Network Neutrality
stripe.com
stripe.com
Since they set up the comparison themselves, I wonder if Stripe would be in favor of legislation that forced them to forever treat all their customers neutrally vs. us just trusting them to "work hard to ensure" that end. Perhaps making it illegal to offer sweetheart deals to bigger clients for example? Arguably payments is the next most fundamental piece to a functioning internet after bandwidth, so its not unreasonable to request. If MegaCorp A received much lower rates on credit card processing than little Startup B, how could we have fair competition after all?
Most consumers and small businesses in the US can buy ISP services only from a duopoly, the cable company or the phone company, who therefore are in a position to dictate terms to customers. In other words, there's no functioning "free market" for consumer and small-business ISP services.
On the other hand, there are many payment processors in the US.[1] Say what you will about their service quality (most suck -- Stripe is an exception), but at least customers have multiple choices. No payment processor is in a position to dictate terms. In other words, there's a functioning market for payment processing services.
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[1] http://www.quora.com/How-many-payment-card-merchants-are-in-...
Federal "net neutrality" regulations freeze into national law a particular formula for access, based on an idealized model that's never quite existed before. (To the extent the net has often been 'neutral', it's not because the FCC demanded it, but customers and businesses. And the legions of de facto exceptions have been practical, and evolving quickly, not waiting for telecom-lawyer mandarins in DC to design us a better internet.)
Even if new utility-style regulation prevents certain abuses, it equally prevents valuable experiments from incumbents or new entrants. The history of regulated utilities – electric, water, classic phones – is one of stagnation, and plenty of subtle abuses from those incumbents whose margins get effectively written into law.
Without opening up infrastructure to competing ISP services, the current system guarantees there will be no new entrants (and, via mergers, an ever decreasing number of competitors). Infrastructure is a natural monopoly, but the services provided over that infrastructure are not. Locking infrastructure customers to a single ISP is effectively giving the monopolies a gift-wrapped invitation to abuse their market power.
So I'm not sure this is a 'natural monopoly' at all. There's been too little time to observe, and things are still changing fast.
Let abusive incumbents try to collect monopoly rents. That would attract lots of new solutions from very savvy and deep-pocketed challengers, like Google, Apple, and other strategic investors.
To be clear, by 'infrastructure' I mean physical lines going to the premises. There's still hope for wireless, but competition in the physical connection space is effectively dead, and getting deader with every merger.
But also: why are the physical lines a separate market from wireless? They are very, very close substitutes – bits are bits. And advancing tech or clever to-the-curb (but not to-the-premises) buildouts could make wireless broadband fully competitive with the wired networks.
If the wired incumbents get fat and happy on a position of temporary advantage – for example for bulk video delivery – then those potential wireless advances will see more investment.
These are different market. You may think the buck stops somewhere, but after 720p video streaming, you get 1080. Then you get gaming, at sixty FPS, not 30. Then you get VR streaming, up to 10 times the pixel rate, and nearly twice the frame rate to have perfect presence. And never mind the latency requirements. Then you can get more sci-fi, with direct neural interfaces, and, eventually whole brain emulation over the network —though at that point, the economy would have changed so much that the fibre vs wireless debate will be quite moot.
That's effectively what I'm advocating--by removing their monopoly power to be the only ISP available to the customer on the other end of their lines. Breaking them up into regionalized monopolies doesn't give consumers a choice, but opening the lines to competition does.
And if it doesn't? How long do we wait?
For example, what if ISPs roll out traffic-preferences-for-pay... but the base bandwidth available to customers, and sites that don't opt to pay for preference, also keeps improving, on a price/performance basis? Would that still be an emergency requiring novel nationwide regulation?
And wouldn't we learn something if some local markets showed abuse or lagging price/performance, while others thrived? Couldn't we, and especially the lagging jurisdictions, then do the minimal targeted reforms to improve results based on actual history, rather than a theoretical "neutral net" ideal?
Note that unlike the shared broadcast airwaves, the economic case for wires being a 'commons' needing public management is weak. There's already at least 3 sets of wires running to most structures – electricity, phones, and cable – and more could be added if those aren't satisfying the customers. And even electricity – far more foundational than internet – is regulated in a diverse manner locally, not nationally.
