Net Neutrality and basic economics

March 15, 2011 11:56 AM

In the run up to the UK Government's round table meeting on net neutrality tomorrow, there has been a great deal of scaremongering over the fact that key stakeholders, ISPs, consumer rights groups and others in the UK will probably adopt an industry-driven code of transparency over one of net neutrality. The Guardian claims that Internet Service Providers (ISPs) discriminate on purpose or entirely arbitrarily. The BBC's Rory Cellan-Jones claims that if content providers have to pay even a little to get their content distributed over the Internet, new and innovative companies like YouTube would never ever happen. Our friends at the Open Rights Group claim that ISPs are “evil”. And even Al Franken has weighed in by saying, "The one thing that big corporations have that we don't is the ability to purchase favourable political outcomes." But one thing is missing from all of these passionate, emotional outcries - basic economics.

Net neutrality is the idea that the Internet needs regulation in order to keep it free and open. It is based on the intuition that all Internet traffic should be treated equally without discrimination or management. The problem is that the open and free Internet that we see and use today exists because of the creation of 'smart networks' or networks that engage in Internet traffic management. These 'smart networks' prevent end users from experiencing more network congestion, stalling or any of the other issues one might experience on a 'dumb network'. There would be no 'smart networks' if all Internet traffic was treated equally.

ISPs are the companies that have created and invested in these smart networks and, in spite of what the Guardian and the BBC might say, ISPs are businesses and exist because they serve customers who are happy to pay for them to provide a service. And ISPs have a financial incentive to offer customers what they want. They don't exist to be evil or to be gatekeepers or to hoard power. ISPs provide a service that customers pay for. In turn ISPs invest in new network infrastructure, pay their employees, pay their shareholders and, yes, provide access to the Internet. I know that this might comes as a shock to many Guardian and BBC readers, but any business - including ISPs - can't exist unless they offer something that customers need and are willing to pay for. After all, the market in the UK is very competitive and transparency will reinforce that. And in order to compete ISPs strike content deals to differentiate their offerings from each other. So that consumers can actually watch YouTube and iPlayer videos smoothly, by giving them priority over an e-mail where a delay of a few seconds isn’t an issue. Not all data is the same and ISPs can deliver a better service if they don’t treat it as if it were.

[caption id="attachment_26291" align="aligncenter" width="442" caption="The 'dumb network' business plan"]Dumb Network Business Plan[/caption]

So here is my suggestion to all of the pro-net neutrality folks weighing in with their emotional scaremongering - start your own ISP. That is right, why don't you start your own co-op, not-for-profit Internet Service Provider? Go ahead, light up dark fibre or lay your own. Pay the fibre tax. Hire network engineers. Buy switching devices and other hardware. Don't strike content deals. Don't partner with Akamai. Don't manage network traffic. And try and make money. Prove us all wrong and provide customers with the alternative 'dumb network' that does nothing but provide Internet access. If there is a customer base for it, then the rest of us who don't want Internet regulation will be proven wrong. Go for it! Quite frankly, I am going to leave my Internet connection with an already established ISP who has given me quality service.In the run up to the UK Government's round table meeting on net neutrality tomorrow, there has been a great deal of scaremongering over the fact that key stakeholders, ISPs, consumer rights groups and others in the UK will probably adopt an industry-driven code of transparency over one of net neutrality. The Guardian claims that Internet Service Providers (ISPs) discriminate on purpose or entirely arbitrarily. The BBC's Rory Cellan-Jones claims that if content providers have to pay even a little to get their content distributed over the Internet, new and innovative companies like YouTube would never ever happen. Our friends at the Open Rights Group claim that ISPs are “evil”. And even Al Franken has weighed in by saying, "The one thing that big corporations have that we don't is the ability to purchase favourable political outcomes." But one thing is missing from all of these passionate, emotional outcries - basic economics.

Net neutrality is the idea that the Internet needs regulation in order to keep it free and open. It is based on the intuition that all Internet traffic should be treated equally without discrimination or management. The problem is that the open and free Internet that we see and use today exists because of the creation of 'smart networks' or networks that engage in Internet traffic management. These 'smart networks' prevent end users from experiencing more network congestion, stalling or any of the other issues one might experience on a 'dumb network'. There would be no 'smart networks' if all Internet traffic was treated equally.

ISPs are the companies that have created and invested in these smart networks and, in spite of what the Guardian and the BBC might say, ISPs are businesses and exist because they serve customers who are happy to pay for them to provide a service. And ISPs have a financial incentive to offer customers what they want. They don't exist to be evil or to be gatekeepers or to hoard power. ISPs provide a service that customers pay for. In turn ISPs invest in new network infrastructure, pay their employees, pay their shareholders and, yes, provide access to the Internet. I know that this might comes as a shock to many Guardian and BBC readers, but any business - including ISPs - can't exist unless they offer something that customers need and are willing to pay for. After all, the market in the UK is very competitive and transparency will reinforce that. And in order to compete ISPs strike content deals to differentiate their offerings from each other. So that consumers can actually watch YouTube and iPlayer videos smoothly, by giving them priority over an e-mail where a delay of a few seconds isn’t an issue. Not all data is the same and ISPs can deliver a better service if they don’t treat it as if it were.

[caption id="attachment_26291" align="aligncenter" width="442" caption="The 'dumb network' business plan"]Dumb Network Business Plan[/caption]

So here is my suggestion to all of the pro-net neutrality folks weighing in with their emotional scaremongering - start your own ISP. That is right, why don't you start your own co-op, not-for-profit Internet Service Provider? Go ahead, light up dark fibre or lay your own. Pay the fibre tax. Hire network engineers. Buy switching devices and other hardware. Don't strike content deals. Don't partner with Akamai. Don't manage network traffic. And try and make money. Prove us all wrong and provide customers with the alternative 'dumb network' that does nothing but provide Internet access. If there is a customer base for it, then the rest of us who don't want Internet regulation will be proven wrong. Go for it! Quite frankly, I am going to leave my Internet connection with an already established ISP who has given me quality service.

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