The Federal Communication Commission

[lungho]

Well this is the price Americans may have to pay, all for the sake of the "change" they voted for.

[OmariJames]

I think their main concern is probably people downloading torrents and anything of that nature. People who host free wifi hotspots should create proxies to avoid that problem. I think they should allow people to continue to tap into free wi-fi.

[whmurray]

Originally Posted by OmariJames

I think their main concern is probably people downloading torrents and anything of that nature. People who host free wifi hotspots should create proxies to avoid that problem. I think they should allow people to continue to tap into free wi-fi.

Not clear who "their" refers to. The concern of the FCC is that 1) (licensed wireless) broadband providers will favor some sources over others, based upon their content, but pretend that they are doing it in the name of efficiency, or that 2) they will charge customers different rates for the same level of service. They are also concerned that 3) the carriers will discriminate against applications that compete with applications where they, the carriers, compete.

For example, AT&T entered into an agreement (in restraint of trade) with Apple to forbid certain applications (e.g., streaming video, VoIP, and PC tethering) access to the cellular network. These are all applications that compete with offerings of AT&T on which, presumably, AT&T's share of the revenue and profits is higher. To the extent that AT&T would comment at all, they pretended that the issue was "protecting the customer from a bad experience," not to say, protecting an already fragile network from overload.

(It is interesting that AT&T permitted these applications on other phones. They seemed to be blaming the success of the iPhone for the problems of their network while gaining new customers, revenue, and market share.)

Both Apple and AT&T denied that there was any such agreement until the FCC began to ask questions. Then, without ever admitting the existence of such an agreement, AT&T gave a wink and a nod and Apple changed its position.

While one might argue that such behavior is already de facto illegal, the carriers do not want it to be clear.

On the other hand, the carriers have a legitimate fear that regulations, adopted in the name of net neutrality, might, intentionally or otherwise, interfere with their legitimate right to manage traffic, or force them to invest more and more to maintain service levels at lower and lower prices. For example, at the same time that AT&T is investing in cells in Vermont where they have no customers but the cost is low, while not investing in San Francisco where they have lots of customers but the cost is high. Each new customer in Vermont is at least marginally more profitable than one in SF.

AT&T would argue that they should be permitted to make such decisions without interference from regulators. They would argue that the market is a better mechanism for allocating their limited resources than the regulators. While markets are often inefficient in the short run, they tend to efficiency in the long run. While well-intentioned regulation may produce desirable results in the short run, they tend to have unintended consequences in the long run.

This is a very complicated issue with good arguments on both sides. The FCC has claimed that their decision will be based on the facts. However, historically such decisions have have tended to be ideological, not to say political. It is not an accident that the democrats on the commission prefer the populist arguments while the republicans side with the market, not to say, the carriers.

[whmurray]

Originally Posted by OmariJames

I think their main concern is probably people downloading torrents and anything of that nature. People who host free wifi hotspots should create proxies to avoid that problem. I think they should allow people to continue to tap into free wi-fi.

It is interesting that AT&T gives free WiFi to iPhone customers that they charge others for. This is a reasonable market response to their problems with iPhone customers while being exactly the kind of practice that regulation may resist.

Charging customers different rates based, for example, upon the device that they use, is exactly the kind of discrimination that regulators do not like.

[whmurray]

Originally Posted by lungho

Well this is the price Americans may have to pay, all for the sake of the "change" they voted for.

We definitely voted for change but this is not the change we voted for.

[Digital]

Originally Posted by whmurray

As I understand "net neutrality" it means that traffic should flow and be priced without regard to origin, destination, application, device, or content. Your packets should not have priority over mine and they should cost the same.

The discussion gained momentum when AT&T suggested that Google should pay more than their other customers.

I do not think that discriminatory pricing or delivery is a good idea. I am glad that the FCC chairman has come down on my side.

However, I do not think that government regulation of the Internet is a good idea either. My favorite five words of English are, "Congress shall make no law........." We do not permit the state to regulate speech because history demonstrates that the state will use such power in its own interest tather than that of the citiizen.

