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1/15/2014
11:40 AM
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Net Neutrality Court Ruling Won't Ruin The Internet

Competition, not massive regulation, is the best way to make the Internet open.

A federal appeals court earlier this week neutered the FCC's Net neutrality rules, which prevented carriers like Verizon and Comcast from interfering with other carriers' traffic. It's a freak-out moment for many, including the Los Angeles Times, which wrote a headline "Bow to Comcast and Verizon, your overlords." Not quite.

Here's the stated problem: The big carriers (notably Comcast) have already shown that, left to their own devices, they will start picking and choosing which data streams should be fast, slow, or simply blocked. That means that the carrier, not the person who pays the bills, is in charge of what will and won't work from end to end. So, enterprises could be in the position of having selected a VoIP-as-a-service provider, tested the provider, and then having service degrade, not because there is a legitimate engineering issue, but because the carrier has decided to deprioritize (or drop) packets between the provider and the enterprise.

Proponents of Net neutrality say that regulations that force carriers to treat all packets the same is the right way to fix this problem, and that, absent Net neutrality, carriers will discriminate against competitors. It's a compelling argument: Why wouldn't AT&T want to mess with Vonage? Why wouldn't any cable provider want to mess with Netflix or Hulu?

[Learn more about the court ruling. See FCC Net Neutrality Rules Rejected.]

Yet, I fundamentally disagree that Net neutrality is the right thing for the FCC or others to focus on. The right thing to focus on is encouraging a broadband free market. A true free market allows consumers to switch when they're not getting what they paid for. Even in today's market, where there are only two or three choices, if a large company's IP voice traffic starts getting messed with by AT&T, let me assure you that AT&T will be minus one customer.

From the consumer standpoint, let me also assure you that the second that Netflix starts getting messed with by a cable provider, Netflix's software will pop up a message on the consumer's screen that says: "For best service, you may wish to switch to XYZ provider in your area."

The trouble is that historically, broadband is not a truly free market, since, typically, there are only two consumer broadband providers in any given community. Enterprises typically have more than two choices, yet pricing is normally baselined at the consumer level, since consumer service is far more common. I have been witness to a third provider entering my market, followed by drops in price and increases in capacity.

In recent years, the American Recovery and Reinvestment Act's Broadband Technology Opportunity Program (BTOP) provided grants to build out more broadband infrastructure. This helped to make the broadband business far more competitive than it has ever been, since part of the "strings attached" to the grant money was that carriers must allow others open access to the fiber. The private sector has also contributed to competition: Google singlehandedly raised "fiber optic" to public and economic development consciousness. Smaller municipal successes like Gig Tank have also fueled investment interest in middle-mile networks.

Net neutrality isn't a bad thing to focus on, but I worry that too much regulation could really drag down the Internet. You have only to look at the antique and slow-moving common carrier telecom regulation environment to see that this worry is founded in reality.

Why am I worried about burdensome regulation? You see, the FCC originally crafted its Net neutrality rules classifying Internet service as "information services," not a common carrier telecommunications service. Since the court struck down Net neutrality largely based on this classification, it is possible that the FCC may reclassify Internet service as telecom, making it subject to a vast quagmire of obsolete and awful regs.

The larger -- and more productive -- issue for the FCC to focus on would be how to foster more broadband competition. Let me guarantee you that without competition, no amount of regulation will help prevent bad things from happening. Without competition, prices and capacity stay the same.

Bottom line, I don't think that enterprise CIOs have anything to worry about, for now. Carriers would be idiots to start messing with the very customers that keep the best metrics about service delivery: enterprise customers.

And in general, the Internet is not going to melt down because of a lack of Net neutrality. But choice will be seriously affected if growth in competition doesn't continue. And the best way to kill new entrants into the market would be to significantly increase regulatory burden on Internet providers. Whatever the FCC does in response to the ruling, let's hope that it's not that.

Jonathan Feldman writes for InformationWeek on the topics of leadership, innovation, IT people skills, and running large organizations "like a startup." He is CIO for the City of Asheville, N.C., where he encourages innovation through better business technology and process.

Too many companies treat digital and mobile strategies as pet projects. Here are four ideas to shake up your company. Also in the Digital Disruption issue of InformationWeek: Six enduring truths about selecting enterprise software. (Free registration required.)

