WSJ: Internet Wrecking Ball

Imagine a town that has all sorts of gasoline pipelines running by it but only one gas pump. Rationing is inevitable. So are price controls.

Everyone gets equal amounts, except of course first responders like police and ambulances, which should get all the gas they want. And, well, so should the mayor. And if you can make a good business case that you work 60 miles away, you can file paperwork and perhaps pull some strings for more gas. How about those kids hot-rodding around town who can't drive 55? They get last dibs, and maybe we can sneak in some gas thinner to slow down their engines and not waste gas.

You can do all that and constantly update the gas neutrality rules -- or you can just open another gas station across the street. Or one on each corner.

The trick to an open and innovative Internet is not sneaky technical fixes nor more rules and regulations and bureaucracies to enforce them. The Internet will only expand based on competitive principles, not socialist diktat.

This is the essence of the Ed Markey's (D., Mass.) Orwellian-named Internet Freedom Preservation Act of 2008, which would foist network neutrality on the wild and woolly Internet. The Federal Communications Commission is holding a public hearing today at Harvard Law School in Cambridge, Mass., to build the case for the ill-conceived idea of preventing, as Mr. Markey's bill would, network operators from using technologies that may favor one application over another.

It's a bad idea because the only thing Mr. Markey's bill will preserve is mediocrity via the lack of competition, and full employment for regulators micromanaging a business whose very innovation comes from the lack of rules. With net neutrality, there will be no new competition and no incentives for build outs. Bandwidth speeds will stagnate, and new services will wither from bandwidth starvation.

The idea of network neutrality is that all of our Internet packets are equal, and that the spirit of the Internet and its ability to create wonderful new applications like Google, MySpace and Facebook is predicated on open (albeit limited) access for all. Yet, despite an overabundance of bandwidth pulsing throughout the U.S., we are still stuck with rationing to our homes. Haven't we learned that advancing technology is never served by arbitrary rules to divvy up scarce resources? Look at the dearth of good cell phone applications. Rules make incumbents lazy.

This is all in response to Comcast trying to kill off pirates. Arrgghh. After denying it, Comcast was caught "traffic shaping," sending TCP Reset packets to stop P2P BitTorrent downloads.

In plain English: Comcast is this country's second largest Internet provider and has been plagued by mostly illegal copyrighted video file sharing that is chewing up half or more of its precious bandwidth. More of that than you'd think consists of "Family Guy" episodes. Comcast, whose growth is slowing and whose stock is down 30%, is acting scared of the day when video is delivered one episode at a time instead of via Basic Cable, threatening its bread and butter.

So Comcast took matters into its own hands and applied a sneaky technical fix, a fake message that severely slowed these peer-to-peer video downloads. By the way, this same technique is used by the so-called Great Firewall of China to censor search requests like "Falun" or "Tiananmen." Nice company.

So that's it, isn't it? Comcast's franchise is threatened so it got out the bag of dirty tricks. Google, who you would think has a huge incentive to kill the video star, supports net neutrality. Google has become an incumbent, protecting its no-longer-modern textual ads.

But new layers of regulation just mean long gas lines/slow bandwidth. We have faux competition, cable monopolies versus phone monopolies. Cable modems work by taking away a TV channel or two and using them for data, at $59 per month for 4.5 megabits per second and $69 for 8 meg (while 100 meg in Japan is $30/month).

I have no problem with Comcast cutting back BitTorrent or anything else, as long as I know about it and I have a choice to go elsewhere with my business. But I don't. I might like Comcast service without BitTorrent because my Web pages will come up faster. Others won't. But there is no elsewhere. Antiquated franchise rules mean there's only one cable provider in most towns, and AT&T's DSL service over creaky phone lines is way too slow.

We need policy to help cut a path for more competition, rather than protecting incumbents -- a Bandwidth Competition Act of 2008, not bogus net neutrality. All takers should be allowed access to poles or underground conduits. This is where neutrality should be enforced, instead of being a choke point.

Municipal or privately run wireless data services using Wi-Fi or WiMax should be sprouting like weeds. But they aren't being built because of lack of access to street lights, of all things, to set up access points. Verizon is busy rolling out a fiber optic service, FIOS, that will provide much higher speeds and real competition to Comcast. But it is slow going, as state by state video franchise rules still favor cable over any newcomers.

