Tracing consequences both seen and unseen.
Lee SharpeThe Case Against Net Neutrality
Posted at 10:06 am on August 11, 2010, by Lee Sharpe

What is “net neutrality”? Net neutrality is government regulation which prohibits internet service providers from diffrentiating internet traffic based upon its content and/or the service being used. Advocates are concerned about internet service providers charging different amounts for different types of traffic or manipulating how internet traffic is processed so, for example, to increase the priority of a certain website’s traffic or decrease the priority of a certain website’s traffic.

Generally, regulation advocates point to something happening, identify it as a problem that government needs to solve, and propose regulation they feel will accomplish that goal. This is not the case with net neutrality because right now internet service providers are voluntarily complying with the standards net neutrality advocates seek to codify. This is even after a federal appeals court ruled in Comcast v. FCC that the FCC (at least currently) lacks the authority to prevent companies from engaging in this behavior. Given all of this, one must wonder why is regulation needed to address this in the first place.

Like many other newspapers, the New York Times runs advertisements. The newspaper and advertiser agree on the ad, where it will appear, how much it will cost, and on which printing(s) it will appear. All well and good. And, of course, the New York Times can reject any ad which it does not wish to run. The reason could be because the content is inappropriate for the paper’s readership. It could be because it advertises a competing newspaper. It could be because the editor has a random grudge against a local business and won’t support its ads. Whatever the reason, the New York Times has the freedom to not run certain advertisements. The freedom to refuse to facilitate speech one doesn’t like is part of one’s First Amendment freedom of speech rights. There is no reason this right should not carry over to internet providers as well, just like any other entity.

Many airlines offer passengers who pay for a “first class” ticket improved service for extra money. This extra service is for those willing to pay more. In addition to covering the costs of providing the extra service, this revenue helps the airlines lower fares for the other passengers, so its existence helps them as well. Similarly, television providers (both cable and satellite) offer various premium channel packages for extra fees. Nothing is wrong with these business models. Of course, nothing is wrong with a business model that handles all traffic equally either. Supply and demand will determine which business models are best just fine, just as described above in the airline and television industries. Congress and the FCC do not need to enforce a particular business model on internet service providers, as it might end up that way in the future. It’s entirely possible that at some point poorer consumers will be served by options of cheaper, more limited internet. Under net neutrality, however, internet service providers would be prohibited from pursuing such plans.

Logically, companies in any industry don’t want to be regulated. So it should cause one to pause when companies in an industry come out in favor of them being regulated. Google and Verizon Wireless did just that in a recent joint proposal to the FCC as a suggestion for how to implement Net Neutrality. In the first four of their seven points, Google and Verizon start off sounding like they support their own regulation. (“This means that for the first time, wireline broadband providers would not be able to discriminate against or prioritize lawful internet content, applications or services in a way that causes harm to users or competition.”) However, the fifth and sixth create a couple exceptions to their Net Neutrality propsals for “additional services” (it’s unclear how this is defined) and internet service provided wirelessly.

Now that we’ve examined their proposal, we should ask why would they propose it in the first place? The answer is to gain an advantage over its competitors, an example of behavior known as rent seeking. Businesses can and will use not just market advantages to seek profit, but legislative advantages if it can create them. Verizon is already a leader in wireless internet service, and with its FIOS technology and Google’s constant innovations, it seems like these rules are being constructed to create an advantage over more traditional internet service providers which use DSL or cable lines and would thus be subject to the net neutrality provisions while Google and Verizon are comparitively less regulated.

The common response to this by net neutrality advocates is to reject the Google and Verizon plan and adopt a stronger one instead. Indeed, this is already happening by some advocates. History shows, however, that industry is heavily involved in the regulatory process and puts heavy pressure to implement them in its favor. This is common with regulation, since the benefits to a single given consumer from net neutrality are relatively minor, while the costs are borne by the companies. Since these internet service providers don’t really care about much except internet aceess, they have lot of reason to lobby and shape the regulation to their advantage, and bigger providers have more resources to do this. Consumers care, but it is a small fraction of things they must worry about in their lives, and give the legislation little attention. This results in regulation that hurts consumers by distorting the industry away from customers’ true preferences. For example, exempting wireless from net neutrality may mean that cheap wireless limited internet plans exist, while even cheaper cable ones legally can’t, which hurts consumers seeking this type of plan. The net result of all of this is the FCC implementing policies that actually have significant support from within the industry. However, if the regulation was actually achieving its goals, this regulation should actually be opposed by the industry.

If the government regulates net neutrality, policies for internet access are set by one entity: the FCC. However, if the government stays out, each company will set its own policies. If you don’t like the FCC’s policies, you are stuck with them unless you leave the United States. If you don’t like your internet service provider’s policies, you can simply switch to another one. So which model sounds better to you?

Update: The Electonic Frontier Foundation is also worried about the phenomenon I descibed above (Hat Tip to @wilw):

Efforts to protect net neutrality that involve government regulation have always faced one fundamental obstacle: the substantial danger that the regulators will cause more harm than good for the Internet. The worst case scenario would be that, in allowing the FCC to regulate the Internet, we open the door for big business, Hollywood and the indecency police to exert even more influence on the Net than they do now.

Filed under: Internet, Regulation
Comments: 85 Comments


  1. You’d have a good point if people actually had a choice of ISP’s. Most people do not have a choice; that’s the problem.

    Comment by Ronco — August 11, 2010 @ 3:20 pm

  2. While your argument is mostly sound, it ignores one thing. Most Americans have exactly one, maybe two choices when it comes to broadband service: Their local phone monopoly, and their cable monopoly. If my provider offers things I don’t want/like, I’ll very well be stuck. Calling and complaining to customer service won’t help – they know I can’t “switch”. Writing to the FCC and my congressman, however, actually has a chance of working.

    Comment by Anthony — August 11, 2010 @ 3:25 pm

  3. Compare internet to busy phone lines. The concept behind net neutrality is to prevent companies from arbitrarily giving priority to, or blocking of, certain phone numbers, or people on these lines. Considering that these companies don’t actually own the lines in question, they don’t have any right to sell such control. Net neutrality is simply the prevention of applying such priorities to these lines, which is very different from a government-regulated priority.

    Additionally, you say that there is always the option to switch carriers, but that is most certainly not the case. In many locations, even dense urban areas, only one or two carriers are present. Considering that each carrier has specific regions where they have a near-monopoly as a provider, you would be forced to leave that region in order to switch carriers. Personally, I’d rather not have to pick the state I live in based on what internet company controls it. (And honestly, most people don’t have the freedom in their career to make such a decision)

    Comment by John Narse — August 11, 2010 @ 3:28 pm

  4. If you don’t like your internet service provider’s policies, you can simply switch to another one.

    Except that in many areas you do NOT have said choice. That is why anti-monopoly laws exist. Net neutrality heads this off at the pass.

    Comment by BilboBaggins — August 11, 2010 @ 3:29 pm

  5. Letting competition sort out the rules sounds like a great idea, but in practice, most Americans don’t really have meaningful choices in service. Personally, I would love to choose an ISP other than Comcast, but I really can’t if I want decently fast service. So, my choice is supposed to be: stay with Comcast, and deal with them throttling access to YouTube or whatnot, or switch to some other provider that offers 1/10th the bandwidth to start with?

    Comment by Maciej — August 11, 2010 @ 3:30 pm

  6. Yes, we should be vigilant against government-backed internet filtering, but I don’t see any evidence that net neutrality regulations are necessary or sufficient for the government to try to stifle pornography or file sharing online.

    If we have net neutrality legislation, ISPs and government alike can try to screw the network user.

    If we don’t have net neutrality legislation, government can still try to screw the network user.

    I suppose there is a risk that a bill called (e.g.) “The Network Neutrality and Taxpayer Relief Act” actually says in the text that it levies a 50% national sales tax on phones and puts the money in a fund for Alaskan bridges, but that’s not a risk specific to net neutrality.

    Comment by Matt — August 11, 2010 @ 3:32 pm

  7. Oh hell, obviously I switched the cases. *With* net neutrality ISPs are more limited in how they can screw network users, but it neither increases nor diminishes the power of a censorious government to screw network users.

    Comment by Matt — August 11, 2010 @ 3:34 pm

  8. Well honestly a lot of people don’t have more than one choice thanks to government-granted monopolies for telecomms. That alone has killed any type of competition, which sucks considering most of the wire laid down by the telecomms was at least subsidized heavily, if not outright paid for, by the federal or state government.

