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30Dec/103

Net Neutrality: Are you sure it’s what you want?

Last week, the FCC, in concert with a priority of the Obama administration, passed a resolution stating that they would begin acting in promotion of “net neutrality,” an idea that all internet traffic should be considered equal.  But, are you sure that’s what you want?

A lot of techie geeks are in favor of this concept, and on its surface, at least, the principle sounds nice.  What would happen to the internet if Microsoft partnered with Verizon or Comcast to block Google from home or mobile internet users, so that they had to use Bing?  Or, even worse, consider what would happen if Cox blocked its customers from visiting Qwest.com here in the Phoenix area – they would be unable to switch services, at least via the internet.

Or would they?

The Historical Perspective

As we take a look at the idea of net neutrality, let’s take a look at the historical internet (circa early 90’s).  Prevalent offerings included America Online, now part of AOL Time Warner; The Microsoft Network, some features of which have now been folded into MSN.com and Windows Live; Prodigy, which was the first online services provider to offer its own web browser; and CompuServe, which was the first provider to allow users to send email to internet-based email addresses as early as 1991.

The internet was many orders of magnitude smaller, and yet net neutrality wasn’t even something that would have been considered.  MSN, AOL, and CompuServe all, in the early 90’s, proprietary: MSN featured channels, AOL offered its own channel-based content, and CompuServe had a substantial series of forums (promoting user-generated content).  CompuServe and MSN both offered world-wide web access starting in 1995, with CompuServe’s launch of Spry Mosaic and MSN’s offering of Internet Explorer 1; AOL also started offering limited internet access in 1995.  Ironically, the Wikipedia article about AOL notes that Prodigy “for several years allowed AOL advertising.”

In the early days of the internet, “net neutrality” as it is now termed wasn’t even a concern.  Why?  Businesses took huge risks and invested huge sums of money to provide any online services to its customers.  They were right in being able to be the content providers for their customers; and if customers didn’t like what their services provided, they (the customers) could figure out how to change services.

Today

I’ll start here: I don’t really know how much of a problem a lack of net neutrality exists in the United States.  Why?  It’s very simple.

Internet service providers have a collective interest in keeping the entire internet available to their subscribers.

Why does Verizon, for example, have an interest in keeping internet access to a direct competitor’s website, such as T-Mobile?  Well, there are two principles in play here:

  • Subscribers to Verizon would say, “If they’re blocking me from T-Mobile, what else are they blocking me from?”
  • Verizon isn’t an “exclusive” service; there is at least a reasonable chance that a Verizon customer has a competitor’s service for home or business use.  If Verizon doesn’t allow access to that service, the customer may decide that Verizon is an inadequate service provider.

In such a situation, it is the provider’s motivation of self-interest that promotes its desire for net neutrality.  The provider has a significant desire to retain customers for its continuous revenue.  One needs to look only as far as the 2005 scandal over the Sony BMG rootkit (software that was unknowingly installed on end-user computer systems) and the public outcry (and legal actions) that it caused Sony BMG to backpedal and eventually recall the affected product.  While this implies that a company may attempt to circumvent consumer “freedom,” it is important to note that the cost in doing so can easily become prohibitive. Particularly today with the rampant accessibility of microblogging and social media, companies need to be very careful how the treat their customers.

Businesses like NetZero paint a clear picture that some users are content to have a non-neutral internet service.  NetZero offered free internet service, provided that the user retained a permanent banner advertisement during a customer’s online connection.  The service has varied for cost, advertising methods, and speed, but the crux of the service remains the same; but with such a service, the user explicitly acknowledges that the service is not “neutral,” but is in fact sponsored by advertisers.

Why should ISPs not be allowed to be non-neutral, or even to offer different, neutral or non-neutral services to different market segments?  Consider a license for Microsoft Windows.  It has two primary market segments, namely, end-user and server.  Both of these segments are further segmented; Windows 7 is offered in variants such as “Home Basic,” “Home Premium,” “Professional,” “Enterprise,” and “Ultimate,” whereas the server version comes in version ranging from “Foundation,” “Web,” “Standard,” “Enterprise,” and “Datacenter.”  The core components of Windows are the same across all of the editions of the operating system; the specific feature set varies from one SKU to the next, because Microsoft can expand their market of potential customers by subsidizing the development of the lower-end licenses by charging more for the higher-end.  Similarly, ISPs may offer a basic “non-neutral” broadband package for an incredibly inexpensive $10/month, but your internet connection may not offer the “whole internet,” or may simply perform slowly when doing specific activities (like downloading illegal movies, or doing something legal like watching Hulu and Netflix) – how many customers could use this effectively, since they only use a very small number of sites?  Preferred providers could receive better performance on their sites for the provider’s customers because they help to subsidize those users.