Wait and see and let localities and businesses experiment is just fine - it's what got us to this point, after all, and the internet is doing just fine – albeit prone to occasional panic attacks: "Death of the Internet Predicted, Film At 11".
Specific measurable abuses and the court rulings in the specific attempt to deal with them in the Comcast FCC action and subsequent litigation in 2007-2010 was one of the things which spurred the FCC to move network neutrality from a set of generalized objectives that it was seeking to preserve in it its other actions to a specific focus of dedicated, generally-applicable regulation.
So been there, done that.
Er, no it doesn't "freeze" anything. FCC regulations of other regulated industries are very frequently updated. And regulations, while given force of law by the laws authorizing regulation, are not the same as law particularly with regard to being "frozen", as they can be changed by either changing the law on which they are based, or by change through regulatory process. They are, therefore, strictly less "frozen" than law.
In fact, it will make it easier to add similar regulations, as has been shown throughout the history of our country's particular style of governance.
Plus, to be a fair comparison, it would mean regulation so that payment processors couldn't actively make it HARDER for you unless you pay them. Which again, they should be in support of.
It's more like the DMV throwing down nails and tacks in your driveway and telling you that you can have them removed if you pay them more.
While you may be able to obtain DSL service from multiple "providers", they're almost always using the same resources. Kind of in the same way that there are many mobile providers, but they all rely on the major networks.
Companies like Stripe on the other hand, are equivalent to the front end of that system. Nearly anybody can provide the same service that Stripe does. Which makes it a competition to see who can provide the best service vs price (or whatever choices you're basing your decision on).
If you only have access to the internet through your cable lines or phone lines, having the entities that control those finite resources legally able to charge more for different types of content over their lines or content from different locations, etc. is a pretty huge deal.
Even when you use some "local ISP", if the company that controls the end point at which your phone lines are connected to the internet decides to start filtering, rate limiting, etc. the data you're receiving, there's not much you can do about it.
Heck, even wireless internet providers are working with finite resources. You can't just decide one day that you want to start a business doing wireless networking over large distances without getting the FCC involved. It's to the point that you could basically consider wireless networks with enough broadcast strength to cover a city to have virtual hard lines. They essentially own those frequencies, so they may as well be considered the same type of finite resource.
As a broadband customer, I pay for access to "the Internet". Over the last couple of decades, "the Internet" has meant access with something akin to net neutrality in place.
What my ISP wants to sell me is not "the Internet", but something new, which they have yet to define. But from what their lobbyists have put into the FCC proposal, the "Internet" they want to sell me is one where both sender and receiver of data pay them for data. This is not a wholly unreasonable payment model, but it would represent a profound shift in how the Internet is paid for in the U.S.
Further, under their proposal, my speeds to any particular website are dependent on how much I pay and how much the other side pays to my ISP (not theirs). Crucially, half of this is wholly outside my control. Of course, I still pay for the full pipe regardless.
Note that in particular the source server has not been a customer of my ISP, but the FCC thinks they should become a customer of my ISP so that I can have the speeds I have been sold as of today. This is not how the Internet has worked, and is a new service offering being marketed as "the" Internet.
So a better Stripe analogy would be that Stripe offers would be if they 1) first became as big as Chase, Bank of America, Wells Fargo, and American Express combined (that would give them approximately the market heft of the American broadband ISPs); 2) required cardholders to buy a Stripe Consumer subscription before processing their cards for merchants. I'm fairly certain that even our lax banking regulators would have something to say about this.
Just because the internet would work differently it needs to be absolutely abolished? Consider the following:
If the funds ISPs get from service providers begins to completely overshadow the monthly fees from consumers, you may end up with really interesting incentives: namely, it may be in an ISPs best interest to provide as many people with as cheap as internet as possible. Doing so would mean more people using Netflix, which means Netflix paying them more. We could end up in a situation where the services providers do all the paying, and internet becomes free for consumers, since every additional free consumer is cheap for ISPs, and every additional byte delivered by Netflix to the consumer is a huge win for them. I'm not saying this WILL happen, but I think its silly to assume that everything in the world will fall apart with this model, just because its different.