    Comment by redmid17 — August 11, 2010 @ 3:36 pm

  9. I agree but I think it goes further — the real problem is the access monopoly in the US. If the FCC breaks the access monopoly, then I can vote with my wallet. Providers will be free to earn their rents with whatever policies they want, and I will be free to take my business to a provider that offers me what I want.

    This whole net neutrality argument is loved by the access monopoly since it keeps them in power.

    Comment by Jason Sherron — August 11, 2010 @ 3:38 pm

  10. From TFA:
    If you don’t like the FCC’s policies, you are stuck with them unless you leave the United States. If you don’t like your internet service provider’s policies, you can simply switch to another one.

    Unless, like many if not most home internet users you don’t have a choice of ISP. Here in southern NJ, Comcast (Xfinity) is the ONLY GAME IN TOWN.
    I’m sure that it must be the same in other places.
    Even if there was an option to switch, it would only become like cellular service… they all give you the same deal.
    I’m not a big believer in govt involvement in industry but sometimes it’s needed.

    Comment by Palmer Eldritch — August 11, 2010 @ 3:39 pm

  11. […] The Lesson Applied » The Case Against Net Neutrality. […]

    Pingback by benrobb :: The Case Against Net Neutrality — August 11, 2010 @ 3:40 pm

  12. This is the worst argument against net neutrality, ever. You’re comparing the internet to newspapers and airlines. Let’s think about this for a second.

    Newspapers are read-only media that do nothing but provide information. No business-critical services are built around a newspaper, except for the publisher of said newspaper. If my newspaper could, say, allow people to purchase my product through it directly or allow people to interact with my ad, then maybe they could be comparable. This is a bad metaphor.

    Next you compare the internet to airlines, which is laughable. Comparing first-class service on an airline to maybe that of a train is comparable, but not the internet. Sure, paying for faster service is tenable, but for BETTER service, or simply access? If I don’t want better service on a plane, I will still end up at my destination. However, without net neutrality, UNLESS I pay for better service, I can’t necessarily get to my destination.

    Unless you have something better than these examples for metaphors, I suggest you rethink your arguments.

    Comment by Jason — August 11, 2010 @ 3:42 pm

  13. If you are in a rural area,like I am,you have a choice of ONE provider.The tiered internet MUST NOT HAPPEN or its back to BBS systems.

    Comment by Keith Smith — August 11, 2010 @ 3:42 pm

  14. This assumes you have a choice of providers (beyond moving). I’m lucky with DSL, Cable, and 4G wireless…but not all are so blessed.

    Also there isn’t that much difference between what they offer or charge. So how do you get any change in an environment like that?

    On the other hand with government there is the chance that an official (who isn’t benefiting directly from more profit) might limit how selfish a company can be. They aren’t going to do it themselves.

    Comment by Joe Millenbach — August 11, 2010 @ 3:45 pm

  15. “If the government regulates net neutrality, policies for internet access are set by one entity: the FCC. However, if the government stays out, each company will set its own policies. If you don’t like the FCC’s policies, you are stuck with them unless you leave the United States. If you don’t like your internet service provider’s policies, you can simply switch to another one. So which model sounds better to you?”

    simply switch to another? I think you’re getting a lot of flak about this. IMHO well deserved flak, in the world I live in, Reality, it is not as simple. Content Providers should not dictate the flow of information.

    Comment by motus — August 11, 2010 @ 3:50 pm

  16. one must wonder why is regulation needed to address this in the first place.

    is it needed?

    Comment by peter cottontail — August 11, 2010 @ 3:50 pm

  17. Supply and demand cannot determine which business model is best when the ISPs have government approved monopolies. There is often only one chose for consumers. So you are left with either the FCC regulating the internet, or the regulating it. Not an easy choice, but for now I’d go with the FCC.

    Comment by Kevin — August 11, 2010 @ 3:51 pm

  18. There are a number of factual problems with what you have written

    1) Not all ISP’s are voluntarily obeying Net Neutrality rules. Many of them perform filtering of certain types of packets (ssh, p2p), some of them actively block and disrupt certain protocols (ssh, bittorrent), and they occasionally practice censorship (to silence criticism).

    2) I personally have a wonderful choice of 0, 1, or 2 ISP’s in my community, depending on where I choose to rent, so I don’t actually have much of a choice. Both ISP’s are large companies which don’t give much of a damn, and pretty much offer the same service at the same price. This situation is very similar to that in the cell phone market, where AT&T, Verizon, and Sprint all offer pretty much the same service at the same price, and they all are making ridiculous profits off of SMS, for example. If there were a larger number of competitors, and if they weren’t in collusion, then there might be true competition, the service might improve, and the price might go down.

    Comment by Haydn Huntley — August 11, 2010 @ 3:52 pm

  19. Freedom to facilitate the speech you want is all well and good… unless you’re a monopoly who has singular control over what speech someone recieves. If you’re like many in the US, there is not a choice of providers that can be chosen from. If you’re lucky, you’ll have broadband, and if not you’ll have dial-up. There is no, “I like this one better” or anything like that. If you want to have a different ISP, you move. Simple as that. It is ridiculous to suggest that if a person’s only option is moving, that that applies as freedom of information. Also, the FCC does not have the primary goal of making money off its users, so I’d really rather have them decide the rules.

    Comment by correnos — August 11, 2010 @ 3:52 pm

  20. The very existence of governments and states can be justified only by one goal: to provide infrastructure.

    Your example of airplane seats is flawed; people pay for the luxury of a premium seat, not for faster transport. The infrastructure part of the air travel is unaffected by their payment, only the luxury aspect is.

    When you’re talking about regulating bandwidth and latency, you’re directly affecting the infrastructure aspect of the data transport.

    Luxury doesn’t come into play… in the same way that if you feel paved roads are luxury, you might as well stick to dirt tracks for all your cross-country traveling needs. Right?

    So if you consider internet access essential infrastructure, then of course government is required to provide a level playing field. That’s it’s purpose.

    Comment by unwesen — August 11, 2010 @ 4:02 pm

  21. Obviously there is a problem – that for a lot of Americans they have at best, two choices of ISP – and the costs to create a new one are insane. A different approach has been adopted by Britain – as most of the cabling was laid by what was at the time a government owned entity (but has since been privatised), they were told to break themselves into two – a services arm, and an infrastructure arm.

    On top of this, independent companies are permitted to place their own equipment inside telephone exchanges. This has led to numerous ISPs, each of which can serve individual customers. Some ISPs offer their own video platforms on top, with tight caps and some restrictions. One ISP offers ‘free’ Internet with their premium TV. Another ISP offers discounted internet for customers of their phone network.

    It would probably be more politically difficult to achieve this in the US than it was in Britain, and it is not without its issues, but it seems to work fairly well.

    Talks about it in more detail, and it would seem to me that where there is one or two dominant providers in an area then it makes sense to provide this service instead.

    Comment by Andrew Shuttlewood — August 11, 2010 @ 4:03 pm

  22. “If you don’t like your internet service provider’s policies, you can simply switch to another one.”

    WHAT other ISP? This may be news to you but in the United States, there is virtually zero competition between ISPs. That is because ISPs are government enforced monopolies.

    Letting the free market decide doesn’t work when there ISN’T a free market.

    Comment by Mark P — August 11, 2010 @ 4:04 pm

  23. Lets start with your newspaper argument. First of all, internet providers are not content producers (well they could be both, but lets separate out the departments). The NYT on the other hand is a content producer. They can choose what content to put in their paper. Your argument would be more along the lines of the delivery boy deciding not to do his rounds because he doesn’t like what’s on the front page that day. You still want your copy, and the NYT still has the ability to put whatever they want on that copy.. but some third party has arbitrarily decided to withhold the “service” from you without the permission of either the NYT or yourself — a third party who’s being paid to deliver no less!

    The problem with most of these arguments (on both sides) is that there’s more than one aspect of net neutrality.. ISPs have the ability to filter traffic in more and more detail. FCC vs Comcast was about Comcast specifically filtering out certain protocols (Bittorrent). Now if I have a 5Mbps drop to my location, and the ISP has promised me 5Mbps.. I should be able to use that 5Mbps in any way I see fit. Of course ISP’s oversubscribe their lines to ridiculous percentages (which is an issue of itself) but if their lines are being taxed, they need to be adjusting the TOTAL throughput of their lines, not just a single protocol/website/etc. It should be up to me if I want to prioritize BT over VOIP, not up to some arbitrary third party.