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rradina
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rradina,
User Rank: Ninja
1/15/2014 | 4:44:52 PM
Re: Not buying it...
The only flaw is assuming folks even have a reasonable choice of providers.  While I have multiple options, I have only one wired option and the other wireless options simply cannot compare.  Don't get me wrong.  I think highly of my one wired option but if they start to follow others down the path that we seem to fear, right now I don't have an alternative to take NetFlix's advice and switch to another carrier.

Otherwise I agree with what you are saying.
rradina
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rradina,
User Rank: Ninja
1/15/2014 | 4:41:16 PM
Re: Consumer's interest
That's already differentiated and IMO clouds the issue.  If a hospital needs a super fast connection to another hospital for video medical procedures, they can contract with a major provider to create an MPLS with an SLA that guarantees bandwidth and latency.  That traffic shouldn't even be on the public Internet for so many reasons I have no idea where to begin.  How about a public personality having their operation show up on YouTube?

What we're discussing is a consumer grade Internet connection and that connection treating all data equally has no bearing on the type of connection in my first paragraph.  If that connection doesn't do what the consumer wants, they should have the option to pay for faster/better service.  So should the service provider that seeks to serve them.  However, an ISP shouldn't be allowed to extort more money from me because I want to use service X instead of service Y.  And they shouldn't be allowed to extort money from service providers because they are service X instead of service Y.  If we want to penalize data usage, then let's bill by the byte.  So far we don't seem to want to go there but that's where we should go rather than the silly door we're about to open with ATT's latest moves and this court victory.
rradina
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rradina,
User Rank: Ninja
1/15/2014 | 4:28:04 PM
Re: Here's the REAL problem...
Please investigate how much bandwidth an HD NetFlix stream uses.  You might be surprised that it isn't the bandwidth hog that everyone assumes.  Last weekend I watched the Avengers with my kids. The HD stream only used between 700Kbps and 1.5Mbps.  I have a 30Mbps connection and that means at least 25Mbps of it is left for someone else to use.

Using this kind of bandwidth will only get less consequential as technology improves and network vendors (who by the way aren't losing money) continue to invest and improve their networks.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
1/15/2014 | 4:12:58 PM
Re: Regulatory Capture
Arguing for lack of regulation is more persuasive when the potential for harm is small. Where harm is a real possibility (ie: robbery or other criminal behavior), we tend not to call for self-policing of behavior. Instead we rely on self-restraint in conjunction with police and the law.

Failing to insist on net neutrality will make it easy for network providers to harm those downstream. In fact, companies like AT&T and Comcast will have an incentive to do so. It's simply not adequate to suggest large telecom companies will behave nicely, particularly when there's very little real competition in the US broadband market.
Lorna Garey
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Lorna Garey,
User Rank: Author
1/15/2014 | 3:31:30 PM
Re: Regulatory Capture
The laws of physics, not the government, limits spectrum. And, where there is sufficient demand for passenger railroads, they exist. The Northeast corridor, for example.

My take is that Jonathan is right in the long term but in the short term is overestimating the ability of the free market to provide competition sufficient to make up for a lack of regulation. The Internet is a utility, like electricity or water. Or healthcare, for that matter, though probably don't want to get into that here. As such, it needs some level of regulation. I'm not big fan of micromanagement, governmental or otherwise. But we need a balance, and I for one don't trust Verizon, Comcast or any carrier with a utility.

As others say, follow the money.

 
TerryB
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TerryB,
User Rank: Ninja
1/15/2014 | 3:09:24 PM
Re: Here's the REAL problem...
Your primary concern is because the ISP doubles as a content provider. Under that scenario, with the limited competion possible for last mile, there is little choice but to enforce Net Neutrality for just the reason you state. I'm sure FCC will. But doesn't mean I have to like funding it versus getting the ISP's out of the content business in first place. Then we wouldn't be having this discussion.

