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1/17/2014
12:55 PM
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Net Neutrality: Regulation Makes Evil Empire Giggle

Want a faster, better, cheaper, more available Internet? Painful Net neutrality regulations won't help. Competition will.

When I weighed in on Tuesday's court ruling reining in Net neutrality rules, I argued that more competition, not misguided regulation, is the best way to keep the Internet open and promote innovation. I stand by that argument, and I want to further explain why an FCC-gone-wild will only make the carrier duopoloy that you hate even stronger. If you want to destroy that duopoly, you must be open to other ideas.

We all hate the lack of broadband choice. But that's what we have as a result of our history, going back to when AT&T (Ma Bell) was the government-regulated monopoly. If you translate that into Internet terms, it was as if one entity operated 98% of all Internet connections and made 90% of all computer equipment.

An antitrust lawsuit resulted in the breakup of Ma Bell in 1984 into separate, for-profit Baby Bell telcos. Then the 1996 Federal Telecommunications Act, ostensibly enacted to enable competition, introduced complex regulation surrounding what are still called CLECs, or competitive local exchange carriers. The broken-up phone companies were called ILECs, or incumbent local exchange carriers.

If these confusing acronyms make you think that the governing regulations were also confusing, you're darned right. The experiment of regulating our way to competition was, by any measure, a failure. CLECs had their boom day but have since petered out, as the telecom market collapsed back to a far less competitive one, whereby SBC, a child of the broken-up AT&T, merged three of the Baby Bells into one in 2005 and acquired AT&T (and took on its name).

Regulation did not make the market more competitive. It did not make the market more attractive. And so we stayed, mostly, with the local telecom incumbents in one business and the local cable company in a different business, prior to the great Internet boom.

Prioritize or overbuild
Now, let's talk about the need for traffic prioritization, because this is also important when we talk about why Net neutrality will have the reverse effect of what is intended.

I was amused that some InformationWeek readers think that no provider should ever have to prioritize the traffic it delivers. Really? C'mon, guys. All you would have to do is run a truly large network but have no authority over all of the end users for more than 35 seconds, and you'd know that the ability to prioritize or block traffic is absolutely necessary in order to serve the many when the few are acting up. In my long-ago work as an infrastructure and security consultant, I helped universities and large companies configure equipment to either drop or deprioritize peer-to-peer or ridiculously high users.

Traffic prioritization is not a monstrous thing to implement. The alternative is to over-provision 5:1 so that the many aren't affected when the few act up. That's expensive. Who's going to pay for it? Those of you who are in love with the idea of Net neutrality? Because I sure don't want to pay for it. And the carriers aren't going to pay for it either. They're going to pass those costs on to you. And that state of affairs won't have the intended effect of a faster, better, cheaper, more available Internet.

Regulate others?
Now back to regulation. Regulation is to the masses a bit like workstation lockdown is to IT pros: Nobody cares when it's happening to someone else.

As someone who cut his teeth on infrastructure and has moved between private sector and government jobs, I've watched both regulation and IT lockdown for 20-plus years. The law of unintended consequences doesn't just apply to traffic prioritization and overbuilding costs. It also applies to competition.

Like the mythical energy monster that only gets stronger when you shoot it with a laser gun, the incumbents that you hate so much have no problem dealing with regulation -- it's far better than having to compete with market entrants. When I was in business school, some of my classmates were in telecom, and one of them who worked for an ILEC would laugh at the notion of new CLECs dealing with the regulatory environment. You see, the ILECs are used to dealing with bureaucracy, and have lawyered up and passed the expense to you, the consumer. Market entrants see lots of regulations as a threat, not a way to level the playing field. Because they don't level it.

Regulation, like medicine, should be used only when there's no alternative. The chief reason cited for Net neutrality is to prevent monopoly and antitrust types of behavior. My question for you is this: If we don't believe antitrust laws will be enforced on the Internet, why do we think that Net neutrality laws will be? And if we do think those antitrust laws will be enforced, there's no need for Net neutrality.