    But the real danger in allowing the net to become less neutral isn’t protocol filtering or bandwidth capping — its site filtering. This is a situation where Verizon caps out all websites at say, 5Mbps per connection, and then they go to Google (or NYT or any other website) and say “if you pay us $10million/year, we’ll boost your throughput to 15Mbps”. Now we’re in a situation where the “big boys” who can afford $10mil/yr get prioritized over everyone else. If I want to start a Youtube competitor, I’m either going to be stuck at a lower throughput or I’m going to have to pony up some big bucks — $10mil is a huge amount to a startup, even though its a drop in the bucket for the Googles and Microsofts of the world.

    The NN opponents do everything in their power to hide the above scenario, preferring to pull out arguments like “do you want your VOIP call to suffer because Johnny down the street is an evil pirate?” Its a completely false argument (why does Johnny have anything to do with my VOIP? What if he’s just playing a really network-intensive game? Will you ban that as well? And while we’re at it, why are you spying on a 14 year old kid?)

    And the whole idea of “simply switch to another one” is laughable. People in New York and other large metro areas might have that ability, but for the majority of the country you can consider yourself lucky to even have two options, and they’re both frequently as bad as each other.

    Plus, if this kind of thing gets off the ground, its going to be very unlikely for ANY provider to not be participating. Its obviously a business advantage for the ISPs to create a non-neutral internet (or they wouldn’t be fighting so hard.. in fact it wouldn’t be an issue in the first place!) so you can assume that they’ll all want their piece of the pie if they’re allowed to have it. It would be like having the choice between McDonald’s and Burger King when you really want a steak.

    Comment by Erin — August 11, 2010 @ 4:05 pm

  24. Where I live, there is only one ISP that offers broadband speeds. I have no choice. If I want to switch ISPs, I have to move, which is exactly what you say the danger is of FCC mandated network neutrality.

    Comment by Stubby — August 11, 2010 @ 4:14 pm

  25. Fuck you.

    “‘If the government regulates net neutrality, policies for internet access are set by one entity: the FCC. However, if the government stays out, each company will set its own policies. If you don’t like the FCC’s policies, you are stuck with them unless you leave the United States. If you don’t like your internet service provider’s policies, you can simply switch to another one.”

    WHAT other one? 90% of the US market lives in a monopoly or duopoly situation in which the only choice or only two choices are the exact type of shitty multinational abusers that are going to have fucked-up policies in the first place.

    Where, precisely, are we to go if we don’t like the policy of the shitty monopolist in our area? Moving for net access is a bit strange, and most people would have to quit their jobs in order to move far enough away to switch providers.

    Comment by Bob — August 11, 2010 @ 4:14 pm

  26. “If you don’t like the FCC’s policies, you are stuck with them unless you leave the United States. If you don’t like your internet service provider’s policies, you can simply switch to another one.”

    Or elect a different president/senators/representatives willing to appoint different people to the FCC that align the People’s wishes.

    To influence a corporate body, I would need to buy stocks.

    You also falsely assert there is even a choice in the first place amongst available service providers in your area. Even if you are lucky enough that the number is greater than 1, they are way too often a colluding oligarchy.

    Also, what if you are a content producer? You want your content to be available to as many people in as many regions as possible. Let’s say I reach 1,000 customers of a certain service provider. That provider chooses to majorly throttle the bandwidth for my content. All 1,000 of those customers will perceive my product as slow or clunky. They do not have the luxury of viewing my content over several different providers, noticing my content is a lot faster on some providers than others. They will never, never come to the realization there is nothing wrong with my content. It’s their malicious provider. But it’s not the provider’s brand that’s hurt, it’s the content producers. How is that fair?

    Comment by TODD TRIMMER — August 11, 2010 @ 4:15 pm

  27. “Logically, companies in any industry don’t want to be regulated.”


    Assume that there is an altruistic Company A, and a Company B that lies, cheats & manipulates on a regular basis. I don’t think it would be hard to see why Company A would want regulations. Company B could use any tactics it wants while Company A languishes and can’t keep up with what Company B is doing. This is especially troublesome if the consumer base has no idea that Company B is intentionally manipulating the market in order to appear faultless. In this situation, Company A would love to have government regulation to ensure fair competition

    Even though this is overly simplified, this situation has, and still does happen. Take the case of AMD v. Intel. Intel used several anti-competitive practices to gain an advantage over AMD, even though AMD had the superior chip on the market. Because of the existence of government regulation, AMD was able to sue Intel and eventually settle for over a billion dollars. It’s easy to see that companies would support regulation to ensure fair practices, not necessarily to gain a competitive advantage.

    Aside from that, where your argument really falls apart is that you assume that the laws of supply and demand apply. The problem is that this “law” requires a free market, with relatively low barriers to entry. Currently, this simply does not exist in many – perhaps even most – parts of the country for broadband internet.

    In many cities, there is only one choice for broadband, and the barriers to entry are too high for anyone else to enter the market. In fact, many of the companies that provide internet to certain areas are only able to do so because of government subsidies to lay lines. Because of this, they have a de facto monopoly, and I’m sure I don’t need to delve into the problems with monopolies.

    Overall, I still fail to see a compelling argument why shaping traffic is a good idea. If I use my 7 Mbps to download my favorite movies, does that make me less deserving of bandwidth than someone who uses their bandwidth allotment to play the newest high tech video games? I don’t think so. I also don’t think that my cable provider should decide that I can no longer access and instead have to go to because ESPN didn’t pay as much as Foxsports did.

    Comment by Jayme — August 11, 2010 @ 4:16 pm

  28. Choice of ISP would solve NOTHING! Most internet traffic gets routed through a handful of major “backbones”. Using the age-old highway analogy, net neutrality is like keeping all highways open to any delivery truck to bring through packets at whatever speed that truck and driver can. Without Net Neutrality, several large corporations that own the highways would be able to set up tolls and arbitrary speed limits. For example, AT&T could let their own packet trucks through with a 100 mph speed limits, while forcing all the competition’s packet trucks to obey a 30 mph speed limit, or enforce tolls, or whatever! This is why neutrality is important and just CAN’T be sorted out with the market. The internet is too entwined to work any other way.

    Comment by Arby — August 11, 2010 @ 4:17 pm

  29. Nonsense….I have ONE wire into my home…where do I get all this competition? Satellite – again nonaense…they are two different things. Competition is between two of the SAME items. Sat is different from cable is different from DSL. None are competing. They are all SLOWER by a factor of 10 at our home from the Cable.

    Sat is useless for important work or games.

    What we should do is force all wires, cables, nets to be SOLD to ONE Utility company. Then ANY one can offer you ANY service over the ONE cable into your home. No CONTENT provider would be allowed to own any DELIVERY method. The utility would maintain, update the wire only. The Media people would provide CONTENT only….not control the method of delivery.

    Would you like for Ford of GM to own the hiway..and only allow Fords or GMs on their road. Nope. EVERYONE can use the road. The cars and the roads are owned by different entities.

    Comment by Bill — August 11, 2010 @ 4:19 pm

  30. Actually you are making one bad assumption. You are assuming that it is a one-stop for the consumer to reach their location. If I buy access from Comcast. I’m not 100% on comcast’s network to get to Youtube, Amazon,, etc. I do have to go out to, level3,, etc to get my final location. If any of those backbone providers decides they don’t like a traffic type, a website, or decides they can make cash by charging non-customers (read their customer’s customer) for removing the access limiter for that traffic. What defense does that customer have? We’re not talking about’s customer (Comcast), but Comcast’s customer now faced with a bill from for traffic usage ABOVE their Comcast bill?

    A simple airline example. I’m on a Delta flight circling MSP. The pilot gets on the speaker and states, “Sorry folks, but the MSP airport doesn’t feel they are getting enough from Delta. We can either circle for another hour or if every person pays $150 more we can land in 5 minutes.” How do you think that would be taken?

    Would that be acceptable behavior? Would we put our hands up and go, “Ok, that is the price of business.. I guess we’ll pay it.”

    That is what true net neutrality is about. It’s ensuring that all the cards are on the table up front and that information is clearly communicated and no person or company is held hostage by a group of people because they control a pathway between a company and their customer.

    Comment by Mouring — August 11, 2010 @ 4:27 pm

  31. i was trying to isolate why it is i find your analogies so repulsive and i believe it is because you seem to treat the internet as a privilege. with your airline analogy, you come dangerously close to painting the internet as a luxury item. currently, not everyone can afford even the cheapest of flights. you cannot go to your public library and fly anywhere in the world for free (unless, you know.. metaphorically, on the internet). this analogy is entirely broken.

    by comparing the internet to print media, you make the false assumption that ISPs are like publishers. they are not and, in my opinion, they absolutely never should be.

    let us correct your analogy by comparing ISPs to their most similar entities: cable companies. i feel the reasons that this analogy is more appropriate should be blindingly obvious.

    you say that supply and demand will ensure that customers eventually receive the service that they desire. please stop to consider that statement in regards to a cable company. for decades, consumers have asked for an a la carte system for ordering channels. this will never happen. there is absolutely no incentive for any existing cable company to release it’s grasp on the pricing bundles and content control it currently has.

