VOIP News: Cato Is Tops! But Let’s Clarify Something
Though I hadn’t heard of it before, I was delighted to see a publication called VOIP News cite the Cato Institute as one of 15 “Greatest Enemies of Net Neutrality.” As VOIP News says, we are indeed a “voice of reason during political debates.”
Alas, I’m selectively quoting. What they actually said, snidely, was that Cato is a “hired voice of reason during political debates, because of its pseudo-academic affiliations.” (I don’t know why they italicized “voice of reason” – I always thought Reason was the voice of reason.)
But my selective quotation is as accurate as the selective research that VOIP News did for this fluffy hit piece. You see, Cato recently published a lengthy paper that articulates the benefits of net neutrality (referred to as the end-to-end principle).
Where do you find that in the paper? Here’s the first paragraph of the executive summary:
An important reason for the Internet’s remarkable growth over the last quarter century is the “end-to-end” principle that networks should confine themselves to transmitting generic packets without worrying about their contents. Not only has this made deployment of internet infrastructure cheap and efficient, but it has created fertile ground for entrepreneurship. On a network that respects the end-to-end principle, prior approval from network owners is not needed to launch new applications, services, or content.
The paper expresses well-founded concerns about net neutrality regulation—taking a good engineering practice and making a mandate of it for lawyers and bureaucrats to implement. From the executive summary’s third paragraph:
New regulations inevitably come with unintended consequences. Indeed, today’s network neutrality debate is strikingly similar to the debate that produced the first modern regulatory agency, the Interstate Commerce Commission. Unfortunately, rather than protecting consumers from the railroads, the ICC protected the railroads from competition by erecting new barriers to entry in the surface transportation marketplace. Other 20th-century regulatory agencies also limited competition in the industries they regulated. Like these older regulatory regimes, network neutrality regulations are likely not to achieve their intended aims.
It’s tough sledding, working through most of a one-page executive summary. But many publications go that far in researching the pieces they publish.
I do sincerely appreciate the nod to our prominence in this debate. I hope VOIP News does a better job of portraying where we stand and why in the future.
Filed under: Cato Publications; Telecom, Internet & Information Policy
Siding with the Geeks on Network Neutrality
One of the perennial tropes of the network neutrality debate has been the tendency of the pro-regulation side to paint it as a David-and-Goliath struggle between big, evil corporations and the little guy. Way back in 2006, James Gattuso pointed out how silly this is: in fact, the push for network neutrality is backed by some of the largest companies in Silicon Valley. Julian points out a particularly lazy example of this kind of ad hominem that happens to target Cato: It seems that we’re one of the “15 greatest enemies of net neutrality.” And that along with CEI, Cato “seems to draw its funding from a smattering of every major corporation ever to fund lobbyists.”
As Julian points out, if “VoIP News” had done its homework, it might have discovered that Cato makes its annual report freely available online. Then they they would have noticed that corporate support accounts for about 1 percent of Cato’s budget, and that none of Cato’s corporate funders are major opponents of network neutrality regulation.
Shoddy reporting aside, the “VoIP News” article does actually highlight an important point: the people who built the Internet are deeply split on the issue of regulating the Internet, with eminent computer scientists including Bob Kahn (co-inventor of the Internet’s TCP/IP protocols with Vint Cerf) and Dave Farber (another networking pioneer) on the anti-regulation side. And based on conversations I’ve had here at Princeton, Kahn and Farber are far from the only computer scientists who are skeptical that the FCC is up to the job of regulating the Internet.
In a vacuous appearance on Rachel Maddow last week, blogger Xeni Jardin cited Vint Cerf’s support of regulation and urged viewers to “side with the geeks who actually built the Internet.” She did not, of course, mention that Kahn and Farber, who fit that description as well as Cerf does, are on the other side. “The geeks” are as split on this issue as everyone else.
Update: Tim Carney has an excellent article making a similar point: Internet companies like Google and Amazon, who have lobbied hard for network neutrality, gave overwhelmingly to Obama over McCain in the 2008 election. This doesn’t prove Obama and Chairman Genachowski are insincere in their support for network neutrality. But it does mean we should take both side’s arguments with a grain of salt.
How Did the FCC Come to Acquire This Power?
Jeff Eisenach and Adam Thierer have a great essay in The American honoring the 50th anniversary of Ronald Coase’s article “The Federal Communications Commission.” It’s timely given the FCC’s proposal to establish public utility-style regulation of the Internet under the banner “net neutrality,” and it’s a good general warning to Neo-Progressives who “see market failure as the source of most problems, and government as the centerpiece of most solutions.”
