Friday, June 06, 2014

Net Futility...

So, the "net neutrality" thing.  John Oliver gives an overview and some background.

Some problems with Mr. Oliver's (predictably) mushy view.

1.  I can imgaine hearing some guy in 1915.  "Our road system is not broken, and the guys who want to put up traffic signals are trying to fix that!  (Laughter)  There is no reason to allow innovation, or new ideas!  Our horse and buggy system is working just fine!  And it's fair:  everyone can operate at the same horse and buggy speed!  Unless EVERYONE can afford automobiles, no one should be allowed to travel faster than a horse and buggy can travel.  Road neutrality! Let's keep the road-net safe for the Amish!"  (Applause from the idiots who applaud that sort of thing).

2.  In airplanes, we have first class.  Hotels have suites.  The world won't end if there are different levels of service.

3.  But wait:  competitors will be at a disadvantage!  Yes, that happens all the time.  The makers of buggies, and whips, and saddles, and so on, were all hammered by the advent of the car.  There is no good reason to care about PRODUCERS.  We should care about consumers.  People want different things. 

If we allow producers to compete along the "faster service" margin, competition will spur faster service and lower prices.  And everyone will be able to afford faster service.  Outlawing competition along that margin will trap all of us at horse-and-buggy speeds.  The analogy is the phone system, under Ma Bell:  It "worked," but it worked by preventing competition.  Once alternatives were legalized, the system changed in ways no one could have predicted.  Now, landlines are fast disappearing.

I admit this is complicated.  The problem is that, as always on the John Stewart show, silly and superficial ideology is substituted for actual analysis.  The FCC is trying hard to "protect" net neutrality, not to eliminate it.  And the FCC should be our primary concern.  That is the real threat to the internet, folks:  The FCC is using net neutrality to try to control things.  Far from a benefit, they are the bad guys. 


Dave said...

Several things.

(1) Remember that many or most internet providers are operating under the telephone/cable model in which a geographic monopoly is given in exchange for regulation including some kind of universal service agreement. "Net neutrality" regulation is basically an extension of the current telephone rules--AT&T can't charge you extra to accept calls from someone who has service from Verizon. Once they give you a phone number, they are agreeing to put through calls with no extra barriers.

In general, I oppose any deregulation which leaves monopoly providers in place.

(2) There are two ends of the transaction, and net neutrality only applies to one. Re: "first class"--providers can and do charge their customers, the people who purchase internet service, more for different levels of service. Always have, and likely always will.

Basically, anything that sends packets to your computer is something you requested. The issue is whether your provider can say to you: "your delivery of some packets will be impaired unless the sender pays us extra", or to the entity you order from "if one of our customers orders packets from you, we'll slow them down unless you pay more."

(3) Your point #3 seems to miss who has the buggy whips. The canonical example: you get internet from your cable tv provider. Watching TV shows and movies streamed over the internet is a lot more convenient and cheaper than getting cable TV. Many consumers feel they will benefit from dropping cable TV service and just watching via the internet.

But without net neutrality, the cable/internet provider can just throttle down video delivery--so either you get frustrated, give up on streaming, and go back to cable TV or they manage to force the streaming companies to give them enough money to make up for the cable bill you're not paying.

Effectively, we have a situation where the road is wholly owned by the buggy company--and they want to either set speed limits so that these fancy motorcars can't go any faster than their buggies or charge tolls to the cars to make up for any loss of buggy profits.

Now--there might be a different story if there were true competition for internet service, either via more fiber/cable/wire providers or via substantial improvements in wireless bandwidth, then there might be an argument for dropping net neutrality. But until there's real competition, I think we need to keep it.

(Note the recent story about how Verizon and other providers reacted when Netflix put up indicators that the slow delivery was the fault of congestion in the providers' service. Nice, but with the local monopolies most folks will find themselves knowing who to blame but unable to do anything about it.)

Norman said...

Big thumbs up to Dave's response. Why insist on applying the logic of perfect competition to a market where those assumptions are nowhere close to holding? It comes across as a foxes and hedgehogs thing. Perfect competition is the wrong model for this market, and we have others that fit better.

ConnGator said...

There is a solution: real competition in high-speed Internet access. If I have 4+ providers who want me as a customer I won't worry too much about net neutrality.

Come on, Google Fiber, come to Raleigh and give me an alternative to crappy Time Warner.

mike shupp said...

Also, we generally try to deliver the same air quality to a broad area, instead of singling out the people who are best able to pay for high quality air for extra charges, and vice versa. We try to make water quality the same for all consumers. Ditto drug purity. Our public schools may be of different quality by empirical observation, but not a school board in the nation will ever admit such an inconvenient fact. Every ballot cast is of equal weight, every person who wishes to address the city council receives the same consideration, ....

The list goes on and on. It just ISN'T the case that every good imaginable is divided into high quality merchandise for the affluent, and a lower quality product for the poor and bargain-conscious consumers.

Moreover, technology changes, often in positive directions. You're at liberty today to say that current broadcast speeds and tehnology and the extent of cable networks and the demands for internet access justify a multiple-tier pricing scheme for net usage. Perhaps that's true today in the USA -- though oddly enough, not the case in the rest of the industrialized world. Will this same multiple-tier pricing be justified in economic terms across the nation a year from now? Or 5 years from now? Or 20 years? (Please bear in mind that once the FCC acts on net neutrality, it's going to be many years before the issue is raised again. The market, as we all know, reacts so sluggishly to changing conditions!)

So. I think we're on opposite sides of this issue.

Another Dave said...

The first comment pretty well summarizes my thoughts on this issue. However, I'd like to know, from people who share the good Mungowitz's opinon:

1) Where is the innovation?

2) How will allowing a price differential for data from a popular provider, say Netflix, encourage competitors to enter the market? Their costs to entry, mainly infrastructure at the user end, are still the same, but with no chance of grabbing an incremental share of Netflix's business.

Tom said...

Dave seems to think that, since government screwed us (by providing and protecting local monopolies), we need to look to government for aid. I suppose I should go rob him and then he'll want to buy my alarm service.

Norman said...

Tom, You think local monopolies on cable internet service are created by government? Does the same apply to water & sewer, or electricity transmission?

I'd be fascinated to see evidence that these industries are highly competitive in the absence of government regulation. I was under the impression that fixed costs still mattered.

Anonymous said...

I have always enjoyed the net neutrality argument. People who hate giant corporations picking sides in a battle between giant corporations. Net neutrality isn't about Kids Prefer Cheese being slowed down by ISP's, it's about ISP's extracting rents from Netflix and Google.

To use the highway analogy. The ISP's don't care about the SMART car on the road. They care about Walmart's trucks. That's where the money is.