Net Neutrality

You hear a lot in the news today about net neutrality. Net neutrality is basically this – currently telecommunication companies (hereafter called telcos) give you whatever bits you request on the internet without deciding which ones you deserve. Now telcos are fighting to be allowed to prioritize certain bits over others. This may seem trivial, it isn’t.

The telcos claim that this will allow them to offer better service to firms. Google.com can pay and get faster access to your connection than joeblow.com. This seems like a good idea per se. I don’t think it is.

Arguments for Net Neutrality

Many people think that neutrality would end the usable internet. Sites like youtube would drown out more legitimate traffic, like vonage[1] and IPTV.[2] They claim junk would crowd out non-junk.

First – why would youtube crowd out IPTV? If the network really is neutral, IPTV is just as likely choke off youtube. And if anything is getting choked off that suggests that users are demanding more bandwidth than exists. If this is the case, the telcos should either lay more cable or charge more until demand = supply.

Second – what these people are afraid of has never happened. That doesn’t mean it can’t happen, just that it is unlikely. Even if it was likely, this is a QoS[3] issue NOT an aggregate bandwidth issue.

Third – it is awfully pretentious to tell an internet user which parts of his/her browsing is less important than others. Obviously things like emergency services should receive priority, but they are the exception. Why is youtube less important than IPTV?

Another common thing to hear is that companies like Google and eBay are getting a free ride on the telcos. The telcos are just making them pay for the access they already enjoy. This is junk – Google already pays for the bandwidth it uses. So do you. If you are both already paying, who is getting the free ride? No one.

If you controlled a near monopoly (oligopoly) on an important technology, would you want more or less government intervention? I know I would want less intervention. As a monopoly (or oligopoly), the telcos can charge artificially high prices. The huge costs to entry (fixed costs from laying the cable) deter entry and the monopolist can make scads of money.

So guess what position the telcos are taking towards net neutrality? Slogans like “hands off!” and “don’t regulate!” [4] It is clearly in their best interest to lobby against regulation, so our politicians really need to take their lobbying less seriously (or more precisely, evaluate the arguments not the arguers or their contributions).

What is this really?

This is nothing new. Firms have been trying (and sometimes succeeding) to do this for a long time. It is essentially holding another firm hostage, extortion. Let me give an example. Let’s say that Moneybags Inc. owns all the highways. Currently they charge tolls for access. Truckers r’ Us uses those highways to do business, and they pay the toll for access like everyone else. Moneybags Inc. sees how much money the truckers are making, so they institute a policy – if you want to drive over 30 MPH, you have to pay double in tolls. It makes sense right? If you are driving 60 you should have to pay 30 right? Bullocks.

This scenario isn’t actually completely accurate. First we’d have to add that Moneybags Inc, which used to let anyone on the highway, now has a competing trucking firm that doesn’t have to pay the tolls (or gets them rebated). To add further accuracy, Moneybags can also exclude completely, for any reason, any vehicle they want. Not only that, but since it is so expensive to set up a highway system, Moneybags Inc. actually got the government (meaning you and me) to fund the vast majority of the road building. And in fact, Moneybags Inc. pocketed a whole bunch of the cash and didn’t build all the roads they promised.

That is pretty close to the scenario with net neutrality. As the scenario shows, this is purely a money grab. The worst thing is that it might actually work. With all the money, slogans and rhetoric these companies are (and have been) throwing at congress, they might just win.

For more information about what telcos have been doing with our money, read here about the scandal.

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[1] Vonage is basically telephone over the internet. In the past the sound quality for such technology was so poor that it was virtually unusable. Firms like Vonage and Skype figured out ways to improve the sound quality without requiring really really fast internet connections.

[2] IPTV is simply television delivered over the internet. Individuals, groups of people or firms create TV shows and distribute them for free over the internet. In the future, many people expect all TV to be delivered through the internet because the internet allows for greater variety of shows, less use of the electromagnetic spectrum and lower distribution costs.

[3] QoS – Quality of Service refers to the probability of your connection meeting a specific throughput. Telecommunication firms oversell capacity, but if you always get the capacity you were guaranteed when you signed up, there should be no problems with crowding out.

[4] It is pretty well known that these two websites were created by the telcos as a sort of fake grassroots campaign.