Last week in an opinion piece for Time, Nick Gillespie smacked around Obama’s plan to sneak net neutrality in the back door by having the FCC reclassify internet service providers, essentially regulating them as public utilities. In addition to questioning the tactic, he also slams net neutrality for the usual reasons, which essentially boil down to this:
If you think cable companies and internet service providers (ISPs) absolutely suck at customer service (and they pretty much do), they’re simply faint echoes of the old Bell system, which set the standard for awfulness. … Public utilities and government-granted monopolies — the only sort that actually stick around for very long — are rarely famous for their customer service and innovative practices. … As bad as Comcast or Verizon might be, things can always get worse — and likely will if federal regulators gain more control.
Gillespie goes on to argue that if internet service providers want to provide different levels of service to different sources of content, that may turn out to be a good idea, and in any case, experimentation and customization are usually good things for consumers.
The most likely outcome is that regulators will freeze in place today’s business models, thereby slowing innovation and change. […] That’s never a good idea, especially in an area where new ways of bundling and delivering content are constantly being tried.
I think he’s right about all of that, but unfortunately his argument begins to go off the rails when he discusses the current market structure of internet service providers:
It’s a historical accident that cable companies, who back in the day benefited from monopoly contracts with local governments, have morphed into ISPs.
No, it’s not an accident. The cable companies may have cut monopoly deals with local governments, but their monopoly was never just about providing television programming; it was about controlling the right-of-way to run wires over that last mile from the local point-of-presence to individual businesses and households.
It is true that nobody back then knew we would have something quite like our modern internet, but the technology for using those cables to transmit digital data was already being manufactured. In the 1980’s, I helped install a Zenith Data Systems network that used 6MHz channels flowing over ordinary television broadband cables to transmit data between computers. The concept was to be the middle ground between the small high-speed Local Area Networks (LAN) that were sprouting up in business buildings and the sprawling Wide Area Networks (WAN) that linked businesses across the country using relatively low-speed leased telephone lines. Called the Metropolitan Area Network (MAN), it would allow businesses and residents within a city-sized area to communicate with each other at near-LAN speeds for reasonable costs.
The MANs never really developed that way — instead we have optical fiber in a multi-hub layout that feeds high-speed data to local points of presence — but the cable companies knew all along that data would someday be flowing across their wires, and when that time came, they leveraged their last-mile monopolies to take over the internet service business. That’s one of the things you can do with a monopoly.
According to the FCC’s own findings, the speed and variety of American Internet connections are growing substantially every year. Despite claims that monopolistic ISPs don’t have to listen to customers, 80% of households have at least two providers that can deliver the internet at 10Mbps or faster, which is FCC’s top rating.
For reasons that I can only assume have something to do with regulatory capture, the FCC paints far too rosy a picture of the state of ISP competition. To start with, their top speed rating of 10Mbps isn’t very fast these days. My household has to support the data and video and audio streaming load from three computers, two laptops, two smartphones, an iPad, and a DVR while still permitting pop-free VOIP service for business calls, so I have service at five times that speed, and it’s not the highest speed available.
Another problem with the FCC’s numbers is that classifying services by speed alone does not take into account other factors such as quality of service or even price, and that makes for misleading comparisons. For example, if I look up my home address on the National Broadband Map, it says that in addition to my cable provider, Comcast, there are five companies that can offer me 10Mbps or faster service.
One of them is Everywhere Wireless, which can’t hook me up with service because they specialize in selling WiFi services as a utility for entire multi-unit dwellings such as condominiums and apartment complexes.
The only other provider of high-speed wired service is Platinum Equity, which provides Megapath business-quality internet services at business-sized prices. For my purposes, I would need at least their 10Mbps symmetric service, which costs a whopping $449 per month. It’s not that they’re overpriced, they’re just providing a different kind of service, with a service level agreement specifying minimum performance and availability standards, and truly responsive customer service. I used their slower lower-cost services up until about 5 years ago, and they were excellent.
The remaining three companies — Verizon, AT&T, and T-Mobile — all provide WiFi tethering services over the cellular data network. They have various pricing bundles, but they all essentially charge for the total amount of data transferred. The cheapest plan I could find was about $6/GB, which can get expensive really fast. For example, buying the latest Call of Duty: Advanced Warfare Digital Pro Edition would cost me $100, but downloading it over a cellular data network would set me back an additional $293. I also have 1200GB of data backed up in the cloud over my Comcast connection. If I had been using a cellular network, the initial upload would have cost $7200, and if only 5% of it changed every month, that would add $360/month to my internet bill.
In other words, no one comes close to Comcast at providing the service I want at a price I can afford. It would be nice if that was due to Comcast’s superior technology and cost management, but the ugly truth is that Comcast’s dominance is the result of a decades-long local political battle to keep competition out of the market. As long as that’s the case, I think that some kind of regulation is probably necessary.
But it’s not my first choice. I’d much prefer the FCC to back off and let the free market decide. So if it were up to me, my policy would be that internet service providers only have to comply with net neutrality in locations where they don’t face competition. If they have competition, they could do whatever they want. It would have to be true competition, though, with similar price/performance ratios, and it would have to be on a house-by-house basis: If that customer has a choice of internet providers, then that customer is exempt from net neutrality.
My guess is that we’d pretty much still have net neutrality, because in a competitive market, who would want anything less from their ISP? Unless it came with a steep price discount…