    AOL was basically a cable company’s approach to providing internet service: control, compartmentalize, condescend the user. if net neutrality is not sustained in one way or another, i fear that cable companies will revert our internet experience back to AOL levels of hand-holding and censorship (i may be wrong about AOLs censorship history). as with cable companies, most people really only have one or two options when choosing an ISP. the normal rules of competition, supply and demand, do not seem to apply in the same way to companies that can claim vast control over infrastructures.

    do i want the FCC to ‘control the internet?’ i’m not sure. it is a little scary. but i think you’re injecting a lot of panic and fear into that quote from the EFF. it seems more like a pragmatic assessment of the situation rather than an endorsement of your argument.

    anyway, i vehemently disagree with your views on the internet but realize there’s no precedent. we have only opinions and fears to go on. maybe if we can draw out this debate indefinitely, our internet will stay exactly how it is now: open.

    Comment by brian — August 11, 2010 @ 4:27 pm

  32. Hello Lee! I read your article and disagree with it because some of your analogies do not quite work!

    Instead of comparing ISPs (Internet Service Providers) to newspapers, compare them to couriers. Like many other courier corporations, FedEx delivers mail. Are they allowed to refuse to process certain mail because they don’t like someone who’s trying to send mail? Certainly it’s possible for the couriers to refuse to send certain kinds of mail, or to refuse to send mail from certain individuals, but is that a thing they are allowed to do by law? Are they allowed by law to open packages and inspect the contents before deciding if they will send the mail? This question isn’t rhetorical, it’s a concern that I don’t know the answer to!

    Instead of comparing ISPs to the airline industry, compare them to utilities. Unlike airlines, utilities have an extraordinarily large fixed cost and a very small marginal cost. That is to say, it costs a lot of money to install the infrastructure, but it doesn’t cost a lot of money to serve one more customer once all that infrastructure is installed. Airlines have a high fixed cost and a high marginal cost. It’s actually hard to compare the airline industry to any other industry because it is almost always operating at a loss. Five of the eight largest US airlines have declared chapter 11 bankruptcy!

    About the television industry: if I wanted to create my own channel, what are my barriers to entry? Because television is operated on a channel package basis, it’s nigh-impossible to create my own channel. What about my own television show? This is also something that most people can only dream about! Please do not compare television to the Internet because the nature of the two mediums is completely different (even though they are both digital). One is participatory, and the other is not. I can register a website with a healthy bandwidth allowance for $150 a year. Compare that to television. If possible, I would like to hear how a “premium” Internet argument doesn’t sound silly! The only way that it doesn’t is if ISPs simply provide a slower Internet speed for customers who don’t opt to pay for the higher speed. This is something they already do!

    Of course corporations do not want to be regulated! In fact, capitalism in and of itself is a system that is supposed to generate profit, not serve consumers. Were it not for anti-trust laws, a capitalist free market economy would naturally evolve into a series of monopolies. Monopolies are excellent for capitalism, because they provide ways for corporations to be anti-competitive and eke out ever greater profit at the expense of customer satisfaction (consumer surplus, if you want to use economic terms).

    Now, I mentioned utilities before. Utilities are government-regulated natural monopolies because of the cost distribution of the industry. If water and electrical utilities were not natural monopolies, they might need to install their own water mains and transformer stations. And then they would be able to charge any price they want, because they are a private industry! The consumer would have very little choice, because there is no incentive for one utility to pay for the privilege of asking a consumer if he or she wants to connect to their network instead of the other one: there is more incentive for the utility to reach out to new consumers. Now at this point there is a monopoly or a duopoly, and consumers lose out!

    As other people have pointed out while I was writing this response, most people do not have a choice between ISPs! Or if they do, the choice is very limited and therefore not actually a true choice at all! Therefore the ISP industry is operating under a monopoly or duopoly set up, depending on the area. Doesn’t it make sense to regulate these corporations for the benefit of the consumer and for reasons of anti-trust laws? Monopolies stifle innovation! How long has it been since new broadband technologies were developed? Verizon’s FiOS is the only example I can think of, at least in my area! The other ISP I can choose is Comcast, whose latency is horrible, and has been for the past 15 years! I remember being unable to join my Comcast friends’ Starcraft games in middle school because “game host’s latency is too high!”

    Comment by Anonymous — August 11, 2010 @ 4:29 pm

  33. Thanks, Lee, for a well-thought-out, perfectly reasonable argument against net neutrality regulation. This is probably the best I have seen. However, I do disagree with you on a couple points.

    1) Internet service providers have a different role than content providers. Of course a newspaper can select what it does or does not want to publish; it is the content provider. Your service provider is supposed to simply bring content from “the web” to you. Time Warner Cable choosing which websites you can see (or how much they cost to see) would be more like the postal service deciding which newspapers you can see. What if the USPS decided to charge more to deliver The New York Times than to deliver The Wall Street Journal? This seems absurd, but if a single company was both a content provider and a service provider, they could use their power as service provider to block the competition of other content providers.

    2) Internet service is not a typical free market. It is a utility, and thus a regulated monopoly. For instance, in North Carolina, I can only get broadband cable service from one company: Time Warner Cable. Sure, I can get DSL or dial-up, but these are not always available or sufficient. This monopoly is allowed for the same reason that I only have one power company and one water company — it requires heavy infrastructure, often on public property. Time Warner is allowed to use public resources and operate this way, but is necessarily subjected to extra regulation to prevent it from abusing its position as the sole cable internet provider in this area.

    If it were a free market I would agree with you, that consumers would choose the best option. But since in many cases consumers do not have a choice, free market rules do not apply. The service provider has the power to dictate the rules. And while no one wants the FCC to be in charge of regulating the content on the internet (almost no one…), someone has to keep the service providers from doing just that to further their own business goals.

    I’m open to suggestions.

    Comment by JD — August 11, 2010 @ 4:31 pm

  34. Your arguements are flawed. They focus on either the end user, or the content provider. In your newspaper example, a subscriber pays for a paper (like I pay for my ISP). A content provider gets paid for advertisements (like Google gets paid for ads on their site). Now pretend that another party is going to charge the reader more for allowing that newspaper to come in dry and folded properly, and charge the content provider for the ability to deliver the paper on a gravel potholed road or a nicely paved street. Same for the airplane example. The ISP’s are already making money on how they sell bandwidth. It costs them nothing to make it faster or slower, all the equipment is in place. They’re wanting to double their money based upon what the user wants to read, and how desperately the content provider wants to deliver their content. I’m already paying for internet. I pay more than the normal user, and I use more than the normal user. In reality, I cost the ISP’s no more than my father who pays for faster internet than I do, but almost never uses it.

    Comment by Eric Brown — August 11, 2010 @ 4:38 pm

  35. As noted, most people don’t have a choice of what internet provider is offered. But beyond that, do a tracert on traffic to another part of the country. See that? That’s Ma Bell for most of the links. So your local provider is largely irrelevant.

    Business is good for goods and services that you can opt out of. Those you can’t (like the internet these days) are called infrastructure, and giving business control over infrastructure is a golden invitation to rent-seeking behaviour.

    Legislative capture is a problem in its own right, and will become a more pressing problem now that the Supreme Court has given corporations the right to buy politicians as they see fit. If the Tea Party would address that issue, I’d sign up. But they won’t, because they are a wholly owned subsidiary of Murdoch’s News Corp., the goal of which is, you guessed it, legislative capture. So much for small government.

    Comment by Mark — August 11, 2010 @ 4:40 pm

  36. Let me just call up the other ISP’s in my town… oh yea…

    Comment by Arron Lorenz — August 11, 2010 @ 4:41 pm

  37. The opinion you outline is ridiculous, and it reeks of the kind of malformed free market tripe shoveled every day by right wing conservatives who have little to no understanding of economics, game theory, and economic psychology.

    Corporations have a natural and instinctive tendency to pursue monopolies. It’s not their fault it’s the end game of a competitive market, but it’s none the less true. This tendency is diametrically opposed to consumer best interests, specifically choice and competition, and has (historically in ALL cases) led to the victimization of consumers.

    The role of govt is to regulate and protect consumers from corporations that will, if left to their own devices, naturally take advantage of them. It is not to “control” anything, but to establish rules and spur competition and innovation through regulation.

    When govt is removed we get EXACTLY what we’ve gotten over the last 8 years; less competition, higher prices, WORSE service, and stifled innovation.

