Reading the ongoing Net Neutrality debate, here are a few comments on some of what is going on:
Firstly, Google has defended its jumping the fence and says its still a Good Guy, but no one is buying it. You can fool some of the people etc etc.....
Secondly, Facebook and all the other "Aggregators Without a Stake In Networks" lambast Google - well they would, wouldn't they - the last thing they want is the Distributors (Telcos and ISPs) cranking up the rents on their (currently) underpriced rides and Google hops over the fence.
Fred Wilson
weighs in with a view on Net Neutrality, when he says:
I don't want to see the Internet regulated. I don't want rules that require oversight and adjudication. But given that we now have an on ramp that is tightly controlled by a small set of access providers with almost identical interests, I would like to have one basic rule that is so simple that everyone understands what it means and we can simply follow it.
Our firm are fans of the work of Barbara Van Schewick, Professor of Law at Stanford, who argues for the following simple rule:
A non-discrimination rule that bans all application-specific discrimination, but allows all application-agnostic discrimination. Discrimination is application-specific if the discrimination is based on the specific application or content (e.g. Skype is treated differently from Vonage), or based on classes of applications or content (e.g. Internet telephony is treated differently from e-mail).
That is all we need. Nothing more, nothing less. That is net neutrality. A policy that maintains the way the Internet works today. That has brought us Google, Amazon, eBay, Yahoo!, Facebook, Twitter, and many many more innovative web services.
Now this is fine as far as it goes, but what it forgets is those great services - Google, Amazon, Facebook etc - grew up on an economically unsustainable transport network, ie the ISPs have spent most of the last 10 years massively underpricing their pipes and that is coming to an end as video starts to fill them up. And its that underpriced ride that is filling the key issue now, and what is behind the Net Neutrality gerfuffle.
If I may step back to the beginning (about 10 years ago or so......) and tell a little story of how we all got here.
Once upon a time, long long ago in the 1990's, there was a deregulation of old national Telcos, and a resultant speculative boom in "New Telcos". Many miles of cable were laid, acres of hosting space was built, and Sun handed over many months' production of its tins on credit to the Application Service Providers (an ancient term for Cloud Service providers). This whole panjandrum than went spectacularly bust in about 2001 - leaving all these assets at firesale prices, and they were picked up by the big survivors (the Telcos and ISPs of today).
"Net Neutrality" at this time was the argument about "equal access" - ie that the large oligopoly of surviving Telcos and ISP Ogres should not give their own services priority in the quality of service stakes. All bits were to be treated equally from ingress to egress.
Move onwards to about 2005, and Broadband is growing like topsy. The Telcos realise its a race for consumers so price it at ludicrously low to grab market share from each other. Ths allows all the aggregators (Google, the Social Networks et al) to get a near "Free Ride" over the pipes - which they immediiately priced into their long term business models and then persuaded all their VCs and other backers that the fairy tale that was "FreeConomics" ruled for ever and ever.
At the same time, another thing was happening - the arrival of internet Video meant the Pipes were filling up far faster than predicted, and the Telcos/ISPS started to look at the prospect of having to either (i) invest billions in new infrastructure or (ii) start to throttle traffic on existing capacity. Given the under-recovery due to low pricing, (i) was economically impossible unless some form of subsidy or long term guarantee was given, or unless they started to charge the upstream providers (mainly the content aggregators who had the money) more for access to the pipes.
It was at this point that the Aggregators and their proxies started to conflate the original Net Neutrality debate with the "Equality of Assets" argument - ie the Telcos didn't really own their pipes, they were common goods and thus everybody's pipes, so everyone needed access (at the same price, and preferably a price of $0) regardless of whether they were shunting a few emails or megastreams of videos. This refrain was picked up avidly by what I term the "Net Hippies" who believed in free love, free services, and most of all - free access to big bandwidth for free content. A typical expression of this view was Cory Doctorow:
I say, it's our dirt, so we make the rules. If they don't like those rules, let them get their goddamned wires out of our dirt, off our streets, out of our basements. Let's give them 60 days, and if they haven't pulled up their wires by then, we'll buy them for the scrappage price of the copper.