‘Net Neutrality’ Regs: Corporate Interests Do Battle
Some people have labored under the impression that “net neutrality” regulation was about the government stepping in to ensure that large corporations would not control the Internet. Now that the issue is truly joined, it is clear (as exhibited in this Wall Street Journal story) that the debate is about one set of corporate interests battling another set of corporate interests about the Internet, each seeking to protect or strengthen its business model. The FCC is surfing the debate pursuing a greater role for itself, meaning more budget and power.
Tim Lee’s paper, The Durable Internet, dispels the idea that owners of Internet infrastructure can actually control the Internet. The preferred approach to “net neutrality” is to let Internet users decide what they want from their ISPs and let ISPs and content companies do unmediated battle with one another to create and capture the greatest value from the Internet ecosystem.
If the FCC were to reduce its power by freeing up more wireless spectrum—either selling it as property or dedicating it to commons treatment—competition to provide Internet service would strengthen consumers’ hands.
Understanding the Consequences of Internet Regulation
In an effort to achieve “network neutrality” online, the FCC is starting to write new regulations for Internet providers. Reuters reports:
U.S. communications regulators voted unanimously Thursday to support an open Internet rule that would prevent telecom network operators from barring or blocking content based on the revenue it generates.
The proposed rule now goes to the public for comment until Jan. 14, after which the Federal Communications Commissions will review the feedback and possibly seek more comment. A final rule is not expected until the spring of next year.
Cato Director of Information Policy Studies Jim Harper appeared on Fox News this week to discuss the FCC decision. “This is governmental tinkering with a market place that is working really well and growing right now,” said Harper. “The last thing we need is to cut that off.”
There are ways to achieve net neutrality without regulation, says Timothy B. Lee:
An important reason for the Internet’s remarkable growth over the last quarter century is the “end-to-end” principle that networks should confine themselves to transmitting generic packets without worrying about their contents. Not only has this made deployment of internet infrastructure cheap and efficient, but it has created fertile ground for entrepreneurship. On a network that respects the end-to-end principle, prior approval from network owners is not needed to launch new applications, services, or content.
…Like these older regulatory regimes, network neutrality regulations are likely not to achieve their intended aims. Given the need for more competition in the broadband marketplace, policymakers should be especially wary of enacting regulations that could become a barrier to entry for new broadband firms.
Filed under: General; Telecom, Internet & Information Policy
Internet Companies’ Bogus Plea for Regulation
Some of the most prominent Internet companies sent a letter yesterday asking for protection from market forces. Among them: Facebook, Google, Amazon, and Twitter.
A Washington Post story summarizes their concerns: “[W]ithout a strong anti-discrimination policy, companies like theirs may not get a fair shot on the Internet because carriers could decide to block them from ever reaching consumers.”
No ISP could block access to these popular services and survive, of course. What they could do is try to charge the most popular services a higher tariff to get their services through. Thus, weep the helpless, multi-billion-dollar Internet behemoths, we need a “fair shot”!
Plain and simple, these companies want regulation to ensure that ISPs can’t capture a larger share of the profits that the Internet generates. They want it all for themselves. Phrased another way, the goal is to create a subsidy for content creators by blocking ISPs from getting a piece of the action.
It’s all very reminiscent of disputes between coal mines and railroads. The coal mines “produced the coal” and believed that the profitability of the coal-energy ecosystem should accrue only to themselves, with railroads earning the barest minimum. But where is it written that digging coal out of the ground is what creates the value, and getting it where it’s used creates none? Transport may be as valuable as “production” of both commodities and content. The market should decide, not the industry with the best lobbyists.
What happens if ISPs can’t capture the value of providing transport? Of course, less investment flows to transport and we have less of it. Consumers will have to pay more of their dollars out of pocket for broadband, while Facebook’s boy CEO draws an excessive salary from atop a pile of overpriced stock holdings. The irony is thick when opponents of high executive compensation support “net neutrality” regulation.
Another reason why these Internet companies’ concerns are bogus is their size and popularity. They have a direct line to consumers and more than enough capability to convince consumers that any given ISP is wrongly degrading access to their services. As Tim Lee pointed out in his excellent paper, “The Durable Internet,” ownership of a network service does not equate to control. ISPs can be quickly reined in by the public, as has already happened.
A “net neutrality” subsidy for small start-up services is also unnecessary: They have no profits to share with ISPs. What about mid-size services—heading to profitability, but not there yet? Can ISPs choke them off? Absolutely not.
Large, established companies are not known for being ahead of trends, for one thing, and the anti-authoritarian culture of the Internet is the perfect place to play “beleaguered upstart” against the giant, evil ISP. There could be no greater PR gift than for a small service to have access to it degraded by an ISP.