    The only guy in the room who wants less govt is the guy who collects the cash. You, sir, are a shill…

    Comment by TimeWarnerPrisoner — August 11, 2010 @ 4:44 pm

  38. So if an ISP say Comcast sees a news story about its self the that is published by a news website and it is negative (say Comcast ripping its customers off for some service) that it has the right to block that site because it doesn’t “agree” with the content?? Or you can’t do research on buying a BMW or Mercedes Benz online because they only want you to buy an American made car. This seems right to you? That seems like I’m only allowed get the information that THEY want me to get rather than being able to see and read any and all news or information, and then be able to form my own opinion. What about internet services?

    Say you use Vonage for your home phone, and Comcast decides to block or severely hinder Vonage from working, to force you to use Comcast’s Voice service. Before you get a chance to switch you have an medical emergency and you can’t get though to 911 because Comcast is blocking it. How is that a free market. If you can’t choose who will provide your internet phone service, it isn’t a free market!!

    And for your statement that if you don’t like how your ISP is operating you can move to another. How many choices do you have? I have all of two, Cablevision (15 Mbps) or Verizon DSL (maybe 3 Mbps if I’m in the right area), which isn’t a choice at all, being that DSL can’t go faster than 3 Mbps and will most likely be less than 1 Mbps. Most people in this country are limited to this choices, unless FiOS or U-Verse are available in the area (still a really a choice between two ISP’s; Telco or Cable).

    If all of us had more than just two or three choices of ISP’s and could switch from one to another as easily as just picking up a different newspaper at the store, then this wouldn’t be as big of deal. But we don’t. This is a very slippery slope, and there is not regulation to prevent it, we will be stuck with only being able to get the content that the major corporations want us to see.

    Comment by Alex — August 11, 2010 @ 4:53 pm

  39. “You’d have a good point if people actually had a choice of ISP’s. Most people do not have a choice; that’s the problem.”

    Exactly, and now we get the heart of the matter. However, what is appalling to me is that no one wants to talk about WHY the average American only has two choices of ISP.

    The reason that the average American household only has two choices of ISP, a cable provider and your phone company, is because your local municipality has granted franchises for cable and phone service in your town. Contrary to the idea that networks are just too expensive to rollout, the truth is that if you had all the money in the world, you could not start a new ISP in most towns in America because it is against the law.

    As a result, the whole, current debate about “Net Neutrality” is hopeless misguided. No amount of Federal government regulation on how ISPs route traffic is going to ameliorate the problem of ISP choice in the US. Instead, new Federal powers to regulate the Internet will both have the exact repercussion described in this article and will further obfuscate the cause of America’s lack of ISP choice and the root reason why American last-mile Internet connects are rapidly falling behind those of the rest of the world (all the while, the US still has the fastest Internet backbone in the world, hands down). In addition, “Net Neutrality” only serves to further entrench the current ISP system, meaning that in future we will have fewer ISPs, the biggest and most well connected to the government, instead of more ISPs, which everyone believes is a good thing.

    Comment by George P. Burdell — August 11, 2010 @ 4:57 pm

  40. Aside from the fact that in most areas, there aren’t a lot of choices, virtually all of the service providers I know of are philosophically opposed to Net neutrality. They don’t need to resort to collusion to provide a united front against it (and therefore against consumers). So even if there were choice, it would be a matter of least of evils. But to switch frequently incurs an early-termination penalty of hundreds of dollars.

    Of all the industrialized nations we have one of the poorest rates of broadband adoption, some of the slowest broadband data rates, and some of the highest fees to consumers. It isn’t that we have too many people using the bandwidth. On the contrary, it’s that we have large areas of low population density that the broadband providers don’t find sufficiently profitable to wire and service.

    We don’t need less regulation, we need more. I can’t think of one industry where deregulation has led to log-term competition and better goods and services for consumers. In profitable industries, it invariably leads to consolidation and therefore less competition, which invariably guarantees less choice, poorer service, and higher costs to consumers.

    Comment by Tzedekh — August 11, 2010 @ 5:00 pm

  41. While I share your dislike of regulation, competition in the ISP space has degraded to the point where the remaining players have little regard for consumer preferences. This will only become worse if the ISPs start collecting fees on the other side of the connection (e.g. the NFL pays Comcast to carry its games on the FasterNet), because then the availability of content then becomes dependent on business-to-business relationships, which consumers have little ability to influence.

    Comment by S. Colcord — August 11, 2010 @ 5:24 pm

  42. How about they just leave the internet alone? I also find it humorous that the second I checked out this article I lost my net connection.

    Comment by ecco6t9 — August 11, 2010 @ 5:26 pm

  43. While the argument that most people do not have a choice is a good one, it isn’t in my mind the best argument. The FCC does not stand to gain from anything if they are the ones making the rules. No one there is getting paid (except maybe by lobbies for the companies already in question).

    The companies in question however stand to gain from a lack of net neutrality. So it is in their best interest to serve themselves, where it would typically suit the FCC to benefit the people.

    Comment by arekin — August 11, 2010 @ 5:41 pm

  44. Wow, you must have not thought this out very well — I mean most replies in the comments point to a particular argument which demolishes your case. How come you missed it? Please stop spreading misinformation.

    Comment by arkas jones — August 11, 2010 @ 5:48 pm

  45. ps. I was referring to the article.

    Comment by arkas jones — August 11, 2010 @ 5:49 pm

  46. Actually you completely ignore that we are already on a tiered Internet. For example I pay extra to Comcast for their fastest plan available. I have no problem with them charging different rates for different speed plans.

    Also the content providers also must lease their telecom lines from some provider so they too are paying for the ability to deliver their content to consumers. No one is getting a free ride as the CEO of AT&T has suggested previously. Everyone is paying for the bandwidth they receive. What the CEO of AT&T suggested was that he also wanted to charge Google for access to the consumers that he was already exacting a toll on. So basically AT&T wants to charge three times for packets to get where they should once from the consumer once from the content provider and once for the content provider to access the consumer in a timely fashion. Also they want to be able to act a gatekeeper of new media and determine winners and losers. And this is where it gets really insidious because most people do not have much choice in their broadband service providers. So there is not enough competition to prevent them from creating a barrier of entry so large that future innovation will be largely compromised.

    The Internet would then be more like old media where a few players would control much if not all of the information flow on the network. In short it would be a total disaster for growth and innovation in web services and thus a distaster for the American economy which currently dominates that sector

    Comment by Allen — August 11, 2010 @ 5:50 pm

  47. There are several problems with your argument, and net neutrality in general:

    1. As others have mentioned, most people in the U.S. have only one choice for broadband, making your suggestion to “vote with your dollars” unrealistic.

    2. ISPs have certain legal rights as “common carriers”, which means they don’t get in trouble when illegal material passes over their networks as long as they act purely as passive conduits. This is very different from a newspaper, which is responsible for the material it publishes. ISPs cannot be allowed to enjoy common carrier status and regulate their networks. The fact that you are apparently unfamiliar with the notion of common carrier demonstrates your ignorance of networking and telecommunications regulation.

    3. ISPs’ do not actually gain significant cost-savings from regulating their networks. There are two ways to ensure that all traffic receives the service it requires: (1) differentiate traffic by type (e.g. video vs. email) and give higher priority to some traffic, or (2) buy equipment that is fast enough to handle all traffic at equal priority. Since internet traffic is growing so fast, ISPs have to upgrade their equipment every couple of years, anyway. Implementing differentiated service would basically only enable them to skip one upgrade cycle. So they’d save money for one year, but after that, they’d be right back on the continuous upgrade treadmill.

    Do we really want to allow ISPs to discriminate against our traffic just so they can skip one upgrade cycle?

    Wouldn’t we rather force ISPs to over-provision their networks (which is actually quite practical), giving us unrestricted _and_ fast access? Other countries do it. Why can’t we?

    This last argument is well-known in the network research and technical community, but is apparently unknown to students in economics, business, and law.

    That’s why technical people almost universally support network neutrality — they know that the ISPs don’t really have a financial need to implement differentiated services and that ISPs want to abandaon net neutrality solely so they can start favoring their own content services.

    Opponents of network neutrality, on the other hand, can only support their position by making patently false claims, such as the claim that citizens in the U.S. have a choice of broadband.

    The only thing you got right in this article is your concern about regulatory capture.

    Comment by Rob Johnson — August 11, 2010 @ 6:10 pm

  48. no net neutrality = no right of way

    Comment by John — August 11, 2010 @ 6:25 pm

  49. Curiously, there is a word that never appears in the article, or in the many comments.

    “of course, the New York Times can reject any ad which it does not wish to run.”