The internet itself was basically built on equality. Look at any of the articles and blog posts being written by the actual internet backbone providers. They've been keeping the equality stable through the years with their peering agreements.
We would basically be giving the rights to providers like Comcast to say "We've decided that Wikipedia should pay extra if they want consumers of their information to continue to receive it in a timely manner." "Oh, we're also starting up a new service called Xfinipedia that provides a similar service, but one where we moderate the content."
Call it paranoid, but this is exactly what they're intending to do with video streaming services. They want to provide on demand video streaming to their online customers, while making it more expensive for competitive services to operate. What prevents them (or other providers) from doing the same with any service?
If you look at the deliberation involved in the rollout of IPv6 and compare to this, which is about as fundamental on the business side, there's no comparison. The FCC is moving in a haphazard fashion without addressing what a fundamental change this is.
It is indeed interesting to wonder how the incentives change if the funds ISPs get from service providers (SPs) overshadow the fees from consumers. In an unregulated market, that would possibly lead ISPs to acquire those SPs (a la Comcast-NBC) and make it harder to access content not owned by the ISP. So we could circle back to an AOL-like environment. The FCC is so far pretending that this is not possible.
Also note that under your scenario it's possible that the Netflix business would not be possible, because the ISPs would make the connection fees high enough to destroy the business model, instead shunting their customers onto their proprietary platforms. In fact, any time an SP becomes popular, it would be shareholder-friendly for the ISP to make a bad clone of that SP and then make connection fees to the original unbearably high. The FCC is again ignoring this likely outcome.
To say nothing of the likelihood that fewer SPs will get started in the first place. Given free reign, why wouldn't large ISPs charge a baseline connection fee for every SP? And why would we expect that fee to accessible to businesses without institutional funding? It would be "commercially reasonable" for e.g. Comcast to charge $10k annually for access to it's tens of millions of subscribers. It would be "commercially reasonable" for AT&T, Verizon, T-Mobile, etc. to do the same. Don't forget that any web operator that wants to be accessible nationally/globally (if other countries follow suit) will need to pay that connection fee many times. The FCC is silent on this issue.
The point is there's a lot here that's not being addressed by the FCC.
Moreover, you're doing nothing to address the lack of competition among ISPs, meaning ISPs have an incentive to raise prices above the market clearing equilibrium in order to extract greater rents.
Tangentially, I don't understand why anyone is talking about fairness here. Corporations don't care about fairness; they care about profit. If corporations were individuals they'd be psychopaths; they are a necessary evil to aid the price mechanism in efficiently allocating resources, nothing more. The goal is to get them to perform this function while minimizing market distortions and rent extraction. If this entails being "unfair" to a corporation, who cares?
I also don't understand the problem in principle with regulation. Of course it can be abused, but so can a complete lack of regulation. The only economists who believe that the solution to all our woes is completely unregulated markets are a few wingnut Austrain economists and people who fundamentally misunderstand the Coase theorem.
How are you not describing exactly the model we 'benefit' from now with cable TV? And in what version of the future does the ISP not choose to continue to charge the customer the same exact way companies do now with cable TV?
I'm just struggling to understand how your version is anything but wishful thinking.
What Stripe does is the same as any other payment gateway. Not only did they fully create their own platform, but there are dozens of competitors with no barrier to entry, and mind you, even if they did have some kind of monopoly to something they themselves built, it still wouldn't fall into the same category as the Internet.
Even suggesting this comparison is to frame the debate in favorable terms for the telecoms, and they definitely don't deserve the support.
"As we’ve written before, we believe in the power of impartial platforms. We’re building a platform ourselves, and we work hard to ensure that Stripe treats businesses of all size neutrally. Mr. Wheeler’s plan would push the internet in the opposite direction. It would give larger players a distinct advantage, hurt new companies, and dampen the rapid innovation that has thus far defined the internet economy."
