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April 20, 2017

Net Neutrality. What’s It All About?

The fear is that your Internet Service Provider (ISP) will be able to determine what Internet content you get to access or at least make it more expensive or less convenient to access some content than other content. Most Americans get their fixed line Internet access from either a phone company or a cable company. Former phone companies like AT&T (owns DirecTV)  and Verizon (buying Yahoo) are increasingly in the content business, and cable companies like Comcast have always owned and controlled content.  Why wouldn’t an ISP favor their own content over that from Netflix or Amazon or YouTube? They could, for example, prioritize the packets which carry their own shows over packets from others; you would have a good experience watching content from the ISP and a lousy experience with content from others – constant freezes and stutters. Yuk!

So is this a credible threat? Do we need a law or regulation to protect us? Google and Amazon and Netflix think we do; they lobbied successfully at the end of the Obama administration to have the Federal Communications Commission (FCC) promulgate a regulation protecting “net neutrality” which essentially mandates that at least wireline ISPs treat all traffic equally and that the FCC gets to decide exactly what this neutrality means. Obviously these companies have a commercial interest in protecting themselves against “ discrimination” by ISPs who have ambitions to sell search and content. But an argument motivated by commercial interest doesn’t have to be wrong in terms of the public interest.

Not surprisingly the ISPs argue that their Internet access business, which has been unregulated so far, should remain unregulated. They say that there have not been proven instances of any such discrimination, that consumers would simply switch away from them if they interfered with customers’ content choices, and (somewhat contradictorily)  that they invested in their networks so they should be able to use them profitably. If they are regulated, they say, they won’t invest an Internet access will not improve. These arguments are also profit-motivated; but that doesn’t necessarily make them wrong from a public interest PoV. The now Republican FCC agrees with the ISPs and is getting ready to reverse the net neutrality regulation.

History tells us that regulation is the enemy of innovation (and usually the friend of monopolists). In the last fifty years of regulated telecommunication, the only innovations we saw were the dial tone and 800 numbers. Just compare the capabilities of your smartphone connected to a largely unregulated data network and your desk phone attached to the regulated phone network which can’t even text.

Internet pioneers lobbied AGAINST attempts to bring the Internet under common carrier regulation; the FCC under Democrats and Republicans agreed; the result was the tidal wave of innovation which brought us to where we are today. Interestingly it was then many of the telcos that wanted to regulate the Internet to prevent it from becoming competition. Good thing they lost or you wouldn’t be Skyping today.

The regulations promulgated last year do exactly what Internet companies, until recently, were against: they impose “common carrier” regulation on ISPs. The common carrier regulations were devised when phone companies were granted monopolies. They gave us some degree of protection (not much) against monopoly pricing and they gave the monopolies protection against competition.

So, if regulation isn’t the answer to potential predatory behavior by ISPs, what is? And what about the danger that ISPs will sell a history of everything we browse which I blogged about last week? Stay tuned.

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