
Net Neutrality Is Just a Symptom - NelsonMinar
https://corp.sonic.net/ceo/2014/11/12/neutrality-is-just-a-symptom/
======
lorddoig
In the UK, unbundling has had a very limited effect on pricing when compared
to straight-up nationalisation.

Excluding Virgin's cable service, the last-mile infrastructure is wholly owned
by BT Wholesale which, despite the name, is "independent" of BT Retail. It's
operations are heavily bounded by legislation and politics - it is, in
_effect_ , a public corporation. So tied down are they, in fact, that they
have a flat price list for almost all customers. Pricing innovation is
precisely nil. I've have a copy from two years ago, but I'm under NDA wrt
specifics.

(Note that none of the above is a criticism, the idea of letting them free to
do what they want is horrifying.)

The result of this is strange to observe from an economists vantage point. On
the one hand you can catch a glimpse of what perfect competition might look
like in the consumer market as a thousand companies vie to maximise market
share with an almost perfectly commoditised good, which in reality means
packaging (with TV, phone, mobile, insurance, pretty much anything.)

Aaand on the other hand most of the country is paying £30/month ($50) for
6Mbps down/0.2Mbps up at 50:1 contention and a fair usage policy to boot.

Of course this is much better than straight up nationalisation as the private
companies will at least innovate on peripheral services like billing and
support, and will use a stronger punch when it comes to motivating BT
Wholesale to stay on their toes.

Is this better than the US situation? Most probably. Is this the ideal
solution? Most probably not.

I have a 152Mbps connection from Virgin which is around the same price, and am
now in a super-exclusive club of Brits who get to moan about not being able so
saturate a servers pipe (I want my downloads to read 18MBps every time,
dammit!)

~~~
radiowave
Excellent summary of the UK situation, although I'd say most people are paying
quite a bit less than £30/m for their broadband service (or are you including
line-rental in that?)

The other part of the regulatory environment here that's worth mentioning is
the "MAC-code" system which makes it relatively straightforward to switch
ISPs. The ease with which customers can vote with their feet is a major part
of what keeps (most) retail ISPs competitive.

------
al_bundling
Net neutrality issues are a symptom of the lack of competition in the US, but
it's not all roses and sunshine in countries with robust broadband competition
either.

Since network netrality violations are frowned upon, eyeball ISPs have
resorted to playing favorites and extracting payments from over the top / web
service providers.

The battlefields are in carrier interconnect points and Internet exchanges,
where ISP, transit providers and service providers meet to exchange bits
coming and going to broadband users.

The weapons of choice are denial of peering connections and congestion of
existing connections.

The shakedown is as simple as it is effective. Want your bits to go through?
Pay up.

Some of these peering wars have made it to the press, but most don't being
shrouded in NDAs and trade secrets. Here are some examples of the public ones:
\- Free in France vs. Youtube \- Orange vs. Megaupload \- Orange in Africa vs.
Google \- Netflix vs. US ISPs

Public or not, one thing is for sure these peering wars are only about to get
worse.

What is needed to avoid these and other potential problems are just basic
consumer protection rules: \- Truth in advertizing \- Minimum performance
guarantees \- Independent third party verification

The funny part is that we don't need new laws or regulations. We just need to
actually enforce the laws we have. And sufficiently penalize infractions to
make it economically unfeasible not to comply.

------
magice
The root cause of all this is the fantasy of a certain group of people. Those
believe, against the evidence and the suffering of their fellow citizens (let
alone their fellow human beings), that enthroning money (aka capital,
corporation, and all that) will boost the economy. The result? Money now owns
the US, and drags all down into hell hole.

One moment of sadness passes. Let's go and make some money. Gotta pay the
bills.

~~~
nickik
Oh comon. Stop with your philosophic anti captialist meta ravings. Either make
real arguments or g stop posting.

------
rayiner
I agree with the premise that the lack of competition is at issue, but the
reasoning of this article is at odds with itself.

> they include net neutrality, the price of Internet access in America,
> performance, _rural availability_ and privacy.

In a free-market, rural availability won't improve. Someone posted this the
other day:
[http://www.louisvilleco.gov/SERVICES/CityManagersOffice/Fran...](http://www.louisvilleco.gov/SERVICES/CityManagersOffice/FranchiseAgreements/CableFranchiseInformation/2013ComcastCableFranchiseRenewal/tabid/766/Default.aspx#faq).
That page describes the cable franchise negotiations for Louisville, CO,
population 4,500. The page notes: "Should another cable provider want to offer
cable service in Louisville the City would offer that company the same
franchise opportunity that Comcast now has. _To date, no other service
providers have asked for a franshise_."

The only reason phone infrastructure got built in rural America at all is that
the Telecom Act's Universal Service Fund diverted billions of dollars a year
from long-distance customers to paying to subsidize service for rural
customers. What will the free market do when you take that away?