    Yes, because the NYT is a for-profit corporation with many competitors. The entities (whether commercial for-profit, not-for-profit, or governmental) that supply all of us with electricity, water, garbage collection, and sewage, are all called “commodities”. The characteristic of a commodity is that it is granted something equivalent to a charter to supply service to a community, service that can only be provided cost-effectively by a provider that has a monopoly on the region, if sometimes only a limited monopoly where a few other providers compete.

    Can you imagine the inefficiency if I wanted to get my water from a competitor to the licensed quasi-governmental monopoly. Installing and maintaining those pipes is expensive! Do we need three competing sewerage companies running down your street?

    When a new service emerges, private companies are usually the initial vendors. But once the service matures into a “commodity” that nearly everyone employs, and when that commodity requires an expensive network to distribute reliably (like water or inverse water (sewage) or electricity or bits) it makes perfect sense to regulate that service as a commodity. It is the only efficient way.

    So, I want the pipes to be run by an entity, whether profit making or not, that cares only that I am connected to the service and discharging a typical household amount of dishwater or urine or defecation and water.

    As for internet bits, it isn’t pernicious that connection providers might want to differentiate between different services. Under conditions of limited bandwidth, it _might_ be entirely reasonable for give different performance characteristics to a long-term bittorrent connection and an immediate, real-time gaming connection. But that assumes the pipe provider can differentiate. And the allocation heuristics must _not_ depend on how much money a data provider is giving the pipeline provider. There is too much opportunity for scheming,

    Think about this the next time just before you flush the toilet. Tell your congressman and senators to think about it too, since (I expect) many of them sometimes also flush their toilets.

    Comment by smh — August 11, 2010 @ 6:56 pm

  50. I’m not sure why, but people tend to forget that there are two factors for Internet connectivity. The method of access (dial-up/DSL/fiber/cable), and the ISP. Dial-up made this obvious, and if your provider’s network didn’t work as you liked, you voted with your packet book, and gave your patronage to another ISP.

    If there’s going to be regulation, let it come in the form of forcing access providers to allow consumers to connect to any ISP they wish. We don’t need network neutrality, we need access neutrality.

    Imagine paying $30/month to an access provider that would connect you to an ISP of your choice. My brother would go with Giigle’s ISP that gives him free Internet access — but you can’t reach Hooray!s search engine over it. Me? I’d likely *pay* my ISP to ensure that I had what people now call network neutrality. I can’t even imagine the varieties of ISP I’d find in between those two extremes.

    Your arguments are spot on. Network neutrality is likely to be a bad bet. But if you don’t have a choice of ISPs, it’s better than being locked into whatever your access provider decides is best.

    Comment by John Osmon — August 11, 2010 @ 7:13 pm

  51. Sorry, but there ISN’T any competition. And even if there is, they get sued into oblivion. Just as the town of Wilson, NC what happened to them when they tried to make their own ISP.

    Private industry MUST be collared and leashed by a government that has the ability to destroy them if they fail to obey the law or otherwise cause harm to the public.

    Comment by John Antilety — August 11, 2010 @ 8:38 pm

  52. The opening paragraph has an incorrect statement. The incorrect statement is:

    “Net neutrality is government regulation which prohibits internet service providers from diffrentiating internet traffic based upon its content and/or the service being used.”

    This statement is incorrect because Net Neutrality is not government regulation. Net Neutrality is a concept that the Internet has used since day one. It is how the Internet works right now. What the FCC is trying to do is preserve how the Internet works today.

    Much of the Internet’s success comes from Net Neutrality. So, it is important to keep the Internet the way it is and not let it be tampered with.

    Comment by Noel Ferreria — August 11, 2010 @ 8:56 pm

  53. Boy, Scanning many of the comments it sounds like most disagree with you. Reasons against generally center about lack of competition and monopolies.

    Don’t want to spend $10 for a beer at a major league game, find another vender. Oops, they’re all operated by the same vendor. Try another game. Sorry, no other options.

    Don’t like the 2-year minium terms of your cell carrier, try another. Oops, they all require a 2-year term.

    Don’t like you cable provider, sorry, no other options.

    What? You don’t have an alternative newspaper?

    That’s why!

    These companies have been given monopoliy protections and billions of dollars to build out their networks. That is why they shouldn’t be allowed to screw customers.

    Comment by John Doe — August 11, 2010 @ 9:41 pm

  54. Your argument is mostly sound but leaves out two important things. Firstly, as most people said, there aren’t many ISPs in most places(1 maybe 2 providing broadband). Secondly there is some price differentiation by speed under net neutrality. All data can be treated equally even while limited to a certain speed or possibly even total capacity like data caps.

    Comment by Grady — August 11, 2010 @ 9:41 pm

  55. What a crapload of apples to oranges. Newspapers are content, internet is infrastructure. Just like telephones. By your newspaper argument, telcos could censor what you say on the phone. It is their line, right?

    And what cost to the ISP’s is it you are talking about? What cost is there in forbidding something they don’t do yet anyway? Quite the opposite, doing prioritization would probably mean costs, for expensive equipment to look inside the packets.

    Besides, you are confusing what is politically desirable with what is commercially desirable.

    You can have freedom or non-legislation, but not both – when the freedom you want is under commercial pressure.

    Finally, there is certainly a risk that FCC just ends up being owned by corps and help their anticompetitive behaviours, in the disguise of helping you. But is that a problem with the concept of legislation to protect people’s freedom? No.

    If the FCC ends up as a corp tool, it is rather a problem with weak and corrupt politicians, with whom things will go wrong anyway, either way. Fight them rather than the FCC.

    Comment by Simon — August 11, 2010 @ 9:42 pm

  56. […] Lee Sharpe criticized net neutrality. Net neutrality seems to be a good concept to me. I don’t think […]

    Pingback by CompuCrunch » The Case For Net Neutrality — August 11, 2010 @ 9:52 pm

  57. You are being disingenuous.

    The FCC doesn’t create our ISP experience.

    The FCC would be establishing *minimum requirements* for service — NOT maximums.

    So there would be Lots of choices — the only ones you wouldn’t have would be ones that provided worse service than the FCC requires.

    This is no way equivalent to deciding between ISP — presuming — as many people have pointed out, that you have any option of another ISP in your area — which is not the case in my area, as I gather is the case in most other areas of the country.

    We are already stuck in the no-ISP choice option. We don’t like it. That isn’t the fault of the FCC — because they have, to my knowledge, only required minimums. If you are saying that having to provided “minimums” is keeping ISP’s out of the market that might provide worse service — then you are creating a false threat.

    If the FCC added more regulation, say — that to enter the phone market (wireless or wired), they must also offer a minimum of 10MB/s connection, I think you’d see more internet offerings, though maybe fewer phone companies.

    Comment by L. Walsh — August 11, 2010 @ 10:21 pm

  58. Your bad arguments one at a time.

    1. People pay for the NY Times because its a printed product not a utility. The publishers are responsible for the content of the NYTimes, in case you didn’t know, ISPs, telephone cos, utilities, don’t have editorial control over the internets. Wow that one took neuroscience to figure out.

    2. The “premium” analogy is dumb. First class passengers and coach passengers are going to the same destination, in the same amount of time. The first class passengers just pay a little more for extra ass padding. We are not speaking of anything to do with the free speech, free assembly, with which common carriers essentially can mediate by adding “premiums” which essentially would allow the wealthy to have free speech over the internets and the poor to have some new version of digital cable (but maybe in this post Reagan cleptocracy we live in its actually reasonable to make the rich free and the poor not). The comparison isn’t even close.

    3. Your last three paragraphs must be the results of sniffing glue or pens. I can’t believe that you argue regulation is fundamentally bad, because we need to prefactor in American ambivalence to the mix that will ultimately make it a net negative.

    This country is fried.

    Comment by B D — August 11, 2010 @ 11:52 pm

  59. “Whatever the reason, the New York Times has the freedom to not run certain advertisements. The freedom to refuse to facilitate speech one doesn’t like is part of one’s First Amendment freedom of speech rights. There is no reason this right should not carry over to internet providers as well, just like any other entity.”

    Yes there is. Telecom operators are considered common carriers. They are not liable for the content of the traffic they carry because they accept all traffic without screening. To selectively refuse traffic, based on protocol, port, or direction, would risk losing that status and accepting liability for the content of the traffic.

    Further, such a service would cease to be “Internet access” as generally understood and would have to be described differently, as “Internet access” is not considered to be access to certain approved sites, or access to certain sites at certain speeds at certain times, but is offered with a quality of service guarantee described as “best effort”. If a service provider could carry traffic between my computer and Google faster than it does, but does not do so because Google does not pay them a premium, they are no longer delivering “best effort” quality.

