
Giving the Behemoths a Leg Up on the Little Guy - JumpCrisscross
https://www.nytimes.com/2017/05/03/technology/net-neutrality-fcc-giving-behemoths-leg-up.html
======
pharrlax
What's stunning to me is seeing Ajit Pai and conservative interest groups
citing the FCC's investigation into ISPs subsidizing certain types of data
(a.k.a. zero-rating) as an innovation that burdensome regulation was
inhibiting.

There's plenty of room for debate on what constitutes predatory pricing. But I
think it's clear that when you drop the price for a product to _zero_ ,
there's no longer an argument that you are attempting to fairly compete in
that market. The only rational reason is to drive your competitors out of
business.

Pai isn't interested in a competitive market; he's told us that much
explicitly. He's interested in a market where the powerful have a free hand to
consolidate that power into full-on monopoly. And he's right, consumers will
see certain benefits -- like zero-rating -- while that consolidation is
occurring. But then, afterwards, we'll be stuck relearning the lessons of
Standard Oil and Pacific Bell all over again.

~~~
golergka
> there's no longer an argument that you are attempting to fairly compete in
> that market. The only rational reason is to drive your competitors out of
> business.

Wait. "Fairly compete" and "drive your competitors out of business" are
opposite things now? How?

Obviously, most businesses, ideally, want to be so successful so that their
competitors go out of business - as long as the market is more or less zero-
sum game, one always go in hand with the other.

~~~
dbingham
> ...as long as the market is more or less zero-sum game, one always go in
> hand with the other.

This statement derives from pure propaganda. It has almost never played out
that way in history. What almost always actually happens is that once a
business gets large enough, it has the power to force all of its competitors
into bankruptcy or buy them out and then it gets monopoly power. Once it has
monopoly power, anything goes.

There are so many examples of this just in American history up until Teddy
Roosevelt busted the trusts. Even after that, there are a ton of examples of
businesses being allowed to get way too close before the government got around
to breaking them up.

If you want to see the clearest example what happens in an entirely
unregulated free market -- look at the internet. The internet has, thus far,
been almost entirely unregulated and it has the lowest barrier to entry of
almost any business ever. It takes almost no capital to start an internet
startup -- just the knowledge and some free time. And yet, Google has near
monopoly power over search. Facebook has near monopoly power over social
media. Amazon is nearing monopoly power over internet retail. In each case,
they haven't wielded their enormous power in the marketplace, largely for fear
of public backlash leading to regulation. If there was no threat of
regulation, you could sure bet they would.

~~~
api
It's worse than that. There is no such thing as an impenetrable firewall
between the public and the private sphere.

It's one of the areas where libertarian idealism doesn't quite work in the
real world. I can't think of a way to limit the political influence of
business without limiting the size and financial leverage of individual
businesses. A libertarian society that fails to do this will not remain
libertarian for long, since suitably large corporate entities will become the
state.

Why compete at all when you can just write your own laws and tap the public
treasury?

~~~
mdpopescu
The reason why large corporate entities becoming the state is less of a
problem than the actual state is because of competition.

I called the cops three times in my life (Romania), the first two times I was
told "not my job" (public drunkness instances), the third time someone's life
was actually in danger. They told me they're going to show up... half an hour
later, I had to leave the place; they hadn't showed up. (And they never called
me back, so they probably never bothered.)

I cannot fire them for that. I cannot tell them "I want to hire another
company". That is the problem I have with the state. I actually don't want to
bother with defending myself - I am more than willing to pay someone else to
do it for me. But if the state claims to do that, I cannot go to the
competition when they don't do their job.

~~~
api
How do you compete with a corporate entity that has become the state?

Getting back to net neutrality: you also have the concept of a natural
monopoly.

A natural monopoly is something where there is an _intrinsic_ barrier to
competition. In the case of telecom there is a natural monopoly over last mile
connectivity because it makes zero economic sense to create more than one or
two redundant last mile connectivity networks. It would also be an eyesore.
Imagine huge sprawling bundles of wires or constant digging everywhere.

So for telecoms like Cox, Comcast, etc. you have a double whammy: they are
natural monopolies and competition is _also_ restricted by a state over which
they have achieved regulatory capture.

These companies are monopolies, plain and simple, and if they can leverage
that monopoly they can effectively shut down the Internet as a venue for
entrepreneurship.

~~~
mdpopescu
If by "become the state" you mean "is supplying state-like services" (like
defense), you compete by creating another company supplying the same services.
We have dozens of private defense companies in Romania.