> But in 2004, the FCC took steps to limit competition, turning away from key
> provisions of the 1996 Telecom Act. They set aside unbundling requirements
> which serve as a key bridge for competitive carriers. By circumventing
> Congress this way, the Bush-appointed Chairman of the FCC was able to turn
> back a competitive tide, creating an intentional duopoly on Internet access
> in the US.

The "competitive tide" under unbundling is a fiction. In the early 1990's, you
could order DSL from a large number of ISP's . . . all of which used the same
copper wire the AT&T monopoly had put in the ground decades before. It was not
accompanied by increased investment into the actual wires that ran into
peoples' homes. Indeed, it eliminated any incentive to invest in those wires--
why pour billions of dollars into infrastructure you'll have to lease out at
cost to your competitors?

People mention the "unbundling" requirement as if its a panacea, comparing it
to what has been done in Europe, but ignore what makes that policy work in
places like the U.K.--the company that owns the wires is a sanctioned
monopoly, _protected from competition_ , that is _guaranteed_ return on
investment through statutory means.

It's illustrative to look at places in the U.S. where the market for telecom
is working pretty well. In Chicago, there is cable via Comcast, and both AT&T
and RCN building FTTP networks. In a place like Baltimore, RCN wouldn't be
_allowed_ to build its network, because they only serve the wealthier
neighborhoods from the Loop northward. When local governments intervene in the
market and make such deployments impossible, rational market participants do
not respond by building a bunch of unprofitable infrastructure. They do it by
not building infrastructure at all.

~~~
AnthonyMouse
> It was not accompanied by increased investment into the actual wires that
> ran into peoples' homes. Indeed, it eliminated any incentive to invest in
> those wires--why pour billions of dollars into infrastructure you'll have to
> lease out at cost to your competitors?

The trouble is without competition they have exactly the same lack of
incentive. Why invest in those wires when you can charge customers the same
amount whether you make the internet faster or not, and the customers don't
have any better alternative?

There are two valid ways out of this. The first is to somehow create
competition at the wire level, but that seems rather implausible. Running new
fiber to every American household is so expensive that nobody wants to do it
unless they can have a monopoly. Creating competition would require some
plurality of companies to do it even though the competition, if effective,
would eat all of their margins. If anyone can describe a way to make that
happen it would probably be worthy of a Nobel prize.

Which leaves the second alternative, which is writing the incentives into the
regulations. Set it up so that the nationwide average ISP speed is regularly
measured and the ISPs with above average network performance are allowed to
charge more by an amount that justifies making regular upgrades.

Or just require the last mile provider to install fiber everywhere once and
then let the competing ISPs who lease it provide their own terminating
equipment, since the terminating equipment is the thing that needs to be
upgraded but isn't the thing that constitutes a natural monopoly.

> People mention the "unbundling" requirement as if its a panacea, comparing
> it to what has been done in Europe, but ignore what makes that policy work
> in places like the U.K.--the company that owns the wires is a sanctioned
> monopoly, protected from competition, that is guaranteed return on
> investment through statutory means.

Your criticism seems to be that we aren't doing exactly the same thing they're
doing. Is there a reason we can't just do exactly the same thing they're
doing?

~~~
rayiner
> Your criticism seems to be that we aren't doing exactly the same thing
> they're doing.

My criticism is that it's not sensible to implement one part of a two-part
solution.

> Is there a reason we can't just do exactly the same thing they're doing?

In principle, I'm fine with the idea. In practice--basically New York is the
only municipality I'd trust with infrastructure like that.

~~~
sounds
So because we don't have a full answer to your criticism, you'd rather we
roast in Comcast Hell?

Seriously?

By the way, I do have a full solution to both parts of the problem, which this
margin is too narrow to contain. :)

I'm in earnest here: I can't exactly divulge the trade secrets of my approach
but I do think there's a good solution to it.

And I'm really happy to say that Sonic.net is on the right track. If you're in
their service area, try them out. You won't look back.

Edit: I'll add Verizon FiOS is fine.

~~~
rayiner
> So because we don't have a full answer to your criticism, you'd rather we
> roast in Comcast Hell?

Regulatory regimes are systems. Leaving out key provisions can result in a
"solution" worse than the problem. It's like leaving a support off a bridge
design--you don't get partial credit. If you impose unbundling without
creating a compensating incentive structure, you'll just drive investment out
of the industry and end up with stagnation.

Also, the choice isn't between Comcast/Verizon and Ofcom. It's between
Comcast/Verizon and the City of Baltimore (or San Francisco, or <other city
run by crazies here>).

------
danielnaab
I agree, we need service providers to unbundle. It's an abuse of network
ownership to extend that control into monopolies/duopolies on network
services, be it internet service, phone, or television.