Unless you believe mentioning themselves and how they stay neutral was one big typo, or some sort of strange and irrelevant digression, it seems pretty clear that they are comparing their neutral intentions with the importance of keeping net neutrality. Their argument basically goes:
1. We believe in impartial platforms as a general tenant.
2. For example, our platform, as a subset of "platforms", should remain neutral which we strive to do.
3. The internet, another platform, should also be neutral, if not these bad things will happen: blah blah blah.
If stripe started to charge two different companies based on which brand of jeans they were selling you had a point but that is not what Stripe do.
They treat everyone the same regardless of what they sell but not how much they pay. Thats the difference.
The problem of network neutrality is much more subtle in that it introduces the idea of censorship with the type of content that is considered acceptable.
If Stripe started asking porn companies to pay more than lets say a church group for the same service you could start to talk about an analogy but thats not the case.
The point to me is that you might treat people differently based on what they pay you, but you don't treat them differently based on what they are selling.
ISPs already do that all the time with in-network CDNs, dedicated ports and the like. And nobody cares because it does not make things worse.
One assumes larger customers get more favorable processing rates than smaller customers. So if two services do largely the same thing and both use Stripe and one is substantially larger than the other then I suspect Stripe is directly, even if inadvertently, favoring one over the other. Stripe's in the payments business and they favor one set of customers over the other based on their size and pricing power.
My issue isn't with Stripe. It's with the language around net neutrality. Basically 1000+ entrepreneurs and VC's who generally bemoan all things government are now asking that this area be protected from market forces. Very awkward. Any half way decent free market economist will tell you that every non Netflix user is subsidizing the crap out of Netflix users under the current set up and that's not very free marketish.
Can you explain the reasoning of this statement?
I think he means that people who pay for internet access and then barely use it subsidize the people who do use it. Just like gym memberships that aren't used subsidize those that are.
But it's a specious argument. Just because some users are more profitable than others doesn't mean that it's OK to charge money to providers to not degrade the pipe that I'm paying for.
If I want to download at full speed 24/7, I should be able to do that (barring any specific limits in my contract with the ISP). Yes, I will be a less profitable customer than one who sends an email once a week, but those are the breaks: Either change the contract so its limits are clear, or make sure that the average profit stays enough in the black to cover the cost of the outliers.
I'm paying for a service. If they aren't providing that service, and they are limiting my connection to try to shake down providers, they're doing it by hurting my service experience. And if they're doing that in a market where there are no ISP options, then it's an abuse of monopoly power.
And any "half way decent free market economist" should recognize that monopolies can and should be regulated. Especially when the monopoly is on something that the UN has declared to be a human right. [1]
[1] http://www.thewire.com/technology/2011/06/united-nations-wik...
Why exactly? Replace your reasoning with any other commodity and does it still make sense? What makes data streaming so holy?
If they want to sell limited bandwidth, that's fine. But if they're selling me a product that claims it's unlimited, then they should be prepared to actually offer that product.
What commodity DOESN'T operate in the manner it's advertised?
Now imagine the poorest household in town has to decide if they can afford water service. They would like to purchase a small amount of water for showers and cleaning, but must buy an unlimited supply of water just like everybody else. Some households may choose to go without water to pay for food. This is bad for the poor and bad for the utility who loses out on would-be customers.
Now imagine if the utility proposed a variable rate structure. The businesses that sell products that are consumed along side water, like sprinklers or fish tanks, (Silicon Valley) would fight hard against the utility!
Water utilities btw have "pipe neutrality", i.e. it's none of their business what you do with the water you are paying for, and they certainly can't shake down dishwasher manufacturers for money to compensate them for the water that's being used by their customer's dishwashers :-)
Right. There's a good argument to be made that ISPs have local monopolies (due either to natural failings of utility markets, or to crony government intervention, depending on your political persuasion) and therefore government regulation is a necessary evil that can be accepted in this case even by people who are generally free-market oriented. But that distinction must be made clear by anyone who wants to salvage their free-market credentials. Likewise, they must acknowledge that net neutrality will unfortunately destroy benefits that would naturally accrue in a without government regulation: the ability for users who need it to pay a premium for fast or reliable service, a la first class mail. (You can try to carve out exceptions for this with even more complex regulation, but the serious downsides of this must too be acknowledged.)
