Can someone explain "Net-Neutrality" to me?

[blutoski]

Yes there is (might be mobile link).

I think AvalonXQ did ask 'without limiting ISP behavior'

Local loop unbundling is the current regulatory model that I described whereby the regulator decrees that ILECs must permit lease of part of their capital for a tariffed price that may or may not be profitable for the ILEC.

What would be limited would be their right to set what they think is a 'fair' price for the wholesaleing, and also their right to refuse a competitor's request to use their facilities.

A further frustration: this has been in place in Canada for 20 years, and it has not produced meaningful competition. Wholesaled loops are less than 1/10th of a % of the installed voicelines. I'm sure it's similar in the US.

LLU is regulation, and hasn't been very succesful in encouraging competition.

The main competitors to ILECs are cable companies who have their own backbones and local loops, and also cellular networks that are increasingly offering adequate data throughput.

And in any case, that's a phone model. The internet is different because the wholesaling of ports and access to central offices is not the same thing as a duplicate network. The adsl reseller just banana-clips their port onto the ILEC's loop, but the ports themselves are usually hooked into the ILEC's backbone in the first place. ie: if the ILEC is shaping ports, the adsl reseller is shaping ports because they don't have their own network.

Just to drive that home with a contemporary example here in Canada: the major carriers have decided to stop offering unlimited throughput, so that means the adsl resellers will probably have to as well (*), because they're just reselling the carrier's products.


(*) the exception would be a reseller who is willing to pay the carrier per-bit rates, but charge their end customer a flat rate for unlimited - very risky, and I'm unaware of any that are considering it

Incorrect and something of a pro-regulation canard.

I'm not sure what you mean. Duplicate networks would have duplicate costs. The alternative is regulatory management of existing networks. I don't see an option where duplicate networks would have no costs.

 

[blutoski]

Isn't telcom infastructure subsidized?

Not as much as you'd think, and not more than a new competitor would be. It used to be what's called "cross-subsidized" which meant that 'luxury' products (long distance, business advertising) were overcharged to pay for socially desireable products that could not be economical at a price that would cover the cost (residential local service).

Since deregulation, this internal subsidization has wound down, and the trajectory for prices is toward yield maximization.

There are small exceptions. eg: in Alberta, the SIP/SEP program was a provincial subsidy for a few thousand extremely remote farm acreages - the province would pay for the first two residential lines' install charge. That's the only direct subsidy I'm aware of in Canada.

Indirectly, you could include right-of-way access, which is usually municipal land. In Canada, all the utilities would have access through some network of right-of-ways. Mostly following power company infrastructure. Competitors would benefit from this as well, if they wanted to build a parallel network.

 

[blutoski]

Even if they did have to, one would only need a relative few marginal consumers to effectively set prices, and the majority could remain rationally ignorant (in the same way as only a few shoppers are responsible for the checkout queues being almost identical length)

I was trying to figure out what you meant, and I finally understood we had slightly different assumptions.

My impression is that the cost would probably not be passed on to the end consumer, but rather to the enterprise. Telco would charge, say, Google based on traffic from their servers, rather than the customers who use it. Google would need to pass that cost on to their customers, or take it from potential dividends &c.

Amazon.com and Dell and Apple would be other merchants high on the shortlist, as they clearly monetize internet connections to the end consumer.

 

[Francesca R]

LLU is regulation, and hasn't been very succesful in encouraging competition.

I agree it's regulation. Competition-enhancing regulation is generally good. As for its success, that depends on where you look. In much of Europe, pretty good. This is a very long (3MB) global survey of broadband policy and implementation conducted by a Harvard Professor in 2009. The country comparison in respect of competition in broadband space starts on page 82. The US is the baseline in more than one sense of the word.

 

[Francesca R]

My impression is that the cost would probably not be passed on to the end consumer, but rather to the enterprise. Telco would charge, say, Google based on traffic from their servers, rather than the customers who use it. Google would need to pass that cost on to their customers, or take it from potential dividends &c.

Amazon.com and Dell and Apple would be other merchants high on the shortlist, as they clearly monetize internet connections to the end consumer.

Absolutely--that's how a two-sided market works. But there are efficiency (welfare) savings to be made by the platform owner distributing costs differentially to both sides of the bargain, as opposed to charging one side only and being compelled to offer undifferentiated service to the other.

Statements that "ultimately the consumer pays" are as valid as they are with everything else--normally overly simplistic IMO. Costs are distributed around the value chain (shareholders' profits, labour compensation, capex, sales revenues) according to the influence of each factor in the chain. Typically--and especially with stuff where abundance increases in leaps and bounds--it is rather hard to prevent the consumer influence dominating, and for customers to walk off with the lion's share of welfare gains. Even if it doesn't feel like that.

