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Mutualist Blog: Free Market Anti-Capitalism

To dissolve, submerge, and cause to disappear the political or governmental system in the economic system by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of this great machine, which is called the Government or the State. --Proudhon, General Idea of the Revolution

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Thursday, May 25, 2006

Net Neutrality

I've pretty much stayed out of the "net neutrality" debate because I'm so unqualified to write on such issues. I do have an instinctive reaction against "public good" arguments for equal access without regard to paying for the bandwidth one consumes, as indicated by a previous post. And I found this anti-net neutrality article by Julian Sanchez pretty helpful for a tech dummy like me: "A Neutral Panic: Why there's no need for new laws to keep the Internet open."

Of course, just from my vague layman's impression of the debate, I think there's probably a distinction to be made between cost-based pricing and corporate enclosure of the Web. There's probably some way to combine control of service delivery by content producers with market pricing of services. And here's something worth considering on the other side (via A.E. Lewis on the Distributism yahoogroup). I'd appreciate any comment from readers more tech savvy than I am--which is probably most of you.

You've Already Paid $2,000 For A Fiber Connection You'll Never Get

from the money-back,-please dept

As the Baby Bells falsely complain about how people aren't paying them for the internet, or whine about how it's unfair to expect them to compete against muni-broadband, there's something important to remember. For the last decade, those same telcos have made promise after promise to local governments concerning the delivery of truly open fiber optic connections to the home. In exchange, they've been granted all sorts of privileges and rate increases by the government, costing all of us money. And where did the money go? Not towards what was promised. Bruce Kushnick, who we've written about before is now coming out with a book [$200 Billion Broadband Scandal] that details how the telcos scammed approximately $200 billion from all of us (about $2,000 per household), promising fiber to every home with symmetric 45 Mbps speeds and an open access model that would allow anyone to offer competitive internet services over that connection. This is a promise that they have not kept... though, they have kept our money. That fiber was supposed to be delivered this year (earlier in other cases), but it's not coming. The fiber that telcos are finally starting to offer is much more expensive, much slower, and locked down.

22 Comments:

Blogger Jeremy said...

Kevin, I'm not an expert on internet issues but I do make my living off it as a web developer so here's my take.

There's two separate issues here: 1. What do the Baby Bells owe the public in exchange for the grants of privilege they received, and 2. how intensively can they corner the market through these privileges.

On the first point, I think it's a mixed bag. The current (unprecedented) pervasiveness of broadband is the result of huge investments telecoms made in the late 90s during the dot com boom, laying tons of fiber - investments that haven't even come close to paying for themselves yet. So we're benefiting from a glut of bad investments, basically (at least from their POV). To the extent that they got incentives and breaks to do this, yes, they owe us something, but the fact that they have delivered as much as the public wants doesn't mean they've totally screwed us.

The key issue is: where do we go from here? Theoretically there's a demand for bandwidth approaching the infinite - especially when you factor in the grand plans of some to use broadband for TV, phone, etc. So the increasing demands are coming from the top down as well as authentic consumer bottom up demand. I'm loathe to let the scarcity of bandwidth drive prices up simply to pay for investments the Bells were paid themselves to make via incentives, but if we accept their ownership of much of the plumbing as legitimate there doesn't seem to be much other choice.

On the second point, I'm unconvinced about the competitiveness of technologies competing against the established infrastructure. I could be proven totally wrong, but currently satelite and power line technologies are simply not there. It's great that the market will balance out some huge favoritism going on in the market. That doesn't make it ideal, and it doesn't mean we should just let telecoms have their monopoly profits now at our expense. It's hard to find a middle ground that's fair to everybody, though I can see where a net neutrality thing would be workable as a short term stop-gap. Maybe the telecoms could be allowed to build special pipes to sell premium bandwidth for every X amount of dumb pipes they build.

BTW, Kevin, there was an internet related issue I asked you about that never got a response. If you get a sec I'd like to hear your POV.

May 26, 2006 7:09 AM  
Blogger Kevin Carson said...

