Network Neutrality and the FCC Proposal to Abandon it

The internet and the availability of content broadly and uniformly to all users has driven the largest wave of innovation ever e experienced in our industry. Small startups offering a service of value have the same access to customers as the largest and best funded incumbents. All customers have access to the same array of content regardless of their interests or content preferences. Some customers have access to faster access than others but, whatever the access speed, all customers have access to it all content uniformly. Some countries have done an amazing job of getting high speed access to an very broad swath of the population. South Korea has done a notably good job on this measure. The US is nowhere close to the top by this measure nor does the US have anything approaching the best price/performing access. But it’s nowhere close to the worst either. And, up until the most recently Federal Communications Commission (FCC) proposal, it’s always been the case that when a user buys internet connectivity they get access to the entire internet.

Given how many huge US companies have been built upon the availability of broad internet connectivity, it’s at least a bit surprising that the US market isn’t closer to the best connected. And given that the US still has the largest number of internet-based startups — almost certainly some of the next home run startups will come from this group — one would expect a very strong belief in the importance of maintaining broad access to all content and the importance of even the smallest startups having uniform access to customers. Surprisingly, this is not the case and the US Federal Communications Commission has proposed that networks providers should be able to choose what content their customers get access to at what speed.

Clearly large owners of eyeball networks like Comcast and Verizon would like to have a two-sided market. On this model, they would like to be able to charge customers to access the internet and at the same time charge content providers to have access to “their” customers. I abstractly understand why they would want to be allowed to charge both consumers and providers. There is no question that this will be highly profitable. In many ways, that’s one of the wonderful things about the free market economy. Companies will be very motivated to do what is best for themselves and their shareholders and this has driven much innovation. As long as there is competition without collusion, it’s mostly a good thing. But, there are potential downsides. There needs to be guardrails to prevent the free market from doing things that are bad for society. Society shouldn’t let companies use child labor for example. Charging content providers for the privilege of being able to provide services to customers that want access to their services and have paid Comcast, Verizon, Time-Warner etc. for access is another example of corporate behavior not in the best interests of society as a whole. We want customers who paid to access the internet to get access to all of it and not just the slice of content from providers that paid the most. Comcast should not be the arbiter of who customer get to buy services from. Surprisingly, that is currently what the FCC is currently proposing

Allowing last-mile network providers to decide which services are available or usable by a large swatch of customers without access to competing services is a serious mistake. Losing network neutrality is not good for customers, it’s not good for content providers, it’s not good for innovation but its, oh so very good for Verizon and Comcast. Just as using child labor isn’t something we allow companies to do even if it could help them to be more profitable, we should not allow these companies to be able to hold content providers hostage. Without network neutrality content providers must pay last mile network providers or lose access to customers connecting to the internet using those networks. This is why Netflix has been forced to grudging pay the “protection” fee money required by the major eye ball markets.

Netflix is perhaps the best example of a provider that customers would like to have access to but has been forced to pay last mile network owners like Verizon even though Verizon customers have already paid for access to Netflix. Some recent articles:

· Netflix blames Sluggish streaming on Verizon, other service providers

· Netflix Agrees to Pay Verizon for faster Internet, Too

· Netflix is Still Mad at Verizon and Has the Charts to Prove It

· Netflix got worse on Verizon even faster Netflix agreed to pay Verizon

The open internet and network neutrality has helped to create a hotbed of innovation, has allowed new winners to emerge every day, and the proposal to give it up is hard to understand and is open to cynical interpretations revolving around the power of lobbyist and campaign contributions over what is best for the constituents.

Network neutrality is a serious topic but comedian John Oliver has done an excellent job of pointing out how ludicrous this proposed legislation really is. In fact, Oliver did such a good job of appealing to the broader population to actively comment during the FCC comment period on this proposed legislation that the FCC web site failed under the load. This video is a bit long at nearly just over 13 minutes but it really is worth watching John Oliver point out some of the harder to explain aspects of this legislation: http://www.theguardian.com/technology/2014/jun/03/john-oliver-fcc-website-net-neutrality?CMP=fb_us.

And, once you have seen the video, leave your feedback for the FCC on their proposal to give up network neutrality at http://fcc.gov/comments.

Enter your comments against the ironically titled “14-28 Protecting and Promoting the Open Internet.” My comments follow:

The internet and the availability of content broadly and uniformly to all users (network neutrality) has driven the largest wave of innovation ever experienced in the technology sector. Small startups offering a service have the same access to customers as the largest and best funded incumbents. All customers have access to the same array of content regardless of their interests or content preferences. Some customers have access to faster access than others but, whatever the access speed, all customers have access to it all content uniformly. Some of the most successful companies in the country have been built on this broad and uniform access to customers. The next wave of startups are coming and achieving incredible valuations in IPOs or acquisitions. Giving up network neutrality puts our technology industry at risk by making it harder for new companies to get access to customers and places far too much power in the hands of access network providers where we have few competitive alternatives.

–James Hamilton, jrh@mvdirona.com, http://perspectives.mvdirona.com

5 comments on “Network Neutrality and the FCC Proposal to Abandon it
  1. Rob Smith says:

    Hi James
    I think your comment to the FCC possibly has a typo in the last sentence (or maybe I am just failing to read it correctly).
    “Giving up network neutrality puts our technology industry by making…”
    I think you mean “Giving up network neutrality (hurts/harms) our technology industry by making…”

    • Fortunatetly, the FCC got enough comments that they were able to arrive at the right conclusio even if my comment has a couple of missinng words :-). I’ll update the blog entry. Thanks for the correction Rob.

  2. Good hearing from you Dave.

    In my view, it is sort of sad that it takes a commedian to get folks out participating in the democratic process but I’m glad John Oliver did take a stand, it was funny as hell, and it’s particularily amusing that his plea ended up taking down the FCC comment site.

  3. Dave Quick says:

    I wrote in to the FCC the day after the John Oliver piece – it was excruciatingly slow and error prone – after about 30 tries it saved.

  4. Dave Kalata says:

    An excellent article that explains what Net Neutrality is about, but also why Net Neutrality is a good thing. Further, it points out that the FCC’s title is a bit ironic. If passed, there would NO LONGER BE ANY NET NEUTRALITY! Different ISP players could speed up and SLOW down ANY traffic they pleased. Try to keep track of who is PRIORITIZING which traffic. You’d need a spread sheet to track all the possibilities!

    One thing I would add is to include in your FCC comments a request to re-classiffy the phone and cable companies as the "common carriers" that they are! This means they would be classified as a communications service rather than as an information service. This is commonly referred to as Title II. It’s really the only position, as verified by the courts, that would provide the legal standing to enact STRONG Net Neutrality rules that would withstand the inevitable legal challenge.

    Further, I would encourage each site visitor to contact your elected representatives. Although the FCC is autonomous, it never hurts to get your senators and representatives into the mix as well.

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