I don’t think it’s a great sign when there’s a lot of public outcry about public policy. Of course, you can’t make everybody happy, but it’s usually a good idea to make as few people unhappy as possible. In this case, the irony is that the public outcry is largely taking place on the platform that is the source of the outcry - the internet, the web, the interwebs, the world wide web, the cloud, the global system of interconnected computer networks that use the Internet protocol suite (TCP/IP) to link devices worldwide...basically Spynet(you think I’m joking?). A bunch of servers hanging out, all around the world, talking to each other.
Not so long ago, in the Universal Declaration of Human Rights, particularly Article 19 Section 32, the UN declared that access to the internet is a human right:
“Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers.”
Section 32 adds a list of recommendations with regard to the rights of those who work in and rely on internet access. Among these recommendations are a few that I think are most relevant to this question of Net Neutrality:
“...Recognizing that, for the Internet to remain global, open and interoperable, it is imperative that States address security concerns in accordance with their international human rights obligations, in particular with regard to freedom of expression, freedom of association and privacy,...”
“...Deeply concerned also by measures aiming to or that intentionally prevent or disrupt access to or dissemination of information online, in violation of international human rights law,...“
“...Stressing the importance of applying a comprehensive human rights-based approach when providing and expanding access to the Internet and for the Internet to be open, accessible and nurtured by multi-stakeholder participation,...”
There are a bunch of other points raised that are also important, though not *as* directly relevant to Net Neutrality. Anyway, I’m not interested in exploring the philosophical ramifications of Article 19, but given that the Human Rights Declaration that you probably didn’t read but probably assumed that you agreed with is an important backdrop to any discussion of Net Neutrality, I figured it was worth mentioning.
Ok, so, definition. Net Neutrality is the principle that Internet service providers(ISPs) must treat all data on the Internet the same way, and not discriminate or charge differently by users, content, website, platform, application, type of attached equipment, or method of communication. Particularly, ISPs are not allowed to intentionally block, slow down, or charge money for specific websites and online content. The shift “began” in February 2015, with the FCC reclassifying broadband access as a telecommunications service(a public utility) - this applied regulatory provisions under the Communications act of 1934 as well as the Telecommunications act of 1996. In April of 2015, the Net Neutrality rules as defined above went into effect. There was a lawsuit filed against the FCC by the United States Telecom Association(USTelecom), arguing that this was an overstep by the FCC and would hurt their businesses. Now, the current FCC Chairman has stated his intention to end the “utility-style” regulatory approach and allow market forces to regulate the Internet. Additionally, that the oversight of privacy practices should fall to the Federal Trade Commission(FTC). Furthermore, that a regulatory framework based on reactionary action rather than preemptive action, with regard to infractions by ISPs, would be more effective. The FCC stance is that this reversal will increase innovation as well as investment in internet infrastructure - an economic statement.
As it’s been framed in most of the discussions that I’ve seen, the Net Neutrality issue is about the choice between allowing Big Telecom to run rampant, force people to pay for access to certain sites, and to take advantage of tiered pricing schemes to maximize their profits or...to continue protecting consumers by ensuring that the speed and breadth of access to the Internet is equal regardless of which ISP you use. While I do think that these two possibilities exist as meaningful discussion points, I don’t think that they’re what the policy of Net Neutrality is about. It’s really an economic question about how to incentivize innovation and investment. For me, the questions that are more fundamental to consider:
- How should we classify the internet among other “utilities”?
- Depending on what kind of utility the internet is classified as, what degree and type of regulation should be put in place to best benefit(through innovation, investment, lower prices, etc.) the “average” citizen?
I think the conversations about “free access vs throttling & restriction” and “competition vs regulation” are ultimately captured in the questions posed above. That said, I’ll come back to what I think the optimal outcome(s) are. Shall we begin?
I think we should start with defining a utility, particularly a public utility. The list of public utilities includes electricity, natural gas, water, sewage, telephones, and transportation. In general, they are government owned monopolies or are tightly regulated if privately owned. While it’s not an apples to apples comparison, I think the best existing public utility to compare the internet to is water. Water can come in varying levels of cleanliness/purity, it can be supplied at different temperatures, and it can be supplied at different pressures. So, to continue with my bad apples to oranges comparison...let’s say that the content available to you is like the quality of your water, the temperature is how fast your connection is, and that the pressure is the bandwidth that is available to you. I suppose I’ve assumed that what content, connection speed, and bandwidth are household concepts, but to be thorough*:
- Content - Facebook, Netflix, Hulu, Google, Youtube, Amazon, Chris Hunter’s mediocre personal website, etc. basically it’s the places you go on the internet.
- Speed - how fast youtube videos buffer(sorta), but mostly how long it takes for those pirated movies to download.
- Bandwidth - how many people can be using it at the same time. E.g. trying to use the free airport wifi when the airport is packed vs. watching Netflix(because it’s on autoplay) at 3 am while everyone else is asleep.
*these definitions are not thorough, but you can google them...I believe in you.
Before I forget, the missing piece would be the pipes that transport the water to you. They could be old and rusted. They could be able to withstand high pressures. They could bring the water all the way to your house, or not. In the case of the infrastructure of the internet, the pipes would be fiber or wires that you connect to. The goal would be to make sure that there is fiber reaching as many people as possible(span) and to ensure that the quality available over that fiber is as high as possible.
So, the objective is to maximize those few things in the same way that, as an individual, I’d try to make sure that I have warm, clean, and decent pressure water whenever and wherever I need/want it. The job of policy makers is to craft policy that leads to those things being as high as they can be while keeping costs as low as they can be. The internet is a relatively new thing to be asking these questions about, because it’s the newest of the public utilities I listed before. So the question that I started with, what kind of utility is it is where to start.