Similarly, government should not be able to regulate access to media. Government should not influence what I use my ink to say and should not be able to restrict my access to ink.

In this case, government is using speculation about the potential for market abuse to justify a regulatory role for itself. It is already a crime for AT&T to collude with Verizon to force Google to pay more than other customers. That law and competition ought to be enough power for government to use to prevent discriminatory prices.

That may not be sufficient to resist discriminatory treatment of traffic. Carriers are already "shaping" traffic in the name of network efficiency. There is concern that they will discriminate in the name of efficiency. However, I am willing to leave even that to the market and the states until someone demonstrates abuse. I am not yet willing to grant power to the federal government in anticipation of a problem that may never be real.

What am I missing?

+1
Very well said.

[Digital]

Originally Posted by whmurray

Government just loves "crisis." "Looming" crises are the best kind of all. They justify more government.

The solution to limited bandwidth is technical, not regulatory. Spectrum is infinitely reusable. The trick is (highly redundant signal over) low power. For example, CDMA technology uses only that power necessary to reach the nearest cell. The more cells, the less signal.

Think about micro-cells. There are at least three solutions to low signal in my apartment: 1) AT&T boosts the signal; 2) I sit closer to the window; 3) (AT&T permits me to) install a micro-cell in my apartment. Note that what the industry refers to as the "backhaul" for the micro-cell already exists and I pay for it whether I use it or not. Note that Sprint and Verizon micro-cells reduce the signal output of CDMA phones so that they do not interfere with other's use of the spectrum.

Economics argues for moving long-distance broadcast to glass. Policy, which gives the vested broadcast industry the right to consume huge amounts of spectrum, is counter-productive. The role for policy is to get out of the way of economics.

So, to the extent that there is a "looming crises" it is the result of government. Government's favorite solution for the unintended consequences of too much government is always more government. That is a solution that results in ever increasing inefficiency.

Let us deal with real crises. We always do. Let us not grant government more power in the name of (government) speculation about crisis.

I realize I'm late to this party, but I'm new and catching up.

I actually agree with all of what you said here ... again. But I'd like to expound on the portion I bolded.

The "Economics" that you mentioned was foretold by Nicholas Negroponte and termed the "Negroponte Switch" and it makes a lot of sense. High bandwidth items (e.g. video/TV) are the ones that should be carried by landlines, whereas low bandwidth items (e.g. text and voice) are the ones more suited for wireless solutions. Eventually we started seeing cable TV do just that. They built an entirely new wireline network (system not TV company) to deliver high bandwidth video/TV, and it was wildly popular.

The "Policy" you mentioned is old world regulation. Now, don't get me wrong, we had a pretty good media system by comparision when these regulations were put into place. The regulations incentized certain things and and the system as a whole worked. The problem comes in when technology moves far faster and more efficiently than governmental regulation. When cable TV came along, the FCC didn't know how to treat it. It ended up regulating it differently than broadcast TV, and thus a regulatory dichotomy was born that we still haven't resolved.

Fast forward to today. The broadcast TV medium is quickly dying, moving it's content to the realm of cable and satelite to reach it's consumers moreso than broadcasting. The game has changed with a paradigm shift away from broadcast TV ... but the legacy regulation hasn't adjusted. Business moves first, then government and law follow trying to cobble together a system to cover it. But, that system rarely gets re-invented. Technology has re-invented the business dynamic several times since the regulation was first in place.

So now we have broadcast TV regulated one way, cable TV regulated a second way, and the internet regulated not at all ... and you can see that the government is drooling at the prospect of finally getting it's teeth into this latest techonological evolution. IMHO, the internet is better off without governmental regulation. The industry quickly rewards certain behaviors and punishes others, but probably more efficiently than the government has done thus far and without the stifling aspect.

