It is disheartening how much FUD is being spread by conservatives on the anti-NN side.
The incentive concern is real. What incentive will telecom companies have to build the wireline networks that enable next-generation of web services if they can't make enough money to justify the investment? The liberal response to this point is either myth or fantasy. Myth, in that they assume that wireline is insanely profitable, and that fat Verizon shareholders will just have to squeeze their belts a bit. In reality, the operating margin of Verizon's wireline division is 2-3%.[1] Fantasy, because they alternatively posit that municipal systems will take up the slack. How states and cities that are broke, crushed under liberal public union pension obligations, will pay for these municipal networks is up in the air.
The worry of further regulation is also real. Telecom is already a morass of regulation, largely to fulfill liberal concerns. For example, there is already rate-setting. Municipal governments require cable companies to offer basic cable at low regulated rates. Since it doesn't cost appreciably less to offer basic cable than more expensive packages, this sets an important constraint on the economics of the network. Huge amounts of wealth transfer from urban to rural areas are already baked into the system at the federal and state levels. And build-out restrictions, preventing upstart competitors from stealing away lucrative tracts of incumbants' service areas, are already stifling competition. The HN crowd acts like NN is being added on top of an otherwise pristine regulatory regime, but in reality it's just one more straw on a giant pile of hay.
None of this is FUD. The fact that these points are also raised by the telecom companies, who have a monetary interest in avoiding NN, does not make them FUD any more than the pro-NN points are FUD because they're raised by web-tech companies.
I'm not an ideologue. I'd be fine with, for example, the U.K. approach. But what that would mean, which most people on HN don't know, would be putting AT&T back together and letting them enjoy monopoly profits. Take a look at BT Openreach's financials sometime: http://www.digitallook.com/news/news-and-announcements/retai.... Their EBITDA margin is a staggering 45%, double that of Verizon wireline, significantly higher than Comcast's whole operation, and higher than AT&T and Verizon's wireless divisions.
[1] http://www.verizonwireless.com/news/article/2012/01/pr2012-0....
A 97% profit margin[0] on those very same services ought to be enough of an incentive for any business.
[0]http://www.huffingtonpost.com/bruce-kushnick/time-warner-cab...
If I spend $8 billion building an OS and sell it for $80 on an 80 cent CD, those same people would say I had a 99% profit margin.
And the issue isn't whether the companies are struggling. Nobody feels bad for Comcast's CEO's kids. The issue is the incentives to build telecom infrastructure relative to other opportunities in the economy for the billions of dollars needed.
There's no free lunch. If the writing is on the wall for wireline profitability, companies like Comcast will take their capital and buy companies like NBC instead of investing in their network. If you make it illegal for them to do so, their shareholders will force them to do stock buybacks with their capital, then take that money and invest in whoever does buy NBC.
We can just make that illegal, right?
Cable companies, like Comcast, did that with broadcast companies, like NBC, without net neutrality, so, not seeing the nexus to the immediate issue here.
The primary cost is that they have to keep building. My neighbors are going to want more and fatter Netflix streams all at the same time that my family wants them. That requiring increasing the maximum capacity at peak demand time.
Demonstrably false. AT&T and Verizon stopped with the Great Recession. US Worst/Century never seriously played that game in the first place. Don't follow the cablecos much since I'm (just) outside of a city and only have non-U-verse 150 GB/month AT&T as an option, but don't a lot of them also cap in a variety of ways, including just peering congestion, especially since Netflix directly competes with them?
Unfortunately, I'm old enough to remember watching "We're the phone company, we don't have to care", and that hasn't changed much. Cablecos, I suppose we'll see.
"I have been pretty consistent with this in the fact that we will spend more CapEx in the Wireless side and we will continue to curtail CapEx on the Wireline side. Some of that is because we are getting to the end of our committed build around FiOS, penetration is getting higher," Verizon CFO Fran Shammo said yesterday in the Q4 2014 call with investors.
Although maybe they're replacing DSLAMs as they become unmaintainable; AT&T is just moving hardware around (even pulling an old DSLAM out of a training facility), adding newer generation DSL here and there, and in many places where we supposize all the DSLAM slots are filled just refusing to supply new service.