Net Neutrality does not prohibit an ISP from charging their customers more for a faster or more reliable Internet connection; it simply prohibits the ISP from accepting money from Dominos to speed up access to their website (or slow down or even block access to Pizza Hut's website).
If net neutrality applied to mail, then it would be illegal for Amazon to send me pre-paid first-class envelopes for returns. (This turns out not to be useful for mail, but the analogous case could be very useful for data.)
What the cable companies are trying to do isn't about you, the user, paying a premium for faster access; it's about you, the user, and the web service provider, both paying a premium to your ISP for faster access--even though the service provider is already paying a premium to their own ISP for faster access to the Internet as a whole.
From the ISP's point of view, selling you faster access only to certain websites would probably be a lot harder, technically, than selling you faster access to the whole Internet, because the ISP would have to inspect every packet you send or receive to see whether it was part of a connection with a website you want faster access to. Plus, you would have to have the physical bandwidth present anyway, which means you could just as easily get faster access to the entire Internet. So I don't see how an ISP could sell you faster access to a limited set of sites any more cheaply than faster access to the Internet as a whole; in fact it seems to me that it would be more expensive to do the former.
> Nor, in a perfect world, should it be illegal for a website to cover this fee if the website can derive unusual profits from it.
Websites that can benefit from faster access already do this in the real world: they put their content on CDNs--or in extreme cases, like Google or Facebook, they build their own CDNs--and spend extra resources in other ways to give users faster access to their content.
What I think you're missing in all this is that the cable ISPs do not (currently) own the entire Internet; they only own their own networks. That means they can only extract artificial scarcity rents from their own customers, not from the rest of the Internet. What they would like to do is to effectively own the entire Internet so they can extract artificial scarcity rents from everybody.
I can't imagine Ebay or Stamps.com getting charged MORE from USPS because they have higher shipment volume.
You're effectively arguing in favor of spending more money for the same service you are currently getting (as the service providers getting charged are going to transfer that burden to you the consumer and Comcast will not lower rates to you).
You must be joking. First class mail service has consistently gotten more and more expensive for poorer and poorer service, while private companies like FedEx and UPS have consistently gotten cheaper for better and better service. Are you maintaining that this would not have happened if the rule that only the US Postal Service could carry first class mail had been abolished? It seems to me that, if anything, abolishing that regulation would have given us cheaper FedEx and UPS sooner.
So in that analogy, did the postal service also begin to mishandle regular mail that was being sent to certain specific apartments and office suites, in order to force people to buy first-class?
Note that no form of net neutrality regulation that the FCC has ever proposed prohibited metered rates for broadband. You don't need the absence of neutrality to correct any problem with high-use users being subsidized by low-use users in the current "pay for peak bandwidth" system.
But metering is more visible to customers and less effective and capturing the specific and proven profits of particular content firms than per-source tolls to the content firms.
Trust-busting and anti-collusion laws aren't "anti-capitalist", even though you could argue backroom deals are just the free market at work. The same goes for regulation of a natural monopoly.
Sure they are. They are specifically directed at preventing capitalists from combining in certain ways to advance their interests as capitalists, and can't be anything but anti-capitalist.
Completely unregulated markets aren't very friendly to capitalism (although some individual capitalists may end up on top of the heap) either as they don't stay capitalist, so most capitalists go along with trust busting and anti collusion regulations as they (correctly) assume that their individual odds of ending up as the apex predator in a dog-eat-dog world are not very good.
No, but markets which are regulated in favor of capitalists rather than restraining them are -- which is the feature of "capitalism" for which the system was named by its 19th century critics.
(Of course, "capitalism" gets abused to mean "a system with whatever features of modern mixed economies the speaker likes but without those which the speaker does not like" frequently enough that it is getting close to the point of being a completely useless term.)
That said, yes, I am aware of the 'what do you mean by capitalism' issue. I've found this article interesting in that vein: http://bleedingheartlibertarians.com/2011/08/libertarian-ant...
It's a conflict of interest to be both an ISP and a content provider.
