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NetNeutralityDebate:InternetAccessandCostsAreTopIssuesTheNewYorkTimes
http://nyti.ms/1B3cf3X
BUSINESSDAY
NetNeutralityDebate:InternetAccessandCostsAre
TopIssues
EduardoPorter
ECONOMICSCENE
NOV.11,2014
WhatistheproblemwiththeInternetintheUnitedStates?
OnMonday,PresidentObamaurgedtheFederalCommunicationsCommissiontosetstringentnetneutrality
rulestoensurethefreeflowofcontentontheinformationsuperhighway.
Theregulations,hesaid,shouldensurethatneitherthecablecompanynorthephonecompanywillbeableto
actasagatekeeper,restrictingwhatyoucandoorseeonline.Todoso,hesuggestedclassifyingconsumer
broadbandasapublicutilityliketelephoneserviceorthecompanythatdeliverselectricitytoyourhome
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allowingtheF.C.C.tosetpreciseproscriptionscoveringqualityofservice.
Inprinciple,thismakessense.ItishardtooverstatetheimportanceofbroadbandtoAmericaseconomyand
society.Freetodoastheypleased,theclutchofcompaniesthatcontrolaccesstotheInternetwouldhaveenormous
powertodeterminewhatinformationreachesAmericansonline.
Butwouldthecurebeworsethanthedisease,entanglingtheInternetinanendlessfightoverregulationand
perhapsslowinginvestmentinoneofthenationsmostvitalservices?Tosomeextent,itdependsonhowyouview
thethreat.
ForGeneKimmelman,presidentoftheadvocacygroupPublicKnowledge,whatsatstakeisnolessthan
Americandemocracy.Hecanremember1992,whenhewasattheConsumerFederationofAmericapushingabill
thatwouldreregulatethecableindustryandallownewsatellitecompetitorsintothemarket.
Ihadwellfundedsatelliteprovidersonmyside,hetoldme.Therewasnocablecompanythatwouldtake
theirads.Leftfreetodecidewhichcontentflowedthroughtheirpipes,broadbandproviderscouldsimilarlydeploy
theirpowerintheserviceoftheirpoliticalpreferences.
Themoreprosaicthoughactuallytrickierissuenetneutralityismeanttoaddressisaboutprice.Should
broadbandprovidersbeallowedtochargeprovidersofcontentdifferentiallyfordifferentspeedsortiersofservices?
ConsumergroupsandfreespeechadvocateslikePublicKnowledgearguethisisasurefirewaytosplittheInternet
intohavesdeeppocketedcompaniesthatwouldpaytohavetheirmoviesdeliveredatblisteringspeedand
havenotsthatwouldberelegatedtoacongested,snailpacedlane.
Thesmartkidwiththeclevernewideawouldnolongerbeabletocompetewiththezippywebsitesofestablished
playersinthefastlane.TheInternetwouldloseitsgaragebasedengineofcreativity.
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NetNeutralityDebate:InternetAccessandCostsAreTopIssuesTheNewYorkTimes
Theseconcernsshouldntbelightlydismissed.InaworldwheretheKochbrotherswillspendtensofmillionsto
installconservativeRepublicansinoffice,Mr.Kimmelmanspoliticalfearsarenotfarfetched.
Still,thethreatsarticulatedbythestaunchestdefendersofaneutralInternetdonotquiteamounttoan
imminentdanger,nordotheynecessarilycallforanalloutembraceoftraditionalregulation.
Politicalspendingmightbeatrecordhighs.ButthenationsbroadbandGoliathshavenot,infact,beenusing
theirmighttothrottlespeechonline.Andtheyarelikelytothinktwicebefore,say,alienatingDemocraticconsumers
byusingtheirpipestofavorRepublicancauses.
Whatsmore,thethreattospeechisthemosteasilyaddressed,viaastraightforwardbanagainstblockingor
throttlinglegalcontent.
Thepricingthreatisevenmorenebulous.Companiesengageindifferentialpricingallthetime,andbroadband
providerswouldsurelydosoifallowed.Butthatoftenservesconsumerswell.
RobertAtkinson,thepresidentoftheInformationTechnologyInnovationFoundation,notedthatitwouldmake
senseforserviceslikeSkype,whichneedsitsbitstoarriveattheirdestinationinatight,precisesequence,topay
Internetserviceproviderstoprioritizetheircallsoveremailthatdoesntrequiresuchcarefultiming.
