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| April 10, 2006

Julian Sanchez enters the heated battle over (network) neutrality.

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|4.10.06 @ 4:31PM|

FYI, Julian accidently repeated a sentence in the in the article:

"The best argument for mandating network neutrality is that almost nobody wants to go back to the Bad Old Media Days where high communications costs raise high barriers to innovation and a few media conglomerates monopolize our passive eyeballs. The best argument against mandating network neutrality is that almost nobody wants to go back to the Bad Old Media Days where high communications costs raise high barriers to innovation and a few media conglomerates monopolize our passive eyeballs. "

David Weigel|4.10.06 @ 4:33PM|

Thanks for the tip. Fixed.

|4.10.06 @ 4:53PM|

It wasn't a repeated sentence, if you read it closely, just a parallel construction.

|4.10.06 @ 4:57PM|

Ah, gotcha, I see. Best argument for/best argument against.

|4.10.06 @ 5:03PM|

Even in areas currently served by a DSL/cable broadband duopoly, consumers accustomed to a smorgasbord of online options will check to some extent the ability of ISPs to restrict user access to innovative content and applications.

Uhmm...how will the do that? By threatening to go to the only other carrier who is doing the same thing?

CodeMonkeySteve|4.10.06 @ 5:03PM|

It doesn't care -- or, indeed, pay much attention to -- whether you're sending voice traffic, streaming movies, or just sending an e-mail to Aunt Hortense.

ObligatoryTomLehrer:

As the judge remarked the day that he
acquitted my Aunt Hortense,
"To be smut
It must be ut-
Terly without redeeming social importance."

|4.10.06 @ 5:17PM|

In a free market, we wouldn't have to worry about network neutrality. But do we have anything even remotly resembling a free market?

|4.10.06 @ 5:17PM|

Holy Jesus, someone got the Tom Lehrer reference? Though I suppose I shouldn't be surprise. And ChicagoTom: Yes, actually. Or, put it another way, even if both are doing some amount of "policy routing," at the point at which the way they're doing it becomes noxious to consumers, the gains from being able to advertise that you've got the more open network probably exceed the payments they're going to be able to extract from content providers for degrading their competitors in that firms sector of the net relatively quickly. (Remember, even if it's a duopoly locally, all they can offer the content company is differential access to the part of the country they service, and at the national level, provision isn't really all that concentrated.)

David 2|4.10.06 @ 5:20PM|

Something to ponder in this: if broadband providers want to say that they will control access, doesn't that violate the exemption they were already given in the Telecom law of 1996 that stated that they were just "the providers" of the content and they have no control over it? Wouldn't that make them legally RESPONSBILE for the content that they DO allow their subscribers to access? If they can actively herd subscribers "towards" certain websites, then they can actively herd those same subscribers "away" other sites.

Net neutrality, then, isn't just a matter of "convenience", but it is really the legal principle that keeps them free from frivilous lawsuits and government persecutions.

|4.10.06 @ 5:21PM|

And, for that matter, nobody seems to see a problem with an equally common kind of content tiering, where the consumer pays one price for Internet access, and another for high-quality video programming, perhaps even coming in over the same pipes.

That isn't content tiering, technically. You don't pay for the high quality programming to the internet provider. You pay the content provider for its premium content, regardless of the delivery system.

There is content tiering currently, in that some people give content away for free, and others ask for money for their content. But none of this is even remotely related to the price one pays for internet access.

In essence, ISPs get paid to provide throughput. They should have no say/control over the content that is being pushed through the pipes. Once they start levying tariffs based on content being passed through, they basically become extortionists. Either content provders pony up or all of our users will either be blocked, or the performance will be so bad that no one will be able to view it properly.