If you mean "is preventing others from supplying the same services"... if it
does that by using force, we're no worse off than now. If it does that by
enticing people to sign bad agreements... I can't say I like the idea, but I'm
not seeing it as a big deal long-term.

> In the case of telecom there is a natural monopoly over last mile
> connectivity because it makes zero economic sense to create more than one or
> two redundant last mile connectivity networks

And yet, I have one ISP that put up 7 km of fiber optics, that have been
stolen several times, in order to get my business. (I live in the country
side.) I had another ISP that put up 15 km of regular cable for the same
reason. (I no longer use them because at some point I had 3 ISPs and I was
trying to cut costs. I honestly regret that now that I'm making a lot more
money.)

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thr0waway1239
Perhaps it is time to split up companies - FB + WhatsApp, Google + YouTube,
Microsoft + LinkedIn and add your own little favorite here.

If the tech sector tends to move towards natural monopolies and cannot
generate its own competition, the competition has to be foisted on it. It is a
better alternative than the consolidation of so much power into the hands of
such a small group of people.

Although, frankly speaking, it is probably a bit too late. At this rate, large
tech companies generally, and the megacorps in particular, are probably going
to have a "Let them eat cake" [1] moment over the coming months, and the
consequences will be worse than the mere breakup into smaller entities.

[1] I have heard that it is an invented anecdote. Necessity is the mother of
invention, and there has been a clear need to express how out of touch certain
groups of society can become sometimes. Cue the ostrich-like response of
company employees to genuinely troubling complaints against privacy issues on
these forums.

------
ajwin
I see the problem being that if net neutrality disappears it gives the
internet companies good reason to slow down the internet generally so that the
content providers need to purchase the speed ups. Investment in general
network throughput will reduce profit from fast lane sales and so big
companies will reduce investment in their networks outside of fast lanes. Cost
flows down the tree. We are already paying for the internet... does it make
sense to pay twice? This is why I think no consumer should be for the axing of
the net neutrality rules. In general this is bad for everyone. Its like
creating an energy market... It leads to people reducing generation capacity
and prices sky rocketing while service/quality reduces. Good for the ownership
class bad for humanity.

~~~
QEPMALKIyTgGH
As far as I can see energy markets work well in Europe. It started in Norway
as far as I know (not exactly the bastion of free markets) then spread across
Scandinavia and down to Continental Europe.

How it works in Norway is that all power producers sell their power on an
exchange where before 12 each day they specify the volume they will produce
depending on the price for each hour the next day. All bids are compared to
see who will produce how much. Price your power too high you don't get to sell
any power, price too low you loose profits.

Among the buyers on this market are power resellers that sell to consumers. As
a consumer I can buy from any reseller regardless of my grid provider. This
makes resellers highly competetive and a consumer only pay a few cents above
the exchange price per KWh (depending on contract and the type add ons the
manage to sell you)

The grid owner charge a fix connection fee together with a per KWh fee. My
guess is that both fees are regulated.

I guess the markets in other parts of Europe work quite similar. It is hard to
know what the prices would be if the market was not in place but energy
production has in the last few years gone from being very lucrative to be much
lower margins.

This is not an argument against net neutrality though. Only wanted to point
out that energy markets can and do work.

~~~
igk
One important thing to note that this is not in any definition a "free"
market. IIRC producers cannot directly sell to consumers, grid providers
cannot easily set up new power plants, the pricing is done in a VERY regulated
way...basically the whole system is set up to be _competitive_ not _free_.
This distinction is something which I feel is often lost.

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coldcode
If net neutrality dies completely, Apple will take its 1/4 Trillion and buy a
cable/phone company. Google likely will too. It's cheaper than having their
customers balkanized all over the place and having to pay monopoly rates to be
allowed to connect to them.

~~~
mattnewton
Honestly yes, this is likely to happen, because the alternative of the
telecoms making their own android phones that use their own ad networks and
web search and bleeding out the internet giants with pure market power is too
much of an existential threat without their own carrier for negotiation
purposes.

Then we would have massive cash-out days for all the holders of carrier
companies. Maybe these new subsidiaries of the frightful 5 would actually
compete with each other? Or the ones that don't stumble in the transition at
least.

But of course we could have a totally different regulatory environment in 4
years.

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thriftwy
"Every year, the internet gets a little less fair" might not apply to every
locale. USA is not all of the internet, it's important but not even very big.

If ISP BigCo's break it seriously, USA will start to falling behind the world
(internet connectivity is already not great), notice that, and probably fix
something.

------
electic
Frankly, these journalists are part of the problem. Pulling up their
publishing history, all you see them writing about is Amazon, Facebook,
Google, and Microsoft.

In that type of PR environment, it is hard to see other startups rising up
unless they raise massive amounts of money which gets them PR. Every year the
bar gets higher and you never see them writing about new and exciting
companies working on interesting projects on a consistent basis. In the end,
most of these tech writers are not journalists, but ghostwriters for the big
tech titans.

