Don't Mess With Our Net!

Google Plays Offense - The Latest from the Net Neutrality Front
by publius

Over the past few days, I've been reading the net neutrality comments filed at the FCC last week (from the major parties, that is). There’s some good stuff in there (Susan Crawford has more). As background, the FCC (perhaps in an effort to avoid dealing with the issue) released a “Notice of Inquiry” this spring, essentially asking for comments on the state of the broadband access market (i.e., whether net neutrality is needed). Google’s comments (pdf) in particular are both interesting and illustrate some of the high-level themes and questions in the current net neutrality debate.

To back up, when you cut through all the rhetoric, the net neutrality debate is really about “access tiering,” which is the practice of charging content or service providers (e.g., Amazon, Google, Vonage) additional fees for a guaranteed level of service (or “quality of service” -- “QoS”). People raise the specter that the Verizons of the world will block websites and services, but I’m less worried about that. And frankly, that’s not really what the industry fight is about.

It’s about access tiering.

To be grossly simple, here’s how it works. The Googles of the world pay access providers (Verizon, Comcast, etc.) for the bandwidth they use. But they don’t pay additional fees to access you the customer. When you go to the Google website, its servers ultimately send the information through the wires (or “pipes”) running into your house. Because access providers own these “last-mile” pipes, the fear is that they will impose an additional charge for reaching you -- i.e., they will put bouncers at the door and charge a fee.

But these companies don’t necessarily want to block sites. What they really want to do is to set up premium “lanes,” with guaranteed QoS. For instance, to ensure that you get Google really fast, Google would have to pay up and sign on for QoS guarantees or get relegated to the slow lane. The fear, among others, is that this system (1) will raise the cost of entry for new providers/services, especially start-ups; and (2) will lead to a “second class” Internet as access providers ignore the non-premium lane.

The access providers’ arguments -- which aren’t necessarily absurd -- is that they need additional money to improve the Internet and, in particular, to increase bandwidth. The future of the Internet is high-data video and p2p services, so we need more bandwidth they say (and they’re right). Access tiering addresses this need by both subsidizing improvements and allowing for efficient management of congested networks.

Thus, the policy debate turns on whether net neutrality will prevent (or de-incent) network improvements. Access providers spend a long time saying “yes, it will,” while others say “no, it won’t.” Regardless, the focus is often on the effect that net neutrality regulations would have. Net neutrality advocates are often on defense, having to explain why net neutrality won’t harm the future of the Net.

Google puts an interesting twist on this -- and goes on the offensive. They argue that a QoS access tiering regime would actually retard network build-out and create fewer incentives to expand bandwidth. The basic idea is that access tiering relies on -- and creates incentives to maintain -- limited capacity.

Here’s what they say:

QoS robs broadband providers of their incentives to build out greater broadband capacity.QoS originally was conceived as a software-based technical response to limited capacity. Once QoS becomes a profit center for the broadband provider, however, that provider no longer has an incentive to remove the bottlenecks that generate QoS revenues. Instead, the provider has every incentive to maintain capacity constraints in order to justify the QoS fees to customers.

If the broadband providers are able to prioritize packets flowing over their network to the benefit of themselves and their chosen few, they will come to rely on QoS as a revenue-generating crutch that deters them from building bigger, faster broadband pipes that actually serve everyone.

In other words, regulatory policy should encourage a system of abundance rather than freezing a system of scarcity in place. Once this system is in place, Google argues, inertia and reliance will set in, limiting future reforms.

Access tiering isn’t an insane idea, but the broader argument against it is that it would have harmful effects (externalities) on the public at large by locking the broadband market into a “scarcity” model. Net neutrality, by contrast, would force access providers to expand their pipes, or so the argument goes.

In a sense, this seems unfair. We’re essentially asking the access providers to incur private costs for public benefits. Two responses – first, it may not be a public cost if the improved, net-neutrality-inspired pipes sharply increase demand and grow the market. Second, the providers networks' are themselves the product of earlier public subsidies.

But from a more realistic perspective, it's going to be hard to get anything passed if the uber-powerful access providers are passionately opposed to it. Thus, if the politics of net neutrality are hopeless mired on this question of fairness, maybe the ultimate answer is some sort of public subsidy for private fiber buildout, not unlike the great infrastructure projects of the past (railroads, canals). Instead of the stick, the government would rely on the carrot. For instance, we might say “if you agree to net neutrality regulation, we will drown you in money for new fancy-pants fiber.” A few months of Iraq spending would go a long way in that respect.

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