Net Neutrality

The Federal Communications Commission is working on a decision to either stay the course on net-neutrality, or to permit internet service providers (ISPs) to charge websites for faster, preferential delivery speeds – thus also permitting ISPs to deliver non-preferred websites at slower speeds.

“Net Neutrality” conceives the internet as a “dumb” network, which doesnt know who’s sending what to whom, and thus treats everything from Wikipedia to Netflix to Craigslist to pornography to this blog the same, with respect to transmission speed and quality. An alternative scenario might let ISPs (like Time Warner or Comcast) charge Skype or Youtube to deliver their data faster… for a price – but as a consequence, everyone else will be delivered slower.

The economics of net neutrality are tricky. On the one hand, there’s a very basic free market notion that finite resources should be allocated to whoever values them more. If some websites place greater value on faster content delivery, and given that the volume and speed of data on the net are finite, then it makes sense to let the market decide who moves faster. Letting ISPs put a price on speed will allow whoever values it the most to obtain it. (This arrangement has always been permitted for end users, who can choose to pay more for faster up- and downloading speeds.) ISPs claim that unless they can establish these faster “toll roads,” they will not make enough money to continue to make investments needed to upgrade their services and increase bandwidth.

The problem with establishing faster internet “toll roads” is that internet innovation has always been driven by the quality of services and content, which has always depended on ideas and technology, not a special fee-arrangement with ISPs. If you want to drive traffic to your site, you have to make your content or your services more attractive. (Advertising helps too!) It has never been possible to compensate for inferior content and services with faster delivery speeds.

It’s also worth taking a closer look at ISP claims that the current net-neutrality model doesnt work for their business. ISPs today make their money by charging end-users to connect to the internet. Cable companies typically charge $30-50 per month for broadband service. In the US, there tends to be little competition for broadband – within a given market, there may be just one or two carriers. Such market conditions are highly favorable to ISPs, allowing them to vastly inflate¬†consumer prices. Compared to consumers in other advanced countries, Americans are commonly charged ten times more for broadband, receiving slower, less reliable service for their extra cost.

Net neutrality is a good thing. It rewards innovation, and it lets the internet live up to its best promise: to be an even playing field, where we all connect on equal terms – and may the best mousetrap win. American ISPs are already fat pigs in cushy markets – if they cannot thrive on monopoly profits from consumers, then they should be excluded from the retail ISP business entirely, and forced to sell their bandwidth wholesale, to allow for real competition.






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