Net Banality

DIGG THIS

1934 was a bad year for the constitution. 69 years to the day after Galveston Texas learned the Civil War had ended and that southern slaves were now free, Congress passed the Federal Communications Act, creating the FCC. Seven days later Congress passed the National Firearms Act. The Communications Act expanded the influence of what was once the Federal Radio Commission to include television. The act has been amended over the years to include wired communication of all types. Ever since it became obvious that the Internet was going to be an important means of transferring wealth and information, the FCC has turned a jealous eye to it. The hyperventilating Congress has been more than willing to hand over power to the FCC when it is allowed. We had the “Internet Decency Act,” thankfully struck down for the most part by a temporarily sane Supreme Court, taxing attempts and now the latest is so-called Net Neutrality.

The term Net Neutrality (NN) is not even satisfactorily defined but has certainly attracted a large group of followers. NN proponents are quite certain that at any moment AT&T, Southwestern Bell, AOL, and any number of ISPs and bandwidth providers, are going to suddenly start preventing their customers from visiting sites or accessing services. Why they would want to do such things is explained with hand-wavy responses and hyperbole. Attempting to get a net neutrality proponent to give a concise definition or rational argument to support the fear-mongering is like pulling teeth with a set of rusty pliers. One of the most vocal proponents of NN is Columbia law professor Tim Wu (occasionally given credit for coining the term). Tim really wants us to care about Net Neutrality. In Why You Should Care About Network Neutrality (The future of the Internet depends on it!) he pants:

“In trying to figure out who’s right, let’s forget about the Internet and look at KFC. The fast-food chain discriminates. It has an exclusive deal with Pepsi, and that seems fine to pretty much everyone. Now, let’s think about the nation’s highways. How would you feel if I-95 announced an exclusive deal with General Motors to provide a special “rush-hour” lane for GM cars only? That seems intuitively wrong. But what, if anything, is the difference between KFC and I-95? And which is a better model for the Internet?

We’re all supposed to care so much about “Net Neutrality” that we throw logic and common sense out the window. Wu wants us to that KFC, a private entity with the right to engage in private contracts and competitive agreements, is the same as a government transportation agency engaging in fascist policy – the subsidization of an automobile manufacturer. He also wants us to believe that a competitive agreement between two companies is “discrimination.” If you are a consumer and want Coca Cola, but KFC only serves Pepsi, you have a choice. In Wu’s highway example, the traveler has no choice. He is the victim of a government-imposed monopoly (a redundancy – monopolies are not possible in free markets). This is generally the level of argument you can expect from neutrality proponents.

The overwhelming historical evidence of ISP behavior in the marketplace would itself suggest that these fears are unfounded. While it is true that competition for ad revenue is fiercely contested and many content providers have tried to make their content "sticky," users still have a tendency to wander off the reservations. The companies that have rejected tight controls on their users have thrived and the companies that have attempted to force users into closed systems haven’t fared so well. A good example of this is AOL. Their customer base is largely made up of people who are happy with the way that AOL’s software tries to keep them “in network,” though AOL before their merger with Time Warner were losing customers as other alternatives emerged. AOL’s inclusion of a web browser allowing customers to surf outside the AOL network was primarily done to prevent their customer base from fleeing. It was in their best interest to provide access to other locations. They still have a significant customer base and they can credit the inclusion of a standard browser for this.

Internet companies have responded slowly to customer desires at their own peril. I remember the day I was hired at Lycos to help manage their ad delivery network. Lycos’ stock was trading at $107 dollars and the company was a legitimate threat to Yahoo. At that time page views were the current measure of success and Lycos was in the #2 spot with 38,000,000 page views per day. A year later, in 2000, Lycos’ stock was trading at just over $30 dollars a share. They didn’t listen to their customers and paid the price. Their customers found other destinations. After the Terra/Lycos merger, they have become almost irrelevant. They aren’t even listed as significant in search engine rankings compared to their competitors even though they were one of the first to claim the space. This kind of market fallout isn’t limited to strictly ISPs. The Internet has totally changed the face of the tech industry. Where proprietary business models were once very lucrative for technology companies – systems with networking protocols and devices locked the customer into a single brand – you can count on one hand any of the companies which have managed to survive those practices as the demand for open systems grew. I still remember the Wang “Soup to Nuts” radio commercials from 1991. Where’s Wang now?

Net Neutrality proponents want us to believe that in spite of market forces dictating that content and destination restrictions are not good for business, they will one day defy all logic and start engaging in the practice.

But let’s at least discuss an equivalent to the KFC example provided by Wu. Let’s say that AOL/Time Warner decides it no longer wants to allow AOL customers to reach Google and instead drives them to their own in-house search engine. Why is this bad? Time Warner/AOL owns the equipment and network they’ve built. Net Neutrality proponents would claim that the FCC needs to step in to prevent this. What if AOL, who by the way has to pay for the bandwidth it provides to its customers, limits movie and file downloads or certain chat clients that they haven’t written? It’s their company. Their customers are not required to continue to accept bad service. Customers are still free to switch providers. Nobody has been harmed.

NN proponents would like you to believe otherwise but their entire argument is based on fear. NN is the classic protection racket with the FCC as “savior.” This idea is barely newer than prostitution. Ironically Wu projects his own designs on those he is attempting to punish:

But what must be banned are blocking, gratuitous discrimination, and choosing favorites. While it’s one way to earn cash, it’s just too close to the Tony Soprano vision of networking: Use your position to make threats and extract payments. This is similar to the outlawed, but still common, “payola” schemes in the radio world. Yes, there’s money in such schemes, but they aren’t good for the industry or the country. If allowing network discrimination means being stuck with AT&T’s long-term vision of the Internet, it won’t be worth it. [emphasis added]

This would be amusing if it weren’t for a good number of people taking this drivel seriously.

There is one area the NN proponents touch upon which I find compelling. The main infrastructure which allows the Internet to thrive has been traditionally controlled by the monopoly phone companies. Landlines and power infrastructure are good examples where the consumers have not been given a fair shake. In many areas, there is little choice but to use a single provider because the rights of way and easements were long ago co-opted by government and business interests in concert to create monopoly phone and power companies.

However, rather than inject yet another bureaucracy to protect us, why not try something different for a change? Why not try freedom? If the easements were not controlled by monopolies, entrepreneurs could start delivering fiber to your neighborhood  (there is quite a bit of “dark fiber” already available which represents a great deal of potentially available bandwidth). Any local or federal easement could be auctioned off to the highest bidder. Wireless companies could gain access and put up towers. Innovation and creativity may even eliminate the necessity for unsightly towers, poles and lines to deliver services. Why not introduce real competition in the areas where currently none exists and let the market decide? If content-limiting schemes prove successful, maybe we should, rather than assume that the company doing this is evil, consider the customers are getting the service they desire. What if this turns out to be a valuable service which is then further emulated? It would be far better than the unimaginative solution being proposed which has the ugly side effect of encroaching upon our liberties.

July 20, 2007

Political Theatre

LRC Blog

LRC Podcasts