I don't think this invalidates my argument about capacity, though. If you're not in a Verizon FiOS area, or worse, in one of the many states and territories they've sold, you're not getting more capacity out of your DSL line from them, right? They might, though, be putting in more backhaul to satisfy, and I've heard no reports of AT&T DSL suffering from saturated backhaul.
This is why people were afraid of the "let one company build the network, but everyone else gets to compete on it" plans. It might make all the networks look like the DSL networks.
And this meme that Internet speeds are staying flat is just plain wrong. Akamai's state of the internet report consistently shows average speeds increasing year-over-year in nearly every state in the US. ("Vermont was the only state across the whole country to see a year-over-year decline in its average connection speed—the cause of this decline has been discussed in prior issues of the report.") For peak speeds, only Vermont and Oklahoma saw year-over-year losses.
But if you can expect to sell 102 million copies at that 99% profit margin, those profits will justify the R&D expenses.
If you can hire an actuary, they can come up with a way to factor the initial R&D cost into your per-unit calculations with a few reasonable assumptions, such that your quarterly reports look great. But if you want the board to understand enough to calculate the right bonus for you, it's best to keep the math simple, and sweep the necessary and nonrecoverable expenses into a different category.
Even leaving aside that egregious error, that calculation excludes interest, depreciation, taxes, and all the other numbers that must be taken out to get to "profit margin."
As I've said elsewhere, this is indeed FUD. (I also disagree with most of the rest of what you say, but I agree that it's not FUD.)
The notion of "steps closer" to rate-setting makes little sense in the real-world regulatory environment. If today's FCC hadn't decided to reclassify broadband Internet service under Title II, this would do very little, perhaps nothing, to hold back a future Commission that wanted to impose a rate-setting regime. That future Commission, persuaded that rate-setting was a good idea, would simply open a proceeding to reclassify broadband internet service under Title II and impose a rate setting regime. The fact that broadband internet service was not already classified as a Title II service would be, at most, a very minor impediment given the tremendous deference the FCC is given in making such regulatory decisions. (For one thing, the reversal of a prior regulatory decision is subjected to no special scrutiny.) This would only require a single proceeding in which whatever reasoning the Commission had to support rate setting, would also be its support for Title II reclassification. And since one of the primary objections to Title II reclassification today is that it somehow raises the risk of rate setting, one can only imagine the resistance to actually imposing a rate-setting regime.
In other words, this is a classic slippery-slope argument. All the considerations that stop us from setting rates today will be present in the future. The minor administrative hassle of reclassifying broadband internet service under Title II, barely ranks as one of the impediments to imposing such a regime.
It's also not a slippery-slope argument. Rate setting is a part of Title II, whether or not the FCC says they will forebear. And it's part of Title II because there is a long history of rate-setting in telecom. I posit that it's very different to argue about the unprecedented direction a policy may lead (like the NN advocates are doing), and to argue that a policy will take us back to a place we've already been.
It is an argument that this is bad because of what might be done later based on it. That is exactly a slippery slope argument.
> Rate setting is a part of Title II, whether or not the FCC says they will forebear.
Rate setting is part of Title II, but if the FCC does forbear (not "say they will forbear") as part of the same regulatory package in which they find that retail broadband service is a Title II telecommunication service, the rate setting is expressly not part of this regulation package. Its a speculative thing that some future FCC might do, hence, a slippery slope argument. (And, its a speculative thing that a future FCC could do whether or not this FCC adopted Title II with forbearance on rate setting.)
OTOH, if the speculative future risk of rate setting is a real concern, I'm sure that many supporters of net neutrality would stand with you in lobbying Congress for a revision to Title II prohibiting, or at least establishing a long moratorium that can be reviewed later for a more permanent prohibition, FCC rate setting for retail broadband.
Regulation forcing them to build the networks or be heavily fined. Given their profit margins, I'm weeping...hold on...taking careful count...carry the seven...zero tears for them.
Comparatively speaking, politicians individually are cheaper by, say, 3-5 orders of magnitude, as a whole, maybe 2.
And there we go.
> Why do you dismiss the anti-NN concerns as FUD?
He said anti-NN were spreading a lot of FUD. I didn't see him say all anti-NN concerns were FUD.
And he's right about a lot of FUD from anti-NN people. Some claims I saw, largely from Republican official, Republican writers and radio/TV hosts, and random people whose affiliation was not stated but from their remarks about Obama being a communist, dirty liberal, or Muslim I think it is a safe bet that they are not moderates or liberals:
• You will have to apply for an expensive license from the FCC if you want to put up a website.
