Monday, December 12, 2005
What a Network Neutrality Rule Wants
Network Neutrality, that is, a network that just delivers the packets, stupid, with no cognizance of what app, device, or end-user generated them, is an public good that gives rise to much innovation, value creation and economic growth at the application layer. It is the single greatest factor in the success of the current Internet.
But a Network Neutrality rule, even a strong one, can fail. Here's my thinking:
1. The carriers have huge incentives to discriminate, as a ground-breaking paper, entitled Towards an Economic Framework for Network Neutrality Regulation, by Barbara van Schewick clearly shows. One major finding is that a carrier does not need to be a monopoly to reap clear benefits from discrimination; carriers can benefit from discriminating even in a competitive market.
2. Anybody who says that there's no need for Network Neutrality because the carriers have no intention to discriminate is ignoring the carriers' huge incentives to discriminate. Please, Mr. Fox, guard my hen house; I know your intentions are pure. [Link]
3. No mealy-mouthed language. Any Network Neutrality rule must be iron-clad, with no possibility of misinterpretation. Because carriers will try to misinterpret it. Because they will have economic incentives to do so.
4. The punishment must fit the crime. Network Neutrality rules are not in the carriers' best interests. They put carriers in a self-competitive situation, that is, in a situation where following the rule is not in their self-interest. Therefore, if carriers stand to make billions by violating Network Neutrality, then the punishment must be in the tens of billions.
5. Physical network development is still a problem. Under Network Neutrality and competition, unless we find a way around the Paradox of the Best Network, carriers do lose incentive to build according to the latest technology. We need to solve this problem by confronting it squarely, by dis-entangling the network development issue from the network neutrality issue.
Network Neutrality is a clear case of public good versus private benefit. That's what regulation is for. In this case, competition will not replace regulation. We don't need any old Network Neutrality rule. We need a network neutrality rule that is (a) clear, (b) strongly enforceable, and (c) incents physical network development. Anything less is bound to fail.
But a Network Neutrality rule, even a strong one, can fail. Here's my thinking:
1. The carriers have huge incentives to discriminate, as a ground-breaking paper, entitled Towards an Economic Framework for Network Neutrality Regulation, by Barbara van Schewick clearly shows. One major finding is that a carrier does not need to be a monopoly to reap clear benefits from discrimination; carriers can benefit from discriminating even in a competitive market.
2. Anybody who says that there's no need for Network Neutrality because the carriers have no intention to discriminate is ignoring the carriers' huge incentives to discriminate. Please, Mr. Fox, guard my hen house; I know your intentions are pure. [Link]
3. No mealy-mouthed language. Any Network Neutrality rule must be iron-clad, with no possibility of misinterpretation. Because carriers will try to misinterpret it. Because they will have economic incentives to do so.
4. The punishment must fit the crime. Network Neutrality rules are not in the carriers' best interests. They put carriers in a self-competitive situation, that is, in a situation where following the rule is not in their self-interest. Therefore, if carriers stand to make billions by violating Network Neutrality, then the punishment must be in the tens of billions.
5. Physical network development is still a problem. Under Network Neutrality and competition, unless we find a way around the Paradox of the Best Network, carriers do lose incentive to build according to the latest technology. We need to solve this problem by confronting it squarely, by dis-entangling the network development issue from the network neutrality issue.
Network Neutrality is a clear case of public good versus private benefit. That's what regulation is for. In this case, competition will not replace regulation. We don't need any old Network Neutrality rule. We need a network neutrality rule that is (a) clear, (b) strongly enforceable, and (c) incents physical network development. Anything less is bound to fail.
Technorati Tags: Berkman, Competition, Content-Conduit, Deregulation, F2C, Internet, NetworkNeutrality, OpenAccess, ParadoxoftheBestNetwork, Politics, Regulatorium, Telco, Telepocalypse
Comments:
"Network Neutrality rules are not in the carriers' best interests."
The Internet is going through a caotic situation that certainly won't help its progress.
Everybody wants to do everything.
Telecoms want to be broadcasters, broadcasters want to be Telecoms.
How much better would be if everybody did its job, not aspiring to become the emperor of the moment.
Connectivity has a lot to do with content, if there is a good content there is also the need of good connectivity, if there is no good and affordable connectivity there is not good content.
Right now the only really blooming businesses on the Net have been the ones created by the users, or the ones which saw the majority of the users involved.
They were businesses which didn't make money directly, that is you pay for what you get, but you pay fo leasing the line and you get what you want for free.
Probably the only good business till now has been the "connectivity" business.
The more alluring the content (free movies, free music, free or vey cheap calls)the more people went to broadband.
How many would still pay for fiber optic in Italy if they couldn't use the P2P?
Everybody knows the answer but doesn't dare to say it.
And while they look for something else to use the fiber network for, P2P goes on...
So the stupid network is already producing big revenues the way it is and to produce more it needs to give opportunities to the ones who produce content, and free content.
And to produce free or cheap content you need affordable and reliable lines.
Discriminating won't produce the effects the providers are looking for.
There will always be a smart guy who will understand it: give something cheap or free and get huge revenues from it...
A stupid dumb network will allow intelligent applications to run on it, and intelligent applications will make the number of users, and the number definetely makes the price and the value...
Patrizia
http://woip.blogspot.com
The Internet is going through a caotic situation that certainly won't help its progress.
Everybody wants to do everything.
Telecoms want to be broadcasters, broadcasters want to be Telecoms.
How much better would be if everybody did its job, not aspiring to become the emperor of the moment.
Connectivity has a lot to do with content, if there is a good content there is also the need of good connectivity, if there is no good and affordable connectivity there is not good content.