And what is to stop them from completely blacking out certain types of content. I can easily see a situation where the ISPs blacklist data from activists who or agitating for political changes that would hurt the ISP

|4.10.06 @ 5:25PM|

Rex-
No, though as I argue in the piece, allowing this kind of flexibility for providers might do something to hasten the arrival of a more competitive market. Also, I didn't want to make the piece even longer by going into this discussion, but Richard Posner's "Natural Monopoly and Its Regualtion" is a slightly-dated but still interesting argument for why you might sometimes want to abstain from regulation even in a monopolized market. Also--and I omitted this for the same reasons--if we're going to have some kind of regulation on this front, something that adheres to the principles developed recently by the Annenberg center strikes me as far preferable to a full-blown neutrality requiriement. The idea there is that you'd have to offer some minimum-level "neutral" broadband access, and then you could offer different services that involved "Policy routing" if you wanted. The only concern there is that you can see that very quickly involving some kind of price controls for that minimum open tier if the "policy routed" alternatives ended up being faster and cheaper.

|4.10.06 @ 5:50PM|

I'm not sure if this is on the same subject, but I'm having a hard time grasping whether governments want more network choices so they can extract rent from all of them or whether they want to sell exclusivity to one preferred network. (Cellular/satellite kind of blows holes in any right-of-way arguments.)

http://arstechnica.com/news.ars/post/20060402-6506.html

|4.10.06 @ 5:55PM|

1. All the problems the article seems to identify can be solved by discriminating based on bandwidth.

2. here is the type of problem that the article doesn't identify:

Record companies buy a stake in the largest ISPs. Soon after, the large ISPs decide that no content goes over their pipes absent DRM. (there's a zillion more hypotheticals where this came from)

Expected libertarian response: oh, then small ISPs will explode and take their place as outraged consumer switch their broadband service providers in protest.

Realistic response: Oh, that is the kind of reason we need net neutrailty legislation. The libertarians are pipe dreaming away the affects of consolidation as is their wont.

Sandy|4.10.06 @ 6:06PM|

Julian--in what way would Baby Bells be considered "natural" monopolies? Microsoft can arguably be referred to as a "natural monopoly" of desktop operating systems, but the telecoms market monopolies have been mandated from the beginning. I'm not sure I want to see backbone providers violating their peering agreements before they can demonstrate their ability to compete a little better in the market than the DSL debacle has shown.

In short, I'd want the Internet market to look more like the long distance phone market and less like the local phone market.

|4.10.06 @ 6:07PM|

Expected libertarian response: oh, then small ISPs will explode and take their place as outraged consumer switch their broadband service providers in protest.

Furthermore, even small ISPs are really just renting out the lines of major players.

In my area, EVERY DSL provider goes over SBC's lines. Local DSL Providers are really just resellers of SBCs lines. In fact, when I was originally looking into DSL, the competitor I wanted to buy from told me -- and SBC confirmed this -- that my signal would be weak because of the distance my home was from the main line... and SBC wasn'tt turn on their repeaters to allow me to get decent service. Of course once the competitor went under and SBC took on their clients, all of a sudden I got a call from SBC telling me that they have turned on the repeaters and that my address now had DSL available.

So if SBC institutes content based tariffs/restrictions, then everyone renting will have to either institute the tariff as well, or pay it out of pocket. I doubt SBC would exclude resellers from the tariff/restrictions -- that would be slitting their own throat as no one would buy from SBC directly if they could go to a reseller and not worry about content restrictions.

|4.10.06 @ 6:13PM|

"The Banner ad Matches The Article" -- FWIW, I decided to write about this well before we started running that ad--not that you'll find that persuasive, I suppose, if you think I'm just shilling for Verizon or whatever.

And at the risk of pulling a Fermat, there were a lot of arguments I wanted to consider that just weren't feasible at this length; maybe I'll try to do something longer at some point.

|4.10.06 @ 6:17PM|

David2-
OK, *that's* an argument I hadn't considered, and an interesting one. If that's right, it would just make net neutrality legislation redundant, insofar as no ISP is going to expose itself to liability for what flows over its pipes.

|4.10.06 @ 6:18PM|

I D E A:

Maybe allow content restrictions over half of the promising new transmission mediums, and impose net neutrality over the other half. For example, force net neutrality on telephone lines, but make no corresponding regulation for cable lines.

This way we can:

1. spur enhanced competition between the transmission mediums; and

2. see what customers prefer insofar as net neutrality goes. see if there is an observable preference there at all.