• The FCC will be regulating Google search results, Facebook's news feed, and the like.
• This helps the governments of North Korea, Syria, Iran, and China to oppress their people with their internet censorship, because now the US cannot pressure them for a free internet without appearing hypocritical because now we are imposing the same kind of controls on the internet in the US.
> What incentive will telecom companies have to build the wireline networks that enable next-generation of web services if they can't make enough money to justify the investment?
What money making opportunity, besides paid prioritization, does this remove?
> The fact that these points are also raised by the telecom companies [...]
By some telecom companies. T-Mobile and Sprint aren't having much of a problem with it. The rural broadband provider's trade group outright supports it and has long asked for Title II.
> I'm not an ideologue. I'd be fine with, for example, the U.K. approach. But what that would mean, which most people on HN don't know, would be putting AT&T back together and letting them enjoy monopoly profits.
What do you mean by the U.K. approach? The main aspect of their broadband approach that I'm aware of us the forced line sharing, but I don't see how that would require putting AT&T back together.
Question: wireless voice has been regulated under similar (but more extensive) Title II regulations for around 20 years. Why have the doom and gloom scenarios forecast for internet not already come to pass there? The carriers there have invested massively in their infrastructure under those rules.
BT Openreach is the successor to the government monopoly that built the phone lines, and still owns them. As a condition of privatization, they are required to lease the lines to competitors, but, and this is key, the prices for such leases are set using a "price cap" system which ensures they have an incentive to keep investing in the network: http://siteresources.worldbank.org/EXTFINANCIALSECTOR/Resour.... In practice, the price caps are set high enough that Openreach makes a lot of money. If you dig into the financials, they make way more than ATT and Verizon make on their wired networks, and about as much as they make on their wireless networks.
So no, it's not just "forced line sharing." It's about putting publicly-built infrastructure into a company that's insulated from competition, and regulating their prices in a way that ensures they are very profitable.
You mean because neither of those have happened at all, and ISPs were already charging companies for pay-for-play? Its well documented that several ISPs were throttling Netflix for months before netflix folded and agreed to pay additional fees. That happened. thats real life. Thats more of a real concern than any of your hypotheticals.
>In reality, the operating margin of Verizon's wireline division is 2-3%.[1]
Nice cherry picking, meanwhile Comcast reports over 40% operating margin each year.
>Cable Communications Segment — Operating Costs and Expenses We continue to focus on controlling the growth of expenses. Our operating margin (operating income before depreciation and amortization as a percentage of revenue) for 2011, 2010 and 2009 was 41.1%, 40.4% and 40.1%, respectively.[1]
So where was that lack of incentive again? because 40% operating margin sounds fantastic to me
>Since it doesn't cost appreciably less to offer basic cable than more expensive packages, this sets an important constraint on the economics of the network
Source? Do you know how much cable companies pay each cable channel to carry them? Are you qualified to evaluate the cost differential to the provider of basic cable vs other packages?
>And build-out restrictions, preventing upstart competitors from stealing away lucrative tracts of incumbents' service areas, are already stifling competition
I agree here, this is why google has been rolling out fiber in the way they have, they are finding municipalities willing to overlook buildout requirements
>The HN crowd acts like NN is being added on top of an otherwise pristine regulatory regime, but in reality it's just one more straw on a giant pile of hay.
I dont know where you got that opinion, I've seen little other than criticism of the current status quo.
>I'd be fine with, for example, the U.K. approach
Do you have a link that kind of explains their approach? I'd be interested to learn more about it and http://en.wikipedia.org/wiki/Internet_in_the_United_Kingdom#... isnt doing a particularly great job
[1] http://www.sec.gov/Archives/edgar/data/1166691/0001193125120...
Blocking certain lawful services was actually done by major ISPs, and prohibiting lawful services and applications to retail customers is still policy of most ISPs (fixed and mobile.)
Likewise prioritization of content provided by ISPs affiliates (either same owner or paid prioritization of third party service) has been done, by both fixed and mobile ISPs.
So while the anti-NN concerns may be "real" in the sense of having a valid chain of reasoning supporting them, they are not more real than the pro-NN concerns which center around real, actual practices that exist in the status quo and have been seen in the period that NN has been debated.