Orthinkof,say,TMobileofferingtoexcludemusicservicesfromitsdatacapinordertoattractmore
consumers.Syntonic,whosetechnologyallowscompaniestoprovidesponsoredcontenttocustomersfreeover
wirelesscarriers,isinfactbroadeningaccessbylowincomeconsumers.
Theseformsofdiscriminationhardlyaffectothertraffic.Andwithaveragespeedsalreadyaround10megabits
persecond,notesMr.Atkinson,themarketforprioritizationisgoingtobealotsmallerthanpeoplethink.
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Todate,themostnotableinstanceofanythingresemblingpaidprioritizationisNetflixspaymenttoComcast,
TimeWarnerCable,AT&TandVerizontoensureitsshowsflowedsmoothlyontheirpipes.Netflixaccusedthe
broadbandprovidersofslowingitscontentonpurposetogetpaidandstronglysupportstoughernetneutralityrules.
Still,thechargelookslikeanotunreasonablecongestionfeetocovertheaddedcostsofhandlingitsvoluminous
traffic.ComcastcouldeitherchargeNetflixorrequireallitsconsumerstoshouldertheburden.Itschoiceishardly
unreasonable.
IoncesupportedreclassifyingbroadbandasapublicutilityunderTitleIIoftheTelecommunicationsAct,asthe
presidentisnowproposing.Thethreattofreespeechandinnovationonthecontentsideofthebroadbandeconomy
seemedplausibleenoughtowarrantaheavyhand.
Sofar,however,themostawfulsituationshavenotcometopass.Whilethisdoesnotensuretheyneverwill,it
suggeststhatrestraintcanbeachievedthroughlightermeansthatdonotputatriskothercrucialobjectiveslike
broadeningaccesstotheInternetandtacklingthenationsveryrealdigitaldivide.
AreportpublishedthisyearbyRobertLitanoftheBrookingsInstitutionandHalSingeroftheProgressivePolicy
InstituterecommendspickthepolicythatmaximizestotalinvestmentacrosstheentireInternetecosystem.
PresidentObamasuggestedtheF.C.C.shouldapplyTitleIImorelightlythanthelawprovidesfor,refraining
fromregulatingprices.Butotherprovisionscouldbeequallychilling.Mr.LitanandMr.Singeroutlinedhowthe
requirementthatbroadbandcompaniesunbundleandleasecapacityontheirpipestocompetitorshamstrung
investmentforyearsuntiltheunbundlingrequirementwasdropped.
And,intheend,TitleIIwouldnotnecessarilybandifferentiatedpricing.Itwouldjustmakeitavailabletoall
comersonthesameterms,banningonlyunjustorunreasonablediscrimination.Mr.Litannotedthatdetermining
whatthismeanscouldleadtoendless,contentiousandpoliticallychargedproceedings.
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TheUnitedStateshasanimperfectInternet.Thereislittlecompetitioninwiredbroadband,limitedmostlytoa
cablecompanyandatelecomcarrierofferinglesspowerfulDSLaccess.Consolidationisshrinkingthenumberof
playersfurther.Andmobilebroadband,whilemoreadvancedthaninmostothercountries,isnotyetareal
competitorforfastfixedbroadband.
Thecablecompaniesthatprovidemostfastbroadbandhaveaclearmotivationtodiscriminateagainstcontent
fromrivalsourcestoprotecttheirbusinessmodel.AndtheircombinationwithprogrammerslikeNBCincreasesthe
riskofdiscriminatorytreatment.
ButtheseshortcomingswontbefixedbyregulatingtheflowofcontentontheInternetlikeelectricitythrough
thewiresorvoicestravelingdownaphoneline.Stoppingunreasonablediscriminationcanbedoneatalowercost,on
acasebycasebasisthatdoesnotimperilperhapsthemostimportantobjectiveofall:extendingtheInternettoall
Americans.
PresidentObamaisrightwhenhearguesthatthebroadbandcompaniesconnectingAmericanstotheInternet
havespecialobligationsnottoexploitthemonopolytheyenjoyoveraccessinandoutofyourhomeorbusiness.
Intheabsenceofmorecompetition,thiswillhavetobemonitoredbyregulators.Butthemonitoringshouldbe
performedattheleastpossiblecost.
Email:eporter@nytimes.comTwitter:@portereduardo
AversionofthiseconomicanalysisappearsinprintonNovember12,2014,onpageB1oftheNewYorkeditionwiththeheadline:ThePitfallsin
NetNeutrality.
2016TheNewYorkTimesCompany
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