But it seems apparent to me that what we really need is more publicly owned
networks, at the very least on the local level. Let ISPs and other service
providers (phone, television, etc) compete for the consumer over open fiber
networks in the same way cab companies compete over publicly owned roads. Fund
the networks with taxes on network service providers, and provide federal
subsidies for rural networks.

------
nextw33k
I've been making comments to that effect for years. The FCC shouldn't be
looking at this, the FTC should:

"The Federal Trade Commission's Bureau of Competition enforces the nation's
antitrust laws, which form the foundation of our free market economy. The
antitrust laws promote the interests of consumers; they support unfettered
markets and result in lower prices and more choices."

Unfettered markets being the operative words.

~~~
nickik
This is funny. You have one part of the government activly promoting monopoly
and things like that while you have another part of government that is claming
to prefent the same thing.

The reality is that antitrust law has been used more often to destroy
competition that underpriced you rather than taking out evil monopolys. Many
free market economist are against antitrust regulation.

------
dbroockman
The question is whether the lack of competition reflects a natural monopoly
(i.e., something inherent to this market given spread out suburban geography),
like for electricity service, or other forces. It's probably some of both. At
the very least, increasing competition won't be easy in the medium term. So, I
disagree with the notion that net neutrality is a trivial issue ("just a
symptom").

------
jaunkst
Virtualize the bandwith. Remove the provider. Broker the line providers as
what they are and create compition for higher speed lines for profit.

~~~
al_bundling
This is called bitstream access. It's not a very good idea if it's the only
option.

Bitstream access is susceptible to the lowest common denominator of access
technology and is at the mercy of the infrastructure owners upgrade cycle or
lack of it.

As an option to unbundling it is fine.

~~~
jaunkst
Can you explain more about the lowest common denominater? Does this mean sower
technologies are more dominate in a bitstream access scenario?

------
mp99e99
This article is largely correct. Although we do cloud now, my company started
as a access provider that was pushed out of the industry once Michael Powell
changed the rules eliminating competition. If people knew what Internet access
costs to deliver (small fractions of what you are paying) they would be
shocked. Sadly, in the long-run it leaves the USA behind the rest of the
world.

------
EGreg
I'm a minarchist. I think the government should ensure people's minimum
expectations are met (safe potable water, low violence, 20MBPS internet, etc.)
but that's it. So I am not against "internet fast lanes" beyond the basics
where both sides have to pay for them.

That said, I think it's just good policy to have the same for startups. A
minimum level of protection (bankruptcy protection, as well as a level playing
field) for new entrants. I think that on the level of Netflix, they should
indeed pay for special agreements. After all -- come on -- Netflix does
special peering agreements with Tier 1 ISPs and their traffic accounts for 34%
of all traffic to consumers. So basically, I think the general principle is:

REDISTRIBUTE THE ECONOMICS TO ENSURE THE MINIMUM LEVEL THAT MAINTAINS
INNOVATION, FREEDOM, BASIC EXPECTATIONS, BUT BEYOND THAT, LET THE MARKET BE
FREE (BARRING REGULATIONS TO MINIMIZE AGAINST NEGATIVE EXTERNALITIES).

PS: If you downvote, I'd love for you to actually reply with a reasoned
comment.

~~~
nickik
20mps? Really? A couple of years ago was high speed. If you want that every
development in infrastructure is available to everybody in a couple of years
you are not really a minarchist.

A level playingfield? That does not even mean anything.

~~~
EGreg
Replace "level playing field" with "low barrier to entry". Basicay I think
that the markets should be distorted to a small extent to create a "free
layer" for people and companies to get started and have safety nets etc.

~~~
nickik
The problem is that its simply not possible, there will never be a "low
barrier to entry" into the space industry, or the airplane industry or many
other industrys. The amount of investment required is just to high.

I know why people want it, and I think generally that the basic idea is not
bad. However the idea that we can controll all markets to achive this goal is
just not relistic. This kind of thing was tried in "indian socialism" were
they would have permits for every market to controll how many firms operated
in each market.

All you need is effective banking and low regulatory burden. A safty net is of
course nice, but Im not sure I would put it into "low barrier to entry"
category.

------
wmf
So wire neutrality instead of net neutrality.

~~~
jaunkst
Yes, that's the game. They own wires. The service sucks. Build better lines,
sell access to providers for highest bid.

------
driverdan
Dane nailed it. This is a problem the free market would resolve if allowed to.
Yes, there are issues that others have raised like rural access but
competition would make net neutrality a much smaller issue.

~~~
lern_too_spel
How libertarians interpret government-mandated unbundling with guaranteed
fixed profits as "free market" is something I may never understand.

~~~
wmf
Yeah, in this debate "net neutrality" means regulation and "competition"
usually also means regulation.

