A Network Neutrality Meme That Will Not Go Away

Recently, arguments against network neutrality as a “solution in search of a problem” have resurfaced (recently subscribed to by Mitt Romney’s campaign, recently argued by Verizon in its challenge to the Open Internet Order, and also argued here and here). People who make this argument essentially claim either (1) discrimination predicted by Public Knowledge (and the FCC) will never actually come to pass, or (2) discrimination can be benign or even beneficial. For the reasons set out below, these arguments are not persuasive, especially in light of recent examples of discrimination by service providers.

Network Discrimination Is Happening Now

Companies have already engaged in the exact behavior that created the need for an open Internet rule. For example, AT&T recently decided to discriminate regarding which customers can use FaceTime over its cellular network—only those on AT&T’s premium “mobile share” plan. This looks like blocking a competing application, a violation of the rules in the Open Internet Order.

Another open Internet violation occurred when Comcast exempted its own Xbox-based Xfinity video service from data caps. This incented Xbox users to use Xfinity (Comcast’s service) rather than competing services such as Netflix, Hulu, Youtube, and other video sites. This looks like discrimination against a competing application, another rule violation.

There has been a history of other discriminatory actions, including Comcast blocking BitTorrent and Madison River Communications blocking VoIP. There is no shortage of examples of discrimination by providers. We’ve found the problem, and it is right here. Thus, the idea that network neutrality is a solution in search of a problem lacks merit.

Discrimination Outlawed by the Open Internet Order Is Harmful to Consumers

Discrimination by Internet Service Providers could be seen in two lights: it could benefit consumers by providing Quality of Service when it is most needed and by more accurately meeting the demands of users; alternatively, it could be used as a way to stifle innovation, shut out competition, and harm users that rely on, or would benefit from, such innovation (the latter could be achieved intentionally or unintentionally and it does not matter—the harm is there regardless). By requiring a neutral Internet, the FCC decided that the benefits provided by enhanced Quality of Service et al. were outweighed by the benefits provided at the edges of the network by a truly open platform.

This was the correct determination. We are not talking about price discrimination here (though that is also suspect), we are talking about discrimination based on the use of the network. While price discrimination could arguably reduce deadweight losses by requiring those who can pay more to do that, use-based discrimination is much more problematic. There is no value proposition for the user with use-based discrimination—the ISP either intentionally chooses the winners and losers based on whether that application competes with the ISP’s other services, or does so unintentionally, but it still stifles innovation.

For instance, competitive e-mail services might speed through because ISPs receive minimal revenue from email. But video applications, TV-online applications, or VoIP might be blocked or degraded to the point of nonuse in order to pad the provider’s bottom line. Alternatively, the ISP blocks something for “reasonable network management” purposes, but the management is not reasonable, and end-users lose the benefit of that innovation. Society benefits much more from substantial and significant innovation at the edges of the network rather than a more finely-tuned service plan.

The FCC devoted pages and pages of its Open Internet Order to the fact that carriers have a monetary incentive to block or degrade competing applications. Barbara van Schewick made a similar argument in her book Internet Architecture and Innovation. In addition, technologies like deep-packet inspection have made it incredibly easy for Internet Service Providers (ISPs) to monitor traffic activity and discriminate based upon it. Users, meanwhile, would not know why a particular website or app would be blocked or slowed. High switching costs (or lack of competition) mean these bottleneck ISPs have little to lose by blocking or degrading traffic since users will not, or cannot, switch providers. And let us not forget, Comcast, an ISP, owns NBC, a content company. Regardless of whether you believe NBC is run “independently,” Comcast has a clear and rational incentive to discriminate in favor of NBC content.

Verizon’s Assertions

Verizon also argues that the Open Internet Order is not solving any real problems (pages 46-47 of its brief) when it says “[h]ere . . . the FCC is acting alone, without evidence of an actual problem. . . . [T]he FCC . . . acknowledges that the problems it fears are hypothetical.” As of the time the FCC passed the Open Internet Order, there were already at least two instances of service providers blocking applications. These justified, on their own, the FCC’s actions because of the harmful potential of the bottleneck-power over content that ISPs exhibited. Subsequent developments have only further exemplified the need for openness standards and neutrality requirements, as more ISPs continue down the path of stifling competition and editing-out portions of the Internet rather than allowing a level playing field for all applications and users at the edges.

There is an inherent dissonance in Verizon’s claims. First, it claims that it is like a newspaper and has the right to edit the Internet. Then, it claims that FCC is hallucinating the problem in the first place. But, the very fact that Verizon is claiming that it should be allowed to edit the Internet (as a first amendment “speaker”) means that this problem that the FCC spares no words in analyzing actually does exist. In other words, the FCC predicted correctly.

Conclusion

It is not secret that the public Internet has been unbelievably successful since its inception. It has flourished because it was, and is, neutral, allowing for maximum innovation at the edges. The Open Internet Order aims to keep it that way rather than gamble on promises made by the ISPs of pricing and network innovation. The FCC made the correct choice.

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