With all the money they throw at this area, I hope I am not the 1st person just now to think of this.

|4.10.06 @ 6:33PM|

While I understand the theoretical free market argument against the principle of net neutrality, I do note that in a 'competitive' market here in Detroit I pay about fifty bucks a month for basic internet service (not to mention another fifty for virtually rock bottom cable TV service). DSL isn't particularly cheaper and there's no other service available (well, I could get satellite, but given the snow here that would be somewhat of a waste of money). Sure, in a free market we'd have plenty of competition, but I suspect, whatever comes out of congress the Cable/AT&T duopoly will continue, in which case there's plenty of business case for routing alternative traffic (say, competitor's e-mail) via slower routes.

strat|4.10.06 @ 10:35PM|

As someone who was at a Tier-1 ISP back in the early Wild West days, I'd feel a lot better if we hadn't just seen such consolidation back into the RBOCs.

When I was at UUNET, we received great value from the designation of "enhanced service provider" under the Modified Final Judgement. (Sorry, that's a telco weenie term - the MFJ was the breakup of the Bell System) Enhanced service providers were able to do interesting things with novel services without being constrained like the RBOCs.

My concern now is that the RBOCs have all but re-consolidated, and still (with exceptions) show the same stunted conprehension of customer desires they always have. They have a serious bias toward viewing us as "eyeballs", and react with hostility to any technology that implies autonomy on the part of the user. This is not confined to big telcos, as demonstrated by the ISP in Michigan that was filtering foreign VOIP services for its customers' convenience.

The rejection of settlement-based pricing and interconnect models is one of the policies that has allowed the Internet to grow as fast as it has. We fought that battle over and over, and in the end, things have worked out reasonably, with some bumps in the road. (The public squabble between Cogent and Level(3) is one of the best recent examples of discord. It was newsworthy, because it was so unusual.)

I can't help but compare our Internet development to the Europeans with their X.25 networks. Charging by the bit held back the growth of the Internet in Europe for the better part of a decade. This despite the fact that Germany had more ISDN users than the U.S. probably has to this day.

I defend the right of any network builder to provision, do capacity planning,and price their services as they see fit. My concern is that all of the contenders who want to price by content call their service "The Internet" like everyone else.

I foresee a bunch of frustrated consumers and retardation of the market, unless we can find a way to call a spade a spade and clearly identify those network providers who want to muck in the innards of their customers' packets.

|4.10.06 @ 11:19PM|

Oh, I fully agree with one pat of the Annenberg principles: Any content routing should be transparent. I have no problem with disclosure regulations.

|4.11.06 @ 7:41AM|

If they build out fiber to the home, as Bell South has done, then bandwidth to each home is essentially unlimited. Only by creating an artificial bandwidth limit, as SBC/ATT has done by pushing fiber out only to the node, does tiered service levels become "necessary." By creating what is essentially an artificial shortage, SBC/ATT now has the ability to create a whole new revenue stream by charging the content senders as well.

Contrast this to Korea, where 100 megabits/sec is standard to the home. It's subsidized, but subsidized like building roads. We're using our money in Iraq. Maybe they'll have cheap broadband. We won't.

|4.11.06 @ 11:37AM|

--"In my area, EVERY DSL provider goes over SBC's lines."

This is true in many areas, and most have just one actual provider, just not always SBC/AT&T. As long as they've got the last-mile sewn up network neutrality will be a real issue. I wouldn't really call it a natural monopoly, though, since in part it's because of restrictive government policies that prevent other companies from laying their own fiber, and not just expense.

Some alternatives are mentioned in the article, but only one of them, WiMAX, is a real possibility. The others are bad ideas for various reasons.
Satellite has latency problems (speed of light limits) that rule out gamers even considering them.
Broadband over powerlines turns our entire power grid into a giant interference-broadcasting antenna (the ham radio guys really despise this one, and with reason).
Free Space Optics is good for certain scenarios, but is unlikely to scale well to the level required for residential use.
Cellular broadband probably isn't going to get any real real residential penetration until the pricing schemes change.