Whether the FCC plan goes forward or not, will change nothing about what Comcast and others are doing. Courtesy of an extremely accommodating Obama Administration, Comcast has joined the government protected monopoly crew, with Verizon and AT&T. They are now untouchable, which is why there is nearly zero political opposition to their acquisition of a cable monopoly. They're going to continue to degrade major services as they see fit to exact fast lane tolls, and there is no political group that is going to stand up and do anything about it.
The people fighting this fight, are waging a war they lost a long time ago. An entirely new approach to dealing with the FCC, the Internet, and the monopoly telecom providers is necessary.
I wish all interested players (including the huge ones, especially Google!) had agreed to slow down all USA internet users to "dialup speed" for the day, explaining why it is being done, and prompting people to phone/email the FCC about it.
Related Topic Info: http://www.fcc.gov/guides/open-internet
This is not only not true, but the problem is typically understated.
I'm paying for the bandwidth to my house. I pay extra to get a higher bandwidth capacity, in fact.
Under absolutely no circumstances is it OK for my ISP to throttle YouTube or Netflix or any other site just because it's popular.
They are double-dipping, it's that simple. I've already paid them for a pipe (allegedly) of a certain size. If I want to watch YouTube, then give me the bits at the rate that fit in the pipe I paid for.
If I want to watch SomeOtherVideoStreamingSite, then I want it to stream to the limits of the pipe I'm paying for, whether or not SomeOtherVideoStreamingSite has coughed up extortion money.
In markets where there are one or two ISPs available, if all available ISPs are engaging in this extortion, then my experience is degraded any time my ISP hasn't extracted its shakedown money from the site I want to visit. And that is abuse of a monopoly position, plain and simple.
That's because bittorrent uses a lot of upstream bandwidth, and the ISPs' contracts with their customers already explicitly limited upstream bandwidth to be much smaller than downstream bandwidth. With services like Netflix, the vast majority of the bandwidth is downstream.
(That's not to say that I'm in favor of the standard ISP contracts: basically the ISPs want their customers to be passive consumers of content, not active creators of it, which has been a big factor in creating the system of highly centralized services we have today, rather than a much more robust system of decentralized services that was the original vision for the Internet. But that's a whole other argument.)
I'd like to see a world with no BitTorrent throttling too, but given that I don't watch BitTorrent video in real time (or even use it for the most part), it's harder for me to get worked up about that.
Don't get me wrong: I support the concept of complete net neutrality. It's just harder to achieve a political goal when only a small minority of people are affected.
Right. They only want to impose tolls and kill competitors that have already spent the money to develop a market and show how to serve it, so that they can use the tolls to capture the profits, throttle the incumbent, and use the proceeds to deliver their own implementation.
So it won't necessary be bad for "little guys" directly, except insofar as it kills competition in any market with lots of money in it (including ones that the little guys may be customers of), limiting customer (consumer or business) choice, and limiting the ability of little guys to ever become big without themselves getting killed by tolls so that the dominant broadband providers can steal their market.
Nobody is getting a free ride here.
By selectively throttling YouTube and Netflix.
http://hustlebear.com/2011/01/05/why-net-neutrality-regulati...
Article is from 2011, but still pertinent.
So… greedy companies “might” restrict us from things, or they “might”
prioritize content delivery to the highest payer.
Further:
One problem with the diagram above is that our homes are not connected to
just one big ISP. The FCC’s own data shows that as of June 2008, 98 percent
of zip codes have at least 2 broadband providers, and 88% of zip codes have
at least 4 broadband providers
And comcast costs $65/mo where I live for just internet. And they're looking at neflix and google and all those other internet businesses and chomping at the bit to steal some money from them.
Also, weirdly enough, my internet bill keeps going up but the speed doesn't. Feel the competition!
Except, it's out of date as we've had ISPs intentionally manipulating their networks to their own advantage (and more importantly their customers disadvantage) for at least a year. Even when this article was written, overzealous throttling of select services was/is common. (Youtube in particular)
The condescending tone of the article is pretty entertaining given the level of ignorance he willfully displayed even then.
Except for the whole part where what he decries as non-existent (ISPs slowing down traffic for non-payers) which thus does not need regulating is happening right now.