The Internet companies’ plea for regulation is bogus, and these companies are losing their way. The leadership of these companies should fire their government relations staffs, disband their contrived advocacy organization, and get back to innovating and competing.
Technology: Debating the Pace of Progress
Last night, thanks to Craigslist and a Web-enabled cell phone, I unloaded two extra tickets to tonight’s World Cup qualifying game between the U.S. and Costa Rica in under an hour. (8:00, ESPN2 “USA! USA! USA!”)
Wanting to avoid the hassle of selling the tickets at RFK, I placed an ad on Craigslist offering them at cost, figuring I might find a taker and arrange to hand them off downtown today or at the stadium tonight. Checking email as I walked to the gym, I found an inquiry about the tickets and phoned the guy, who happened to live 100 feet from where I was walking. A few minutes later, he had the tickets and I had the cash.
This quaint story is a single data point in a trend line—the high-tech version of It’s Getting Better All the Time. Everyone living a connected life enjoys hundreds, or even thousands, of conveniences every day because of information technology. Through billions of transactions across the society, technology improves our lives in ways unimaginable two decades ago.
Before 1995, nobody ever traded spare soccer tickets in under an hour, on a Tuesday night, without even changing his evening routine. If soccer tickets are too trivial (you must not understand the game), the same dynamics deliver incremental, but massive improvements in material wealth, awareness, education, and social and political empowerment to everyone—even those who don’t live “online.”
Sometimes debates about technology regulation are cast in doom and gloom terms like the Malthusian arguments about material wealth. But the benefits we already enjoy thanks to technology are not going away, and they will continue to accrue. We are arguing about the pace of progress, not its existence.
This is no reason to let up in our quest to give technologists and investors the freedom to produce more innovations that enhance everyone’s well-being even more. But it does counsel us to be optimistic and to teach this optimism to our ideological opponents, many of whom seem to look ahead and see only calamity.
From the Oxymoron File: The Neutral Subsidy
Peter Van Doren points me to some revealing passages in a new article in the Journal of Economic Perspectives. In “Subsidizing Creativity through Network Design: Zero-Pricing and Net Neutrality,” Robin S. Lee and Tim Wu caution against tiered pricing for Internet access services, writing:
[U]nless sufficient bandwidth and quality of service can be guaranteed for the “free” Internet, there is a risk that . . . tiering will serve to sidestep de facto prohibition on termination fees. . . . [A] priced-priority system could simply become a de facto fee charged for all content providers if the “free” Internet was of sufficiently poor quality and consumers shifted their usage behavior accordingly. . . . [T]his might dampen the introduction of new content and services and eliminate the subsidy for content innovation currently provided by net neutrality.
Locking in net neutrality by regulation would lock in a subsidy to content providers. Lee and Wu prefer it, and many of us may like the results, but it’s hard to call a subsidy regime “neutral.”
Is This Intervention Necessary?
So asks the Washington Post in a cogent editorial about FCC Chairman Jules Genachowski’s speech proposing to regulate the terms on which broadband service is provided. (More from TLJ, Julian Sanchez, and me.) The WaPo piece nicely dismantles the few incidents and arguments that underlie Genachowski’s call for regulation.
As the debate about “‘net neutrality” regulation continues, I imagine it will move from principled arguments, such as whether the government should control communications infrastructure, to practical ones: Will limitations on ISPs’ ability to manage their networks cause Internet brown-outs and failures? (This is what Comcast was trying to avoid when it ham-handedly degraded the use of the BitTorrent protocol on its network.) Will regulation bar ISPs from shifting costs to heavy users, cause individual consumers to pay more, and hasten a move from all-you-can-eat to metered Internet service? We’ll have much to discuss.
TLJ on Genachowski’s ‘Net Neutrality’ Speech
TechLawJournal is a consistently high-quality subscription service that provides news, records, and analysis of legislation, litigation, and regulation affecting the computer, Internet, communications and information technology sectors. It reported this morning on FCC chairman Julius Genachowski’s speech proposing to regulate the provision of Internet service. The TLJ piece includes background that I think might benefit Cato@Liberty readers wishing to understand the issues better, so I asked for and received permission to republish it here.
[TLJ Report after the jump]
Read the rest of this post »
Preemptive Regulation of the Internet
Julian Sanchez has already done a fine job of assessing FCC Chairman Julius Genachowski’s speech announcing his plan for federal regulation of the Internet. There was nothing really new in it. No substantial problems justifying regulation have emerged, and—Genachowski’s claims to modest aims aside—any ‘net neutrality regulation is likely to be a substantive morass. Says Julian:
[I]t absolutely reeks of the sort of ad hoc ‘I know it when I see it’ standard that leaves telecoms wondering whether some innovative practice will bring down the Wrath of Comms only after resources have been sunk into rolling it out.”
