Tuesday, June 13, 2006

 

Washington Post gets it wrong on Network Neutrality

Yesterday's editorial in the Wash Post, like the blind man and the elephant, gets a few things right, a few things wrong and draws the wrong conclusion. A few observations:

1) The Post editorial points out that Verizon's P/E is 12 while Google's is 69. True. Telcos have, except for the mania of 1998-2001, always been utility-like plodders. But the Post argues that,
"charging the Googles and Amazons for use of their network would balance the incentives for innovation more closely.
Horse hockey! The telcos will never be innovative, no matter how they're incented. Should the makers of paint and canvas charge more because they need to "balance the incentives" with today's Dalis and Picassos?

The crux of the matter is that the telcos almost-always-modest P/E is now shrinking because the telcos earnings are shrinking because the telco business model is obsolete.

2) The Post editorial says (I'm heavily editing here to bring out a buried point):
The serious argument for net neutrality . . . [is] that a non-neutral net will raise barriers to entry . . . enough to be alarming.
That's right, but here's the full Post quote:
The serious argument for net neutrality has nothing to do with the cable TV boogeyman. It's that a non-neutral net will raise barriers to entry just slightly -- but enough to be alarming.
The Post claims that the "cable TV boogeyman" is a "doubly false" argument raised by Net Neutrality proponents because a non-neutral net (a) would deliver more than purely corporate content, and (b) because now that technology prices are falling, "the Internet will always be a relatively democratic medium."

In other words, the Post acknowledges the "alarming" nature of the entry barrier issue, while burying it in verbiage like "slightly," and "relatively democratic." Indeed, when entry barriers are raised, "relatively democratic" becomes amazingly relative.

On the other foot, network neutrality proponents should be clear: A non-neutral net is like cable TV only in that the user is no longer the sole chooser; the wire provider exerts significant control over the content.

3) The Post editorial contains another distortion. It says that Internet access is competitive because,
". . . more than 60 percent of Zip codes in the United States are served by four or more broadband providers . . ."
So lessee, if 60% of all Zip codes have four or more Mercedes Benzes in them, does that mean that there are plenty of Mercedes for all of us? This "logic" is reminiscent of the cigarette industry in the 1980s.

Here's a more accurate way to characterize the state of broadband competition in the U.S.: 95% of U.S. Internet customers have access to zero, one or two broadband providers.

The Post editorial paints that if a broadband provider impaired access to one sector of bloggers, the rest of us,
" . . . would rise up in protest, and the provider would lose customers."
Where would these customers go? I, for one, unhappy when my cable provider blocked my Port 25, was fortunate enough to have a second provider to switch to at my house, but if this second provider begins behaving badly what am I going to do?

4) The Post editorial drags out the old incentive-to-invest argument and dresses it in innovative clothing.
"If you want innovation on the Internet, you need better pipes . . . the lack of incentives for pipe innovation is more pressing than the lack of incentives to
C'mon! If we see an innovative artist, do we need to balance that innovation with better paint? If we can buy innovative cars, does this demand better roads? If we like innovative electronics, do we need better electricity?

5) The Post editorial closes with an old telco clinker, saying,
"The dangers . . . are speculative. It seems unlikely that broadband providers will degrade Web services that people want . . . [Congress] should not burden the Internet with preemptive regulation."
Why not, instead, follow the Precautionary Principle? Let's have regulation that definitively outlaws the speculative nightmare scenarios that "seem unlikely," while permitting the benign activity that the telcos say they want. Perhaps the opponents of Network Neutrality have a feeling that what the telcos are planning is not as benign as they're letting on.

In the entire Post editorial there's one buried word that rings true -- alarming.

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Comments:
You have a source for that statistic, 95% of people have zero, one or two broadband providers available to them? Be even handier if that source verified, as I suspect, that the one or two are invariably utilities.
 
Here's a comment for you to block, impair, or degrade. You say If we can buy innovative cars, does this demand better roads?

Actually, yes. The first cars were designed to run on dirt roads built for wagons. The size and spacing of the wheels was compatible with the specs for wagon wheels. When we got paved roads, we also got better cars, and when Al Gore's daddy built the Interstate Highway System we got better cars again. The rule of transportation seems to be this: "if you build it, somebody will find out how to use it."
 
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