Thanks for the comments. I'm a lot less of an internet expert than you, but I'll try to answer your question FWIW. There's probably some valididty to Searls' comparison, in a negative sense. The Interstate, like the infrastructure of the Net, was built with heavy government spending, and users are not charged according to the costs they impose. But once the network is already built, it's probably worth the cost to users even if costs were internalized. There would probably be a lot less bandwidth usage if there were cost-based pricing, though.

On your comments above, you mention another disadvantage of free bandwidth: the proliferation of sites that eat up ungodly amounts of bandwidth with flash animation and unnecessary graphics. It's another example of subsidized technology crowding out older, simpler stuff. Those of us who still have dialup find more and more of the internet less and less usable.

May 26, 2006 10:22 AM  
Blogger Adam B. Ricketson said...

Wow, is Kevin actually supporting the "big guys"? Even at the risk of sounding like a "vulgar libertarian"? :^)

That Reason article had some good points (don't limit innovation), but it was mired in "no value added" sarcasm and wishful thinking (the first paragraph, and the reliance on undeveloped technologies to make net neutrality irrelevant, respectively). Someone needs to teach these profesional writers how to write.

Anyway, I've written a bit on Net Neturality. I haven't read the proposed legislation, but I'd like to see a sorta moderate ground: any restrictions would be temporary, and new pricing schemes would be allowed with certain restrictions (explicitly notifying consumers of any discrimination, etc.)

May 26, 2006 10:41 AM  
Anonymous quasibill said...

Not exactly my strong point, either, but for what it's worth, I think "net neutrality", like any other attempt at price fixing, will in the end amount to re-distribution of wealth to the (politically) well-connected.

I think the Interstate comparison is valid in one respect, invalid in another. It's valid in the way Kevin notes, and that's exactly why I'm afraid of doing anything to get into the way of market pricing. The government fiat pricing will inevitably favor large scale, centralized operations over smaller scale, distributed operations, just like it does with the interstate.

Furthermore, while what I know about the subject conforms to Adam and Jeremy's points, there IS a possibility for innovation and competition from unknown sources. This is a check on the danger of abuse of the de facto monopoly (or duopoly or whatever) that ISPs currently enjoy. This is in contrast to the interstates, which, because of the physical footprint involved, I don't see being challenged for value until some major breakthrough in physical transportation occurs (I'm talking Star Trek type innovation - I don't see how rail or air can compete as long as they are based on the same current technology).

Again, I'll admit quite a bit of ignorance on the subject, but this is my initial reaction to the net neutrality issue.

May 26, 2006 2:28 PM  
Blogger Jim Lippard said...

I've written extensively on this subject, as someone who supports the *principles* of net neutrality but is highly skeptical of imposing *regulations* mandating net neutrality. My background includes working the last 11 years for an ISP that was acquired by a webhosting company that was acquired by a telco that was acquired by a fiber next-gen telco.

In "Net Neutrality and Last-Mile Connectivity: An Analogy," I try to give an overview that corrects the common confusion between the telcos' last-mile networks and backbones. The former is where the net neutrality debate should focus, because the latter is a highly competitive environment where it's relatively easy to change providers and nobody has a monopoly.

In "Misinformation from Save the Internet" I respond to "Save the Internet"'s critique of "Hands Off the Internet"'s animated cartoon.

In "Misinformation in defense of net neutrality" I rebut some erroneous statements by net neutrality defenders.

Some other posts:

"Net Neutrality", a response to Bill Thompson.

"Geddes on Net Neutrality" a comment on Martin Geddes' excellent take on the subject. (His Telepocalypse blog is well worth reading.)

"Net Neutrality and the Pace of Innovation" I discuss the development and introduction of TouchTone in a highly regulated telco environment.

"Hillary Clinton and Net Neutrality" comments on Adam Thierer's (of the Cato Institute) exposure of the hypocrisy of Hillary Clinton arguing for net neutrality in the name of protecting free speech.

"Bad unintended consequences of HR 5417" is a commentary on some of the implications of the Sensenbrenner net neutrality bill (that was passed by the House Judiciary committee yesterday).

"Consumer broadband last-mile competition in the Phoenix area" is a very heavily commented post in which I spell out the broadband options in the Phoenix area, showing that there are *nine* broadband providers and that the local telco (Qwest) is #2 in the market, making it hard to defend a claim that there's a telco monopoly in broadband here.