If the FCC goes ahead with regulating the Internet, the public will get a good look at what closed systems are really like. The FCC’s retrograde “Electronic Comment Filing System” doesn’t even allow full-text searches of submissions. This is but one failing the Internet’s engineers all over the country—and not just in big telcos—will run into dealing with the FCC. It’s laughable that this outdated telecommunications bureaucracy is trying to take over the Internet.
A complex array of network protocols and business processes make up “the Internet.” The Internet’s end-to-end architecture is good engineering because it is naturally open, flexible, and conducive to communications freedom. The Internet empowers consumers to fend for themselves, such as in their dealings with Internet Service Providers. When Comcast degraded the Bitorrent protocol, it took just weeks for consumer pushback to end the practice. The FCC opened an inquiry long after the matter was settled.
But some politicians and the FCC’s lawyers think their slow-moving, technologically unsophisticated bureaucracy knows better than consumers and technologists how to run the Internet. The FCC’s “net neutrality” plans are nothing more than public utility regulation for broadband. With federal regulation, your online experience will be a little more like dealing with the water company or the electric company and a little less like . . . well, the Internet!
As Julian said, Tim Lee’s is the definitive paper. The Internet is far more durable than regulators and advocates imagine. And regulators are far less capable of neutrally arbitrating what’s in the public interests than they imagine either.
Monday Links
- The health care plan now being debated in Congress is not reform. It’s an insurance-company bailout–and you’re going to paying for it.
- The true cost of financial regulation: “A detailed anatomy of the bubble shows that many of the policies and regulations meant to reduce financial risk actually increased it.”
- A great prep for the upcoming G-20 meeting: Here’s a quick crash course in global economics.
- Government: “Hey, let’s start meddling in the Internet business.” A better idea: Preserve net neutrality without regulation. Here’s how.
- Podcast: Do certain climate change policies threaten global commerce? More here.
Eye of Neutrality, Toe of Frog
I won’t go on at too much length about FCC Chairman Julius Genachowski’s speech at Brookings announcing his intention to codify the principle of “net neutrality” in agency rules—not because I don’t have thoughts, but because I expect it would be hard to improve on my colleague Tim Lee’s definitive paper, and because there’s actually not a whole lot of novel substance in the speech.
The digest version is that the open Internet is awesome (true!) and so the FCC is going to impose a “nondiscrimination” obligation on telecom providers—though Genachowski makes sure to stress this won’t be an obstacle to letting the copyright cops sniff through your packets for potentially “unauthorized” music, or otherwise interfere with “reasonable” network management practices.
And what exactly does that mean?
Well, they’ll do their best to flesh out the definition of “reasonable,” but in general they’ll “evaluate alleged violations…on a case-by-case basis.” Insofar as any more rigid rule would probably be obsolete before the ink dried, I guess that’s somewhat reassuring, but it absolutely reeks of the sort of ad hoc “I know it when I see it” standard that leaves telecoms wondering whether some innovative practice will bring down the Wrath of Comms only after resources have been sunk into rolling it out. Apropos of which, this is the line from the talk that really jumped out at me:
This is not about protecting the Internet against imaginary dangers. We’re seeing the breaks and cracks emerge, and they threaten to change the Internet’s fundamental architecture of openness. [....] This is about preserving and maintaining something profoundly successful and ensuring that it’s not distorted or undermined. If we wait too long to preserve a free and open Internet, it will be too late.
To which I respond: Whaaaa? What we’ve actually seen are some scattered and mostly misguided attempts by certain ISPs to choke off certain kinds of traffic, thus far largely nipped in the bud by a combination of consumer backlash and FCC brandishing of existing powers. To the extent that packet “discrimination” involves digging into the content of user communications, it may well run up against existing privacy regulations that require explicit, affirmative user consent for such monitoring. In any event, I’m prepared to believe the situation could worsen. But pace Genachowski, it’s really pretty mysterious to me why you couldn’t start talking about the wisdom—and precise character—of some further regulatory response if and when it began to look like a free and open Internet were in serious danger.
Obama’s FCC Pick to Seek Internet Regulation
Politico reports that President Obama’s nominee to head the Federal Communications Commission, Julius Genachowski, is expected to pursue “‘net neutrality” regulation of broadband Internet service.
In his paper, The Durable Internet: Preserving Network Neutrality without Regulation, Tim Lee shows why regulation is not needed to preserve the good engineering principle he calls “end-to-end.” His paper also shows how regulation intended to serve consumer-friendly ends is often captured and used by regulated industries to suppress competition and artificially raise profits, denying consumers the benefits of free markets.
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