Sunday, January 22, 2006

Network neutrality.

Further to what Tyler Cowen was discussing the other day, the issue of network neutrality hits the Washington Post's op-ed page today. Christopher Stern writes:
In a November Business Week story, AT&T Chairman Edward E. Whitacre Jr. complained that Internet content providers were getting a free ride: "They don't have any fiber out there. They don't have any wires. . . . They use my lines for free -- and that's bull," he said. "For a Google or a Yahoo or a Vonage or anybody to expect to use these pipes for free is nuts!''

It was a stunner. Whitacre had apparently declared that AT&T planned to unilaterally abandon its role as a neutral carrier.

Whether or not you agree with Whitacre, you can understand his frustration. Companies like Google and Yahoo pay some fees to connect to their servers to the Internet, but AT&T will collect little if any additional revenue when Yahoo starts offering new features that take up lots of bandwidth on the Internet. When Yahoo's millions of customers download huge blocks of video or play complex video games, AT&T ends up carrying that increased digital traffic without additional financial compensation.

The piece continues to discuss the political impact of these and other statements.

I don't understand this, except in the sense that Whitacre, like a good trial lawyer, sees some deep pockets out there and wants to get his hands in them. Companies like Google and Yahoo are suppliers. They connect their servers to the Internet because millions of consumers like me are connected too. I pay a considerable sum of money to my ISP every month to be able to download those huge blocks of video or complex video games. If AT&T ends up carrying increased digital traffic without receiving additional compensation, that's only because it has decided as a business matter to give its customers unlimited access for a flat rate. If I understand Stern correctly, Whitacre's frustration is that he can't charge both sides for the same transaction.

Am I missing something?

Comments:
Since I'm not sure what the "something" you're maybe missing is, it's hard to say. But there's more to it, potentially, than just charging those who congest the network more. Let's put aside whether the flat-rate model for consumers is viable with heavy broadband use. Presumably the usage could become like that it college when Napster was all the rage--colleges had to cut off network access. So that's a problem.

But the author's fear, and alegitimate one, is that the ISPs will not discriminate just on the volume of bits, but also on viewpoint. Like cable providers who don't want to cut deals with ABC, or someone. Say an ISP wants to stick it to foxnews, or msnbc, or someone else. good result?
 
The ISPs decision to charge a flat rate may or may not be viable as broadband usage grows -- we'll have to see. You would think that if it's not viable, you would start to see ISPs competing by offering some kind of variable pricing. I'm not aware of anyone out there doing that. This undercuts any protest by ISPs that they're being victimized here. Colleges weren't charging users for access at all, creating no disincentive to tax the network. If ISPs are having that problem, they just need to change their own pricing.

I'm totally down with the author's fear about viewpoint discrimination. I think the subtext of what I'm saying about the economics of the AT&Ts of the world is that I'm not seeing a complaint that should justify a shift away from neutrality.
 
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