[Digital]

Originally Posted by whmurray

Not clear who "their" refers to. The concern of the FCC is that 1) (licensed wireless) broadband providers will favor some sources over others, based upon their content, but pretend that they are doing it in the name of efficiency, or that 2) they will charge customers different rates for the same level of service. They are also concerned that 3) the carriers will discriminate against applications that compete with applications where they, the carriers, compete.

For example, AT&T entered into an agreement (in restraint of trade) with Apple to forbid certain applications (e.g., streaming video, VoIP, and PC tethering) access to the cellular network. These are all applications that compete with offerings of AT&T on which, presumably, AT&T's share of the revenue and profits is higher. To the extent that AT&T would comment at all, they pretended that the issue was "protecting the customer from a bad experience," not to say, protecting an already fragile network from overload.

(It is interesting that AT&T permitted these applications on other phones. They seemed to be blaming the success of the iPhone for the problems of their network while gaining new customers, revenue, and market share.)

Both Apple and AT&T denied that there was any such agreement until the FCC began to ask questions. Then, without ever admitting the existence of such an agreement, AT&T gave a wink and a nod and Apple changed its position.

While one might argue that such behavior is already de facto illegal, the carriers do not want it to be clear.

On the other hand, the carriers have a legitimate fear that regulations, adopted in the name of net neutrality, might, intentionally or otherwise, interfere with their legitimate right to manage traffic, or force them to invest more and more to maintain service levels at lower and lower prices. For example, at the same time that AT&T is investing in cells in Vermont where they have no customers but the cost is low, while not investing in San Francisco where they have lots of customers but the cost is high. Each new customer in Vermont is at least marginally more profitable than one in SF.

AT&T would argue that they should be permitted to make such decisions without interference from regulators. They would argue that the market is a better mechanism for allocating their limited resources than the regulators. While markets are often inefficient in the short run, they tend to efficiency in the long run. While well-intentioned regulation may produce desirable results in the short run, they tend to have unintended consequences in the long run.

This is a very complicated issue with good arguments on both sides. The FCC has claimed that their decision will be based on the facts. However, historically such decisions have have tended to be ideological, not to say political. It is not an accident that the democrats on the commission prefer the populist arguments while the republicans side with the market, not to say, the carriers.

I notice a like-mindedness in how we view these issues.

Capitalism and freedom are the reasons people want to come to the US. Many other nations have freedom (not enough until they all do IMHO), but we have the closest economic system to true capitalism there is today. This is the biggest reason why we have been so successful as a nation, it enables everything else.

One other thing to remember, is that you cannot compete without competition. Nobody will jump to invest billions of dollars to build out a network if they are not allowed to reap the profits from doing so. This means that to tie the hands of the networks in how they recoup their investments means fewer companies will be attracted to compete with that company by building a network. The market and competition laws already provide the things regulation would force. All government will do is screw it up and prevent competition ... by spending tax payers' money.

Bottom line, let each network operator operate their business in the manner they like, just so long as they stay within the competition laws. No need to watchdog them from these things, because if there is a need for something and a more efficient solution to be had, that's what we want to encourage the new competitors to pick up on and compete on ... not stagnate and regulate.

[Digital]

Our telephone regulation was based on a model of creating competition within the US. Like it or not, it amounted to subsidized local telephone calls, and we all benefitted from that. But, in the rest of the world, every call was metered--essentially every call was a long distance call. When the mobile solution was presented, those other countries found it a cheaper alternative to their current landline solutions, because they were already paying through the nose. Here in the US, it would be a significantly more expensive endeavor to switch from the landline to the mobile telephone. That is because we had our subsidized local phone system. So, companies were quickly rolling out these new networks in other countries, while in the US mobile adoption was slow. Sure, now we have a robust mobile network, but we were and remain years behind other countries in many cases.

The bottom line is that we need to learn from this experience. Restraints on trade, whether they be net neutrality or restrictions of contract rights between carriers and device manufacturers, ends up hurting the potential competitor more than the current market leader. For competition to work, we want to encourage competition, not discourage it.