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Wednesday, November 28, 2007

Net Neutrality Really Net Regulation

Did you ever notice that bad policy ideas often come with nice names?

For example, “universal health care” certainly sounds pleasant enough. That is, until one discovers that it really means inept, inefficient, and costly government running our health care system. Then it doesn’t sound so nice.

Regarding the Internet, same goes for “Net neutrality.” Sounds OK – impartial and fair – until you find out that it’s really about a massive government intrusion into how the Internet develops. Do we really believe that politicians should be dictating how consumers, content providers and Internet service providers (ISPs) interact? Is this more apt to help or hinder investment in broadband and the Internet?

In fact, “Net neutrality” should be called “Net regulation.” We’ll settle here for Net neutrality regulation.

We actually have not heard too much about Net neutrality regulation during the current Congress. But that’s changing. As CNET’s Anne Broach reported on November 27, “Rep. Edward Markey (D-Mass.), the chairman of a House of Representatives Internet and telecommunications panel, is readying a new version of his Network Neutrality Act, which was twice defeated by the Republican-controlled Congress during its consideration of a sweeping broadband policy bill last year. Markey plans to introduce the new effort, which will "closely follow" the old one, during the next two to three weeks, shortly before Congress adjourns for the year, a spokeswoman told CNET on Tuesday. Further action, including hearings, is expected in the new year.”

Net neutrality regulation proponents fear that ISPs will do dastardly deeds like slow down, limit or even block access to certain Websites. They also don’t like the idea of any kind of extras fees being charged to content providers, such as for premium services.

But why would ISPs work to anger the two markets they seek to serve – Internet users and content providers? Don’t they have the incentives in the marketplace to do just the opposite?

Consider, for example, the just-announced shift in policy at Verizon Wireless this week. It shows how the demands of consumers and the marketplace are shifting, and with those changes, companies must adjust and respond. Ryan Kim of the San Francisco Chronicle reported on November 28:

“In a move that could give cellular customers unprecedented freedom and choice, Verizon Wireless announced Tuesday it will be the first major carrier to allow any device or application to connect to its network. The nation's second-largest carrier, with 64 million subscribers, said it will launch an initiative next year called Any App, Any Device, which will allow manufacturers of phones and other mobile devices to connect them to the Verizon Wireless network provided they meet some minimum standards. The move is a major reversal for Verizon Wireless, which has been known for jealously guarding access to its network. The move comes just weeks after Google announced it will create an operating system for mobile phones that similarly will create a wide choice of devices and applications for consumers. Combined with the successful launch of the iPhone from Apple, which peeled back some of the control carriers historically have had over their handsets, the wireless industry appears poised for a revolution as it finally heeds calls to loosen its grip.”

Bottom line – this wasn’t about government interference and strong-arming. This is a business responding to the marketplace. It flies directly in the face of the arguments put forth by the Net neutrality regulation supporters, and shows that these businesses have every incentive to respond to the needs and desires of consumers and businesses.

Think about this from a small business perspective. The Internet has been a great leveler for small firms, allowing them to compete with the big guys, to reach new markets, and to provide new services and products. Do small businesses want ISPs free to explore various business models in order to boost investment and better serve the marketplace, or do they want politicians and government bureaucrats issuing mandates and restricting market experimentation?

The market is far preferable to the government.


Zane said...

I think the question, "Don't they have incentives in the marketplace to [not interfere with net traffic]?" is more correct if asked: "Are their incentives to encourage interference in the free, unencumbered flow of traffic over the net?"

When you consider that the major ISPs, the ones that control the backbone and flow of internet traffic, are now partnering with content providers then it's easy to see their vested interests are best served with 2-tiered plan of handling traffic on the internet.

Consider the examples of Apple's iPhone and ATT's partnership or Sprint, Verizon and any other provider with their product offerings. How convenient would it be to prioritize your own traffic at the expense of your competitors.

Oh sure. They'd all be incentivized to play fair or face equal retribution.

But what about competitive innovations? What about Skype or Vonage or Voip in general? Do you think ATT/Sprint/Verizon, etal would handle traffic to their sites and service on an equal basis, unless legally required?

I compete with Sprint, ATT, etc. What impact do you think it would have on my business if visitors to my site needed to wait 1-2-3 times as long to see it as they do Sprint, ATT, etc.

A 2-tiered internet would turn ISPs into the nation's gatekeeper for all innovations. Remember ATT was throttling our economy until the 1980's when a government ruling required them to open their network to innovation and competition. A 2-tiered network would do the opposite.

The free-flow of traffic over the internet has been the source of innovation and the small companies behind those successes have generated milions of well-aying jobs that have kept the US in the forefront of global competition.

And you want to change that system?

Zane Safrit
Conference Calls Unlimited

Raymond J. Keating said...

Interestingly, the pro-net neutrality regulation crowd is the group that wants to change the system. Our current system has worked quite well for all concerned, including small businesses, and there is no need for more government interference. The concerns Zane notes are theoretical -- there are no examples of ISPs somehow hampering or blocking certain Internet traffic. It would be Internet regulation based on mere speculation. And imagine the market, consumer and media backlash if the ISPs were foolish enough to try to hamper or restrict traffic. They would only do severe damage to their own business.