A stroke of a pen can cure these ills, incumbents be damned. They will adjust. I personally would climb telephone poles on my street to run fiber if I could get 100 megabit Internet service. Any takers? Talk about an economic stimulus; this is the type of infrastructure we need. The stock market will fund it all as well as resolve overbuild problems.

Don't think of Internet access as a static business -- someone put in phone lines 50 years ago or cable lines 20 years ago, and we are stuck with their limitations. Technology changes the game every few years. Even fiber lines put in today will be obsolete within 10 years and need upgrading. Same for wireless systems.

The trick to an open and innovative Internet is not sneaky technical fixes nor more rules and regulations and bureaucracies to enforce them. The Internet will only expand based on competitive principles, not socialist diktat. The more we can do to clear a path, the greater our national wealth will be. Comcast did us a favor by bringing this net neutrality debate out in the open. I hope the FCC doesn't fall for this lousy idea.

Mr. Kessler, a former hedge fund manager, is the author of "How We Got Here" (Collins, 2005).

Comments

[Smokin Joe]

Sorry, no dice. Please think of logic and examples that would be able to explain how the Internet has flourished to this point and then will 'stagnate' (for lack of better all-encompassing word).

Is it me, or has any market that involves the Internet been pushing the limits of quality and bandwidth with everything still being Net Neutral? When the big tech gurus decide it is time to end the neutrality, then perhaps I will start to think otherwise, but the only people who want it removed are the same companies that would profit the most.

[Terry]

You are a liar and a corporate shill. People are smarter than you realize.

[Matt]

"Socialist diktat..." "rationing..." "Orwell..."

This article is a joke. And what a surprise that Mr. Kessler is former hedge fund manager. Now there is a business that really takes seriously ideas about fair distribution of resources.

The net neutrality supporters are so wrongheaded that Comcast has to pay shills to fill seats at public FCC hearings so that their socialist ideas are shut out.

[Ajita]

The internet is neutral right now. Its the only media today that is. If people knew the history of how print and radio media was changed from being neutral to being monopolized by a few corporations, this argument will be see for what it is - a way for capital to regulate speech. The language used by these corporate hacks is grossly misleading. Why call net neutrality "regulation". All neutrality does is prevent money from influencing what information we all have access to. They are the ones "regulating" speech. They pretend that government is this monstrous entity out to get us. Government is about the people. Big business interests don't give a crap about the people AND they control government now. What they are trying to do is regulation. What the net neutrality movement aims for is to de-regulate free speech. Watch this video and listen to Tim Berners-Lee, the inventor of the internet, tell us what's at stake here:
http://www.youtube.com/watch?v=JP_3WnJ42kw

[Karl Spain]

The economic engine produces a little and people are happy.
Somebody gets hurt by the economic engine and people want the engine fixed.
After being "fixed" the engine produces less and people complain.
After being "fixed" again the engine produces even less and the people complain.
Nobody really knows how the engine works but no one will admit it.
Someone clears away some of the fixes, but slowly, at great cost.
Go to the first line.

[Blog Design Center]

Sorry for chiming in so late. Net neutrality is not only good for the competition but will drive the creativity online. If ISPs become the cops controlling the traffic on the web then this new medium will be doomed.

[Mature dating site]

Always was interested in this theme! The Internet Freedom Preservation Act only guarantees that the Telcos don't cut secret backroom deals with other “mega-corps” to throttle the bandwidth they've sold me.

[meet people free]

I searched for this theme! This is just not a true analogy. We are close to the point where there is not enough bandwidth. By giving more bandwidth to the highest bidder you are forcing other players out. THAT is what will stifle innovation, not the other way around - Matt.

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[Camarad]

Thanks for the information! Comcast et al are driven by having to pay huge economic rents to content providers and that seals their fate. Without those rents, there will *be* no content. See "Be Kind Rewind" for details. The only thing they can afford to do is play defense. But the economic rents of the content providers will drive anyone who "competes" to the exact same behavior.

[Garrett Hedlund]

I think, this theme is quite actual now. The language used by these corporate hacks is grossly misleading. Why call net neutrality "regulation". All neutrality does is prevent money from influencing what information we all have access to. They are the ones "regulating" speech. They pretend that government is this monstrous entity out to get us. Government is about the people. Big business interests don't give a crap about the people AND they control government now.