Net Neutrality – Confusion, Content, and the Meaning of Free

There is perhaps no contemporary issue at the intersection of technology and public policy that is more contentious and conflicted than net neutrality. The issue itself has probably accounted for its own increase in Internet traffic over the last couple of years as opinions, jeremiads, official proclamations, and even HBO’s John Oliver, have weighed in on the issue.

One of the interesting parts of this complex and confusing issue is that content plays a central role in the debate. Even more interesting, however, is that unfettered access to content – a right I firmly believe in, alongside an equally vigorous right to the privacy and security of personal data – is conflated with the right of Internet service providers to charge different rates for different access speeds. I believe these are two separate issues, and by separating them (and understanding what free really means) it’s possible to see where a more reasoned compromise may actually be constructed.

To condense way too much of the polemic into a couple of paragraphs, the basic issue is that a wide range of stakeholders – from Internet activists to 1st Amendment liberals to some of the wealthiest and most influential technology companies on the planet, like Netflix, Google, and Amazon, among many others – believe that doing away with net neutrality will stifle freedom of expression, entrepreneurship, and a host of other evils too numerous to count.

On the other side are the major service providers – companies like AT&T, Verizon, and Comcast – who believe it is their capitalist economy-given right to make as much money as possible by selling their Internet pipes at different rates depending on who’s using what.

At least one of these companies – Comcast, one of the least popular corporations in the US – have definitely been caught by regulators impeding Internet traffic from “content providers”, and that impedance has set the stage for what I believe is a poorly constructed argument that goes like this: the ability of service providers to charge differential access rates threatens the free flow of content. Therefore, in the spirit of protecting content, there can be no differential pricing for access to the Internet.

In other words, without a level playing field for Internet traffic, the sanctity of content is in question. And that’s where I start scratching my head.

Let’s start with the content providers. Right now they do pay for differential access. Netflix, for example, agreed last year, most unwillingly, to pay Comcast, Verizon, and other service providers for fast lane service. Netflix’s CEO is on record as saying these fees are unfair. The service providers say that if Netflix wants a big Internet pipe, it should pay for it. And, they add, if Netflix doesn’t pay more, the cost of supporting the Internet infrastructure (and the profitability of the service providers) will be borne by the rest of the user community.

While it is true that Comcast was caught in 2007, and later sanctioned, for deliberately impeding Internet traffic, mostly to stop peer to peer networks such as BitTorrent from sucking up too much bandwidth without appropriately compensating Comcast, I don’t believe we have to have price neutrality in order to ensure access and keep a service provider from misbehaving.

The United States Code of Federal Regulations is replete with regulations that are intended to prevent predatory pricing, monopolistic control, and restraint of trade without the simultaneous requirement that all players in a given market provide an identical level of service at an identical cost.

Pharmaceutical manufacturing regulations are perhaps the simplest example. The same rules for safety – safe drugs is to pharma users what unfettered access is to Internet users – apply whether a manufacturer makes aspirin at fractions of a penny per dose or a new treatment for hepatitis that costs over $80,000. Playing fair – in this case making sure drugs work and consumers aren’t poisoned – is separate from what price the producer is allowed to charge.

Similarly, we should consider an option for the net neutrality issue that allows the movement of content to be priced differently, as long as that movement is not impeded or otherwise blocked. In this way Netflix would pay a proportionately large fee to stream millions of movies to millions of customers, while enterprises and consumers that move relatively smaller quantities would pay commensurate with their usage requirements, and not be asked to effectively pay for Netflix’s disproportionate use of Internet resources.

(I should add that the argument that this kind of price regime would stifle competition is largely disingenuous: Netflix’s stock price did take a dive in in the quarter following reports of its deal with Comcast, but that stock shortfall was attributed to increased competition and an ill-considered price hike by Netflix, not the supposedly onerous and competition-stifling cost of paying a premium to the likes of Comcast. The cost of having Amazon, Google, HBO and other competitors enter the streaming video market is a much bigger deal than paying off Comcast.)

