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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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RobPreston
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RobPreston,
User Rank: Author
1/21/2014 | 9:17:22 AM
Re: Antitrust
Whether you consider the prices AT&T is charging you to be lower or not, the fact of the matter is that prices of local, domestic and international phone service are much lower than they were 20 years ago because of competition. Cable-, wireless-, satellite-, Internet-based competition. No market is perfect, however.
missmouser33
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missmouser33,
User Rank: Apprentice
1/20/2014 | 12:21:48 PM
Internet Must Go
Net neutrality is an issue that hasn't been sqashed yet. It's more important than ever to learn the issues, so here's a great short mockumentary if anyone wants a refresher: www.theinternetmustgo.com/
moonwatcher
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moonwatcher,
User Rank: Strategist
1/19/2014 | 11:51:07 AM
Re: Net neutrality
Comcast, which everyone loves to hate in the North as much as everyone in the South hates Timewarner, has a RIGHT and even a DUTY to limit Netflix, Hulu, and Amazon traffic compared to their own streaming services because THEY built their own infrastructure to carry their own services first and foremost as a way of making a profit by offering those services. If I built a road to serve my own customers, but then noticed a large trucking company hogging that road, I could either slow down the trucks of the large trucking company, charge it more money for access to my road, or I'd have to charge ALL my customers more money to build a bigger, wider road. Why should MY customers have to pay more so the trucking company can more or less "steal" the use of my road? Why shouldn't Netflix and its subscribers have to contribute more to building the infrastructure? What if you were a Comcast subscriber and your streaming service was suffering because they were attempting to carry the Netflix traffic? Wouldn't you be mad? How about if you were a Comcast shareholder expecting return on your investment?
jfeldman
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jfeldman,
User Rank: Strategist
1/19/2014 | 9:35:24 AM
Re: Who runs the network
I don't disagree that unbundling has proven effective in Europe. I'm not dismissing it, I'm actually sort of a fan, I just think we need to move cautiously if we go down this road. One other note: if we want to treat broadband as a national asset and utility, and go the way of Amtrak (which consolidated many independent private railroad companies into one not for profit/gov entity back in the 70s), that's possible, too, we just need to be willing to pay for it.
jfeldman
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jfeldman,
User Rank: Strategist
1/19/2014 | 9:32:27 AM
Re: Wrong problem
Precisely, Rob. It would be extremely unlikely for any carrier to substantially rate limit in an anticompetitive manner and not get held accountable in some way for it. Again, many of the arguments against competition are purely fear based.
moarsauce123
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moarsauce123,
User Rank: Ninja
1/19/2014 | 8:12:34 AM
Who runs the network
It all comes down to who runs the network. The network is the biggest expense and that is why those places who can count themselves lucky have two networks, the one from the cable company and the one from the phone company. I hardly call that competition.

We all know the pesty ESCOs that all rely on the local power company's distribution network. This is skewed competition because the local power company also sells electricity and is likely to give its own customers preferred treatment. Real competition would be if there is one network provider open to everyone charging the same fee per customer. Now we have a level playing field!

Same is needed for broadband, the ones running the network cannot be ISP at the same time. The network is open for every competitor for the same fee per customer. With that the days of preferred content are over because there is no extra money to be made by the network operator. At that point content providers would be all in favor of network neutrality, because they don't want to be at the mercy of the network operator deciding which content or service gets throttled.

Switiching services should also be easier because then the providers do not have to install any hardware. Yes, that may mean consumers have to pay two bills, one for the sevrice provider and one for the network operator, but that is a small price to pay for net neutrality.

So, I disagree with the "we are not Europe" idea. What is happening in Europe is that consumers and companies there enjoy much faster Internet access for a fraction of the price with a much bigger competition. True, the major networks are still operated by the former telecom monopolies, but even that is seeing competition. Quite a few companies build their own networks running fiber along railroad corridors (in a closed channel on the ground, not nailed to poles). There is plenty of stuff that is working great in Europe that would also work great in the US. Why not go with that for lack of a better alternative? At least better than the "not invented here" syndrome.
stevew928
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stevew928,
User Rank: Strategist
1/18/2014 | 3:59:26 PM
Economics 101
First, and in general, you are missing a couple of very basic things about economics. Due to our nature as humans, competition alone isn't the magic ingredient of economics. This is a basic misconception I run into all the time. To have, what would properly be termed a free market, there needs to be adaquate regulation AND cometition. Or, to put this another way, no regulation equals anarchy, not freedom.

Second, there are reasons we have things like utilities. Notice that our roads, our water and sewer systems, the power grid, basic communications systems (*caugh, caugh* a key here), etc. have been designed as utilities. This doesn't mean that they can't be private, but they need proper oversight and regulation, to ensure certain aspects remain intact for the best public interest.

