch up and compete against them and their economies of scale.

The fact of the matter is that we are not being forced to pay for anything. We don't have to like what companies do. We also don't have to pay for it. Plenty of competition exists now that we have a choice in which ISP to award our business.

If any company tries to limit our access to sites like Google, then we are free to punish them by refusing to be their customers. They will learn, or else they will find out that their status as "Big Telecom" or "Big Cable" is very fickle, indeed. If you have a problem with large companies in principle, then you should allow them to make poor decisions--which will allow smaller companies to capture more market share.

Big Telcos that use their control of the infrastructure to limit the capability of competitors to provide service are already being punished by the FCC. No new legislation is needed, except, perhaps, the disclosure requirements I outlined earlier.

The reality is that these telcos still control access to the internet. Almost all providers from your one mand shop to AOL use the telephone and cable networks controlled by a handful of telco and cable companies. Because they control these networks, they can restrict access even if they are selling access to re-sellers. By restricting access to sites, their leveraging an asset that re-creates some of the monoplistic advantages they previously enjoyed. The purpose of Net Neutrality is not to punish these companies, but rather to ensure that they don't compete unfairly through the use of an asset paid for by their customers when they were a regulated monopoly. They may perceive it as punishment, however, it's not too different from when AT&T and the baby bells were split up. Their was a fair use provision that allowed equal access then as there should be now.

This is a complicated issue. Wikipedia actually gives a great description of it. I would suggest any of these as acceptable Net Neutrality provisions:

Enough and as Good — if operators prioritize bandwidth, they must leave enough and as good bandwidth to permit non-prioritized services to reach consumers. (There would need to be some standards around this.)

Tiering only — Operators may discriminate as between their customers, but must offer the same services to content, application, and service providers.

Police what you own — Operators may exercise discrimination with respect to entirely private networks, but not inter-networks.

For more information (both sides of the argument) see http://en.wikipedia.org/wiki/Net_Neutrality

Because they control these networks, they can restrict access even if they are selling access to re-sellers.

The FCC has already been going after anyone who attempts this. I wouldn't be opposed to stiffening the penalty, however. But let's not use a shotgun when a hammer will do.

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