Remaining neutral on network neutrality -- it's the monopoly, stupid

People ask me about the EFF endorsing some of the network neutrality laws proposed in congress. I, and the EFF are big supporters of an open, neutral end-to-end network design. It’s the right way to build the internet, and has given us much of what we have. So why haven’t I endorsed coding it into law?

If you’ve followed closely, you’ve seen very different opinions from EFF board members. Dave Farber has been one of the biggest (non-business) opponents of the laws. Larry Lessig has been a major supporter. Both smart men with a good understanding of the issues.

I haven’t supported the laws personally because I’m very wary of encoding rules of internet operation into law. Just about every other time we’ve seen this attempted, it’s ended badly. And that’s even without considering the telephone companies’ tremendous experience and success in lobbying and manipulation of the law. They’re much, much better at it than any of the other players involved, and their track record is to win. Not every time, but most of it. Remember the past neutrality rules that forced them to resell their copper to CLECs so their could be competition in the DSL space? That ended well, didn’t it?

Read on…

Even without the telco lobbying wizards to be afraid of, none of the draft proposals I have seen have made a lot of sense to me. In general, they have ranged from being quite constraining on the net to being trivial to bypass for a determined telco or cable company. It’s hard enough to find something with the right balance, let alone keep it right through the political process.

We do want an open, neutral net that treats all players the same. If there were a healthy competitive broadband market, we should get that, at least if that’s what the public wants. Unfortunately in most areas we have just one or two serious broadband competitors — in part because of their ability to get past the last round of neutrality laws.

I think we make an error by deciding this is about mandating an architecture for routing internet traffic. This is really a question of monopoly power. We don’t want the duopoly of telcos and cable companies using their franchised position of strength to defeat other players. We don’t want phone companies blocking Vonage, or cable companies blocking or slowing internet video services.

By now more people are aware of the internet cost contract — that each party pays for their pipe to the middle, and we don’t account for the individual packets. When Ed Whitacre talked about Google using “his” pipes, he was breaking that contract, because the pipes may belong to him, but he has rented them to tennants (broadband customers) who are paying good money to carry their traffic (from Google and others) on them. That got people justifiably upset.

Rather than define network neutrality, it makes sense to clarify just what the monopolies shouldn’t be doing. There’s lots of precedent in that, though admittedly it’s one of the hardest areas of the law to use. I don’t think we need new laws, but if we just have to get some, we should focus on discouraging abuse of franchised monopolies even more strongly than ordinary antitrust law, the FTC and the DOJ do so. (Google has threatened to use antitrust law on any monopoly that tries to abuse its power to hurt Google, and that’s a useful step.)

This issue is complicated by the internet’s dirty open secret. ISPs advertise and tell you they’re selling you some number of megabits of bandwidth. But like an airline that sells more tickets than seats, they are overselling their capacity, and by a much greater margin. In fact, the vast majority of people use a tiny fraction of the bandwidth listed on their invoice, so it’s right that they oversell it. (It’s actually beyond what airlines do as they compensate people if too many passengers actually show up. It’s more like, well, what telcos do with unlimited local phone service. The reality, seen in disasters, is everybody can’t pick up the phone at once.)

However, new applications, in particular inefficient video delivery, create demand for more bandwidth. When that demand goes up, it is a headache for the oversellers. They promised you a fat pipe, but know they can’t deliver it to everybody. If typical use goes up, normally price would have to go up because the overselling ratio would have to go down. The net breaks the rules, however, because its basic technologies keep getting cheaper even faster than demand increases. There’s every reason this can continue, but the telcos remain scared.

If they become afraid their network will be overused (ie. they oversold it too much) they have a few choices. As noted, they can raise prices. Or they can build more capacity, using new cheap equipment. Or they can try games to not deliver the promised bandwidth to the heaviest users. Breaking network neutrality would be one way to do that. If they can slow down the big apps like video unless people pay more, they can inhibit those heavy users, or get more money from them.

One of the things I fear is that if ISPS were prohibited from doing this, there is one neutral strategy which does inhibit the heavy users, namely moving to usage-based pricing. Some ISPs, such as wireless ISPs that are very short of bandwidth, already do this, and work to shut down high-bandwidth apps like filesharing, BitTorrent and video.

