Saturday, April 22, 2006

Save the Open Internet--Act Nationally, Act Locally

LafayetteProFiber is by design oriented toward local issues. The name is a good indication. But here's a national issue that pro-fiber partisans in Lafayette and broadband advocates everywhere can get behind: Saving the open internet. That cause has acquired the bland name "network neutrality" but the issue is real and is coming to a head in Congress. A new coalition is launching Monday called Save The Internet and it is bringing together a raft of supporters from the American Library Association to the Consumers Union to the Gun Owners of America to MoveOn.org...a pretty impressive array from every corner of the map.

The immediate worry which prompted the coalition to form is a bill, acronymed "COPE", which is coming up for a vote in the US House Commerce Committee. A internet storm has been building since AT&T CEO Whitacre said that AT&T planned to begin surcharging content providers for premium, higher-speed internet services. Other phone company executives jumped in in support. This would require changing the day-to-day working of the internet works in a pretty radical way...a way that goes well beyond imposing a few new fees on Google.

The Global Issue: The Open Internet vs. Cutting in Line

The open internet is the internet we've all grown used to. You can go anywhere and do pretty much anything. Everyone has the same privileges...once you get on the big network. If I send someone an email it lines up with the email, search requests, uploaded research papers, and commercially purchased video downloads. Like the line at the grocery store, it doesn't matter who you are or what is in your basket...you wait your turn at the routers with everyone else.

The big telephone companies want to change that and they are having pretty good success with some of our Federal legislators. The corporations want to change the old model where everyone-waits-their-turn to allow networkers owners to move some users to the head of the line--if you pay them. If they have their way it will matter who you are and what's in your basket. If you are a corporation, like Google, or iTunes, or any other bandwidth-hungry business you can pay the phone companies and your business will move to the head of the line. The rest of the world waits. If you are a 'mere' user movies from a paying provider like iTunes might come down in a flash but those from non-paying NetFlix are slow and jerky. It will suddenly matter a lot who you are and whose product is in your basket.

The corporations say that this plan will speed up the network and allow its expansion as more bandwidth-hungry applications come on line. But that isn't the full story. Exerting the sort of control they imagine means looking into the packet stream, determining what the packets contain, who ''owns" it, and then whether or not to move it to the head of the line. Aside from privacy issues this uses resources and slows down the line. The process of "monetizing" the line-breaking privilege costs bandwidth. The same equipment could move more bits in the same amount of time without the process that speeds up the few.

There is an alternative: build a bigger, faster pipe. Build more capacity. This is the grocery store solution to the sort of congestion that results when the lines get too long: open new checkout stands until the wait is tolerable. That's been the solution solution to date. And that solution will also work for bigger, faster networks.

The idea of paid line breaking as the new model of network function is frustrating enough...but the dynamics of this new plan are even more worrisome. Right now internet providers compete on speed and price on the internet side of their networks. (Most also sell phone or cable.) The problem for them is to figure out the balance of speed and price that yields them the most return for what they have to invest. The only way to make more money off the internet is to sell more bandwidth to more people. And the only practical way to do that is to sell it more cheaply in order to entice new customers. Generally this is a good dynamic for the customer. (If we had some real, robust, competition the dynamic would be even better.) This results in increasing amounts of a product that gets ever cheaper. The process is called "commodification" -- and the network owners don't particularly like it--especially not when they see websites like iTunes or ebay using "their" bandwidth to make lots of money.

But the new plan to allow folks to 'cut in line' for a fee changes the dynamics that produce cheap, fast bandwidth. Suddenly the network owners have a financial interest in seeing some folks go slower...the folks they'd like to convert to using their "premium" line-cutting services. Now they need to decide what balance between fast and slow internet users yields them the best return on investment. The decision about when to upgrade service and build faster, cheaper, bigger, pipes is shifted away from the solution always being one where "more and faster" yields the biggest income to one where sometimes deciding NOT to upgrade a network leads to higher incomes by pushing bandwidth purchasers to join the more expensive 'cut to the head of the line' services. Consumers see higher prices and less available bandwidth than they would without such a plan that has these dynamics.

