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

[Les Cargill]

The last mile is a disaster area. Like the battle of Cold Harbor, it's trench warfare and technology will not change this. It will only make it worse. WiMax is stillborn and will continue to be. 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.

We've already seen Yahoo et al be prepared to discard mechanical licenses on replicated, downloaded content - which leaves the creative contributors out in the cold. Shades of LeRoy Percey and the Greenville Flood - ironic, given the historical role of the Lomaxes.

Other than doing something straight out of Proudhon, nothing can be done. It's Chinatown, Jake. Grab a banjo (or oud, or froglike magic twanger) and make your own entertainment product. Only live music is any good, anyway.

[Matt]

Andy - in your gas example, you make it sound as though there is enough gas for everybody and that we can open have more output at no cost to anyone already consuming. 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.

[Edward R. Wales-McGrath]

Why are European bandwith rates so much faster than ours when they have net neutrality. This sounds more like a lobbying piece from Comcast/ Verizon than any sort of rational opinion. There is very little honesty here.

[Ben]

I agree with Matt -- how can you expect faster bandwidth speeds at better prices if the net isn't neutral? Even worse, imagine if your ISP decides to give you slower than usual access (or none whatsoever) to The Wall Street Journal website because it is affiliated with the New York Times. Maybe next time you should check with some experts in the field (ie John C. Dvorak of PC Magazine) before hastily coming to an opinion.

[John Gage]

You have no understanding of this bill or the internet apparently. The internet isn’t like a gas pipe BTW.

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.

Connectivity in the USA is ranked 17th in the world... in many other countries bandwidth is faster, cheaper and regulated. The current system isn't working… internet connectivity should be treated like an "information utility" and regulated as such.

[Rob Eamon]

This response from John Dvorak is a bit in your face, but there are many salient points:

http://www.pcmag.com/article2/0,2817,2269835,00.asp

[Rafael]

A guy that thinks Internet bandwidth is like gas is a guy who does not understand what Internet is. Do not let this corporate lackeys fool you, use the Internet, get more information on the subject and you will know how far off this guy is..

[Mark]

I think the point is to eliminate bad legislation instead of layering more bad legislation on top.

Unfornutately while you can create laws far to easily, you cannot understand an entire economic system. You cannot predict with near good enough accuracy human behaviour and responses to artificial incentives. Every model, no matter how robust, is somewhat wrong. Mix in the speed of technological change, and there is no way government can get it right in this case. The only good laws are one that protect individual freedoms, including the freedom to compete. I firmly believe we have a dominant technology industry in the US because it was thankfully left alone. Let's continue that trend.

[Nick]

Andy has written about this before - http://www.weeklystandard.com/Content/Public/Articles/000/000/012/348yjwfo.asp?pg=1. I would read this before calling him a "corporate lackey."

[Matt Stofko]

In how many places can this article be inaccurate or paradoxical? Let's start counting:

1. "This is all in response to Comcast trying to kill off pirates. Arrgghh."

BitTorrent can and is used for much more than "Arrgghh, pirates." So, more accurately, the quote should read: "This is all in response to Comcast trying very unsuccessfully to kill off pirates. At the same time, they severely inconvenienced their customers, who often have no other solution to turn to."

2. "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."

Net Neutrality is the idea of preserving how the internet currently has been operating. We aren't introducing anything new here. So, you're saying that if we preserve things how they currently are, that bandwidth speeds will stagnate. Well, in 1993 I was using a 14.4 Kbps modem, and now I'm using an 8 megabit cable connection. While not with pace of the rest of the world, I hardly call that stagnation.

3. "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."

The lack of municipal Wi-Fi access comes in the form of fat payoffs to municipal governments. Why don't you state that? Probably because it has nothing to do with this argument at all. Let's move on...

4. "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?"

Which is it, an overabundance or a scarcity? Make up your mind.

5. "The Internet will only expand based on competitive principles, not socialist diktat."

The Internet will expand, period. Currently, the "socialist diktat" is a government sanctioned monopoly on high-speed access. Asking for those government sanctioned monopolies to play fair doesn't seem like an impediment to expansion. Instead, it's the only way to get some guarantee of service in a market where a customer basically has no recourse.

Like the article states: "We have faux competition, cable monopolies versus phone monopolies." You can thank the socialist diktat for that. Until that one is lifted, I want some neutrality among the players.