Net Neutrality and a New Beginning

I have made a conscious choice to stop chasing the small and somewhat petty news of the day so that I can more deeply explore issues.  This requires a lot of excavation — and I’ve been looking pretty hard at net neutrality.

What is net neutrality? I’m sure you’ve heard the term being thrown around for the last few years.  Net Neutrality is the concept that all Internet Service Providers (ISPs) and regulating bodies must treat all data crossing the internet the same.  In other words, companies or government bodies are not allowed to artificially encourage or discourage users from visiting a certain site or using a certain kind of bandwidth. For example, using this principle, ISPs would not be allowed to create faster connections to sites that they may own or services that they provide in order to encourage you to use that service —- or discourage you from using the competition. Maybe they would charge Netflix a fee to prioritize their service.  This sounds pretty cut and dry right? Well not so fast.

The question at the very core of the Net Neutrality debate is what kind of regulation do we need, if any, to keep the internet a fair and open place? It also means that when someone asks you if you “support net neutrality” what they really mean is “do you support net neutrality regulation” —a different question as you will see. 

So a long long time ago — in a galaxy far far away – the internet was in its infancy. Originally, the internet was just a few defense computers and (later) university computers linked together.  Eventually, when the government decided to bow out and turn over this network to the private sector, investment and development exploded and the internet we know today was born. It wasn’t long before people started to really dislike their ISP and complaining there wasn’t enough competition because their friend a few cities over had significantly faster internet which “wasn’t available in their area”.   — and they were right to be upset.

And you guessed it – in comes the government.  State and local municipalities had to permit and license the ISPs to access the city’s public infrastructure in order to run cables and install the necessary hardware to build a good network in the area. That process quickly became unfair, expensive, and heavily regulated with cities asking for kickbacks and excessively high rents on telephone polls and other public rights of way.  Compounding the problem was that there was no standard pricing structure or procedure that these ISPs could predict, so they had to treat every city and state as its own unique quandary. In some instances the cost of building a successful network was TWICE as expensive and took FIVE TIMES longer to build than it should have.  (SOURCE) Think that cost the consumer a bit more in terms of billing, options, and connection speed? Moreover, some city governments didn’t charge some ISPs the same as others —- we can only speculate why that was true. (Campaign donations anyone?)

While researching this topic I ran into the  story of Provo, Utah.  Long story short – in 2004 the municipal government attempted to build their own fiber network and provide the public access to the internet for a much lower cost.  The result? They had horrible network reliability and couldn’t afford to run it within two years.  They ended up selling the entire network infrastructure to Google in 2011 — for $1.00. Yes – ONE – DOLLAR.  It cost the taxpayers over $66 Million and the raised taxes still exist to this day. (SOURCE)  Although one could say the government of Provo was relatively forward thinking for installing a broadband network in 2001, it ultimately didn’t have the expertise and resources to operate such a network. This is simply because government doesn’t have the incentives to be efficient like a private company. 

Some of you will remember when Google Fiber internet was the envy of every tech geek in North America.  The idea of fiber optic cable run straight to your neighborhood or even your home was almost too good to be true and google announced the idea in 2009.  The problem was that EVEN GOOGLE was having trouble with some state and local legislatures creating significant barriers to building such a network.  Kansas City raised their hand loud and clear and signaled that they would partner with Google to make their project a reality. They streamlined the permitting process and asked for little to no money for initial cable installation – only for the maintenance cost of repairing whatever they needed to get things back to normal after install. The result? Consumers loved it, investment money poured into the area, and other ISPs asked for the same deal to install their networks in those locations to compete in the same market.  Everyone was a winner in that deal – not to mention they were pulling about 700 Mbps speed up and down. (SOURCE) Yet still, to this day, we have some of those problems with government lingering – albeit a little less than before.

It’s important for me to note that government can (and did) create legislation that was too friendly for some ISPs.  As a result of heavy lobbying and leverage from some large companies like google and AT&T, local and state governments also created the environment to insulate one ISP from “excessive competition.” (SOURCE) I am against this form of regulation as well – because it’s crony capitalism and doesn’t foster competition.  Government’s heavy hand in tilting the scales of the free market has always proven itself to have wide reaching negative consequences.

I recount this history of the ISPs in America so we understand the relationship between government regulation and the flourishing of a competitive (and thus open) internet.  When people originally started complaining about lack of competition in ISPs they turned to the wrong source to remedy the problem.  Only when government steps out of the way does true competition begin.  Government’s short sighted barriers to entry created the large monopoly of big telecom companies AND kept subscription rates high by stifling further competition.  Remember that it is unlikely that a company ever becomes a large monopoly without using the government to choke its competitors.  We need to be vigilant when this type of legislation comes up for review.

Fast forward to 2015 – when the Obama administration’s FCC issued a new ruling on net neutrality knows as the “brightline rule” which classified the internet as a public utility therefore subjecting it to regulation under the Communications Act of 1934 and section 706 of the Telecommunications Act of 1996. ( SOURCE ) What did the FCC do with this new power? They banned website prioritization, speed throttling, and zero-rating. This prompted MASSIVE lawsuits from the ISPs and other telecom companies against government overreach.  (SOURCE) A federal appellate court actually upheld (2-1) that the FCC could do so legally and the ISPs appealed to take this to the supreme court. (SOURCE)

President Trump’s FCC, like many things, looks very different from Obama’s.  Ajit Pai, the current FCC director, has signaled that he would like to abandon this approach of “regulation of the internet as a utility.” (SOURCE) The FCC has voted to scale back previous Obama era regulations and will take public comment until the end of the year. Proponents of this position parrot ideas listed above – that keeping the internet open and lightly regulated will support infrastructure investment and innovation without government slowing or warping that process.