 

[blutoski]

I agree it's regulation. Competition-enhancing regulation is generally good. As for its success, that depends on where you look. In much of Europe, pretty good. This is a very long (3MB) global survey of broadband policy and implementation conducted by a Harvard Professor in 2009. The country comparison in respect of competition in broadband space starts on page 82. The US is the baseline in more than one sense of the word.

I'm not sure we're having the same conversation, though. LLU is intended to displace ILECs in voice service, not specifically broadband. "Wholesaleing" of local loops as an alternative to "reselling" ILEC dialtone. ILECs must offer both.

In Canada local loop wholesaling is tariffed at a loss to ILECs intentionally to build CLEC market share, but it has had surprisingly little impact in two decades. Reselling has been more succesful, but we're still talking about less than 1% market share loss to resellers. Reselling has very low entry cost - no facilities are required.

 

[blutoski]

Absolutely--that's how a two-sided market works. But there are efficiency (welfare) savings to be made by the platform owner distributing costs differentially to both sides of the bargain, as opposed to charging one side only and being compelled to offer undifferentiated service to the other.

Yes, it would be interesting to see how that manifests. One of the cable providers here floated a +$5 premium service with packet shaping that gave priority to Skype VoIP packets. Many customers responded by cancelling their accounts and switching providers as a matter of principle. I don't think any of the customers accepted the offer.

I think customers felt extorted. ie: that the carrier was threatening to cripple Skype unless customers ponied up.

 

[Almo]

If there was no punishment for standing up in a theatre, there'd be no point in installing seats.

Er, really? Very doubtful indeed.

We had this experience at a concert. Someone was standing, so the people behind them stood, so we had to stand. With no controls, we had no choice.

 

[gnome]

Happened to me too. When we first arrived we were lucky enough that the two seats in front of us happened to be empty. Then naturally enough (not bad in itself) two people from rows further back spotted the unused seats and nabbed them.

The problem was, not only were they apparently the tallest people there, but they decided to stand up for every single song. As a result we had to stand, and so did the people behind us, etc. I don't mind a lot of standees for the occasional high-energy song, just like I don't mind someone turning the radio loud for their favorite hit. But when it's EVERY SINGLE ONE it just gets tiring.

 

[Francesca R]

Yes, it would be interesting to see how that manifests. One of the cable providers here floated a +$5 premium service with packet shaping that gave priority to Skype VoIP packets. Many customers responded by cancelling their accounts and switching providers as a matter of principle. I don't think any of the customers accepted the offer.

Well that's quite a perverse business strategy that blatantly doesn't even compete against the non premium offering, so would not be expected to thrive.

In a more standard example, a carrier charges Skype and therefore gives priority to their content to the customer at a reduced cost to the customer. If the customer rejects that, then another carrier may offer undifferentiated throughput, but since the alternative carrier can't get Skype to pay them for that, their offering is more expensive, not cheaper, to the customer.

But under a network neutral regime, that's the only one they can offer, so everybody effectively pays the cost of it. Now of course, those costs may get redistributed via various market mechanisms, but the system lacks any mechanism to skew the higher costs towards the customers who want the undifferentiated (neutral) service that content providers cannot influence. And anybody who would prefer a tiered service, particularly if it is cheaper (because providers subsidise it), can't have one.

So the neutral network, according to this example, reduced welfare (that's welfare in the economic sense) and is pareto inferior.

 

[Francesca R]

We had this experience at a concert. Someone was standing, so the people behind them stood, so we had to stand. With no controls, we had no choice.

Fine, I accept/agree it would happen at a gig, and I did not mean to imply that wasteful "arms races", which it is an example of, can't happen. But I doubt that would happen in a theatre (stage, movie . . . that kind)

 

[blutoski]

Well that's quite a perverse business strategy that blatantly doesn't even compete against the non premium offering, so would not be expected to thrive.

My thought is that they were looking for strategic benefits. The customers who were high Skype users were also abandoning their voice offering (the cable companies here are the #2 provider of voice). My thought is that they may have felt these customers would be willing to part with some newly-freed-up wallet share to get a better approximation of the voice product that was being replaced with Skype.

 

[blutoski]

Fine, I accept/agree it would happen at a gig, and I did not mean to imply that wasteful "arms races", which it is an example of, can't happen. But I doubt that would happen in a theatre (stage, movie . . . that kind)

Sorry about that - I had thrown it out as an example of the fallacy of composition.
It's one of the more accessible analogies for that fallacy.

 

[Skeptic Ginger]

Internet service provision is a two-sided market. Net neutrality is an initiative to turn it into a one-sided market, with content consumers bearing all the costs. In a competitive landscape such a regulation is inferior IMO, and the UK regulator OFCOM agrees with that.

Much of the support for it is inadequately thought out.

And much of the support for the Libertarian version of reality is also inadequately thought out.

Compare the IPad Net service to your regular Internet service and see which one you like better. IPad has no net neutrality. If you surf your IPad, you get the hits you are directed to by those paying to direct you there. Instead of an ad on the side of your screen, you get the ad itself when you go to the link.