But I can't except your argument I have to support unlimited buildout of backbone so the NetFlix's of the world can move traffic off of other circuits I intentionally pay for. Time Warner charges me extra because I request to have HD service, they don't stick it on your bill also when you don't want it. At least not as clearly defined anyway. ;-)

I hope other poster is correct that NetFlix cost of however many T3 circuits they buy into datacenter keeps me from paying for the buildout of the backbone those T3's tie into. Somehow I doubt that today.
rradina
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rradina,
User Rank: Ninja
1/15/2014 | 3:03:00 PM
Re: Confused author
While I have the same concerns about this ruling, let's not roast the judge.  My take on this is the judge told the FCC that they were trying to regulate what they classified as an "information service".  The judge told them that they only have the power to regulate common carriers.  To boil this down further, a common carrier is essentially a utility.  Utilities are allowed monopolies that operate under close supervision (regulations).  Within reason, the regulatory body that oversees the utility can change rules, make new rules and remove rules.  If the utility does not accept the rules, it has the right to challenge the regulatory body in court.

The ruling simply tells the FCC that if they believe the Internet needs regulation, it will have to classify the providers as common carriers (utilities).  Then they can govern these bodies with regulation.

Another option is for Congress to write some laws that regulate the Internet.

Now back to my concerns.  I'm very concerned that we do not have sufficient competition for the Internet to be self-governed.  Recent NetFlix performance ratings show Comcast falling from grace. At least some Comcast customers are not happy with their NetFlix performance and since they apparently don't have an HSI choice, they are dropping NetFlix.  Competition should punish non-performance.  In this case, NetFlix claims the issues is not on their end and points to other HSI providers that don't have any problems.  At one point Comcast was also ranked at the top of the list (top being good).

Let's dive a little deeper.  If folks cut the Comcast video cord but keep their HSI connection, Comcast loses big money.  They either need to figure out a way to stop video customers from defecting to NetFlix or raise their HSI prices to account for lost video revenue.  Raising HSI prices may not be an option because SOME (not all) customer enjoy a choice (especially those in Verizon's FIOS areas).  Raising prices may drive those customers to a competitor for HSI which then means they'll be playing a zero sum game.  I suppose Comcast could only increase prices where folks don't have a choice but I'm pretty sure they don't want to get caught doing that! 

I'm certainly not suggesting Comcast has willfully degraded NetFlix performance to stem NetFlix defectors.  However, what motivation does Comcast have to solve the issue if it only exacerbates defections to NetFlix?  What we have here is a conflict of interest.  History is rife with examples that inappropriate decisions are made whenever such a conflict exists.

We need to either make sure everyone has a whole bunch of choices for their HSI service or we MUST establish a few rules to keep the insanity of allowing HSI providers to not only own content creators but compete with other services that use their network.
MyW0r1d
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MyW0r1d,
User Rank: Strategist
1/15/2014 | 2:58:10 PM
Re: Calm Down everyone
I generally agree with and enjoy Feldman's articles, but he left me confused on this one.  He advocates the best focus of FCC to be encouraging free competitive market, but somewhat conveniently forgets that he reminded us at the beginning that when left to self regulation the big players do not play fairly (ComCast cited).  There can be no free market if the rules do not support a level playing field.  Name the company AT&T, Verizon, ComCast, or Google - where they cannot simply buy you out, they will all seek to tip the scale and rules in their favor.  Simply change providers is not simple as they all have adopted at least two year contracts and high penalties for early termination if you have the luxury of multiple providers to choose from.
The Judge
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The Judge,
User Rank: Apprentice
1/15/2014 | 2:39:48 PM
Re: Regulatory Capture
Keep tilting at windmills, Becky.  

And supporting crackpot leftist groups...
BeckyC031
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BeckyC031,
User Rank: Apprentice
1/15/2014 | 2:29:56 PM
Regulatory Capture
 

 

The Judge" just clearly just loves regulation –from crayons to railroads. If there is this big demand for passenger railroad in the U.S. why doesn't a company provide it? Radio is pseudo deregulation – it is still under government control and most importantly the government restricts the supply – as a result that demand is now met by the Internet. However around the turn of the century that alternative was almost crushed by government regulation –not the FCC but the Patent Office. Tim Wu, who coined the term "net neutrality' said in his book "The Master Switch:

 "Again and again in the histories I have recounted, the state has shown itself an inferior arbiter of what is good for the information industries. The federal government's role in radio and television from the 1920s through the 1960s, for instance, was nothing short of a disgrace.... Government's tendency to protect large market players amounts to an illegitimate complicity ... [particularly its] sense of obligation to protect big industries irrespective of their having become uncompetitive."
<<   <   Page 3 / 6   >   >>
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