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Posted: August 23, 2010

Net neutrality law? Fuggedaboutit

It could hurt business and the economy

Martha Young

Definition of Learn: verb, to acquire knowledge of or skill in by study, instruction, or experience. To have learned is to be able to accurately use a concept in different applications.

The discussion of net neutrality is all over the media. Net neutrality is the idea that all legal Internet content should experience the same level of throughput and speed without rate flow prioritization or interference from the service providers. At first blush, that sounds pretty good, but take a few minutes to consider the implications of what would happen should net neutrality legislation be enacted.

There are four players impacted by any decisions associated with net neutrality: network operators, service providers, content providers and consumers.

• The broadband network operators (ATT, Qwest, Verizon, et al) are those firms responsible for the physical infrastructure.
• The service providers (Amazon, Google, Yahoo, et al) are those firms providing network enabled services but do not build or maintain the physical networks on which the services run.
• The content providers are firms and organizations providing the information users go to the Internet to find. Examples of content providers include universities, social media sites, local and national news services, and millions of other web sites.
• Consumers are the people using their service provider to access the broadband network built by the operators, to obtain content on the Internet.

Should net neutrality become legislated the implications will be vast, extremely negative to businesses, and ripple throughout the economy.

 Net neutrality is a disincentive for network operators to continue to build out the physical infrastructure. The infrastructure would have to be overbuilt to allow for the bandwidth overhead needed to support unknown yet-to-be-developed applications and content.

RESULT: The US is already behind its global competitors in terms of broadband access. Net neutrality would only exacerbate an already weakened global competitive position.

 Service providers would limit the type of content provided to those applications producing the most revenue. YouTube would definitely not be support. Neither would Skype. Both video and voice are bandwidth intensive applications. RESULT: Net neutrality limits innovation and business opportunities. Any new business opportunities the Internet could enable would be squelched. Forget about any on-line shopping or research of the obscure and esoteric questions you may have.

 Content providers would minimize their bandwidth requirements so that the service providers would enable the flow of their information. All video would be disabled. Any graphics intensive materials would be scrutinized and probably removed.

RESULT: Web sites would become paragraphs of information without pictures, sound, or interactive content; and social media and other information sharing sites would disappear.

 Consumers would be less inclined to use the Internet for information sharing and gathering. The content would be limited and incomplete thereby making it less reliable.

RESULT: Consumers would cancel broadband service subscriptions, reducing the revenue streams of service providers which would then impact both the content provider community and the network operators.

The altruistic goal of net neutrality is to allow equal access for all content. However, it does not take into account the costs associated with enabling equal access and who will have to bear those costs. It does not consider the overall economic impact, in terms of lost jobs and business opportunities that are enabled by a robust Internet infrastructure.
Finally, net neutrality does not consider the impact on Internet users and the denial of bandwidth intensive services.

We have been down a similar regulatory path with the telephone infrastructure. As a good friend told me, "We are replaying the old common carriage, universal access, carrier of last resort debates except now in the broadband space." Clearly we did not learn the lessons and are rehashing the same old issues.

The definition of insanity: To repeatedly perform an action with the expectation of a different outcome.

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Martha Young is principal at NovaAmber, LLC, a business strategy company based in Golden. Young has held positions as industry analyst, director of market research, competitive intelligence analyst, and sales associate. She has written books, articles, and papers regarding the intersection of technology and business for over 15 years. She has co-authored four books on the topics of virtual business processes, virtual business implementations, and project management for IT. Young can be reached at myoung@novaamber.com or on Twitter @myoung_vbiz

 

 

 

