Comment by holmesworcester | Hacker News Reader

Comment by holmesworcester | Hacker News Reader

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holmesworcester

This is a common misconception.

Competition itself can't protect against net neutrality violations, because even small-marketshare ISPs can break your startup's product for some customers.

Almost none of these customers will ever even learn that the failure is the ISP's fault. And even if they do, who will switch ISPs just to use some not-yet-proven product by a new startup?

Meanwhile your competitor's product will work well, either because they were too big to mess with or because they paid whatever the ISP was demanding. Maybe you should too!

This is why Europe needed net neutrality rules, and actually passed stronger rules than the U.S., even though the system you describe was prevalent there. Amusingly, before the rules existed, the increased competition in Europe had actually led to more net neutrality violations there (specifically, blocking or throttling things like VOIP and BitTorrent) because ISPs in that competitive landscape were under more pressure to cut costs!

My source on this is Stanford's Barbara van Schewick, who is a leading expert on net neutrality policy and whose work informed both the U.S. and E.U. rules.

For example, which video conferencing solution would you choose: the one that always works for everyone you invite, or the one that works only for 90% of the people you invite, because the other 10% are on an ISP that blocks it? You'd be under a lot of pressure to choose the solution that you know will just work for everyone.

The ISP doesn't need to be anything close to a monopoly to get leverage for extortion and (in the process) mess up competition at the application layer.

Yes, we need more competition, but we still need net neutrality rules.

Competition improves prices and service. Net neutrality rules protect competition at the application layer, and they ensure that ISPs are really competing on how good they are at moving data, not just on how good they can get at shaking down the application layer.

If there is competition, which ISP would you select? One that works with most of the sites or one that works with all sites? And if enough people selects the latter, and assuming blocking small percentage of site doesn't give big monetary gain to the ISP, there is no reason for ISP to behave the way you said in the example.

Free market principles do not apply when the switching costs are non-trivial and information asymmetry makes it difficult for the consumer to know what’s really going on.

Nobody is gonna complain about their ISP when the conversation is simply this: “Aw, shucks, [startup-product] doesn’t work, at least [established-product] works everywhere. The new thing is probably crap anyway.”

I’ll be the first to talk about market failures but the mere existence of friction does mean markets stop working. There’s some amount of friction with every market interaction. There is absolutely a market failing when it comes to ISPs but it’s not really friction that’s the issue, switching ISPs in an area where you actually have options is a few phone calls and scheduling a time for someone to do your wiring.

Now if every store in a 100 mile radius only had Coke, then switching to Pepsi just got a lot harder despite the two products being literal drop-in replacements for one another.

Switching to pepsi is easier as it is a single dimensional change. Switching ISP will have a multitude of effects. Most unknown (how reliable is the new one? will they give me hidden extra charges? what are their TOS? are they blocking XYZ service I need down the road? do they spy on DNS traffic?) and so on. Let alone a decent amount of time on the phone organising it and potentially some early exit penalties.

Also setup costs.

We need common sense regulation in this space, not what we have now. What we have now is Google fiber being told to pound sand all over the country even though they offered to pay for everything when laying down a separate, competing fiber network. Why were they rebuffed? Verizon/Att has the local gov. wrapped up. Let’s break THAT gov-enforced monopoly.

It's in some cases not even a choice. ISP service in the US is to my understanding also tied up in regional availability (it's less of an issue in Europe since afaict infrastructure is just... better in Europe, but even in Europe you have regions where the choices are between shit and slightly worse smelling shit; hence why net neutrality still matters here), and many of the more rural areas just have a single provider so your only choice to change ISP is to... move location. Which is frankly absurd.

The result is that said provider is basically running a regional monopoly, but this doesn't get regulated against because the total ISP market isn't monopolized.

> which ISP would you select? One that works with most of the sites or one that works with all sites?

Some non negligible percentage of people might choose the one that only works with most websites, due to some other reason, such as they have reduced prices.

That non-negligible amount of people on this other service, could still be leveraged by that ISP to strongarm websites.

And that business model produces market concentration.

An ISP grows a large user base by doing aggressive price competition, then starts shaking down services, rate limiting their traffic if they don't pay up. The services are over a barrel and pay, after which the ISP's users don't see slowdowns and have no reason to switch. Meanwhile they use some of the shakedown money to lower prices and get more users. Smaller ISPs don't have as much leverage to extract the danegeld so they can't compete.

It makes perfect sense to prohibit that business model as an antitrust measure.

> An ISP grows a large user base by doing aggressive price competition, then starts shaking down services, rate limiting their traffic if they don't pay up.

Yeah, we’ve already seen this in the Comcast/Netflix debacle and Deutche Telekom vs the world. In fact a lot of large incumbents do this.

> Meanwhile they use some of the shakedown money to lower prices and get more users.

If things were even so rosy. The shakedown money is used for larger profits and monopoly positions to get more users.

My assumption was that ISP couldn't get big cost saving by restricting some sites. I think this assumption is valid as by definition the websites that consumes most of the data are popular sites, and I don't think ISP would touch that due to reputational harm. And banning few of the tail end of the sites wouldn't allow ISPs to reduce the cost by any margin.

Which ISP would you pick, the one that works with every conferencing system, or the one that deliberately blocks some of those conferencing systems in the small markets where they have a monopoly? Second question: which market segment does a typical ISP care more about, the small markets where they have a monopoly, or the large markets where they compete?

> Which ISP would you pick, the one that works with every conferencing system, or the one that deliberately blocks some of those conferencing systems in the small markets where they have a monopoly?

They don't block the conferencing systems in the regions where they have an ISP monopoly, they block them for all their users because they have a monopoly on the network path to those users. The conferencing system needs to be able to reach 100% of its own customers' users or they'll be bleeding customers faster than the ISP does, so they blink first and pay, after which the ISP's customers have no reason to switch because the conferencing system is working.

Which ISP does that? My subtext is that ISPs don't block things like this, because even though they have regional monopolies in small markets, they make a large fraction of their profits in large markets where they have to compete.

This was a public example:

https://techcrunch.com/2014/04/28/netflix-inks-peering-deal-...

But another issue is that if it isn't banned, it can happen in private. The ISP doesn't need to actually throttle the target's traffic if it can credibly threaten to and force them into a contract with an NDA, and they have the incentive to require that when their demands are unpopular, so we have no way to know how widespread it is.

That's not an example of an ISP blocking a service?

They caused the service to be non-functional. Your objection is to the method of degrading the service?

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