The Economist, a magazine I greatly respect when it sticks to issues it knows about, such as, say, economics, writes a giant fail of an article on Net Neutrality, apparently unknowingly contradicting itself in adjacent paragraphs. In a nutshell, the editorial claims:
- Land-based ISPs should be able to fast-track. It only makes economic sense that an company should be able to charge more for a specific type of content.
- Usage-based pricing is the norm, and wireless ISPs should be able to stick to this.
- None of this would be an issue if there were more competition.
Well, I wear contacts, but I’m not blind. For anyone who knows anything about the internet, those three statements directly contradict each other.
First of all, the worry isn’t about an ISP fast-tracking a specific type of content, it’s about an ISP prioritizing its own services and deprioritizing delivery of a competitor’s service. Imagine if the Post Office, wonderful entity that it is, decided to start randomly throwing away mail from senders that didn’t pay it a kickback. You either have to pay into their circle, or live with the fact that you won’t receive half your mail. Nice system. Fortunately or unfortunately, snail mail has becoming increasingly marginalized, while a stable internet connection has become more and more vital.
Ironically, the easy solution to this problem is in point #2, that the Economist also advocates: Usage-based pricing. If you pay for 5Mbps of bandwidth, you get 5Mbps of bandwidth. If you pay for 10, you get 10. This is how pricing has been up to now, and it makes sense. As the Economist would recognize, this type of market will foster the greatest amount of competition within the industry, among both old and new business entities.
The Economist then goes on to brilliantly observe that the market lacks competition. Obviously, we wouldn’t be having this argument if there was more competition. We’ve essentially got a duopoly on our hands, yet the Economist seems to think that all we need to do is “demand it.” From who, is a little more unclear. Should I go petition my local Better Business Bureau in the hopes that some enterprising young whippersnapper will take up my idea and roll out a multi-billion dollar network, so he can compete against even larger corporate behemoths? I’m all for competition, and I think there are regulations that could and should be put into place to allow for a better resale environment for existing networks, but without government subsidies, the only financially feasible new ISP can work in the wireless space. Oh yeah, I guess the Economist forgot about Clearwire.
But until Clearwire WiMax is able to cover more area, we don’t have said competition. I live 45 minutes outside of Los Angeles and am not holding my breath. At this rate, they’ll continue rolling out over the next decade, and that still only adds one highly-leveraged competitor to the market, let alone the two or three necessary for real competition.
So, until we have another competitor or two, how about we go with the Economist’s second recommendation: Put the duopolies and startups on a level playing field, and require usage-based pricing? May the best ISP win.
The problem is, the ISPs are uncomfortable in their own skin. They don’t want to be a utility company, they want to be content providers, or at least syndicators. Instead of being an internet gateway, they want to be a content gateway. Instead of optimizing their network and running a lean, efficient, business that competes on the value of its product, they want to be a digital middleman where none is necessary. I buy electronics from Newegg and content from Netflix. I don’t need Southern California Edison tellling me I can only buy their electronics if I want to use their electricity any more than I need Comcast telling me I can only buy their content if I want to use their pipe. Not a lot of utility in that.
But the devil is in the detail. What happens for instance if some people want to pay for their data to go faster, or if others hog all the bandwidth?
It’s simple, Economist. You already answered it yourself. Usage-based pricing. Internet 101. Now stop hogging my bandwidth.