Third, I think you've missed one of the key points behind Net Neutrality. It isn't a particular regulation, but a PRINCIPAL which is absolutely crucual, however we choose to implement and regulate it. While we can argue over what, if any level of traffic shaping is necessary (say, for emergency communications, or core reliability, etc.), what we don't want is an ISP partnering with a government or content provider to favor or censor content for financial benefit or political interests. There is a 'cloud' of data end users want to access, and the 'pipe' to that 'cloud' should be a 'dumb' as possible, while *maybe* making certain exceptions, only for very important reasons (but, even that opens a potential can of worms, unless done with great public transparency and consideration).

Fourth, sure more competition would be great. However, I'm failing to see how a few powerful telcoms partnering up with content providers to draw customers to their partular flavor of the Internet is going to do this. I see nothing but bad for the end users coming from such an arrangement, if not downright evil... ie: the end of free-speech via the Internet. If you don't think that could happen, you're simply naive. At least keeping that possibility illegal, increases our chances of not going there.

Fifth, you speak about the cost of over-provision. While you're technically accurate, I think the problem is in scales of magnitude. Wasn't it the Comcast CEO who recently made the daft statement that they have so much bandwidth they could unleash, but their customers wouldn't even know what to do with it? Really? Cellular data aside, the Internet end-mile is SO far behind in the USA (despite $200B in tax-breaks we've seen little benefit from), that what you're speaking of isn't even an issue. I think I read that we're talking like $0.02 per/GB of data as the cost... and many say that's high these days. What does the average user consume? 20 GB? 50 GB? That's like $0.40 to $1. Maybe the *big* user uses $10 or $20? Big woppie! They are charging $60+ for crying out loud! This whole push (and why telcos are so adamently opposed to Net Neutrality) is over their want to add another layer of profits onto their business model, and shape the Internet to their financial benefit to win customers from the competiton. If, say AT&T, provided the best access to Netflix and Google, who's going to go with Comcast if they enjoy those services? So, it's exactly anti-competition which is the goal here.

If they have no problem dealing with regulation, as you say, why are they so opposed to it? Why is it telcos vs nearly everyone else? Heck, when the Christian Coalition and the ACLU agree, along with most of the tech industry innovation leaders, shouldn't we, maybe, pay attention? (How often does that happen!) Especially when it's just one group of monopolistic businesses on the opposing side of things?
anon0114985622
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anon0114985622,
User Rank: Apprentice
1/18/2014 | 10:16:58 AM
Re: Regulation and Competition
I wholeheartedly agree that it is quite naive to assume that an ideally competitive and free marketplace is attainable simply by limiting government regulatory influence.

But it is also naive to assume that government regulation is, in any way, egalitarian. just, and uncorruptable.

Neither ideal marketplances nor ideal governments are possible in the real world, and least of all in the imaginary "free world".  Money is power and money trumps all, (including both adequate infrastructure and adequate competition).  Politicians and judiciaries can be bought and sold just as easily as less powerful competitors can.

In the real world, consumers are destined to be eventaully consumed - the Darwinian food chain is never truer than in the world of finance and economics.

 

 
builder7
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builder7,
User Rank: Apprentice
1/18/2014 | 9:41:37 AM
Dark bandwidth
Although all of these arguments hold weight, there is no reason to throttle bandwidth or control anybody, except for network equipment in the central office's.  90% of the bandwidth of the available internet pipes are not used because companies are throttling it because they believe in this business practice of optimal return as to the amount of traffic and at what point they make the most money.  Unfortunately, their business model is flawed because by restricting network bandwidth the only thing that they restrict is the economy, which will make them much more gold if allowed to flourish rather than to wither on the vine with somebody trying to squeeze out the nector of it.  We need an open society that has freedom without corporations controlling our lives and making things more expensive.  The example about 'bad players' who use lots of bandwidth does not make a lot of sense because the bandwidth on the network is a gross amount of bandwith and it goes through the pipes just fine and is restricted at the infrastructure of the network.  Instead of throttling everything they need to open up the dark Internet pipes and lower the prices so that we can be competitive with the rest of the world.  At the rate this country is going, with these pig headed, greedy people running things, the US will be way down the list on everything pretty soon and we have actually been going downhill since the 1960's.  Give me a break AT&T and other American corporations and actually start competing globally, rather than paying global wages and charging old time American prices that drives everybody further down.  If we want to be a true global competitor these companies will open up more bandwidth, suck it up and buy the necessary equipment, and lower the prices like other countries so that we can let innovation flourish in this country once again.  Capitalism does not have any right to shut down free enterprise for 99% of the people in this country!
nolivier100
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nolivier100,
User Rank: Apprentice
1/18/2014 | 8:29:06 AM
Lets get real
To pretend net neutrality is a bad thing - it is carpet bagging - pure and simple.
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