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Why you won’t care that the Net isn’t neutral

It’s very simple. Once we have lost Net neutrality and the access providers are given a free hand to charge Internet companies for delivering their bits faster and more reliably than their competitors’ bits, we will experience this simply as how the Internet works, not as an artificial constraint put in to benefit the access providers.

With so little competition, the access providers will be able to jack up fast lane prices as high as the richest players in the market can bear. So, let’s say Google decides to pay the access providers for “fast lane” service, but Bing does not. You’ll notice that Google results fly in, while Bing seems to be having trouble digesting its oatmeal. You won’t know if that’s because Bing’s search engine is slower or because it didn’t pony up for fast lane service. All you’ll know is that you’re not going back to Bing.

So, what’s the problem? The first is that this raises the hurdle to innovation. You have a great new search engine? You won’t be able to get started competing against Google and Bing without being able to afford the fast lane services they can buy. The big companies will always be able to buy faster service. This encourages the sort of consolidation that would have forestalled the most interesting success stories of the Net so far.

Second, the access providers are also providers of services and content that compete with the organizations they serve. So, Comcast will undoubtedly find economic advantage in making sure that Comcast-NBC content shoulders aside Netflix’s offerings … and your offerings on YouTube. You’ll prefer using the video service that doesn’t suck…not knowing that removing Net neutrality’s economic point is to introduce artifical suckage onto the Internet.

Market forces won’t correct the loss of Net neutrality because the market won’t experience its bad consequences as consequences at all. This is a predictable market weakness. It is why we need to regulate the access providers. It is why we need Net neutrality.

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16 Responses to “Why you won’t care that the Net isn’t neutral”

  1. > You won’t be able to get started competing against Google and Bing without being able to afford the fast lane services they can buy.

    But … but … this is ALREADY TRUE. This is Akamai’s whole market. This is the data-center deals Google already does.

    I mean, there is a reasonable abstract argument about lock-out. However, the practical barriers are high right now.

    > Second, the access providers are also providers of services and content that compete with the organizations they serve.

    So, I take it you support an antitrust probe to examine the charges that Google self-favors its own properties? No? Is it true that:

    “Market forces won’t correct the loss of [search] neutrality because the market won’t experience its bad consequences as consequences at all. This is a predictable market weakness. It is why we need to regulate Google. It is why we need [search] neutrality.”

  2. The idea that CDN’s approximate the fast lane/slow lane result from losing network neutrality is greatly flawed in that CDNs result in marginally faster load times whereas fast lanes will have to be noticeably faster load times or no one will pay to be in them.

  3. Like search engines, CDNs sit at the edge of the Internet. As long as the Internet (i.e., its L3-7 protocols) is source, destination and content agnostic, there’s no structural barrier to multiple CDNs or search engines. I can build a better CDN or a better search engine, but to the Internet that’s no different than building a better role playing game or bookstore or teleconferencing application.

  4. 1) Companies are paying for CDN’s now – are you claiming all that money is a waste? The argument in the post was about barriers to the startups, the precious startups, who must also pay for CDN’s this very moment to compete on those terms.

    2) “there’s no structural barrier to multiple CDNs or search engines” – this is what I meant by “a reasonable abstract argument”. You are absolutely right, there is no abstract argument limiting search engine competition. In practice, in the real world, it’s a duopoly if you’re very generous, and a monopoly in practice. And, per the post above, you’ll never know if e.g. a startup, remember, the precious startups, got downranked by Google because it competed with Google’s own services. All you’ll see is the Google service in the search results and the startup will be relegated to the “slow lane” of result 999 out of 1,000.

    Note to David W – I find the implication of why there’s crickets about this, or worse, even active derision, much more interesting than the n’th iteration of hearing that ISP’s could be anticompetitive in theory. It gets even more interesting when there’s real antitrust investigation being considered.

  5. 1. Google Search could well reach the point — and may have already have reached the point — where anti-trust actions are reasonable. Google is not exempt, as we know from the various anti-trust investigations aimed at them. So, Seth, if you’re in favor of anti-trust action against Google in order to preserve a non-discriminatory network, can I assume that you’re also in favor of regulating the access providers to achieve the same end? Excellent!