If we strip content access away from the net neutrality debate, and just focus on differential pricing, what we end up with is a powerful set of companies on one side – content providers – and another powerful set of companies – the broadband suppliers – on the other side arguing what is really a business problem: how much does it cost for the former to use the latters’ services?

These issues are resolved all the time without resorting to government-sanctioned price controls: logistics providers, manufacturers, distributors, and retailers sort out similar business questions without crying foul or stirring the pot. While some would argue that access to the Internet is not a privilege, but a right that must be protected at all costs, I would believe, in the case of the food business, ensuring public access to the food supply is arguably a much more fundamental need on Maslow’s hierarchy than watching Game of Thrones in HD. There are ways around this without giving some very big corporations a government-mandated price break I’m not sure they deserve or even need.

There is one final argument for price neutrality, which is the potential negative impact that unregulated pricing will have on start-ups, that I’d like to address. First, startups dream big but always start small. Even if I was stupid enough to start a company to compete directly with Netflix (John Oliver refers jokingly to a company he wants to start called Nutflix, which I hope will be the final incentive you need to watch his brilliant analysis of the topic, even if we do disagree), it would take me years to approach the usage levels of Netflix, or HBO, or any of the other competitors in the market.

And if my startup ever did get to the big leagues, there would be other, more fundamental issues I would have to deal with (like the bone-headed idea that I would ever want to compete with these companies in the first place) than what my startup was paying for Internet access.

Secondly, and this is really basic: entrepreneurs don’t let anything stop them if the idea is good enough. We here in California are routinely treated to diatribes about how our taxes, housing costs, and wages are stifling competition, and yet, as all three continue to climb year in and year out, California-based start-ups are blossoming and VCs are spending more than ever.

So, as the debate swirls around net neutrality, let’s keep some perspective on the content side of the issue. Content isn’t all the same, its uses aren’t all the same, and the quantity and quality of content needed for a given purpose varies significantly from use case to use case. There is really no technical or business case for treating all content identically: if I’m archiving last year’s invoices, I need a very different speed and quality of service than if I’m tracking a major retailer’s e-commerce transactions in real time in order to detect fraud – or streaming Orange is the New Black, for that matter.

In fact, the threat of limiting access to content isn’t half as serious as the threat to unlimited access to content. Just whisper the words Snowden and hacking Chancellor Merkel’s cellphone around European IT executives and government regulators and you’ll see what I mean. What’s really needed is highly differentiated, nuanced, and carefully regulated access to the flow of content, which hardly lends itself to the one size fits all mentality of many net neutrality advocates.

Indeed, building Internet infrastructure to support providing identical services – and prices – for all possible content use cases would either result in too much or too little bandwidth for one or the other. The size of the water pipe going into a single family home is vastly different than the one going into an apartment building or a pulp mill, and each user class pays a different price in accordance with its water use. But all users get safe, drinkable water, at the risk of regulatory sanction. Similarly, we could come up with a regime that prevents the “poisoning” of content access without requiring it to be the same no matter the use case.

Finally, for the benefit my mono-lingual English readers, one of the biggest problems with the whole issue boils down to the word “free.” English may be the only language in the Indo-European family (and that’s includes pretty much half of the world’s population) that has a single word that denotes “no cost” and “unrestricted”. All too many arguments across both sides of the net neutrality divide have failed to carefully distinguish between these two very distinct meanings, and the polemic around the issue has been all the poorer for it.

I say we need to make sure that data moves as freely as it legally can, and keep that notion separate from what a company can charge for moving those data from one place to another. Information and content, contrary to the old saw, don’t want to be free, whatever that means, they just want to move where they are the most useful. So let them do so thoughtfully, carefully, and with appropriate speed and accessibility, and keep the issue of who pays what on a completely separate track.

 

 

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