The Belief, Main Idea

Fundamentally, the interested parties (i.e. content providers, such a Yahoo and Google) would have you believe net neutrality is all about equality; the idea that internet users should be in control of what they view and what applications they can use.

The Government, namely the FCC and its philosophy under the guidelines it has proposed since 2005, would have you believe net neutrality is all about obstructing the free flow of information and stifling “…the foundation for democracy in the 21st century.”

Broadband companies

– the companies that actually supply the backbone the applications and content run on – say simply the internet is not free:

“The internet did not appear one day with the current infrastructure we have today.”

Moreover, broadband companies counter by reminding content companies of the $70 billion in investment costs for last year alone. If investments like this were not made you can easily imagine reading your e-mail – after it took you 20 minutes to download it.

Why Now? Is It Really Necessary?

I'm troubled to learn that the FCC is embarking on an exercise that would probably result in rules that are unconstitutional and almost certainly beyond the FCC's statutory jurisdiction. Aside from the legal issues it raises though, I find myself at a loss to understand why the administration wants to start meddling with a sector of the economy that, despite a challenging macro-economic environment, is performing pretty well by any rational standard.

Ken Ferree, President of The Progress & Freedom Foundation.

The people believe, as is correct, that speech and the right to it is free. This is absolutely part of the issue but is so small as compared to what net neutrality so largely about.

The people have a right to a voice they do not have the right to go to a private auditorm that took ages and millions of dollars to build and demand access to it.

The people have a right to go somewhere else and boycot the building that denied them fair access. If the building in question was the only access to the marketplace - such as is the complicated issue at hand - then laws would and should be appropriate!

Although, carriers are not motivated to control your voice but manage their networks. To manage, however, carriers should not have the right to invade your privacy.

What Is the Government’s Philosophy of Net-Neutrality?

The chairman of the Federal Communication Commission is the recently confirmed, Julius Genachowski. At Genachowski’s June confirmation hearing before the Senate Commerce Committee, he described his vision for the commission as “a model for excellence in government – fighting for consumers and families, fostering investment and innovation via open, fair and data-driven processes.”

This would lead any reasonable person to at least consider the FCC now thinks the internet is now in the public sector. Why would you think that? Because you can take that same statement and put it in context of water, gas, electric, airlines, etc…

Whose responsibility is it to pay the bill?

• Last year Comcast was slapped the FCC after it blocked some large data transfer of its customers’ attempts to share files, such as Bit torrent. Comcast Corp. alleges the FCC overstepped its authority to enforce net neutrality principles; a final ruling on the possible $1.77 Trillion fine is probably a year away, a Comcast spokeswoman said.

• Where, Google acknowledges it restricts outgoing calls to some phone numbers through its Google Voice service, including conference-call centers, which charge higher access fees to carriers. Blocking such calls reduces Google’s expenses for the service.

What about antitrust laws?

As Google would tell you allowing internet providers (i.e. carriers) to increase or decrease resources, such as speed or availability, to certain sites or applications will create an artificial gatekeeper with the monopolistic power to pick what stays and goes.

Web companies… business models are built on a Web that makes their services appear “free” to users.

Google’s trick will be to lobby for the optimum of Internet socialism… usage – based pricing would give consumers a reason to think twice before clicking on a Google-sponsored ad? It would be the end of Google’s business model.

Do you remember the early days of AOL’s business model where access numbers were always busy and you paid by the number of hours for access? What happened? To keep the competitive advantage AOL switched to unlimited hours for a flat-cost and invested hundreds of millions to build an infrastructure without the government.

“The greatest fear of Microsoft, Amazon, eBay and Yahoo is having to plumb their deep pockets and offer competing payment to broadband carriers to speed their bits to consumers.”

The Economics of It (if your interested)

A growing opinion in the industry is the installation of discriminatory pricing to pay for the next generation of broadband, 4G wireless, and other networks that could carry an exponential amount of data much faster than today’s standards.

More than likely, first-degree price discrimination in combination with price skimming - Where prices vary based on customer’s agreeableness to pay for faster access leading to new classes of speed pricing groups at higher costs and then gradually reducing prices based on elasticity.

This type of pricing structure allows for lower income populations to get internet and wireless access cheaper while at the same time decreasing costs with maximum consumer leverage because of competition.

The effects of price discrimination typically lead to lower prices for some consumers and higher prices for others. Output can be expanded when price discrimination is very efficient, but output can also decline when discrimination is more effective at extracting surplus from high-valued users than expanding sales to low valued users.

What about my cell phone and wireless service?

In the fine print of their contracts, most carriers reserve the right to limit throughput speeds of the amount of data transferred by users.

Tim Wu, professor at Columbia Law School.

If and when the newly proposed FCC regulations go into effect next spring you can expect your wireless bill to increase anywhere from 10-15%.

The FCC auctioned off licenses for new wireless spectrums not too long ago – and with Google, ironically, joining in to raise the bids – you can bet the wireless providers will increase data plans. Because net neutrality under the FCC means:

• access to all legal data consistently
• no more properly managing networks based on economics
• more increased infrastructure costs

The wireless association CTIA said it is “concerned about the unintended consequences.”

What does the research say?

In a recent interview the chairman of the FCC said …” the Pew Foundation recently released a report saying 43% of the country doesn’t have broadband now and 20-25% does not have access (rural areas) to broadband – whatsoever.”

Unfortunately, the chairman didn’t read the rest of the report where it said: “Overall, 62% of dial-up users say they are not interested in switching from dial-up to broadband.”
Out of the more than half of America that has broadband already, (i.e. 55%), the rest of the 43-45% which doesn’t have it 62% of them do not want it.

Source: Pew Research Center.

“A rise in the cost of high-speed connections, at a time when many people are struggling financially, doesn't appear to have curtailed the growth in adoption.”

Interestingly enough, the day after the House of Representatives left for its scheduled recess in August Edward Markey(D- Massachusetts) and Anna Eshoo (D-California) introduced legislation that would bar internet providers from using the claim of network management to impose their own priorities on data traffic.

The FCC will vote on the proposed changes at its October meeting, but the new rules are not expected to be in place until the spring, well after it issues a national broadband plan to Congress in February.

Note: Any opinions expressed in this article does not represent the opinion of Sound-Science Wireles, LLC or its affiliates.

Please let your representatives know your opinion on the matter - whether for or against. The FCC will be holding public inputs online (fcc.gov).

Sources:
Scatz, Amy. AT&T Asks for Curbs on Google. Wall Street Journal. September 26, 2009.
Nicklaus, David. Net neutrality isn’t a neutral term, and it isn’t good for the net. McClatchy – Tribune Business News. Washington: Sep 25, 2009.
The rights of bits. The Economist print edition.
Noyes, Andrew. Genachowski Affirms Net Neutrality Stance. CongressDailyPM. August 25, 2009
Hatch, David. FCC To Forge Tougher Net Neutrality Rules. CongressDailyPM. September 21, 2009.
55% of Adult Americans have home broadband connections. Pew Internet.
Jenkis, Jr. Holman. Neutering the ‘Net. The real agenda of Google, Amazon, Microsoft and other status-quo web powers behind the Obama administration’s Net Neutrality campaign. The Wall Street Journal. Opinions. September 23, 2009.