    The newspaper and airline analogies are not particularly apt. A more apt analogy would be a telephone company that advertises a flat monthly rate for unlimited calling time, but then charges both sides of a call and offers upselles for more reliable or better quality connections.

    You cite a good definition of “rent-seeking” behavior, but seem to have misapplied it in your article. If I use ISP A, and Google uses ISP B, and ISP A then approaches Google for an expediting fee to prioritize traffic between their client (me) and Google (a client of ISP B) then this is rent-seeking behavior.

    One might potentially justify it if one believed that the expediting fees would be used to expand capacity to Google; however, as ISP A actually has no relationship or direct connection to Google, it cannot actually do this, not without the participation of ISP B. The only way this system works in practice is that all non-fee-paying directions have their traffic throttled– again, failing to meet even the lowest level of quality assurance, “best effort”– in addition to being false advertising.

    Comment by dmjossel — August 12, 2010 @ 12:42 am

  60. so we have 50+ ppl all screaming “but theres only 1 ISP in my area!”
    why is this the case? if we SCRAP the FCC rather than enlarge it, more competition will arise

    Comment by vroman — August 12, 2010 @ 12:49 am

  61. “if we SCRAP the FCC rather than enlarge it, more competition will arise”

    Not so. Phone, cable, electrical, etc all have to run wires. This includes not only tremendous amounts of cost, but also things like obtaining right-of-ways, dealing with injunctions brought up by the existing local monopoly (who certainly won’t let you encroach their territory without a fight) and so on.

    Even if you could pull together the probably 100s of millions if not billions of dollars it would take to string a whole new set of wire, you still have enormous legal hurdles to go through, FCC or no FCC.

    That sort of barrier to entry is about as close to a natural monopoly you can get without it being actually “natural” (in the sense of “if I cut down that tree, you can no longer sit under it”).

    The FCC is simply trying to prevent such monopolies from taking advantage of your internet access. Will they screw it up? Maybe. But an unregulated monopoly will almost certainly be a problem as soon as the spotlight is pointed another direction.

    Comment by Erin — August 12, 2010 @ 1:37 am

  62. “if we SCRAP the FCC rather than enlarge it, more competition will arise”

    Yeah, cause deregulation worked GREAT for this country, didn’t it? Go look at what happened after everything deregulated back in the 80s. All the businesses went apeshit and shot themselves in the foot.

    Free markets don’t work. Period.

    Comment by TOGSolid — August 12, 2010 @ 2:20 am

  63. Just about every net-neutrality discussion misses the point. Net neutrality is about limiting monopolistic and anti-competitive practices. The big players were attempting to extort protection money out of content providers, and I mean this quite literally. Pay us off or we shut you out of our network. In the case of Google, they were arguing that Google was getting a ‘free ride’. Never mind both the content provider and the content consumers were both paying for their own bandwidth to deliver and receive. Still I’m against any kind of law and trust me on this, you don’t want the government involved. This is their big in and they will exploit and use it to expand their powers onto the net. Every net neutrality law proposed has been very very bad.

    Comment by Shred — August 12, 2010 @ 8:56 am

  64. As another person said, internet is infrastructure, not a medium.

    Tell you what. Let’s sell access points the the interstate system. Anyone can use the purchased access points. Everybody gets to go 65mph. Well, except that since I purchased an access point, and I own a trucking company, whenever one of my trucks gets to my access point, I stop everyone until my truck is on the highway. Yes, it’s a public access point, but I’m prioritizing my traffic over yours. And when other trucking companies start paying me to use my access point, all other traffic slows down. A lot.

    It isn’t a perfect analogy, but it’s a lot closer to what we face without net neutrality than the ones posted in this article.

    Comment by Carp — August 12, 2010 @ 10:01 am

  65. Personally I do not care about “monopolies” of ISPs. There are actually very specific reasons why you typically only have one cable company or one phone company in an area and it is of no real fault to the companies themselves. They benefit from it, sure, so they don’t do anything to change it, but they are not the cause.

    But that is not the issue. The issue is government intrusion into things it shouldn’t be intruding into. We as a society have become way too lazy and dependent on the government to take care of stuff.

    All the other “pros and cons” aside, this would be more government regulation. Which is bad and dangerous. No other argument matters.

    “Those who would give up essential liberties for a little temporary security deserve neither liberty nor security” – Benjamin Franklin

    Comment by Unr3a1 — August 12, 2010 @ 10:34 am

  66. “Efforts to protect net neutrality that involve government regulation have always faced one fundamental obstacle: the substantial danger that the regulators will cause more harm than good for the Internet. The worst case scenario would be that, in allowing the FCC to regulate the Internet, we open the door for big business, Hollywood and the indecency police to exert even more influence on the Net than they do now.”

    We have as much (or as little) control over whether the FCC regulates net neutrality as we do over what those regulations are. There is no reason to think that by opposing regulation that serves our interests we will prevent regulation that does not serve our interests.

    Likewise, the companies are not opposed to regulation, just regulation that does not serve their interests. If they thought regulation would be to their advantage, they would (and will) support it. No one will need to “open the door” for them, these large companies are perfectly capable of doing that for themselves.

    I think it is also important to realize that the whole purpose of charging for improved bandwidth is to sell a competitive advantage on the basis of something other than consumer/user preferences. They are paying for an advantage over their competitors.

    Comment by Ross Williams — August 12, 2010 @ 10:56 am

  67. It’s interesting that most of the comments are FOR the government regulating the web. That may be because most of IT has little understanding of how the free market works or why it is essentially a self-regulating process that is inherently responsive to the needs of the market. The fact that we don’t have a free-market is precisely due of government interference (often at the behest of the providers who don’t like competition). The solution, as John Osmon, pointed out is access neutrality (actually less government rather than more). It seems most of IT only knows the frustrations of working with ISPs that have been put in survival mode due to existing government regulation. To compound the problem, the current FCC chairman, in conjunction with the ‘regulatory Czar’ (Cass Sunstein), seem primarily interested in expanding the regulatory power of the FCC. Whatever initial benefit the FCC provides to users will be at a cost borne by taxpayers that ultimately leads to less service rather than more (think USPS). As usual, there is no free lunch.

    Comment by Dick Epler — August 12, 2010 @ 11:36 am

  68. Your advertisement example is extremely faulty. While newspapers choose their ads, comparing that to ISP’s providing ads is a non sequitur. In an accurate comparison, the ISP would be the neutral road one walks to the newspaper stand to get the paper. That is why neutrality is vital. ISP’s provide a gateway to content, a gateway that is largely built by public funds and technology. ISP’s have no right to infringe on personal choice.

    Comment by Adam — August 12, 2010 @ 11:54 am

  69. Man these arguments against the fundamental point of this article are such a complete load of crap.

    90% of all the arguments have to do with “but my area only has 1 provider”. Well no shit sherlock, the various state and local governments under have essentially made it that way through the use of franchise monopolies. By law, any ISP which wishes to operate in a particular region must get a big stamp of approval from whoever the franchise granting body is. In other words, for a competitor to come in and to attempt to let the market process actually work, one must bribe a bunch of politicians to even be allowed to provide the damn service.

    Get rid of the damn franchise monopolies and the problem will essentially go away.

    I love how many of the commentators believe it is appropriate to blame the “free-market” for the way things are currently structured when historically ALL telecommunications services have been one of the most regulated industries in the US. People assume that just because they are charged a price for something that they are paying a “free market price”. This is such a stupid assertion to hold that I cannot believe that any human being who has the necessary brain function to even breath can believe it.

    Before mindlessly commenting that you have only one provider, or better yet justifying this absurd policy by saying that we need it to be a monopoly because it is a “public utility”, I would kindly ask that you use some semblance of logical economic theory to show me WHY these particular services ought to be monopolies. Or even that a “public utility” can even be established in some given industry in a non-arbitrary manner.

    The author uses airline travel as an example, but for exactly the wrong reasons. He should have pointed out how we had a federally enforced monopoly (of various providers making it a cartel in reality) under the Civil Aeronautics Board, and once that was dissolved we had far greater levels of competition than ever before. We would have even more if airspace were privatized and we got rid of the FAA.

    Comment by Slim934 — August 12, 2010 @ 11:57 am

  70. Another note which I have forgotten.

    Another reason NOT to entrust any power to the FCC is that the FCC was one of the primary INNOVATION DECORATORS during the 20th century. It held back cable television by atleast a decade during the 60s and 70s ehrn the dominant media petitioned the FCC to hold down its development.