This is what you can expect without Net Neutrality

What will happen, Diller said, is that they’re going to have to build more capacity to accommodate the increase in online video, and they will charge for usage (which he said he thinks is appropriate), but the people who control the broadband will say that they feel it’s their right to say when they think entities are using too much, so they should pay if they’re pushing the bandwidth out. “It would be like asking a toaster to pay for the electricity,” he said.

He said he doesn’t think it would be the death of entrepreneurship, but that what would be terrible is that the Internet would follow the pattern of other communications media from the last hundred years – in the hands of the very few, where editorial politics come into play – and whoever can pay the most wins.

This is the EVIDENCE BASED conclusion, not the fantasy based conclusion where the market provides all the free speech the public can consume.


Sadly, with newer products like the IPad, the corporate goal of 'only profits' is going to result in the loss of Net Neutrality as corporations build neutrality out of new products, no legislative action required. (Not like we had much hope through legislation anyway.)

 

[Skeptic Ginger]

I have adequately thought it out and I disagree with you.

Me too, and not only have I thought about it, I have been to the city and seen the elephants.

 

[Skeptic Ginger]

I am suspicious of net neutrality because I have a general suspicion of increasing government regulation to limit private companies from deciding what products and services to offer their customers. As long as ISPs cannot be deceptive, I don't see a reason to regulate their resource usage.

Ever compare PBS programs like NOVA to those commercially profit motivated programs like Ancient Aliens on the History Channel? Frontline compared to CNN? Independent Lens compared to the Jersey Shore or the Bachelor?

Did you like the Enron model for the utilities market?

Do you care that the private marketplace sticks the public with cost of disposal of their products? With the cost of cleaning up the pollution they saved their stockholders the cost of cleaning up by walking away after the damage was done?

Would you prefer Blackwater contracted police, or police departments that are accountable to the public?

 

[Skeptic Ginger]

... and in a world where it can never be profitable to be net neutral (i.e., it's not important enough for customers to pay for), why do we care enough to preserve it by fiat?

You think your ISP is barely getting by?

 

[Skeptic Ginger]

I was at a concert once were people started standing up, then standing on their chairs, then standing on the backs of their chairs. The end result was a dangerous situation, but everyone had about the same view as they had while seated.

Tragedy of the commons.

 

[Francesca R]

Compare the IPad Net service to your regular Internet service and see which one you like better.

Actually I prefer an open-platform browser. See:

[The iPad] is rather exquisite, although it also exudes something of a control-freak/we-decide-what-you-get vibe, particularly every time it tells me adobe flash isn't allowed to work. [ . . . ]

IPad has no net neutrality.

I agree. Apple's platform is in general non-neutral, from the iTunes store, to the App store, to Safari, to just about everything to do with the iPhone. It is much broader than merely network non-neutral. And I mentioned it in another thread about network neutrality here:

People select, and pay for tiered service and allow themselves to be price-discriminable across the board. I already mentioned the iPhone example of an extremely popular platform that is shot through with a highly restrictive gatekeeping policy. Why isn't the Open Handset Alliance (Android) totally caning Apple (and BlackBerry)?

That does not mean people won't tell you they'd like it all free, and now^TM, but their actions determine their genuine preferences. No it isn't a hand-wave; it's as empirical as can be.

. . . and here's Nielsen's update of the market share of smartphone platforms (3 March 2011)

But here's where your illiberal views show themselves. I suggest to you that if you argue for network neutrality laws by saying: "If we don't get this, you can expect more things like the iPad", then you will be a laughing stock.

And if you argue for neutrality laws by saying "We need this because the iPad et al should never have come into existence in the first place and nobody should be permitted to have one", you will bury your case completely. So go for it! With advocacy like that, there need be little organised opposition. .

Next you'll probably try to argue that the emergence of the iPad et al is the opposite of innovation.

Me too, and not only have I thought about it [ . . . ]

No, I really don't quite think you have.

 

[Almo]

My thought is that they were looking for strategic benefits. The customers who were high Skype users were also abandoning their voice offering (the cable companies here are the #2 provider of voice). My thought is that they may have felt these customers would be willing to part with some newly-freed-up wallet share to get a better approximation of the voice product that was being replaced with Skype.

It's this sort of thing that bothers me. Videotron has a huge part of the ISP market here in Quebec, and also runs video rental stores. They want to charge Netflix extra money for routing their packets to me, because Netflix competes with their other service. Netflix would presumably charge me more for their service. That gives Videotron the power to raise the price on Netflix until it balances users' use of their video stores.

Given what I read about Microsoft in Judge Jackson's finding of fact against them, I find it very hard to believe they would not use non-neutrality in this way.

As a perverse scenario, imagine Pepsi pays Videotron to slow down any packets mentioning Coke.