Wednesday, May 7, 2008

Net Neutrality Myths

I'm getting a bit concerned over this whole net neutrality issue. People campaign for net neutrality legislation as if it's needed in order to save the internet. What worries me is that people don't know what they're asking for.

The public is being put under the impression that without net neutrality legislation, broadband users will be restricted by their access providers on what content they can access and practically hold them at ransom to force them to pay extra for popular services (e.g. Google, Wikipedia, YouTube etc.), and when that happens it will destroy the internet as we know it.

If that was really the case, we would certainly have something worth campaigning for. The internet is wonderful and standing up against the big evil corporations who are intent on destroying it for profit seems like a noble effort. Unfortunately campaigning to regulate net neutrality isn't, and it shows a lack of understanding of so much of the history and the nature of the internet, economics and the role of governments and completely ignores how the internet came to be as neutral as it is today.

This is my attempt to put together a guide in order to explain many of the myths driving net neutrality activism.

Myth 1: Net Neutrality laws have been protecting us but evil corporations wants it to go away.

This is about the biggest misunderstanding. First I have to make clear what is defined by the term 'Net neutrality'. Net neutrality is the principle that all traffic from all content providers should be considered equal at a broadband provider level. This has never been a law. This has never been explicitly dictated in any set of principles, apart from common sense between those rolling out the commercial internet in the early 90's. It just happens to be the way the internet turned out and is the reason why the internet turned out to be such a success. It's the result of voluntary contracts between consumers and suppliers of the services.

Some people claim that this principle existed in legislation long ago, for example in the US telegraph system, or in the early Acceptable Usage Policy of the internet which was withdrawn before commercial internet providers even existed.

Myth 2: Broadband providers will do certain evil things to us in the future.

Since there have been no laws in place to regulate net neutrality, since the beginning of the commercial internet providers we have been open to all these dark scenarios painted by net neutrality advocates. In other words no laws have been protecting us from evil broadband providers throttling our lines or shutting off access to sites at will. Certainly outside of the US no such laws existed either.

The first commercial internet providers were anything but neutral. They only offered a few protocols and a few sites, and even had control over the software that you use to access it with, and many even charged per hour. It's market demands that have driven internet service providers to be open, and neutral.

Those of us who's been around since the beginning of the commercial internet will know that some providers have actually tried to do just that from time to time, but common sense prevailed and we have little evidence of it happening in the long term. The bottom line is that for a provider to do this is bad for business.

Without naming the name of a particular company, I can relate the story of an ISP in a country that I am familiar with. I'll call it Meganet. A large media group owned and launched an ISP, leveraging the huge marketing ability they had through their satellite and terrestrial televisions channels and printed newspapers and magazines. They were responsible for a significant amount of new users on the internet in the country, and managed to gain over a third of the home user market. Much of Meganet was started from buying an existing ISP, one that was a commercial entity that was created by a government research institution that had its funding cut. The ISP they bought were failing despite having a strong marketing budget, mostly because they charged for access per hour, where other ISP's were all charging a flat rate per month. They also tried to have an advantage over ISPs by claiming that they could provide content that other providers didn't have, this strategy also failed. Why Meganet continued some of their failed ideas, I don't know.

Along with other acquisitions that took place in order to create Meganet, they also ended up hosting a lot of very popular content providers including some news sites. When they reached the point where they were a significant ISP, having more than a third of the home user market, they tried to use their position in order to bully people from other ISPs into joining them. They started to block access to some of the popular sites to users who aren't their own customers. For obvious reasons this strategy failed, this created opportunities for competing content providers hosted elsewhere. The restricted content providers lost a lot of visitors, permanently. They tried to block their own visitors from accessing the new competing sites, but simply lost customers quicker, permanently. These actions by them were the best thing that could have happened to their competitors. Common sense eventually prevailed and they reversed all these restrictions. It didn't take long, maybe a few months.

This same issue came back to bite Meganet again, when other ISPs refused to route their multicast video. Eventually after periods of stupidity the net returned to normal.

Myth 3: Broadband providers use the excuse of cost.

Some people say that broadband providers want to charge more is simply because they want to extract more cost out of the user by using the excuse that it costs more to provide them a service. It's certainly true that private companies want to extract as much money out of their customers as the market allows them to, that's the job of a private company. Whether consumers put up with it or switch to a provider that charges less instead is the job of the consumer.