    Once you set the FCC as even a small, defined regulator of the internet it will have the natural tendency to expand its reach for numerous reasons which have been developed in the school of Public Choice economics.

    Do you really want an organization with such an anti-competitive past as the FCC deciding what the kind of uses for the future of internet should be?

    Comment by Slim934 — August 12, 2010 @ 12:10 pm


    That would be silly.

    Comment by Slim934 — August 12, 2010 @ 12:10 pm


    This article is more than a bit dated, but given that Franchise reform efforts have only been taking place within the past 5 years or so it is still quite pertinent when taking into account exactly what the non-reformed states have to deal with.

    Comment by Slim934 — August 12, 2010 @ 12:17 pm

  73. Free markets self regulate in a specific set of conditions. Simply making a claim like that about a market as tricky as the telco industry without backing it up seems foolhardy. Perhaps the IT folks simply remember that the reason the market is heavily regulated now is that it has already dramatically demonstrated that it does not, in fact, self regulate.

    Comment by Maciej — August 12, 2010 @ 12:40 pm

  74. you are correct: free markets do self-regulate during a very specific set of circumstances.

    When they are left alone.

    Given that this is largely the case concerning such unbelievably complex items as any modern physical electronic device, it seems to me that the exact opposite is the case. Prove that a fully unfettered market is not self-regulating. You certainly will not be able to do so from a theoretical standpoint.

    Or perhaps the IT folks only think that because that is what they have been told to think their entire lives. Given their lack of real historical knowledge on actual market conditions at any given time, and it seems pretty obvious that this is likely the case.

    Comment by Slim934 — August 12, 2010 @ 12:57 pm

  75. “Simply making a claim like that about a market as tricky as the telco industry without backing it up seems foolhardy.”

    A slight addendum: this viewpoint assumes that legal regimes for markets exist BEFORE a market for any particular good has actually organically formed in an economy. This is the historical inverse of every single product class in the history of mankind. Products and their exchange occurs FIRST, and legal regimes arise afterward to take care of problems relating to property rights infringements given those products.

    This is why cable/isp service cannot possibly be considered a legitimate free market. The state set the rules for its use before it could even be sold on the market, which heavily influenced the manner in which the service would be developed in the future.

    If the service were a true market like many other goods, it would be fantastically more productive than it is right now. Even if we were to totally deregulate it, it would probably take atleast a decade for it to develop to where it actually stablly acted like a free market. This is the fault of the state. It should not be given more power to make the matters worse.

    Comment by Slim934 — August 12, 2010 @ 1:04 pm

  76. I agree with your analysis, but I would add that much of the talks of internet regulations are akin to price controls.

    Economic theory and history show price controls to have very negative effects on availability and innovation. Yet, people keep bringing them up…

    There is another point which a commenter (#61) above brought up: right-of-way. It is interesting to see that, once again, prior government intervention is causing more problems and inviting even more intervention (surprise!).

    There have been many interventions in the telecom space (including the government-granted monopoly of Bell, to supposedly mitigate a hypothetical “natural monopoly” situation), but the specific prior intervention I’m referring to is the government control of roads and highways.

    Since cables and fiber optics are closely related to roads, and often times require digging holes in them, cable companies obviously need permission, which does act as a barrier to entry for competition.

    Comment by Julien Couvreur — August 12, 2010 @ 3:15 pm

  77. You really screwed the pooch Lee Sharpe. I hope you post a retraction.

    Comment by Arby — August 12, 2010 @ 3:40 pm

  78. The ideological free marketers here seem to be a bit ignorant of real markets. In the real market businesses are trying to maximize profit, not service. There is nothing in this proposal that is going to allow end users to decide what kind of service they receive.

    The newspaper analogy is pretty close. Newspapers do not sell advertising based on their reader’s preference. There is no limit to how much advertising they will provide. They don’t care if their reader’s are happy with it any more than dairy operators worry about whether their cows are happy to be milked. The readers are a product, their customers are the advertisers.

    If you apply that to this situation, it is possible that an ISP will provide a discount to content that helps attract a larger audience. But if their primary source of revenue is content providers, then your service depends on the content providers’ decisions, not yours. If you want high speed connections to content from a provider who doesn’t pay for bandwidth, it just isn’t going to be available at any price from anyone.

    Just imagine a competition between Facebook and Myspace where Myspace pages load instantly, but Facebook pages load like you were still on dial up. Do you really think the upstart Facebook would take away Myspace’s market, regardless of which product is better?

    Comment by Ross Williams — August 12, 2010 @ 6:00 pm

  79. One other thing to remember. In order to charge a premium from some content providers, the non-premium service has to remain substantially worse. And, the worse it is, the larger the premium you can charge.

    Comment by Ross Williams — August 12, 2010 @ 6:09 pm

  80. Ummm… You keep saying Monopoly, but I do not think it means what you think it means.

    Cable companies have a “Franchise Agreement” with local municipalities to govern a “right of way”, basically the city’s permission to give the cable company right to run it’s lines and provide service to the city. Most municipalities only have 1 cable company because of two things:

    Wiring costs and franchise fees.

    If you open your cable bill, in addition to the usual run of State taxes, you’ll see a “Franchise Fee”.

    Lets start with wiring costs. Your standard Fiber Optic line runs about 20 cents per line foot. When you consider the number of lines necessary to wire even a small city, the costs could easily get into the 10s of millions on Fiber costs alone, including installation. That is 1 part why most cable companies won’t compete head-to-head. The upfront cost to run separate lines (they wouldn’t share), the installation of such lines, and the governance associated with getting approval to run them makes it not worthwhile to add services in areas with an existing provider.

    Let’s get to those pesky franchise fees. Each cable company submits to a LGA or Local Government Authority. They have to submit to them in order to operate their lines (the lifeblood of their service). In order to maintain those lines, the city imposes a tax or fee on the service in the franchise fee. The city will collect as much as 10% in some markets (the averages are usually between 5-6%) in the form of a lop off the top of your cable bill.
    Now, if you switch to some cities that have competing cable companies, you’ll find that the city is only able to collect about 0.5% to 1.5% in franchise fees. You might think that to be a drop in the bucket, but those fees add up when there are 20,000 or 200,000 or 2,000,000 customers. A lot of cities use this money to supplement their state’s local government aid. Why would your city agree to allowing another cable company, when they’re going to lose approximately $750,000/year in a 20k cable customer town, and up to $75 Million in a 2 Million customer town. Hey, LA could use that kind of dough.

    One thing, I’d be willing to be that 99% of people wanting the FCC to run ISPs are Bit Torrent Users. That’s right, they’re people who are technically breaking the law themselves, but are quick to point out that their ISP is blocking them from breaking the law. I’m not trying to be high and mighty here, but I see this as the pot calling the kettle black.

    Comment by Joe L — August 12, 2010 @ 7:47 pm

  81. Writer assumes that providers aren’t monopolies with locked resources. Apparently he lives on mars.

    Comment by David — August 13, 2010 @ 7:44 pm

  82. For you folks griping about lack of choice in ISPs: do your homework, and you’ll see government regulation is at the root of that reality.

    Comment by Joe Cassara — August 17, 2010 @ 1:38 pm

  83. Why not look into a country (one of many) where net neutrality is in fact mandated by law. I’m happy to live here in Finland where we have net neutrality mandated by law (we can also run servers on our home DSL connection without paying for “premium business” service like one US citizen blogger just wrote about having to do – he was not complaining, that was something normal to him). We have cheap DSL’s and we have cheap wireless connections, we have even cheaper DSL’s if you are willing to use only 5/1Mb connection, but my 24/2Mb is not exactly expensive (it’s rather cheap).

    None of the threats you make are reality here where this net neutrality by law has been reality since late half of 90’s. I know that without these laws I would have to pay more to get what I have now and I would not like that. I know which way I would vote if I were a US citizen – but luckily (for many reasons) I am a finn and don’t have to worry about this. I thank my ISP for their fine service (which also makes it possible for me to run that blog site of mine on my home system – with no extra fees).

    Comment by Jani "robsku" Saksa — August 20, 2010 @ 3:41 pm

  84. […] access are so few and far between, it is likely that they could be in violation of some law by censoring certain content. But some of that legal jargon is over my […]

    Pingback by What’s the deal with “net neutrality”? « An Oklahoma State of mind — April 17, 2011 @ 9:16 pm

  85. […] Lee Sharpe↩ […]

    Pingback by Clusory Connection: Should Net Neutrality be Actively Upheld? - Café Clusory Café Clusory — December 10, 2014 @ 12:41 pm

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Henry Hazlitt"[T]he whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."
Henry Hazlitt, Economics in One Lesson






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