Network Neutrality

I’ve not been following the net neutrality debate, so I presume all these points have been made by others. But I want to firm up my thoughts, just for fun.

There are a few frames you might map this into.

The traditional telco regulatory framing is about monopoly power v.s. the little guy. This framing the monopoly power of the telco arises from network effects and physical realities. The state steps in to help coordinate the creation of the monopoly; handing out one of a like license for airwaves and utility poles. The state also steps into limit the perfectly natural tendency for capital to abuse thier monopolies at any oportunity. This framing is all perfectly valid; etc. etc. In the current US poltical ecology it also write it’s own outcome. Capital wins, the little guy looses; an any public good is converted to a private good in the hands of the highest bidder. The only question is who runs the auction; the state or the legislators.

A second frame to drop this debate was nicely coined by Martin; ‘What’s the label on the tin?” Markets work smoothly, scale up quickly, and generate lots of wealth and externalities when the transactions can be executed quickly. That requires setting standards; those standards reduce what aspects of each transaction you need to negotiate. The state gets involved in these debates because of it’s unique power to set standards. Markets participants have a love/hate relationship with this standards making process. They love it because in the best scenarios everybody wins; and they hate it because during the game individual actors can sometimes capture huge benefits for their class of actors. You can predict which standards battle will be long v.s. short using various means. In this case I’d predict a long drawn out battle.

Yet another frame we can drop this into is old v.s. new capital. The distinquishing characteristic of old capital is that it tends to be much more politically connected and conservative. New capital has weak political muscles; since while it’s got them it hasn’t practiced using them. In this story we cast the telcos in the role of old capital and the new web businesses in the role of new capital. The new guys are a complementary industry of the old guys. The old guys would like a peice of the action. So they are looking to get the power to charge the new guys to deliver content over them. This frame predicts that the key question is can old capital move fast to lock-in advantagous regulations; faster than new capital can figure out how to use those untrained political muscles. I think that’s obvious new capital will learn quickly enough. That’s clear because they have common cause with some other large players: media, device makers, and software plaform vendors. Those three already played a round in this frame during the HDTV standards battles. If we presume that then we can also predict that this standards battle will be quite drawn out. Two very wealthy industries competing for the state’s attention is not a recipe for a quick resolution. Bearing that in mind I read this report as indicating that Alen Specter has recognized that could generate a lot of campaign contributions for a very long time.

It was unclear precisely what approach the Judiciary Committee would take. Specter, for one, indicated that he would prefer looking at the issue on a “case-by-case” basis rather than issuing a “general rule” about what network operators can and cannot do–an approach favored by Internet companies. He said it may be more productive to negotiate less formal “standards” for network access with the players involved because writing new laws is “extraordinarily difficult, candidly, when you have the giants on both sides of these issues.”

The final frame I notice in this discussion is how the telco industry is undergoing a very very fundimental shift. The telco industry does distirbution or brokage; like roads, canals, airlines, UPS, eBay, match makers, etc. Traditionally they transported phone calls; one end you place the call, the other end would recieve the call. Note how there are two kinds of actor there; that’s true in all these industries. If you and I play in both roles from day to day – we make calls, and we recieve calls. There are different labels for the two roles. In the internet we call them client and server. At eBay and other markets you call them buyer and seller. The match maker calls them wife and husband; or employee and employeer. The media industry calls the content producers and consumers. Most of the new capital businesses, ebay, google, etc. have very sharp distinctions between the two roles. They often charge one side and the other; and they always have very different pricing schemes for the two sides.

Telco is a interesting case, because historcially it had a reasonably weak two sided network nature. That’s changing, and fast. The emergance of the large web properties who serve vast populations of users means the telcos are now two sided businesses; but only if they can get the regulations written when they weren’t revised to allow them new forms of pricing power.

This frame has some hints in it about how what I suspect will be a very long drawn out standards/regulatory battle might be resolved. This is about how to label the tin; and both old and new capital find that a very puzzling problem. I’m bemused by the thought that the giant web properties might remain “free” by having the telco’s pay them; which is more or less the model uses in the cable TV industry. It’s an ugly outcome; but it’s consistent with the current political ecology; where the little guy doesn’t even have a seat at the table.

0 thoughts on “Network Neutrality

  1. Ian Holsman

    hi Ben,

    the other frame i’ve seen argued is the commons debate.
    That is labeling the network as a essential service which is highly regulated, and access is metered out on a equal basis regardless of you potential ability to pay for better service.

    personally I think that this viewpoint is dangerous, as while it might sound ‘fair’ for the little guy, historically commons are under-developed, and people like Coase have won nobel prizes arguing on how privatizing a common is in the common good.

    the other point I see is there is nothing saying that the overall price paid by everyone will actually rise in the medium term. by having publishers pay it will allow other players pay less.

    I think it will encourage more competition (it makes the industry more attractive for new entrants)

    have you got any thoughts on how congress could lower the price of entry/lower the price of exit to the industry at the same time that they allow them greater freedom to charge? that might be a nice compromise. (sure you can charge more.. but we going to let companies X,Y,Z in as well)

  2. goatchowder

    There’s also a more overtly political element to this, I suspect.

    At least part of the reason why this is coming up, is because speech has become too “free” (as in beer), and this challenge to the current political elite cannot be allowed to stand. Look at the blogosphere calling the corporate media on their clubbiness. I look at the Tester, Busby, Hackett, Webb, and Lamont campaigns, and I see an ascendant netroots flexing its political muscles; there is no way that the Titans of Capital will allow this to stand. Corporate pandering Democrats are getting picked off one by one. They will in turn pick off corporate-pandering Republicans. Bad news all around.

    Instead, corporations need to assert control over this populist medium, by making it too EXPENSIVE for the people to actually use. Then, only the rich will be able to afford to communicate– only those who are part of the capital elite, or have sold themselves out to it in order to pay their telecom bills.

    This pattern has played itself out with every communication innovation I know of. Ruling elites always either crack down on or attempt to overwhelm peer-to-peer communication; as said, it’s a natural competition for them and they should be expected to do that. They survive and prosper through heirarchal one-to-many communications and “mushroom management”… and if it costs too much to run a blog, or a streaming radio station, or a netroots PAC, or a wireless ISP, or a record company, or a movie studio, then guess who gets to maintain dominance?

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