Right now the only really blooming businesses on the Net have been the ones created by the users, or the ones which saw the majority of the users involved.
They were businesses which didn't make money directly, that is you pay for what you get, but you pay fo leasing the line and you get what you want for free.
Probably the only good business till now has been the "connectivity" business.
The more alluring the content (free movies, free music, free or vey cheap calls)the more people went to broadband.
How many would still pay for fiber optic in Italy if they couldn't use the P2P?
Everybody knows the answer but doesn't dare to say it.
And while they look for something else to use the fiber network for, P2P goes on...
So the stupid network is already producing big revenues the way it is and to produce more it needs to give opportunities to the ones who produce content, and free content.
And to produce free or cheap content you need affordable and reliable lines.
Discriminating won't produce the effects the providers are looking for.
There will always be a smart guy who will understand it: give something cheap or free and get huge revenues from it...
A stupid dumb network will allow intelligent applications to run on it, and intelligent applications will make the number of users, and the number definetely makes the price and the value...
Patrizia
http://woip.blogspot.com
David,
You're absolutely right: Network neutrality is a public good AND will require regulation.
The case of regulation arises from the very scale of the networks today. As the RBOCs have worked to reconfigure themselves as sons/daughters of Ma Bell, the concentration of economic and network control power is precisely what both the original AT&T and the Telecommunications Act of 1996 sought to remedy.
Michael Powell's absurd 'competition among the duopolies' of cable and telephone turned a blind eye to network consolidation.
But anyone that clings to the idelogical myth that AT&T and Verizon (along with minor Bells Qwest and BellSouth) are the moral equivalent of some mom and pop startup will never recognize the need for this re-regulation. That 'anyone' includes the Congress and technologists who equate all forms of government with 'black helicopters.'
Network neutrality folks need allies, or failing that, need to align themselves with the foes of the RBOCs and cable companies. That will require allying with people who have come in for some severe (and I would maintain unwarranted) criticism from you and others — yes, the municipal network ownership crowd (be they muni-WiFi folks or, like those in Provo, Lafayette and other places, muni-fiber folks).
What we are all after is responsive network ownership. THAT is not coming from AT&T, Verizon, Comcast or any of the duopolies. You get precisely that with local network ownership. There are a number of success stories of rural telephone companies laying fiber and delivering triple-play services over their networks; Kaplan Telephone and EATEL are two that are doing just that here in Louisiana.
They do this because their interests are pretty closely aligned with the communities they serve. In these cases, familiarity breeds respect.
In the case of the duopolies, few of us will EVER have the opportunity to speak with anyone above a regional manager. From the corporate headquarters, we are all just account numbers.
To paraphrase some Russian dude: "the power of the network belongs to those who own them."
Local ownership — whether public or private — is the ideal. In most of America, local private ownership is not an option. In that case, the next preferable option is public ownership.
In that scenario, you CAN meet face-to-face with the person who runs that network because you are an owner.
Governance of networks resides at the seat of ownership. Governance that is closer to home is easier to influence.
Unless and until Congress and/or the FCC recognizes the hazards that will come from the 'tiered network' approach now being promoted by the RBOCs, local network ownership offers the best solution to the issue of network neutrality.
If your community doesn't own a local network, maybe it's time to start looking into it. Beats the hell out of the alternative.
Post a Comment
You're absolutely right: Network neutrality is a public good AND will require regulation.
The case of regulation arises from the very scale of the networks today. As the RBOCs have worked to reconfigure themselves as sons/daughters of Ma Bell, the concentration of economic and network control power is precisely what both the original AT&T and the Telecommunications Act of 1996 sought to remedy.
Michael Powell's absurd 'competition among the duopolies' of cable and telephone turned a blind eye to network consolidation.
But anyone that clings to the idelogical myth that AT&T and Verizon (along with minor Bells Qwest and BellSouth) are the moral equivalent of some mom and pop startup will never recognize the need for this re-regulation. That 'anyone' includes the Congress and technologists who equate all forms of government with 'black helicopters.'
Network neutrality folks need allies, or failing that, need to align themselves with the foes of the RBOCs and cable companies. That will require allying with people who have come in for some severe (and I would maintain unwarranted) criticism from you and others — yes, the municipal network ownership crowd (be they muni-WiFi folks or, like those in Provo, Lafayette and other places, muni-fiber folks).
What we are all after is responsive network ownership. THAT is not coming from AT&T, Verizon, Comcast or any of the duopolies. You get precisely that with local network ownership. There are a number of success stories of rural telephone companies laying fiber and delivering triple-play services over their networks; Kaplan Telephone and EATEL are two that are doing just that here in Louisiana.
They do this because their interests are pretty closely aligned with the communities they serve. In these cases, familiarity breeds respect.
In the case of the duopolies, few of us will EVER have the opportunity to speak with anyone above a regional manager. From the corporate headquarters, we are all just account numbers.
To paraphrase some Russian dude: "the power of the network belongs to those who own them."
Local ownership — whether public or private — is the ideal. In most of America, local private ownership is not an option. In that case, the next preferable option is public ownership.
In that scenario, you CAN meet face-to-face with the person who runs that network because you are an owner.
Governance of networks resides at the seat of ownership. Governance that is closer to home is easier to influence.
Unless and until Congress and/or the FCC recognizes the hazards that will come from the 'tiered network' approach now being promoted by the RBOCs, local network ownership offers the best solution to the issue of network neutrality.
If your community doesn't own a local network, maybe it's time to start looking into it. Beats the hell out of the alternative.