Networking equipment and nationwide cabling usually have quite a high upfront cost, but after that the costs often stand still while customers have an ongoing monthly cost. This is part of how the business model for ISPs work. The alternative would have been that providers would charge you a joining fee, which would cover the cost of your portion of the cables and switches that makes up your access to their network and those they peer with. This fee would be very high, about 40-60 times as much as the normal subscription model. But after that for the next 3-5 years you would have to pay almost nothing for your access.

After 5 years practically all the equipment except for the much of the long distance cabling would have to be upgraded to cater for increased capacity, because unlike utilities like water and electricity, we keep on finding new uses for the internet requiring more capacity.

Myth 4: Net neutrality regulation is going to ensure faster speeds at cheaper prices in the future.

Unfortunately it's going to do the opposite, that's why it's so dangerous. Domestic broadband connections are cheap, but come with very little guarantees. It's wrong for broadband providers to place restrictions on the customers without specifying or agreeing it with customers. If it's in breach of the contract between the provider and the customer it's a matter for the courts. If it's not in breech, but something customers don't like, then they can change providers. That's why I'm in support of users testing the filtering policies of their providers and publishing the details. That way consumers can be aware of what service providers do and have a choice.

Most providers will give you a connection with guarantees. That's the kind of connection that most businesses that rely on the internet gets. To provide this level of service costs more, that's why business connections cost more. The contracts specify certain service levels and the provider has to make sure they can guarantee delivery within those service levels.

To force providers, through regulation, to guarantee service levels closer to that of business customers, would mean that they have to invest in the kind of infrastructure to meet that, and they would have to raise prices in order to stay in business. In other words regulation would mean that everyone should have something closer to the style of a business connection, you won't be able to get a cheap connection with little guarantees anymore.

Myth 5: Without regulation, the internet as we know it will be destroyed.

The internet has never been as we know it. It's constantly evolving. The best thing that happened to the internet was when commercial companies were allowed to connect to it and sell access to the internet. They were free to do it in many ways, and many creative businesses created the internet as we know it today, from content providers like Google, to service providers that used their cable television infrastructure to provide internet access, to network equipment companies like Cisco that made cheap and reliable IP routers.

If regulation starts to limit them from doing stupid stuff, or limit them from providing cheap solutions but with no guarantee, then it's going to limit innovation. The internet will stay the same as we know it, which is not what we want, we want it to evolve.

Myth 6: Net neutrality legislation will benefit consumers.

If regulation prevents broadband providers from providing cheap service with low guarantees, they won't be able to choose to offer those services. Customers who want that kind of service will have less choice. We forget that not everyone wants a fast, guaranteed connection to download video material all the time, especially if it's going to cost as much as that connection would cost if it was guaranteed. Some people are happy to read e-mail, Wikipedia, some news sites and post on blogs and forums. Actually these people are in the majority, that's why broadband providers can provide a service at an almost wholesale level that's shared by many people. It's those people who are light users that allow others to enjoy fast throughput. The problem lies with when those heavy users, who only make up about 10% of the provider's customers, use more than 70% of the bandwidth.

Regulation will protect the rights of those 10% of the people, by forcing everyone else to have the same guaranteed throughput that those 10% use. That will mean the costs will have to rise to guarantee that kind of unrestricted access. This means the person who was happy to pay $5/month for an unreliable service that he can read his e-mail over will have to pay for a much better service he doesn't want.

What this really will do is kill competition. Perhaps there's a provider that wants to cater for those heavy users and offer them good deals. Perhaps there's providers who wants to offer cheap services to people who don't expect much from a cheap connection. Without regulation it's easy to provide the latter, you sell cheap connections with low guarantees to users, and build yourself a customer base. That's how new players enter the market.

With heavy regulation you take away that option, you force every provider to sell everyone a Rolls Royce when some people would be happy with a Ford. It means a new company would have to make Rolls Royces from day one cheaper than the large entrenched monopolies in order to break into the market. All this will do is protect the big players from competition, and drive the market towards entrenched monopolies. Regulation assisted monopolies are bad for the consumer.

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