Moving forward
Piling on regulations with all of their delicious unintended consequences isn't the answer. So what is?

Let's focus on the actual problems and not what we imagine the problem could be in the future. Let's not focus on imagined anticompetitive traffic-shaping (which is illegal from an antitrust perspective). Let's not, as some readers have, focus on the imagined problems of redundant infrastructure -- that it's "wasteful" to build new fiber paths when incumbent backbones already exist. Your brain has redundant pathways, too. It's not a bad thing. Incumbent network operators have been exceedingly jealous about sharing their infrastructure with competitors, so new infrastructure gets built. Don't worry about it.

Let's focus instead on how to get broadband to the many rural readers who wrote in to bemoan their lack of choice. Let's focus, again, on incentivizing competition. That's an OK thing for government to do.

And government has done that, with reasonable success lately. The NTIA's BTOP (Broadband Technology Opportunities Program) has done a remarkable job of extending broadband coverage in many states over the last several years. You can see a map here. The program is no panacea, but it's an example of what can happen when we apply incentives instead of crushing regulations.

So-called "white spaces" in newly freed-up radio spectrum offer a fantastic opportunity for some enterprising young libertarian engineers who want to create a peer-to-peer "Radio Free Internet." But I guarantee you that traffic management would be a necessary evil of even that network.

If we insist upon the government having a role making the Internet open and accessible, it's possible that "unbundling," the practice of forbidding carriers from being both middle and last-mile providers, could also create competition and reduce anticompetitive behavior. It has worked in Europe, but we're not Europe. And we would do well to consider the law of unintended consequences if we choose that route.

Bottom line, there are competitive broadband success stories across the US. Let's replicate them, preferably without government assistance but with that assistance if it's needed. One local-to-me example is SkyRunner, a wireless ISP that has served western North Carolina since 1997. It provides excellent Internet service to both municipal and rural clients over WiFi.

In this case -- and, I would submit, many others -- no crushing regulation was needed, just hard work and great customer service.

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.

Can the trendy tech strategy of DevOps really bring peace between developers and IT operations -- and deliver faster, more reliable app creation and delivery? Also in the DevOps Challenge issue of InformationWeek: Execs charting digital business strategies can't afford to take Internet connectivity for granted.

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Brian.Dean
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Brian.Dean,
User Rank: Ninja
1/18/2014 | 8:06:09 AM
Re: Wrong problem
Yes excellent points and consumers are becoming extremely good at encrypting their traffic so that the provider does not even know the type of traffic that it is handling. Consumers are never going to allow any practice that makes them pay more or limits them.
Brian.Dean
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Brian.Dean,
User Rank: Ninja
1/18/2014 | 7:47:55 AM
Re: Antitrust
Yes, I agree the current situation is lacking competition. As a consumer not all of my traffic is of equal importance, if I am gaming I need low ping and low bandwidth (I consider this leisure or entertainment), if I am watching a documentary or better yet an important video lecture then I need high bandwidth and ping is not so important (this traffic is more important because fees are being paid elsewhere as well).

If more competition exists then it would be feasible for a consumer to put together a redundant system based on their needs and then pay accordingly. 
Brian.Dean
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Brian.Dean,
User Rank: Ninja
1/18/2014 | 7:23:49 AM
Re: Antitrust
Most probably you are not paying the lowest possible price. However, you might be paying relatively lower than what you would be paying if a monopoly had existed rather than a duopoly. Both situations are bad, it's kind of like choosing between being in the frying pan or in the fire.

We have an ecosystem that is quite diverse i.e. phone service, broadband service, VOIP, wireless communication and so many other types of networks, given my way I would like to see a half dozen providers in every segment, in other words, more competition.