    1a. If Google were letting companies pay for rank without telling anyone, I’d personally hope that the market reaction would be sufficient to curb that behavior, just as I would hope that a newspaper that was discovered taking cash for spinning stories would be punished by the market. It is far harder for customers to switch their access providers; if there were a vibrant market of access providers, or if there were structural separation, we wouldn’t need Net neutrality.

    2. CDNs do indeed tilt the field, the same way the capital investment Google (and the other search engines) makes in server farms, dark fiber, etc., raises the competitive barrier. I do think there is still room for a radically better search engine to gain some traction in the market, although the advantages enjoyed by mega-companies of course make it difficult. It’s even harder to compete against the network effects enjoyed by sites such as FB, eBay, and Skype; as these services increasingly dominant their markets, they are subject to regulation also. But so what? I would rather not tempt those who provide access to the market itself to tilt it further than the market has already.

    3. Crickets? Say what?

  6. This conversation strikes me as surreal in its persistent neglect of the real point.

    “Net neutrality” is about censorship. That is the only thing it has ever been about. That is the only thing it can be about.

  7. 1. In fact, on the pricing and access ISP issues, I’m completely in favor of regulatory mandates there and against the laissez-faire argument. But I don’t want to be an unpaid lobbyist for Google, to be used by it. See my declaration back in: http://sethf.com/infothought/blog/archives/001273.html

    It’s similarly “Excellent!” we’re apparently agreed the search neutrality concerns are not (refering to an earlier post) “incohere[nt]”.

    1a: Your post above is arguing that there wouldn’t be a market reaction, because most people wouldn’t see it. More reasonably: What if Google was downranking startups, the precious start-ups, which competed with its own services? Of course this wouldn’t be an issue if there were structural separation between search and services, or if there were a vibrant market of search engines.

    2. I keep saying, it’s not that the abstract argument is wrong as a totally theoretical matter. But the post was ignoring what’s widespread and existing now, and so the burden of proof is on the proposer to demonstrate a *practical* effect worse than the current situation, on a startup. There sure would be an obvious effect on Google, though.

    3. Crickets – I was writing in a rush. I meant “the sound of crickets chirping, aka silence of voices”. Of course everyone has a right to write about what they want, etc. But I find it very interesting the way so many Berkman people have been up in arms about what could maybe, possibly, in theory, happen with ISP anti-competitive actions and why it’s absolutely vital for civil-liberties, freedom, democracy, etc for there to be ISP regulation, yet are so quiet about now the existing anti-competitive probing of Google. That process itself is much more intriguing to me than the nominal arguments here, which are pretty standard think-tank tropes.

  8. It’s simple, Seth. Berkman is a think tank that’s heavily funded by Google. Of course it’s going to embrace policy positions that favor its patron… and of course it’s going to claim that these are in the “public interest” — i.e. that what is good for Google is good for the country. Let no one be fooled: it makes not one bit of difference to Berkman what ISPs really will or won’t do. It only makes a difference what Google wants it to say.

  9. To advocate net neutrality is nothing more and nothing less than to argue that Internet access providers, who by definition possess the means (and absent real competition, the strong incentive) to actively “broker” interactions between their relatively immobile access customers and everything else in ways that distort the marketplace to their own advantage, should be positively enjoined from exercising that power.

    Why is this so controversial, especially in the US where other kinds of economic intermediaries that sit in the same critical juncture between individuals/households and the rest of the economy — e.g., banks — have long been subject to positive regulation that prohibits their direct involvement in (e.g., crowding out, picking winners and losers, etc.) in the non-intermediation-related, intermediation-dependent sectors of the economy?

    Would critics of NN would be comfortable with the idea of (all of) their local banks being at liberty to cut secret sweetheart deals of any kind with selected employers, producers, and merchants such that whenever they deposit a paycheck, and then again whenever they attempt to use the resulting funds to buy anything, the actual amount of money they’re credited with or obliged to pay is dictated by the terms of those private sweetheart deals?

