'Net Neutrality' Gets Less Neutral

There are many ideas and proposals packed under the rubric of “Net Neutrality,” but the core principle amounts to rent control on the Internet: all web traffic must be treated equally.  In its undiluted, absolute form, this idea would work about as well as rent control does – it would destroy the Internet experience as we know it.  The ability to sell high bandwidth to large websites that can afford it, adjust rates and access speeds for users who consume large amounts of bandwidth, sell unused bandwidth at a discount, and otherwise treat traffic unequally is crucial to the business model that sustains the fast, inexpensive, and powerful Internet we have come to take for granted.  

On the other hand, some ideas packed into Net Neutrality appeal to most consumers, particularly when discussion turns to Internet gatekeepers who deliberately sabotage traffic to certain websites they disfavor.  For example, if an Internet Service Provider happens to sell streaming video, it might decide to artificially reduce bandwidth to other streaming-video providers, giving itself a competitive advantage.  People who buy Internet access from this ISP will think, “Man, their streaming video service works a lot better than Netflix or Amazon Prime, so I’ll buy it from them,” unaware that Netflix and Amazon Prime are being deliberately slowed down to make their service look inferior.  It’s not surprising that this form of unequal bandwidth allocation is unpopular with end users.

The new rules announced by the Federal Communications Commission on Thursday are being described by some as the “death” or “gutting” of Net Neutrality, but that’s not entirely true.  It’s more like a compromise, a re-definition of neutrality principles, as described by the Wall Street Journal:

Developed by FCC Chairman Tom Wheeler, the proposal is an effort to prevent broadband Internet providers such as Comcast Corp. Verizon Communications Inc., and Time Warner Cable from blocking or slowing down individual websites served up to the consumer. The idea is that consumers should be able to access whatever content they choose, not the content chosen by the broadband provider.

But it would also allow providers to give preferential treatment to traffic from some content providers, as long as such arrangements are available on “commercially reasonable” terms for all interested content companies. Whether the terms are commercially reasonable would be decided by the FCC on a case-by-case basis.

This latest plan is likely to be viewed as an effort to find a middle ground, as the FCC has been caught between its promise to keep the Internet open and broadband providers’ desire to explore new business models in a fast-changing marketplace. It likely won’t satisfy everyone, however. Some advocates of an open Internet argue that preferential treatment for some content companies inevitably will result in discriminatory treatment for others.

One suspects the FCC will be on-guard for any “discrimination” more invidious than offering more bandwidth to customers who wish to pay for it.  Consumers are likely to agree there’s a big difference between sabotaging Netflix, and offering Netflix more bandwidth for a premium price.  (It should be noted that even the “anti-blocking” provisions of Net Neutrality have run into trouble in court, although it has been ruled permissible to require ISPs to be transparent with their customers about how they allocate bandwidth.  Presumably the FCC’s new proposals will be written with these court judgments in mind.)

The ability to charge premium prices to heavy bandwidth users is one of the reasons light users can have steeply discounted access plans.  Not every website needs the kind of bandwidth Netflix chews up – actually, virtually no other form of website needs as much juice as a streaming video service.  Charging extra to the high-bandwidth blowtorches allows the more modest sites to operate more cheaply.  

The counter-argument from strong-form Net Neutrality advocates is that even if no traffic is deliberately blocked or slowed, the practice of selling premium access becomes a barrier to entry for new competitors in high-bandwidth industries.  Netflix and Amazon can afford whatever ISPs decide to charge, but good luck launching a new streaming video service to compete with them.  Even a big operation that could afford premium access might not be willing to take the gamble.  Small competitors wouldn’t be able to ante up at all.  (This is especially problematic given that ISPs are only the “last mile” connecting Internet services to end users.  It already costs companies quite a bit to get their content to your local cable company or DSL provider.)

But if there’s no price mechanism to allocate bandwidth, how is that precious resource to be allocated?  If providers aren’t charged for priority access, end users (i.e. you) would likely end up paying for your excessive network usage.  Or maybe bandwidth shortages would be resolved by artificial restrictions on all network access (everything runs slower) or “rolling blackout” slowdowns (random users experience random slowdowns.) 

These are tricky questions, as is always the case with any limited resource that passes through numerous hands before arriving at the ultimate consumer’s doorstep.  Technology is highly likely to relieve the pressure over time, as bandwidth expands – when enormous amounts of it are available, its price declines, and there is no need to worry about rationing.  (And then we’ll all start streaming 3-D holograms, and we’ll be right back into an Internet access crisis.)

The variables in the Net Neutrality equation are unique, thanks to the rapid evolution of a commodity that has only existed for a couple of decades, but the equation itself is very old indeed.  Demand exceeds supply.  Everyone is hungry for the Internet, but there’s only so much of it to go around.  How should we decide who to feed?

Update: House Energy and Commerce Committee chair Fred Upton (R-MI) and Communications and Technology Subcommittee chair Greg Walden (R-OR) don’t think Net Neutrality is dead enough yet:

“We have said repeatedly that the Obama administration’s net neutrality rules are a solution in search of a problem. The marketplace has thrived and will continue to serve customers and invest billions annually to meet Americans’ broadband needs without these rules. Chairman Wheeler’s approach to regulation seeks to freeze current market practices, which will cast a chill on technological breakthroughs and cause American consumers to lose out.”

Upton and Walden continued, “Further underscoring the needlessness of the rules, Internet service providers have made clear they will continue to adhere to the spirit of the rules that were already struck down by the courts. It is well past time for the commission to focus on areas where its work will foster new innovation, competition, and job creation.”

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