A few thoughts on net neutrality

2/27/2015 10:10:00 AM
I'm no lawyer, and in any case we haven't seen the full regulations that FCC will eventually promulgate as a result of it's recent decision to reclassify internet service providers as common carriers. So, much of this is just speculation. Anyway, these are my thoughts:
  1. This is a classic case of asymmetric intensity among voters.

    A recent poll showed that 74 percent of americans have no opinion on this. Don't troll me with their poorly-worded question (3)--their wording is almost word-for-word what opponents of reclassification say in their press releases. Their key results are that 74 percent have no idea what net neutrality is, and that net neutrality regulations are overwhelmingly popular among those who do know what the term means. They didn't ask how many are aware of the FCC reclassification and should have--my guess is that three-fourths aren't following that either.

    So, the people who care about the issue want regulations, and people who don't want regulations don't care enough for it to affect their vote. This doesn't necessarily mean reclassification was inevitable--powerful, wealthy lobbies are strongly opposed--but makes it a lot more likely than if most opponents were as intense as the proponents.
  2. Net neutrality does not prohibit "fast lanes" or "slow lanes" on the internet.

    When you sign up for broadband internet, you pick from a variety of different speed options, and that will remain true under reclassification. If you pay for a crappy connection, you're going to be in the slow lane. If the company uploading the website you are accessing paid for a crappy internet connection, you're going to be in the slow lane.
  3. Net neutrality does not let content providers to "free-ride" on the internet.

    They have to pay for connection to the internet too. Consider this blog. I'm the content provider, and I paid twice to deliver this blog post to your browser. First, I paid for my personal internet connection so I can upload my text to the server. Then I pay again to connect the server to the internet as well so you can http-request it (that is, part of the hosting fees goes to the ISP to pay for internet service with a static IP).
  4. Net neutrality does not prohibit ISPs from charging different prices to content providers versus users.

    Generally speaking, ISPs give you a slower upload speed than download speed, meaning that providing content is more expensive than using it. This will remain true under net neutrality.
  5. Net neutrality does not prohibit congestion pricing.

    The main argument made against net neutrality is that ISPs need to be able to price-discriminate in order to prevent too much congestion from slowing down users. But, net neutrality allows ISPs to charge for data usage, and to adjust that charge based on location and time, meaning that it can perfectly congestion-price all parts of it's network. To use an analogy with highways: under the policy you can charge trucks a toll, but you can't inspect their cargo.

    In concrete terms, Time Warner can charge Netflix more for uploading data during high-traffic times of day, and can charge you more for watching Netflix at high-traffic times of day, but can't charge Netflix a higher price than Hulu for the same thing. This is good because it means Time Warner can't raise your rates because you run a popular blog; they can't say to you "looks like your blog's got a lot of followers out there, it would be a shame if none of them could read it." That is exactly what Comcast did to Netflix.
  6. FCC reclassification probably will involve more regulations than if Congress had passed a net neutrality statute.

    The FCC does have the power to exempt the internet from any regulations that are outdated, irrelevant, or inapplicable to the internet. However, there are still some regulations besides net neutrality that it would be hard for the FCC to argue can't be applied to the internet, such as the requirement that common carriers maintain 24/7 repair services.

    If your phone or electricity goes out in the middle of the night, those companies are required to start repairs right away. Before reclassification, this was untrue of the internet: ISPs aren't legally required to have anyone on staff to repair internet outages, and can wait and do the repairs tomorrow, next week, next month, or whenever. Under reclassification, that will probably change, and that means higher costs to ISPs. In perfectly competitive markets I might argue this harms consumers since better quality service is not always better than lower prices; however, internet companies are essentially monopolies--who have the worst reputations on service quality--so there is a case to be made that this will be good for consumers. There could also be other regulations that are not good for consumers (but for all the debate, no one has actually named any, and that is telling).
Max 2/27/2015 07:58:00 PM
The most salient fact to me is that the only ISPs that have ever violated 'net neutrality' are the 4 largest ones. And only recently. It's an exercise of market power that only the largest ISPs have. An alternative to regulation would be to break up the large ISPs.