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Readers Respond

We have had net neutrality from the beginning, and we have done just fine. Martha's arguments are about 20 years too late, and they never held water then. We don't need to make the Internet a toll road, we have plenty of capital for infrastructure. When the net neutrality debate was at it's high (about 2000), the Internet was actually overbuilt; so much for the need to charge tolls. By Joe Doll on 2010 08 25
John G., The blurring you are witnessing is accurate. Paying for Qwest and an ISP is not what I would recommend. You might consider evaluting your other options and get it under one structure. Your proposed solution: "If there wasn't net neutrality and I could lower my subscription cost in exchange for differential throughput from different content providers I might be tempted, but I doubt the network operators would be transparent about it." is my preferred solution to the issue of net neutrality. It supports business development and growth, user/consumer needs, and directly addresses the forthcoming gating issue of fast changing environment (the 'Net) meets static regulations. Static regulation is the show stopper to Internet-based business growth. That is the underlying issue should net neutrality be legislated. Regards, By Martha Young on 2010 08 24
Martha, Well, now I AM thoroughly confused, because in my case at least I certainly do pay a subscription fee to my network operator (Qwest) and another fee to my ISP (because I don't care to use MSN but I could since that service is bundled with Qwest DSL). My other wired broadband option would be Comcast and I'd have to pay them a subscription fee as both network operator and ISP. Unless I'm missing something (quite possible), the distinction between these roles is pretty blurred. If there wasn't net neutrality and I could lower my subscription cost in exchange for differential throughput from different content providers I might be tempted, but I doubt the network operators would be transparent about it. By John Gless on 2010 08 24
John G., You hit the nail on the head as to why net neutrality is unclear and misunderstood. The network operators do not operate on the subscriber model. It is the service providers who function in the subscriber model. The service providers are the firms using the network operators infrastructure. It is to the service providers that the FCC desires to hand control of information flow rates. This would be at the expense of the network operators who would be responsible to over build the infrastructure to support yet-unknown applications. This would be the equivalent of having your child responsible for the household budget even though you are the income source. Put the controls/power into the hands of those who best understand the strengths and limitations of the enabling environment. In this case, that would be the network operators. As proposed today, net neutrality legislation is illogical. BTW: I found your first post humorous. Thanks for keeping the discussion concurrently friendly and informative. It keeps the intellectual exchange valuable to everyone. Martha By Martha Young on 2010 08 24
Martha, I'm glad to see you made the correction. You asked if I seriously believe the "carriers" should bear the cost, and shouldn't we be paying for our individual useage (sic)? If by "carriers" you mean the broadband network operators (your term from the piece), then yes I think they are doing just fine bearing these costs with the money they make from all of us subscribers who pay for the priviledge each month. If they aren't profitable enough they can raise their rates and worry that some other carrier that's more technically innovative will skim off some customers. It's the American way, n'est pas? By John Gless on 2010 08 24
John Gless, The correct word was used. Go back and double check. The point of the piece is to get people thinking about how the Internet runs. There is, in fact, billions of dollars invested in the infrastructure that supports awesome as well as seriously lame applications and equally adjective inspiring content. Who should be bearing the cost of this tool/entertainment? Are you seriously suggesting that the carriers should bear the cost while the service providers and everyone else benefits? Are you suggesting the govt bear the cost? That equals you and me via our taxes. Where does the attitude of entitlement stop? If, in fact, we think of the Internet as a utility - shouldn't we be paying for our individual useage? By Martha Young on 2010 08 24
The definition of exasperate: verb, to irritate or provoke to a high degree. Of course, Martha meant to say that "Net neutrality would only EXACERBATE an already weakened global competitive position." (definition: to increase the severity), but her incorrect usage is ironically apropos because I find her thesis - that the very thing (lack of competitive favoritism) that has fed an explosion of rich Internet content will necessarily lead to the whole thing crashing down - both provocative and mildly irritating. In other words, her logic is as flawed as her word usage. By John Gless on 2010 08 23
John, I didn't mention the Google/Verizon talks nor the Apple/ATT implementation because those are specific to wireless technologies. Net neutrality proposed legislation is strictly for wireline broadband. We should expect to see the wireless soon-to-be-de facto standards bleed into the wireline standards because enterprise business is much more nimble than government regulators. Bill, Google's growth has nothing to do with net neutrality. Its revenue growth is driven by advertisements (97+%). Its cultural impact is on print media not the availability of broadband connectivity. Thanks, everyone, for taking the time to post your thoughts. Its great to share opposing views. By Martha Young on 2010 08 23
John, An important point to consider here is whether regulation will actually serve any useful purpose. Our projections at Stratecast indicate that very high levels of broadband penetration will occur without any regulation at all. And, further, we have found that the value perception of consumers is based not on access to one brand of content, but to the universe of content that exists on the Web. Discrimination, especially in the presense of competitive options, would be suicide for operators. In the mean time, regulation, because it takes a one size fits all perspective, imposes significant burdens and restrictions on operators...these are perceived as risk and discourage investment. Finally, the Verizon/Google arrangement is not a done deal and there is every reason to suppose that regulators will oppose it. By Mike Jude on 2010 08 23
The article seems a bit one sided. I've grown up in this industry and our business, IP5280, relies on the shared IP backbones of the tier 1 service providers (like Verizon, Comcast, etc). The Internet will never achieve its ultimate purpose if the service providers are discriminating one person's data, like video, in favor of another. The article doesn't mention the already existing general agreement between Google and Verizon about how to prioritize different types of data/media over another, so you could prioritize voice over video, for example (just not one person's over another...make sense?). There is, in other words, general agreement that certain types of traffic, due to latency requirements of that traffic, require prioritization. This issue is about more than politics (degrees of government involvement) and money (amount of investment by service providers to built out / maintain the networks)...it's about a new frontier of IP-based communications requiring new business models to be created so that businesses can thrive and users can gain equal access to content. By John Scarborough on 2010 08 23
Martha, Good points. The pro net neutrality people assume that the new broadband domain is just like the old monopoly telephone domain. They want the government to regulate it as though it is. The problem with this is that broadband is pretty competitive and is providing solutions for access that allow nearly all who want such access to acquire it. In such an environment, if the government steps in to regulate the returns that competitive carriers can generate based on their investment, they will simply stop investing in infrastructure. This is not rocket science and it certainly isn't hard to understand if you have any notion of how publicly traded companies make investment decisions. If the net neutrality folks get their way, they will simply choke off investment and deny consumers the benefit of cheap ubiquitous broadband access. By Mike Jude on 2010 08 23
The logic in this article is backwards. The US is behind the rest of the world BECAUSE of our lack of standards, accountability and government interference. Europe (which is made up of multiple countries that have a consistent, managed approach to their telecom) and Japan have significantly more government involvement in telecom and the internet than the US but are far outstripping the US in terms of access and speeds. In addition, the growth of the Internet and businesses like Google is DUE to net neutrality - not in spite of it. A political ideology that assumes all govt. influence is negative leads to sloppy logic. It may be true that the best govt. is the one that governs least but it demonstrably does not apply in this case. By Bill Bickerton on 2010 08 23

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