Comment by runako | Hacker News Reader

Comment by runako | Hacker News Reader

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I think your analogy is flawed, and here's why.

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.

So....?

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.

Oh I absolutely agree that it's not an entirely unreasonable model. But nothing about the rhetoric coming out of the FCC is saying that they are looking at changing the entire payment model of the Internet. (Also of note is that changing something this fundamental does risk breaking the system in order to fix it on the other side.)

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.

So, you're saying, we should trust the business that's currently trying to milk more money from any tit they can find, to lower their prices because they're bringing in a new revenue stream elsewhere? The same business that has no incentive to do so because they probably only have one competitor in a given geographical area?

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?

No, I'm proposing that there may be a scenario in which it becomes beneficial to provide a free service to customers in order to maximize profits. I other words I'm asking you to trust that they will want to make money (not be kind), which I don't imagine to be a hard hung to imagine. Just how google doesn't offer you search for free out of the goodness of their hearts but rather because it is an ultimately a more profitable model than charging us. Again, I'm not suing this will necessarily happen, and you should read runaku's reply for some good counter points.

So, in your scenario.. Comcast is just going to charge customers less because they already get enough money from big internet companies? That will never happen. Comcast will pocket the money from both sides of the pipes. As internet providers have no competition there is no reason to have to charge less.

Doesn't sound too palatable to me. All you're doing is taking the cost to the consumer and passing it from payment to ISPs to payment to content providers. Meanwhile you are entrenching the few large content providers that can afford the fees.

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.

Doing so would mean more people using Netflix, which means Netflix paying them more.

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.

If service providers are hit with unfavorable regulations they may reconsider being in the 'Internet' service provider business and instead return to an AOL/CompuServe style model.

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