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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,
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1/17/2014 | 1:54:28 PM
Antitrust
Although I agree with the thrust of Jonathan's argument, it COULD be argued that the antirust authorities were too hands off when they let SBC consolidate much of the telco market and then buy AT&T. That said, the cable companies emerged as natural competitors in local markets, and with continued technology innovation, let's see if satellite and wireless (and power?) companies as well will give the telco/cable duopolies a run for their money.
anon8151121903
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anon8151121903,
User Rank: Apprentice
1/17/2014 | 2:12:32 PM
Re: Antitrust
The problem with Jonathan's argument is when is the last time competition has ever lowered prices when it comes to the communications industries?  More competition doesn't necessarily mean lower prices.
RobPreston
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RobPreston,
User Rank: Author
1/17/2014 | 2:27:28 PM
Re: Antitrust
When has competition in the communication industry lowered prices? We're all paying much lower prices for local, long distance and international telephone service because of competition. From MCI and Sprint in the old days to Vonage, Skype and MagicJack today--competition almost always lowers prices. My Cablevision cable TV, local phone and Internet access bill would be much higher if Verizon FIOS wasn't in the wings.
daryel
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daryel,
User Rank: Apprentice
1/17/2014 | 2:29:18 PM
Splitting does not mean competition
The author has confused "compeition" and the splitting of the Ma-Bells.  Splitting the Ma-Bell did nothing to allow any competition.  After the split, 99%+ of consumers still had one choice to get their teleservices from. Southwest Bell never competed with Pacific Bell, and so on.  The split never promoted ANY competition.  Just like most cable subsribers are limited to a handful of options for high speed internet, having limited options only drives the prices higher.

 
JustWorld
IW Pick
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JustWorld,
User Rank: Apprentice
1/17/2014 | 2:35:16 PM
Net neutrality
The need to prioritize trafic does not exclude the need to provide net neutrality. Net neutrality does not mean that there is no prioritization of network traffic. It is about WHAT can be prioritized or what can't. If my trafic for Netflix streaming was slowed down, while traffic for Comcast pay per view, for example would be allowed full throttle, just because I am on comcast internet end, I would be very upset. I imagine lots of people would be very upset. This is what I DO want FCC to regulate and not allow this to ever happen.
anon0349970690
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anon0349970690,
User Rank: Apprentice
1/17/2014 | 2:39:32 PM
Re: Antitrust
Tell me how this will encourage any form of competition?

Cable - In my area we have 1 cable company, and they will not allow any others in the area. And that is Cable One, and the only way im sure that will change is if someone like Comcast buys them out. And this will still leave us with only 1 option.

DSL - On the other end of that the only other internet option we have is AT&T which has absolutly terrible service in our area.

So we are stuck with Cable One in our area which has a terribly over priced service that has extreme packet loss and constant drops from the network. 

Leased -Now if I was a business I could pay out for an extremely expenssive leased line from another carrier, which is not affordable.

SAT -Satelite is not even an option with the increased Ping times that the technology creates.

Cell- still not viable or cost effective for a daily internet user/ gamer

There will not be any new competition, the only viable options are DSL/ Cable for broadband and in most areas only 1 of the services are acceptable. They do not have to compete they have monopolies on the area they supply the service to.
RobPreston
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RobPreston,
User Rank: Author
1/17/2014 | 2:48:55 PM
Re: Splitting does not mean competition
The author does NOT say the splitting of Ma Bell created competition, though it did create competition for telecom long distance and equipment manufacturing. The author says that the 1996 Federal Telecommunications Act created local competition, but that the upstart CLECs choked on the regulations put in place at that time while the established ILECs brushed those regulations off.
J.w.S852
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J.w.S852,
User Rank: Apprentice
1/17/2014 | 3:00:21 PM
Wrong problem
The author is confusing or conflating traffic prioritization with traffic discrimination. ISPs will prioritize not in order to facilitate traffic rationalization for efficiency but for exploitation and monetization. The two, prioritization and monetized discrimination, are two distinct motives with different results. Perhaps there is a better way to acheive net neutrality than regulation but not the way the author is suggesting which does not address the real problem at hand.
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.  
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.
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