Globally, only 2 billion people are connected to the internet and 5 billion people are not connected. In a competitive environment businesses tend to seek out new sources of revenue, if competition is already at a high level in the US market then why do I see more EU and Asian service providers trying to expand?
anon8151121903
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anon8151121903,
User Rank: Apprentice
1/17/2014 | 6:33:55 PM
Re: Antitrust
I don't consider what I'm paying for my AT&T phone services "lower prices."  The fact is, the entire communications industry is one big RACKET. And the American taxpayer gets REAMED because of a LACK of government regulation. PERIOD.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
1/17/2014 | 4:18:32 PM
Re: Splitting does not mean competition
Can I have Google Fiber yet?
RobPreston
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RobPreston,
User Rank: Author
1/17/2014 | 3:22:38 PM
Re: Wrong problem
Doesn't anyone think consumers will punish operators that engage in traffic discrimination in order to hurt their competitors? Going way back to 2006, a local phone company called Madison River Communications was found to be blocking Vonage VoIP traffic. After the public hue and cry, it quickly shaped up. Consumers won't stand for it;  they'll vote with their feet or, if viable provider alternatives are lacking, will take to social media to rip the offending operator a new one. Meantime, as the author states, there are competition laws already in place that prohibit such discrimination
milliamp
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milliamp,
User Rank: Apprentice
1/17/2014 | 3:11:39 PM
Re: Wrong problem
You make it sound like traffic prioritization and traffic discrimination are different when they aren't. "Discrimination" is just giving traffic the lowest priority in prioritization. Telling someone prioritization is ok as long as nobody is lower priority than anyone else doesn't even make sense. 

There is a need to correctly define what would actually be outlawed before writing it into law and that specific part has proven to be more difficult than most expect at face value. I've read several of the proposed documents and there are a lot of problems with the proposal. 

The real problem is we all want to outlaw being evil with no clear way to define just what "evil" really is.
BrianAnes
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BrianAnes,
User Rank: Apprentice
1/17/2014 | 3:09:49 PM
Re: Net Neutrality
Offering different bandwidth and trhoughput options to those receivng internet services very well may be a decision related to competition - IF such competition really exists.

Decisions of different bandwidth and throughput opton to those providing content dependant on what they pay (or most other criteria) is not free market enterprise. It is CENSORSHIP.
milliamp
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milliamp,
User Rank: Apprentice
1/17/2014 | 3:03:48 PM
Re: Net neutrality
The problem is this is not easy to regulate. You say "Net neutrality does not mean that there is no prioritization of network traffic" but the example you give of something that should be outlawed is prioritization of network traffic. 

Its harder than you think to outlaw the bad practices without harming the ones that aren't. QoS is in use on most major networks and being used in ways that are not mailicious but how do you outlaw bad traffic prioritization without outlawing good traffic prioritization?

Everyone working on a network would need a team of technology trained lawyers rubber stamping every change they make. What could possibly go wrong? 

Run into a problem and have to take quick action to mitigate impact? Nope, its pending approval from legal. Could take 4-6 months to fix something that should take minutes. 

Maybe the government will install a bunch of nodes to intercept and monitor traffic on ISP networks to ensure compliance with NN laws and ahem, promise not to let the NSA use data from them.

The government is the orginization you should trust the absolute least with making sure you are getting good return for your dollar.
anon7766509461
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anon7766509461,
User Rank: Apprentice
1/17/2014 | 3:00:30 PM
Regulation and Competition
I believe it's mistaken to assume that lack of regulation = competition.  That's true in perfect markets.

What we're talking about with telcos is natural monopoly.   They're not evil.   The telco delivery infrastructure, in thise case, just has natural properties that discourage competition. E.g. high barriers to entry after the first 1-2 market entrants.    How many people have more than 2-3 broadband options?  That's not a perfect market.   Giving them additional power over content just adds to their market power. 

Defining net neutrality gives consumers a lever over that market power.  

Dogmatically assuming that regulation reduces competition may be true in Econ 10 Widget World.   However reality often astounds theory.  
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