May 26, 2006 5:30 PM  
Anonymous Net Chick said...

Net neutrality is not a neutral proposition. It is designed to favor certain companies such as Google. They want to ride in the fast lane of search engines but dont want to pay for it. Why stifle competition in this industry?

May 26, 2006 8:43 PM  
Anonymous Anonymous said...

from Slashdot:
"BitTorrent inventor Bram Cohen warns on potential 'absurdity' of Network Neutrality laws and concedes that his hook-up with Cachelogic is creating a system that might contravene Network Neutrality. He suggests there'd be no difference between big media footing the bill for their own upload costs of their offerings and subsidizing the consumer's download costs of the same."

May 27, 2006 9:11 AM  
Blogger Luv2Box said...

Net neutrality is being pushed as pro-consumer, but has nothing to do with consumer rights and is all about protecting the dominance of players like Google and Yahoo. While I appreciate these businesses, we need to keep the Internet a free and open space where competition can bring the best of the net to users like us.

May 28, 2006 7:30 AM  
Blogger SoCal619 said...

This posting and all the comments have been immensely helpful in better understanding this heated debate. My "gut" reaction is that keeping the government out of the internet is the priority, as I don't find anything close to compelling evidence to suggest "regulation" is needed. But I plan on reading much more on the subject, so thanks for the jump-start!

May 28, 2006 9:38 AM  
Anonymous Anonymous said...

It's odd that this issue has become perhaps the primary issue of contention at a congressional level (save, perhaps, immigration). Debates about highly technical telecom issues typically take place out of the public eye. However, thanks to the efforts of Google and others, this issue has become rather emotional.

As someone who is less technically savvy than some, I am concerned that important questions of how best to balance free market principles with a technologically sound (and profitable) Internet are being set aside. For their part, Google has dropped seven figures to work with Moveon.org to, well, cloud the issue and make it more emotional.

It's good that some bloggers are interested in getting to the bottom of this issue.

May 28, 2006 9:07 PM  
Blogger Katie2020 said...

The internet is what it is today because there are no limits. If regulations are going to be made on a congressional level, the internet as we know it today is finished. Consumers will fight to keep internet freedom and keep the governements hands out of our pockets.

May 29, 2006 11:48 AM  
Anonymous Wayman said...

Let's hope that more folks "get to the bottom of this issue", because people will start to see the true nature of the debate and realize that Congress is best left on the sidelines. If that message can break through all the pontificating by Moby, REM, the Christian Coalition, and Samantha Micelli, we'll all be better off.

May 29, 2006 5:40 PM  
Blogger Adam B. Ricketson said...

Wow, Kevin. I didn't know you had so many lurkers about. Everyone really wants to comment on this topic. You've even got a bunch of anonymous comments and several comments from new users (2 joined in May, 1 joined in April). I bet they got really excited about your post and signed up simply to comment on it.

May 29, 2006 9:55 PM  
Anonymous Anonymous said...

Wow... ok let's clear some things up.

1) "Net Neutrality" is about saying you pay for the amount of bandwidth you use. It is NOT about "free bandwidth" or even common usage like highways. The concern about the loss of network neutrality is that SBC could give you crappy bandwidth going to CNN.com, but good bandwidth going to MSNBC.com because of various backroom "rent seeking deals". (Sites are just examples and have no relation to the real world.)

2) Large sites like google already pay their internet bills based on the amount of bandwidth they use. Several posters made some ridiculous implications that sites aren't paying for bandwidth. The telco's just want to be able to charge MORE to get packet priority.

I pay for my bandwidth, I want to access where I choose. Hosts on the net pay for their bandwidth as well.

And while I'm concerned about government regulation, I'm also concerned with corporate exploitation. Not sure which is the bigger threat at the moment though.

May 30, 2006 9:08 AM  
Anonymous King of Apathy said...

Anonymous:

Do you really think that companies who control the bandwith are going to enhance your connection to third parties whom they have "rent seeking deals" with? I don't think so.

First, these companies are not going to risk upsetting a mass group of consumers that use their service on a daily basis.

