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?
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.)