I think a move to usage based pricing would be tragic. As I have written before, usage-based pricing requires that every new app that makes noticeable use of bandwidth has to be financially justifiable (rather than simply interesting) from the get go. All sorts of new, experimental apps that surfed on the spare bandwidth would never have been developed in a usage-based pricing world, and many new undreamed of apps of the future will never be developed if we go down that road.

The other big thing we can do to protect a neutral network is to foster competition. If I were designing things, the franchised monopolies that run wires to homes would be kept at level 2 — just deliver the bits. However, with BrandX and other decisions, that’s not going to happen. Still it would be good to see more new broadband providers pop-up, be they wireless ISPs on newly provided spectrum, neighbourhood fiber rings or who knows what else. What a choice of dozens of ISPs, those that block customers from doing what they want would soon feel the pain.

(Please note that this is not the official EFF statement on network neutrality, that will appear on the EFF web site once finalized.)

I respectfully disagree

Mr. Templeton,

Your post was invoked by Tim Lee in a post defending the wait-and-see approach to net neutrality. I respond to Lee, Felten, and you, though I suspect you and I are probably closer on this issue than are Lee and I.

In any case, my extended blog post is here.

I don't doubt the temptation

I understand the motives of those promoting network neutrality as law, and sympathsize with them, and understand the temptation.

But it’s not correct to say that even the laws you cite are not making legal requirements about architecture. Saying you can not do something with your architecture is still legislating architecture. Saying that you can’t charge for something is still legislating architecture. Just because I believe that the flat rate open net is the best architecture doesn’t mean this is the only valid opinion or the only valid way to design, and bill for, a network.

That bill also does exactly what I don’t advise. It regulates “broadband providers” with a definition that’s quite broad (200kbps in one direction) and would thus include satellite, cellular and just about anything else that’s not a dial-up modem. There is no problem here except from franchised broadband providers that have been granted some sort of monopoly. That means MSOs, ILECs and to some extent the new WISPs that have been granted monopoly rights to poles. (It might also include use of licenced spectrum.) We would not want to affect anybody else.

And I don’t think you or others want to affect the small upstart ISPs. I presume it was felt that if you singled out the monopoly ISPs they would complain this was unfair. Either way they will certainly work to amend any bill to make sure it provides regulatory legwork for small competitors. That’s what they do. It’s what they always do. And members of congress don’t seem to understand how much paperwork and permission equal asphixiation.

It is also important to understand that the network of an ISP is not the internet. The internet, by definition, is the network of networks, tied together because they all use IP and can route amongst themselves. You can regulate how private networks interconnect to form internets, but it’s much harder to do it for the private networks at the end, but that’s the likely place they will want to interfere with network neutrality if you could stop them at the interconnect.

While we’ve been concentrating on this legislation, they seemingly snuck past us something far more damning to the internet than network non-neutrality is ever likely to be — the USF. A fat tax on small players, VoIP companies and ISPs, paid to the big telcos, along with a bureaucracy which will involve ISPs having to register, report revenues and pay fat fees.

We want to keep it hands off as much as we can. Which alas, does not mean “hands off except on the things we want.”

Thanks

Thanks for a well thought out commentary on the issue -- that's been very lacking. I never thought about how proponents of "keeping the internet free and accessible to all" will likely wind up causing usage-based fees, which will make the 'net more restrictive. I may just have to change my stance on net neutrality.

In any case, why not just allow ISPs to do whatever, just require them to disclose their bandwidth rules free of charge to anyone who requests it?

a minor correction

not that i support whitacre, but when he spoke of google using "his" pipes,
he was, i think, referring to transit traffic, not last mile traffic (which customers
have rented).

He's backpedaled

But I doubt it was the transit pipes because Google doesn't use those for free, as far as I know, nor does anybody else. Some large ISPs have no-accounting peering but they pay for their own transit to the peering points. Google, it is reported, buys a lot of long haul pipes, more than many ISPs.

Free peering has always been a controversial issue. Large ISPs peer with one another for free, smaller ISPs pay to do this, though in theory only paying for transit. But what makes an ISP an ISP? Can't Google or YouTube argue they are an ISP (with very popular data) with one giant customer, bigger than the combined customers of many medium sized ISPs.

Who is the traffic for? When I search Google, it's for me. When they present me ads, it's for them. The internet decided on the "I pay for my half, you pay for yours" rather than trying to figure out who the traffic was for, and having "toll paid" traffic and "800 number target paid" traffic like the phone system or the X.25 networks. Who won?

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