In fact, Comcast and Cox both offer something akin to this already.  Looking at Cox’s product offerings for residential connectivity, we can see the note about “Download speeds with PowerBoost®” – an explanation of PowerBoost is offered via DSLReports.com:

PowerBoost is a patent-pending Comcast network technology that enables you to experience faster connection speeds while you are downloading and uploading large files to the Internet.  PowerBoost leverages an additional capacity that is already built into Comcast’s advanced network…. PowerBoost provides bursts for the first 20 MB downloading and 10 MB uploading of a file respectively on Comcast’s 6Mbps, 8Mbps, 12Mbps, 16Mbps, or *22Mbps High-Speed Internet services.

This is clearly a “non-neutral” use of the Comcast network; the modem must detect upload and download of files and distinguish between it and other traffic.  One would easily conclude that this is the gateway detecting HTTP or FTP uploads or downloads, and negotiating with the central switch to enable the burst bandwidth.  BitTorrent users would not see the benefit, nor would players of computer games (they would get the non-burst bandwidth speed).

In any case, it should be up to the users to regulate this behavior through market conditions – because that is true internet freedom.  Advocates of such “net neutrality” are often the users of BitTorrent, the popular, decentralized file sharing service, where the most commonly-distributed files include illegally-distributed movies, music, and software.  In essence, these folks have asked the FCC to help them to continue to infringe on copyright holders, and the FCC has now complied.

Tomorrow

Now that the FCC has chosen to support “net neutrality,” if the high Court doesn’t strike it down, what does the future hold for ISPs and consumers?

Well, we have the potential for an overall decrease in throughput for the general user.  When activities like videos can’t be prioritized below activities like email or web browsing, the higher-bandwidth activities will generally have their usage increase.

Scarier, though, is the role of the government as the “decider” of what is “neutral” and what isn’t.  It’s scary to consider that the government might one day decide to regulate the internet, similarly to what China is doing, because it prefers one kind of speech over another.

Net neutrality sounds nice on paper, but let users and ISPs decide whether it’s important to them.  If the options are between a company and the government making the decisions, I choose the people with only the business contract and not the guns to enforce the decision.

Of course, one day this opinion may not be “neutral” enough to be read online….

Comments (3) Trackbacks (0)
  1. Well-written Rob! Two immediate points. (1) It seems like you might be weighing the providers’ interests in providing access to all services too heavily. Of course there are reasons for the providers to be neutral, but there are other reasons for them not to be. Namely, allowing services like bit torrents may cause them financial harm. And all of the providers might agree to that thus eliminating customer options. Furthermore, given that the barriers to entry into the internet provider market are extremely high, the worry that some invisible hand will correct them is very low. It seems to me that the providers’ reasons to block certain services outweigh the reasons to allow them. (2) Also, most providers already offer levels of service. For instance, up to 2Mbps/5Mbps/10Mbps. If they aren’t able to handle that throughput or it costs them too much, they should raise their prices.

    PS: I’m not really up on the whole net neutrality argument, but those “free market” principles jumped out at me.

  2. Thanks for your feedback Robert! I’ve had to think on your comments a little bit, and I think part of what you had to say (regarding the levels of service) means that I was making an assumption that I didn’t make clear.

    I don’t think that the issue of net neutrality IS an issue right now. But, my goal through that proposal was to say, government is preventing a perfectly valid and reasonable method of market segmentation. “Net Neutrality” has the potential to prevent the poorest of individuals from getting a service that interested businesses could subsidize.

    With regard to bittorrent, barring a new law, I don’t see ISPs ever being held liable for the activities of their users in terms of file sharing things like music, software, or movies; so I’m not sure how much of a potential financial harm they face. Providers agreeing to eliminate BitTorrents seems like an antitrust lawsuit waiting to happen.

    It’s interesting, though, that you bring up the barriers to entry. It seems like a lot of problems here stem from governments preferring monopolies or dualopolies in regional areas. But even in Maricopa, there are six ISP options. That’s not true everywhere, of course, but there are a LOT of factors affecting the strength of the invisible hand there.

  3. I made an assumption that I didn’t make clear as well. I assumed that the larger ISPs are financially intertwined with the media companies that have an interest in blocking, say, bittorrent connections.

    I agree that government regulations that lead to market control by a few companies seems like it is not as good as the open market when you can only see the negatives of the implementation in the actual world, but for these industries there is often reason to regulate them as well. Determining when the reasons weigh in favor of regulation or not is often a difficult and complicated process made by, usually, incompetent politicians. However, the fact that it’s not clearly best to regulate or not regulate is reason to think that one course of action is probably not (clearly) much worse than the other. If it were, then the decision would be obvious and there wouldn’t be so much genuine debate about it. Hah, I make it sound so easy :)


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