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Network neutrality and transparency

Timothy Lee makes the pragmatic argument against the need for legislation to enforce network neutrality. Here’s his evidence that the market is already rejecting violations of network neutrality:

This isn’t to say that ISPs will never violate network neutrality. A few have done so already. The most significant was Comcast’s interference with the BitTorrent protocol last year. I think there’s plenty to criticize about what Comcast did. But there’s a big difference between interfering with one networking protocol and the kind of comprehensive filtering that network neutrality advocates fear. And it’s worth noting that even Comcast’s modest interference with network neutrality provoked a ferocious response from customers, the press, and the political process. The Comcast/BitTorrent story certainly isn’t going to make other ISPs think that more aggressive violations of network neutrality would be a good business strategy.

And here’s his argument for why legislation is a bad idea:

So it seems to me that new regulations are unnecessary to protect network neutrality. They are likely to be counterproductive as well. As Ed has argued, defining network neutrality precisely is surprisingly difficult, and enacting a ban without a clear definition is a recipe for problems. In addition, there’s a real danger of what economists call regulatory capture—that industry incumbents will find ways to turn regulatory authority to their advantage.

I agree with him that legislating network neutrality is fraught with peril in terms of unintended consequences and problems defining what, exactly, network neutrality is. What his arguments would indicate is that there’s a pressing need for transparency in this market.

First it’s up to the market to demand transparency, but if that doesn’t work out, I think it’s completely appropriate to pass laws that require Internet service providers to disclose how they handle traffic on their networks. Comcast tried to get away with throttling BitTorrent traffic without telling anyone last year, and I imagine that this is the usual sort of anti-network neutrality activity that we’ll see. If Time-Warner launches its own Internet TV operation, RoadRunner could silently throttle traffic from Hulu.com, for example. If this sort of activity were all disclosed, customers would be in a better position to decide whether they want to subscribe to a service provider that interferes with this fashion.

It’s also much easier to define disclosure requirements for ISPs than it is to define and regulate network neutrality. I’d much rather see the government put effort into creating the conditions that enable the market to work most effectively than to make winners of companies most able to game the system created by a new regulatory regime.

3 Comments

  1. That’s all good and fine in a Libertarian paradise. The reality is that such a world does not (can not) exist.

    When there are only a few providers in a market, the choice is suck it or blow it. In my town, we have a choice of Comcast, Time Warner or AT&T.

    Comcast throttles, Time Warner is going to metered service. AT&T forwards all traffic to the govt trolls.

    If I didn’t want throttled or metered service, then I’m stuck with AT&T. What happens when all the majors go with metered service?

    I claim that ISPs are more important than phone companies, and therefore need to be designated as public utilities.

  2. Metered service is probably not going to win out, because while the amount people are willing to pay for Internet service is fairly constant, the amount they download is not. To keep the high-usage customers happy and keep them from switching to another provider, the rate will have to be low enough that low-usage customers will be paying a lot less than they are now. That’s a big loser for the ISP, who may be looking at their bandwidth charges with alarm right now but will be looking at their balance sheets with a lot more alarm when their monthly revenue is going down and they’re shedding customers to the competition.

    (The fact that the major phone companies have not all undercut each other and gone to unlimited plans to me reflects a silent collusion between them. Because ISPs mostly started with all-you-can-eat, or fiercely competed early-on until they were offering it, the Internet business is starting from the other end to the phone companies. But you can bet that in ten years the idea that you have to pay by the minute for phone calls will be as laughable as paying for telex messages is now compared to email. “You had to PAY to reserve a 64kbit point-to-point channel???”

    Anyway, point is, the providers are in a much weaker position than it may seem. All it takes is competition from 2-3 providers (without collusion!) for most of those anti-customer measures to be suicidal.

  3. Why wouldn’t ISPs in a given market “collude” the same way you say cell phone providers do?

    If they all artificially jack up the prices and lower the amount of service provided, each one wins. Wouldn’t that be the best incentive for them to do it (if they could)?

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