Monday, September 13, 2010

Guest Post on Net Neutrality

A recent student of mine, Brent Mattis, wrote the following on net neutrality. It makes some good points, especially the one on the heterogeneity of consumers, with some willing to accept lower tiers of service quality for a lower price.

"My friend posted a funny image showing the price structure of a
future ISP if proposed network neutrality regulation fails to pass:

It basically resembles the worst parts of your cellphone and cable
subscriptions. The services are expensive, the offerings are limited,
in short it's awful.

If that truly was the future of high-speed internet access without the
proposed legislation I'd have to debate setting aside my libertarian
sympathies on the issue. Fortunately, for the reasons I'll ellucidate
below I think that is NOT what the future of internet access will be
without network neutrality regulation.

First let's take a trip down memory lane. Back in 1999, my house had
two options for high-speed internet access, ADSL for $60/mo or ISDN
for $150/mo, both provided by the local phone monopoly.

In that a situation I could imagine a company like Bellsouth tampering
with access as envisioned by the artist above. Now however, customers
have significantly more options. To enforce mediocre, high-price,
non-neutral service, ISP's would have to form a cartel.

Fortunately, cartels are only stable in two situations:
1) the resource being offered has very limited natural supply (imagine
there are only two iron ore mines in the world)
2) the government grants cartel-like privileges to the firms (for
example, airlines prior to deregulation).

Because of the relentless march of technology, the former seems pretty
impotent. Between DSL, Cable, Microwave, WiMax, 3G, LTE, 4G, Muni
WiFi, Satellite, Powerline, FiOS, 802.20, WiFi Mesh networking, I
think it would be nigh impossible for BellSouth to provide both bad
services and high prices. If Bellsouth told me they would charge me
$80 dollars/mo for service without access to Usenet or Bittorrent, I'd
tell them, thanks but no thanks. In a competitive market place,
customers are king. Take one example, when Comcast started to throttle
Bittorrent traffic, hellfire and brimstone rained down upon them...
other ISP's certainly took note.

This isn't to say that in a competitive scenario, such as the one I
feel is likely, some ISP's might provide 'content-constrained'
internet service, for a very cheap rate. Many gamers might love to pay
$10/mo for a low latency connection that blocked access to Usenet and
Bittorrent. Other folks might opt for a free service that used a
gatekeeper that set Bing as their permanent homepage. These are
options that benefit the company and the consumer. These are options
that wouldn't exist in a world with government mandated network

We can't say in advance what the market structure will evolve to, but
I would caution that putting the FCC in charge of the ISP industry
will likely have unintended consequences. If the FCC holds the power
to license ISP's, we will be one step closer to the cartelization that
would all but guarantee high prices and shitty service."

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