11 June 2010

Neutral on Net Neutrality

As detailed in my previous entry, I’m an open source guy. I argued that it was the right approach for consumers overall as well as a long-term strategy to maximize profits. It would be logical for me to also support net neutrality. Placing a toll on certain internet traffic (or at a minimum prioritization) seems heavy handed. Particularly since so few companies would benefit (ATT, Comcast) in relation to the thousands that could be adversely impacted.

I worked several years at a competitive telecom service provider, so this issue was always front and center. This hurts smaller companies (particularly service providers) so it was a no brainer. It seems the latest ruling in DC was a big blow for net neutrality supporters, but I think the debate will continue for at least a few more years. Unfortunately, I think the law of deep pockets will probably prevail as they generally do when Washington and politics are involved.

For those that are not familiar with the issue at hand: AT&T and others want to have the right to optimize their networks by potentially reducing speeds and priority on bandwidth-intensive traffic. Opponents think traffic should not be regulated -- They say it’s a moral issue. But lets face it, for people like google, its more than just “do no evil.” Imagine a scenario where the few gatekeepers to the consumer’s internet access (ie. your internet service provider) could actually prioritize traffic, charge users for accessing certain content, or in an extreme situation, filter traffic. Hulu or YouTube would need to forge partnerships (read: pay) the likes of AT&T and Comcast to keep their traffic on par with other traffic. This would be fine for companies like Google or Apple that can afford to do so, but what about the millions of upstarts that don’t have that luxury ? Would users be now charged to access Facebook for example? Does this now seem to sound like that red far east country that the US reprimands for filtering internet traffic?

This puts more power in the hands of fewer companies as consolidation has hit the telecom providers (Ma Bell is back). What’s even worse is that these oligarchs are buying content providers which gives a greater incentive to censor traffic (Comcast is buying NBC). Do you think ESPN.com will be placed in the same light as say MSNBC ? Is that right ? No. We as consumers should choose our content, not our ISPs. The ISP should just be the “dumb” pipes that we pay for to access the internet. Sure they would make ESPN available, but it would be as difficult as using Google on new laptops. You have to go out of your way to disable the “ask” or “bing” toolbar and install the google one. It’s not terribly easy and people really don’t “opt-in” when that is their option. Something about this large telco utopia just doesn’t seem right.

But, from an Atma standpoint, is this the right position to take ? From an ISP perpsective, they have a decent gripe about net neutrality. They are spending billions of dollars upgrading their networks and have the right to optimize their networks since they own them. It would be one thing if the internet pipes were the legacy networks that were laid by the US government, but they are not. Building “always on” robust internet networks to fulfill the needs of our ever increasing bandwidth demands are not cheap. Our $50/mo hardly covers the cost of these capital expenditures.

And they are not getting subsidized by anyone. Why shouldn’t they be allowed to charge what they want? If applications like Napster are putting such a strain on their networks, why can’t they route that traffic differently in order to optimize their network performance?

Moreover, what happened to all the alternative internet sources that were supposed to compete with ATT ? Wireless? Ethernet over power? To a certain extent, wireless (over 3G/4G networks) has become a viable alternative, but this factor hasn’t increased competition. The same companies that provide internet to your home also do so over your mobile (ATT, Verizon). My point is, although I don’t like the idea of having a few providers with this potential power to control our internet experience, they are the ones with skin in the game. Other competitiors have not been viable – why hasn’t any true alternatives surfaced? In a free market system, you follow the flow of money. And unfortunately, the money, in this case, has come from the companies we love to hate.

So where do you stand on net neutrality and why? I’ve been so trained to believe that it is of utter importance for the US to maintain its neutrality stance, but I’m wondering if this has the effect of enabling freeloaders to benefit from others’ investments. I don’t think there is an easy answer. My sense is the optimal position would be that net neutrality be maintained but that the large telcos are allowed to charge more based on bandwidth usage versus a flat fee we enjoy now (ATT just enacted this for thier wireless networks). In the end, I think it will cost us as consumers a bit more, but the current subsidized pricing model is just not sustainable in the long-term anyway. I’m quite surprised that I actually see myself siding with the ATTs of the world a little bit, but perhaps that’s what happens when you stay away too long from an entrepreneurial environment.