Now all of this is the meat of the debate — how do we maintain competition, infrastructure investment, AND freedom of information on the internet? Well that all depends on what you think of the motivation of the ISPs. 

Proponents of Net Neutrality Regulation have several arguments that are well taken.  Among them are the worry that ISPs might generally abuse their power in multiple ways – either by stifling competition, controlling your speeds, controlling what you see, and that they may eventually even threaten free speech because of reduced participation as it is now the main way that we communicate. The strongest of these in my opinion is the concern for competition.  I have a good friend of mine who runs a software company whose product heavily uses internet traffic to support its infrastructure — but it’s a startup company and one that may indeed be threatened if an ISP were to aggressively incentivize the use of a product of their own design by making his less accessible or too expensive. I totally get what he means here and we may indeed benefit from looking into protections for something of this nature should it ever occur.  Perhaps we can address this using Ajit Pat’s commitment to “light touch” regulation.

The counter arguments are very strong – the main one is the idea that ISPs have not yet chosen to abuse their power in these ways because it isn’t in their best interest to do so.   Consumers pay for access to the internet and don’t want to pay for an ISP choosing what they use for them.  It’s the same philosophy as choosing to just use streaming services instead of full cable TV packages — you don’t want to pay for things that you don’t use and only want access to the things you do. With the internet, ISPs have an incentive to bring the open internet to consumers so that they may choose what to use and charge users for different connection speeds — just as they are doing now and were doing before any FCC interference. The free market is the best tool to tell ISPs how to segment their services to meet users needs.  Any attempted regulation, taxes, or fees seeking to artificially preserve the internet may heavily interfere with our ability to rapidly change it to reflect needs of newer technology.  There have been studies showing the massive loss of investment capital if these regulations are enacted.  (SOURCEAdditionally, the world is accustomed to an open internet and doesn’t like when ISPs do anything at all to affect this.  A good example is the decent application of data caps on most home internet connections.  Although this really doesn’t affect most users in the slightest it got significant negative public feedback forcing providers to reconsider the move.  They are already making monetary concessions to those threatening to switch providers. 

Lastly, consider this.  Do you remember when the Apple iPhone came out and it was only available on AT&T? Do you remember how angry everyone was that had Verizon, Sprint, or T-Mobile? There was a sizable exodus to get the newest technology and it felt like years before Apple made deals with other providers to widen the field. This happened precisely because there was no regulation against this. Carriers had to compete to carry the phone and Apple had to compete to convince them how great it was for their networks. Imagine a world where this kind of partnership would be seen as “stifling competition” or “abusing power”.  Was it really that much of an offense? The market worked absolutely flawlessly in that scenario without ANY interference from government and it spawned the glorious smartphone revolution we have today.  I bet most of you that are actually reading this are doing so on one. (If you even made it this far). 

To wrap it up – I’m the first person to jump on the bandwagon and hate on AT&T and Cox for their outrageous prices and horrendous customer service — they’re just one circle above Comcast in ISP hell. But I remember how to temper that emotion and use the lessons learned from past government regulation of the internet and related technology.  When given the choice of what to choose as a steward of the internet going forward I will choose almost ANYTHING over the government.  Time and time again they have shown their inability to effectively manage or regulate almost anything.  Post office, Social security, education, finance, you name it. Remember that the next time someone tries to sell you on the benefits of government regulating the big bad ISPs.  Maybe we are looking at the wrong target. I definitely want an open internet as I am a pretty heavy internet user and do so on a regular basis. I want to use the data that I pay for however I please — and so far we’ve been able to do that for over twenty years with no significant help from the government.  Should that change in a significant way perhaps we can revisit this topic.

If you’re interested in reading more about this I really encourage you to do so before the end of the year so you can comment on the changing rules.  Also see the book “The Political Spectrum” by Thomas Hazlett for a good in depth discussion of government involvement in the market. For a proponents view (with a small caveat) of internet regulation see Tim Wu’s “The Master Switch.”

4 Comments on “Net Neutrality and a New Beginning

  1. “Carriers had to compete to carry the phone and Apple had to compete to convince them how great it was for their networks. Imagine a world where this kind of partnership would be seen as “stifling competition” or “abusing power”. Was it really that much of an offense? The market worked absolutely flawlessly in that scenario without ANY interference from government and it spawned the glorious smartphone revolution we have today. I bet most of you that are actually reading this are doing so on one. (If you even made it this far).”

    True, but it took years for the iPhone to reach other carriers, partly because Apple and AT&T realized they had a good thing going and decided to extend the exclusivity. If they were not allowed to do this, consumers would have gotten product faster. Granted, part of the iPhone’s success could be that there was less choice for consumers– somewhat like Tesla releasing the luxury Model S first to work the bugs out with rich enthusiasts before releasing the perfect Model 3 to the masses.

    • It’s possible that the consumers may have gotten the product faster but that sort of heavy hand may negatively affect the market. For example – AT&T took the risk to develop their network to support the iPhone and that type of risk needs to be properly rewarded. The only way to determine what is “proper” is to let the market decide that. Government shouldn’t involve itself in any such outcome for reasons that I listed above. Had they done so we may have a very different market on our hands with fewer incentives for other networks to “catch up” to the improvements the iPhone thrust on AT&T.

      Thanks for the comment

  2. Thanks for this. I can tell you put good work into this. Appreciate it.

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