Second, Isn't it true that the FCC already regulates these companies by making sure we are allowed to control our comings and goings on the internet?

I don't argue against government regulations on some things, but the regulation of the internet seems a little too ego-motivated. It's just another power grab by legislators to get more campaign money and place a blurb on their campaign material about how they saved little Jimmy from the evil MySpace, or how they are doing everything to ensure you have uninhibited access to the internet (which we already do). If you ask me, Katie2020 is right. The internet has done so well, because no one has controlled it. If the government steps in it is sure to hamstring future growth and innovations.

Right now we are free to blog on this site or visit any other site. Once the government gets more involved, you can know with confidence that they will meddle in every aspect of the internet if it will get them a few votes.

We have access to the internet through many different mediums. Those options ensure a lower cost to us, and the freedom to surf as we choose. Shouldn't we just leave well enough alone?

May 30, 2006 1:20 PM  
Anonymous pluto said...

Nail on head, King of Apathy. I've been reading and reading and reading about this issue and no one (seemingly) can explain why we need new Congressional regulations when current FCC authority already protects consumers...

May 31, 2006 11:15 AM  
Blogger Jim Lippard said...

Looks like you've gotten some of the same telco shills I have.

May 31, 2006 6:59 PM  
Blogger buermann said...

"keeping the government out of the internet is the priority"

This comment is going to send me off on a rant I think... Yeah, I can't help it.

The internet was created within the government, the advances in tech continue to be subsidized and funded by the public, and the whole thing since inception has been heavily regulated by the government, just like every other mass communications technology. The private enclosure of all this public investment already happened ten years ago with the telecommunications act of 1996, which resulted in massive telecom and media mergers.

The question right now is a matter of re-regulation, not deregulation, and it's not just Net Neutrality, which is merely the status quo regarding the treatment of packets between users (blogspot.com and us, vs. giving some online video service better ping times for their users) - and not a very terrible status quo - so far as the internet goes compared to every other medium of mass communication that's been stripped barren by unfree market discipline (hello Clear Channel) - at that.

Packet neutrality has only been called into serious question since a June 2005 Supreme Court ruling [NATIONAL CABLE & TELECOMMUNICATIONS ASSN. V.BRAND X INTERNET SERVICES] that internet service was an information service rather than a telecommunications service (as all carriers over phone lines get equal service, so too did all internet carriers - google, kevin - get equal service: this was the way of ensuring market access to competitors with the Bells and market access for smaller ISPs, who are dependent on the bigger companies up the pipe - no longer the case in principle as it wasn't for some time in fact). Thus did the courts re-regulate the market by dictate.

Now as far as Google and Microsoft getting in on the lobbying spree: those complaining about them are ignoring the 3-to-1 (according to a CNET study) lobbying advantage the carriers had in Washington. Google and MS are just barley getting in the game compared to Verizon, AT&T, and Qwest. There's no way of getting around the fact that this net neutrality thing is a political battle and not a market battle, because it's a fight over the management of the marketplace itself.

Right now we all get charged the same per the square footage of our shops in our little marketplace - if Kevin suddenly saw a massive upsurge in foot traffick he'd need a bigger shop and would have to pay more for the room, and if I want to shop at Kevin's store faster I have to pay extra for the fast checkout lane (contrariwise semi-free access is provided for some via the slow dial-up lane). The marketplace association wants to be able to charge a premium price for shop placement and to ban certain shops from the marketplace, say banning spam and porn and piracy (all of whom happen to pay the same square footage fees as the rest of us, coincidentally, and thus help fuel the expansion of the marketplace) so they don't have to expand the size of the floor to facillitate heavy trafficked shops (which, illogically, they say will increase the rate of marketplace expansion), but also to give premium retail space to, say, the voice and television vendors to better facillitate their bulky products. Here the market anology breaks down, since we're just dealing with information there's no real efficiency added for shoppers (all shops are equidistant, virtually), just a greater efficiency for the marketplace association in how they handle different types of good (big fat goods would get priority service, so they promise).