~~~
PhasmaFelis
So the real problem isn't global corporations using lobbying power to suppress
competition, it's journalists who write boring articles.

~~~
justicezyx
> Frankly, these journalists are part of the problem.

Translate to "So the real problem isn't global corporations"

I probably will be downvoted, but you better refine your way of commenting...

~~~
throwaway91111
Ehh, plenty of blame to go around. I'm happy to see both discussed here.

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Apocryphon
Maybe, as someone previously replied to me[0], Verizon really will become a
tech giant on par with the other 5...

[0]
[https://news.ycombinator.com/item?id=13855461](https://news.ycombinator.com/item?id=13855461)

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trey-jones
I'm big on the free market, laissez faire, and deregulation. As with many
topics that incite so much handwringing in congress (health care being another
great example), many of the problems would likely solve themselves if
regulations protecting giant corporations from competition were done away
with. If it were possible for startup telecom companies to compete with the
big 3, then the competition in telecom would likely enforce net neutrality on
its own.

In other words, we are spending a lot of time and effort debating the wrong
problems here.

No system is perfect, but I will always lean towards less is more when it
comes to regulation.

~~~
hackuser
> If it were possible for startup telecom companies to compete with the big 3

One reason to regulate markets is to preserve a competitive environment where
this is possible. Big, dominant players in a market want less competition, not
more, and left on their own they find ways to prevent it.

Look at how Microsoft used the Windows monopoly, for example, to eliminate
competition in office suites and web browsers. They made it technically
difficult for customers to use other products, they pressured vendors into
selling Microsoft's products over others', they used their OS monopoly to give
them a technical advantage in applications that ran on it, they distorted open
standards to lock in their products ('embrace, extend, extinguish'), etc. It
took a government lawsuit to open the web browser market and even that was too
late for the competition, who were out of business. (The office suite market
never again had competition until maybe the online suites now, and I don't
know how much market share they have.)

> competition in telecom would likely enforce net neutrality on its own

I don't see why that particular outcome would be likely. Plenty of industries
do things, sans regulation, that are bad for consumers and that consumers
don't like. Look at the fraud in the financial industry, for example, or the
privacy problems in IT products, or all the nightmares of the health insurance
industry.

~~~
trey-jones
Maybe I shouldn't have been so generally anti-regulation in my initial post; I
am specifically referring to regulation that exists solely to protect large
corporations and their monopolies - these do seem to be more common at the
state and local level.

Your points are taken.

------
supremesaboteur
A few months ago there was a story about starting an ISP on Hacker News [1]
and the comments section was about how hard it is to start one. What if these
rules allow someone to build a new ISP and take some of the advertising profit
from some of the big companies like Google ? Google can afford to lose some
money and perhaps it could improve the ISP competition in the US.

Also reading about the general history of the Internet, even though initial
work was done by DARPA, it did not become the world wide network until
commercial interests ( and free market capitalism ) took over [2]. This is not
the narrative in the featured article.

[1]
[https://news.ycombinator.com/item?id=13688595](https://news.ycombinator.com/item?id=13688595)

[2]
[https://en.wikipedia.org/wiki/Digital_Revolution](https://en.wikipedia.org/wiki/Digital_Revolution)

~~~
hackuser
> it did not become the world wide network until commercial interests ( and
> free market capitalism ) took over

It was literally world-wide before that, but if you mean that it boomed: Yes,
commercial businesses helped a lot, and so did others:

Free, open source software such as the World Wide Web, the entire protocol
stack (IP, TCP/UDP, DNS, etc.), SMTP, POP, IRC, *nix/BSD, Mosaic ... let's
give credit where it's due!

The personal computer revolution and all that went into it. Normal people were
just getting their first computers in the 1990s. No point in Internet access
without a client machine.

Telecommunications innovations such as PPP, modems, etc, which allowed data
connections over phone lines.

Also, not all the commercial business was 'free market capitalism'; one big
one that helped the Internet starting in 1995 was a predatory monopoly.