Now, whether the "Net Hippies" were put up to all this by the Aggregators, or whether the aggregators just joined in (which is what I suspect is more likely) is unclear - but this view was in their interests so they enhusiastically promoted it.
(By the way, I don't disagree with the Net Hippie's view that internet infrastructure is a common good - in fact I think we are not going to get big pipes in any "free" market unless regulation or government intervention occurs - see below! I just disagree with any solution that says "shaft the Distributors and let the Aggregators get free reign)
Fast forward to about 2008 and you see two things happening:
Firstly, the smart aggregators (eg Google, Amazon) are building out their own infrastructure to reduce their dependence and costs in distributing their wares. While enthusiastically promoting Net Neutrality they are busy building their own distribution infrastructures. Others are not and some, like latecomers Facebook, Twitter etc, are still emergent and can't afford to. All of them keep on paying and playing for the Conflated Net Neutrality argument, but - as we predicted at the time - the smart aggregators were doing it to buy time as they bought infrastructure.
Secondly, the Telcos and ISPs were in a bind as their pipes filled up and they weren't charging enough to build out the serious infrastructure that video needs (market hypercompetition isn't helping either), and started to actively think about how to make enough money to pay for the next generation of pipes. The more planned digital economies (Japan, South Korea, Scandinavia, and later - after experimenting a bit with free markets - France) had seen this one coming and have effectively legislated for big pipes, giving the national Telcos sufficient incentives to build them out. In countries where "the market" is the solution the average broadband pipe speeds started to fall behind. It starts to dawn on all the Telcos and ISPs that they need to start forcing a 2-sided or multi sided business model, which - however you look at it - requires charging the upstream aggregators more for big volumes of higher quality of service traffic.
This, of course, the Upstream aggregators want like a hole in the head, so an enormous amount of smoke, mirrors, storm, drang, lobbying, etc etc is generated by them.
And now we are in 2010.
Google's massive foray into Mobile IP has forced its hand, it has to move into the distribution game or be strangled by the existing ISPS and Telcos. It can build hosting centres and peer at Tier 1 for backbone, bt it needs mobile distibution at preferential rates - hence tie up with Verizon.
The Telcos and ISPs know that they are damned if they do, damned if they don't - but if they don't they will be unable to invest in fat new pipes and they will wither on the vine.
The Aggregators Without Infrastructure know that if they can't continue getting a near vree ride then they can't offere near-free services to users anymore, and - worse still - some Aggregator/Distributor competitors like Google will pay less than them for higher quality distribution.
So what is the likely outcome?
Firstly, back to the original point Fred made - to my mind there is "White Hat" net neutrality, ie Equality of Access - that there should be no discrimination on access for any application (so Skype is treated the same as Vonage) is a no brainer and should be regulated.
However, if you look at "Black hat" Net Neutrality - Equality of Assets - ie the argument, that a video bit that needs to be streamed fast in sequence alongside all the other billions of video bits. is the same as an email bit, then I think that is far less fruitful ground. The eventual endgame of utilities is that they are eventually charged for by quantity of usage and quality of service (granted there is often a fixed price or even free "minimum deal") and thus as broadband becomes a utility - nay, a human right even - then this will increasingly become the case.
The other thing - pure and simple - is that unless the distributors can earn enough money to build the next generation of pipes and capture a return on investment, they won't do it. To this end, "Free markets" have (so far) failed to deliver the necessary security of investment. Thus, if the endgame of the current Net Neutrality spat does not, in some way, yield the cash and secure enough investment conditions to build more bigger pipes, then Net Neutrality will devolve to beggars fighting over access to dirt roads while private high speed networks are built for those rich enough to afford them.
Thus, my parting shot in this fairy tale to the "Black Hat" Net Neutrality defenders is "be careful what you wish for". Not all Ogres are always mean, and not all fairytales end happily ever after