    So-called “company towns” eventually disappeared (in the US at least) as a result of competition, personal mobility, and positive regulation that prevented financial intermediaries and non-bank commercial entities from overgrowing or cutting deals across that categorical divide in ways that could suffocate individual consumers. Given the diminishing possibility of meaningful Internet access competition across most if not all all of US territory, a failure (or legal rejection) of the norm/expectation of NN would leave no place to go but offshore — which is exactly where we should expect all of the vast sums of Internet-related inward FDI that the US accumulated over the past two decades to go…

  10. MH – actually, financial deregulation of banks was a huge matter in the last decade. And look what happened (financial crisis). This is one major reason I believe the laissez-faire argument is simply wrong. But it did have a huge number of cheerleaders for a long time (and still does), as all the money was on the deregulation side.

    Brett – I’m interested in a further level of detail. How do these people figure out when to leave the party early, versus when to keep singing at the top of their lungs? I was fascinated that Free Press actually had a NN demonstration against Google a while back, though now it seems bygones are bygones. That’s the sort of complexity of these levels.

  11. Thank you, Seth, for following the intended chain of reasoning to the precise insight that makes this parallel so relevant for so many reasons at this particular moment in time. When present-day bank boosters speak about the importance of “financial innovation,” they’re generally *not* talking about the kind of modular/cumulative/ultimately transferable advances that we generally valorize (and often subsidize) in the domains of science and engineering/technology. Rather, those financial “innovations” are overwhelmingly contractual or process-related/organizational in form, and most are held so tightly by their creators that any positive effects that they ultimately generate rarely extend beyond the confines of the original “innovating” institution itself. Worse still, the recent/ongoing unpleasantness has revealed that one of the key motives driving the absolute secrecy demands of financial innovators is the need to hide minor details like the fact that such techniques aren’t likely to pay off even for their host institutions over the medium term (though the inventor and his immediate cronies may get fabulously rich in the interim*), or that any broader payoffs are likely to be more than offset by the risk-adjusted cost of increased industry volatility (or alternately, more extensive/intrusive/adversarial external oversight) — either of which cost would be borne not just by the mal-innovators themselves, but also by every other industry player, and every other individual and organization that depends on the unique and critical economic intermediary services that the industry(s) support.

    Note well: though it may not be obvious to some of their non-ideological boosters (and the ideologues see no problem with such practices in either industry), the kind of “innovations” that Internet access providers have in mind when they decry the perils of NN are exactly the same kind of transient, ultimately non-additive tricks that got the banks, and everyone else, into the trouble that we all (or almost all*) find ourselves in today. Regardless of whether they “work” as intended or not, you are almost certainly never going to see anything but downside (unless of course you happen to be an innovator* yourself).

    To your point, of course “all the money was on the deregulation side,” — because the beneficiaries of bank deregulation have all of the money. But the question of who backed which side with how much money was and is irrelevant to the facts in the financial sector, just as it irrelevant to the choice that we confront today. Would you have reflexively sided with the champions of bank deregulation if some pro-regulatory interest group with equally deep pockets had miraculously appeared on the scenes in the mid-1990s to challenge the argument for laissez-faire banking?

  12. MH, what I meant was, when you asked “Why is this so controversial … Would critics of NN would be comfortable …”, I believe critics of NN would indeed be comfortable supporting what you ask, because there was such extensive support for the laissez-faire argument during financial deregulation. And even in the aftermath of an utter trainwreck, there’s still a huge headwind against even mild controls. So that’s your answer as to “Why”, even if you (and I) are on the side opposing it.
    The money is relevant to analyzing the politics. Because when money talks, it determines who gets heard.

  13. Just for the record – and I do not intend to be drawn into yet another long argument with Brett – the Berkman Center is not “heavily funded” by Google, nor am I funded at all by the Center.

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  15. […] The argument continues that this will destroy advancement and innovation.  Read the whole post here. […]

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