There are a big batch of other issues involved from the fact that we and companies like Google already pay for our bandwidth and the really bad effects that this will have on innovation and international competitiveness but those are mostly side-effects of the dynamics I describe above.

The Local Issue: What It Means Locally

So net neutrality is a real issue with effects that matter to people where they live even though only the Feds can really do anything about it one way or the other. Joining with others to oppose these changes on the national level is a very good idea and it's a good thing that someone is taking up the job of coalition-building on this issue. They deserve our support.

But there is another very local point to make. The only reason that AT&T-BellSouth, Verizon and the others can contemplate such a move is that they have so little competition in the last mile. Everyone's local last mile. Only a little less than 60% of the country has even two broadband providers. All that really has to happen for their 'new' internet to emerge is for the cable companies to agree to do the same and nobody will have a real choice on this issue. Frankly, the cable companies are already doing the same--they are currently pushing their VOIP ("internet telephone") offerings to the head of the line. Cable companies aren't yet charging outside corporations for it but the technical ability is clearly already in place. Competing VOIP services and their regular internet customers are already having to take what is left over. No, the cable companies are going to sit back and not utter a word during this cat fight--unless the real net neutrality rules appear to be about to go in. Then you can expect to see a sudden eruption of support from the cable companies.

Theres an old economic and political term for this kind of behavior; it's called collusion. Monopolist in different regions and duopolists in the same area collude to maximize their individual profit. It makes good economic sense but allowing it is terrible public policy. But the phone and cable companies are not invulnerable to competition. They are not monopolists in the backbone portions of the network--there is considerably more competition there. Their real power to force the "new internet queuing system" on customers and providers comes from their owing the line into your home. Only a few Americans have more than two competitors from which to choose. That's a real problem. Economists you need at least three competitors to begin to escape monopoly pricing. That's the magic number both former Chairmen Powell and Hunt both mentioned during their presentations at the Freedom To Connect conference recently. Lafayette will hopefully soon be one of the few places to have three real broadband alternatives: Cox, BellSouth, and LUS. What's even more unique is that the third alternative, LUS, will have bandwidth to burn with its fiber to the home network. It can solve the waiting-in-line problem simply by having so much capacity that even the hungriest applications don't slow down its network and cause people to wait in line.

The bottom line is fairly simple: The problem of net neutrality only arises because the interests of network owners and network customers are naturally opposed. Owners want to maximize profit. Customers want to minimize cost. Where competition exists these two can be reconciled. Where effective competition does not exist it must be created. No one knows yet whether fiber optic networks will turn out to be natural monopolies. If they are then the only way to insure that networks are run in the interests of customers is for the customers become the owners in the last mile through cooperative or municipal efforts. If enough places do so private providers will decide it is in their best interests to leave the internet alone. For this stategy to work municipal providers will have to be a credible threat and that means clearing the way for municipal competition.

The federal COPE bill in its present form does include a clause forbidding states to simply outlaw municipal networks. But it would not protect local bodies from laws like Louisiana's which does not directly outlaw municipal networks but do make them forbiddingly difficult to get into and unnecessarily expensive to run. Such laws must be outlawed at the federal level or repealed by the states. A stable solution to the net neutrality problem will have to be primised on significant penetration of big broadband--that is, Fiber To The Home.

Act Nationally, Act Locally

We should all work to defeat the national-level attempt to reorganize the network. The Save the Internet coalition's action page is a good place to start.

We should, as well, work to repeal the Local Government Fair Competition Act in Louisiana. The availability of Lafayette's solution, FTTH, is the surest bulwark against monopoly or duopoly abuse not only in pricing but also in assuring the existence of an open network into the future.

If COPE or something very link its present form does goes through it will be all the more important for local places like Lafayette to be allowed to build high speed networks. They may well be the last places where the spirit of the original internet survives.

The day may come when folks visit Acadiana for the experience of a little French, some good music, hot food, and a taste of the unfettered network their grandparents go on about......

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