--"If they build out fiber to the home"

This is another, related problem. The big telcos, especially SBC/AT&T, have received huge federal subsidies to do just this. Almost none of which has happened. This market is severly distorted as-is, and the net neutrality bill is more a step to keep the distortion in check than anything else. Much as I hate expanding government regulation, unless they're willing to actually step back and stop screwing with the market (ha), this is about the best move they can make.

|4.11.06 @ 11:54AM|

Expected libertarian response: oh, then small ISPs will explode and take their place as outraged consumer switch their broadband service providers in protest.

No, Libertarian response: I will just use encryption, so the ISP has no idea what I am downloading. Seriously, it would take about 5 minutes to change the stuff on my current website to all be encrypted, seamlessly to the end user.

It isn't likely that ISPs get bought out by record companies who don't allow non-DRM music... it is much more likely the record companies pass a law banning non-DRM music formats, and that gets enforced on all ISPs. Of course, that would be an example of government regulation, so people who worship government will say that is only "because we have the wrong people in office". Sure, whatever.

|4.11.06 @ 12:33PM|

It isn't likely that ISPs get bought out by record companies who don't allow non-DRM music... it is much more likely the record companies pass a law banning non-DRM music formats, and that gets enforced on all ISPs.

Yeah, see here's the thing: if Congress did pass such a law, there would be a way of getting the law changed back. There is a democratic feedback mechanism called elections. Notwithstanding McCain-Feingold, I may even be able to buy some political speech aimed at other voters. On the other hand, if this is something that the record companies and SBC accomplish by a private arrangement, then my influence over that decision, or over getting things changed back, diminishes down to nothing. SBC is not going to lissen to me. It is not going to lissen to anybody. The have no seat to lose.

side point: who said anything about the record companies buying the isps (or SBC or whoever)? A small minority share should be adequate to get the policies set the way the record companies want them set. It is not like the customers are going to move to South Korea to get out from under the private US regime.

as far about defeating the scheme with encryption: I don't see how my "customers" could be in a position to decrypt my data, while still forbidding somebody like SBC from doing the same. One approach would be for a human being at SBC to pretend he is one of my customers, visit my website and see all the goodies. there are probably more automated ways to do this. Bottom line, SBC will not be operating at an informatin deficit relative to my (DRM-allergic) "customers."

|4.11.06 @ 2:22PM|

There is a democratic feedback mechanism called elections.

No, not really... Nowadays, with political speech strictly regulated by "campaign finance reform", with gerimandering run wild, with campaigns financed by the Federal government... we no longer have a viable Democracy. The idea that you have any power, whatsoever, through popular elections, is just not reality.

Saying that we have political power, is like saying we are all millionares because we can play the lottery.

"Democracy" is largely a show to get your obedience. If you feel that you have some vauge power to effect politics, you are less likely to rebel.

On the other hand, if this is something that the record companies and SBC accomplish by a private arrangement, then my influence over that decision, or over getting things changed back, diminishes down to nothing.

Having worked for a record company, I can tell you that you have no understanding of how things work. Record companies are not in collusion... one of the reasons record companies haven't really used widespread DRM yet is because no-one wants to be the asshole to use widespread DRM first. Nor are they in any way possible able to stop circumventing DRM, nor the anonymous transfer of files, even if they have a monopoly on all ISPs throughout the world.

The only way for record companies to make DRM work is to legislate its use in consumer devices. If it is illegal to manufacture an Ipod or digital audio player without DRM, or to manufacture a stereo system that plays non-DRM disk, then yes, people can trade music files, but not use them in their devices. And it has to be legislated, because no company is going to be the first to require this kind of thing, and then get smeared.

|4.11.06 @ 2:35PM|

Having worked for a record company, I can tell you that you have no understanding of how things work. Record companies are not in collusion... one of the reasons record companies haven't really used widespread DRM yet is because no-one wants to be the asshole to use widespread DRM first.

Translation: Take my word, the record companies aren't colluding. They just all happen to have parallel business strategies, which happen to minimize competition.

My Take: There *should* have been a record company adopting DRM, years ago. this is a business model that should exist and should have been existing (in practice, not theory) for years. I don't want all the large record companies to use DRM. Nor do I want none of the large companies to use DRM. I want them to compete with each other. Part of that competition should take the form of giving consumers different business models to choose from. That is exactly what they won't do.

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