If VoI and iTV packets need priority to facillitate them then we could create packet classes for them, and allow the marketplace association to give them priority, I suppose, but under the rules the association has proposed in very blurry and poorly defined drafts before congress they would be able to ban any traffic and give preferential treatment to favored vendors, allowing them to charge higher rents and increase their margins. They promise this won't happen, but the same people promised that the 1996 TCA would foster competition and see a diversification of media ownership and availability.

There's a straight interest division: google and MS are users like us - and contrary to this strange myth they DO pay for their bandwidth, as do I for both my server and my home usage, etc - and the cable companies are the (once public) utility. They've got a guarunteed position and don't need any further power. The straight forward libertarian stake in this beef is with the protections of a government protected utility cartel that wants to leverage their position against competition in the marketplace they manage, like the aforementioned laws against community and municipal wi-fi networks.

Talking about "regulating" a "market" I think just confuses the matter of net nuetrality, as it isn't a market we're talking about then, but the land the market sits on, all of which happens to be owned by the membership of the National Cable and Telecommunications Association.

May 31, 2006 8:17 PM  
Blogger Kevin Carson said...

Nice post, Adam. That Fitzpatrick bill is especially frightening. As you say, it would amount to corporate/government enclosure of the internet for those relying on public computers in schools and libraries. If all sites open to reader-provided content are blocked, what's left will consist mainly of institutional websites.

June 01, 2006 11:11 AM  
Blogger Kevin Carson said...

Jim,

Thanks for all the links. I appreciate your explaining the distinction between forbidding telecos to deny competitor access to their "last-mile" networks, and forbidding them to charge for different levels of service.

I especially like this explanation of why the former is justified: "...the telcos were given free rights-of-way to build their networks, were given monopoly status for local telephony status, and received huge tax breaks and subsidies in the form of universal service fees collected from long distance providers; this form of public funding justified the common carriage requirements that made them allow their networks to be used by other players that compete with them."

Actually, it makes me wonder if the extent of state involvement in building these local networks doesn't put them in the same class as Boeing and McDonnell-Douglas, for the purposes discussed in Rothbard's "Confiscation and the Homesteading Principle": that is, treating them as quasi-state property to be homesteaded by consumer cooperatives.

June 01, 2006 11:21 AM  
Blogger Kevin Carson said...

More generally, the variety of well-informed (yet disagreeing) comments here has reinforced my earlier suspicion that I'm getting in over my head. Thanks to all for contributing.

Buermann, thanks for your insights on the pro-neutrality side of the debate. Thanks especially for pointing out that there's a lot of self-serving corporate lobbying on both sides of the debate.

Adam, I suspect that some of these lurkers who have just signed up to comment are actually part of the comment spam Jim Lippard mentioned.

June 01, 2006 11:29 AM  
Blogger Jim Lippard said...

Buermann wrote: "Packet neutrality has only been called into serious question since a June 2005 Supreme Court ruling [NATIONAL CABLE & TELECOMMUNICATIONS ASSN. V.BRAND X INTERNET SERVICES] that internet service was an information service rather than a telecommunications service (as all carriers over phone lines get equal service, so too did all internet carriers - google, kevin - get equal service: this was the way of ensuring market access to competitors with the Bells and market access for smaller ISPs, who are dependent on the bigger companies up the pipe - no longer the case in principle as it wasn't for some time in fact). Thus did the courts re-regulate the market by dictate."

This is not factually correct. Brand X did not result in a decision that Internet was classified as an information service--Internet has always been classified as an information service. Brand X was an attempt by Brand X Internet to get the FCC to regulate cable companies the way it regulated the telcos, and require them to open up their last-mile networks to common carriage, the way that the telcos were forced to allow third-party DSL providers to use their lines. Brand X lost the case, and cable maintained the status it has always had, as a private, contract carrier (not a common carrier). The telcos then argued that it is now time that they be treated the same with respect to DSL, and the FCC agreed--that status changes next year.

There has *never* been regulation of Internet services (as opposed to regulation of the telco wires), nor regulation of Internet interconnection agreements (apart from standard contract law and antitrust). When third-party DSL providers use telco wires, they do *not* interconnect Internet services with the telcos--companies like Covad and Speakeasy contract with Internet backbone providers to get connections to the Internet, and contract with the telcos to get the access circuits from the customers to their facilities.

June 21, 2006 10:34 PM  

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