So, given that the UN decided to include internet access as a human right, I’m going to assume that it’s reasonable to consider it a public utility. I think of it as something that you don’t get for free, but that in our information dependent age is as necessary as water. That’s basically just to say that comparing the internet to water, while a bad comparison, is at least comparing two fruits. So, how does it fit in with the rest of the fruits? What are its characteristics? Like electricity, most of our day to day lives rely on it. We do need water in our day to day lives, but our machine overlords don’t. But, unlike electricity there’s an entire spectrum of different content - electricity is always just electrons. Water on the other hand can have varying levels of different chemicals in it - yes, Netflix is a chemical. For the sake of not continuing to go around in circles, I think that the internet is in fact a sufficiently comparable utility to warrant comparable levels of regulation to water, electricity, but that it also bears similarities to television. While also regulated, it is significantly more diverse in terms of content, and the regulation it is subject to is meaningfully different.
So, how do we regulate this hybrid thing to get the optimal consumer outcome. If the outcome were to purely benefit the bottom lines of the major ISPs, that wouldn’t be explicitly bad, but it would only be explicitly good for shareholders in those companies and would only benefit the “average” consumer if it leads to innovation and investment. I personally consider the objective to be the fostering of competition, which I think is not likely to occur if existing or larger companies have too large an advantage as a result of regulation. However, it is clear that the large existing players want less regulation so I think it’s best to start with considering why. After that, I’d like to take a stab at who the winners and losers are given the outcome of the December FCC vote.
In the pre-regulation world of “before 2014” there were a variety of investigations and lawsuits that took place in the context of the net neutrality conversation. To keep the examples relatable, let’s start with Netflix. Over the course of 2013, Netflix subscribers who used Comcast noticed that their connection speeds had decreased significantly from previous years. In early 2014, Netflix made a deal with Comcast to improve its(Comcast’s) quality of service to Netflix clients. Later that year Netflix also struck a similar deal with Verizon after seeing a similar reduction in connection speed. Mind you, the deal was only struck after Verizon obtained a cease and desist order in response to Netflix notifying its customers of the “issue”. In any case, the interactions between these ISPs(Comcast and Verizon) and the content provider(Netflix) is a fairly clear use of market power(I’m not going to define market power, but I think the description makes it fairly clear what happened...sorry that this parenthetical is so long) by the ISPs. I think it’s also worth mentioning that this is particularly relevant when Hulu and HBO Go are direct Netflix competitors and are conveniently owned by Comcast or Time Warner or Disney or some combination of all of them. In simple terms, “We’re going to slow down access to your site to push people to our sites, or you can pay us money to be treated the same way”. I mean, that’s what I would do if I were in their position. In fact it’s something that is done fairly frequently in the television network world.
For example, I’m from Long Island, where you can get News 12 Long Island. However, you can only get it if you use Cablevision. That is, there is certain content(a channel) that you can only gain access to if you subscribe to a specific company. So, the Netflix scenario would be something like the cable company saying, sure, you can watch Netflix, but the channel will be blurry to the point of being unwatchable. Is that a reasonable way for television channels to be made available? It is to some degree exactly how they’re set up, so do we want a similar outcome? I think it’s worth considering the infrastructure that has been created as a result of this type of competition between companies. Is our television service reliable? Do we have access to all of the content that we want to? Are there alternative services that we can switch to if we don’t like the one we currently have? I’d say that it depends on where you are, but that by and large there are two options that you don’t like to choose from.
The barriers to entry on both the individual broadcasting network side as well as the cable television companies that provide access to those networks are high as a result of a great deal of regulation, but also the reality that it’s fairly capital intensive to start a service that does either of those things. That is really the largest difference between the internet service market and the television service market - content is less expensive to produce on the internet side. Given that it is relatively inexpensive, there are more content creators. So, the question becomes, does that shift in the quantity of content producers incentivize more service providers to enter the market? Does it and should it shift the level of power between content producers and service providers? There are lots of questions and few answers. So, on to my stabs at the winners.
In the last several years, we’ve seen a sharp uptick in the number of people who have begun replacing television services with online streaming services. Unlike water, there are a plethora of sources of entertainment and information. We’ve gone from books, to TV, to the internet in the last 90 or so years. In that period of time the number of telecom companies has continued to shrink. In general, I do think it is better to have utilities to be monopolies of some form, simply because it’s not efficient to lay 2 sets of pipe or to pave two roads in the same geographical area as a result of competition between companies. There are space constraints on where you can fit things efficiently. However, we’re presented with a problem when a small set of wholly private interests control the fate of a public good. At the same time, I don’t consider the often government owned water, transportation, and electric companies to have produced an optimal outcome in any of those markets. Our infrastructure is old in a lot of places, and there doesn't seem to be too strong of a push for improving it. So, while my suspicion is that content providers will be harmed while ISPs benefit in the short run by the absence of Net Neutrality, I think it’s actually okay that it’s been rolled back. Firstly, states have been implementing their own Net Neutrality provisions. But additionally, I haven’t encountered meaningful disparities in service between sites just yet. Time will tell whether investment/innovation has taken place, but that’s really what this is - an experiment. We have been in something of a stalemate as far as creating further investment in internet service. At this point, we’re starting to lag behind other developed countries in terms of the speed that is available.
So, to finish off what has become far longer than I originally intended, my advice is to buy shares in Disney/Comcast/TimeWarner/Verizon/whoever’s service you actually use as well as content that you actually consume. If you’re worried about a company extracting profit in the form of your internet bill, why not buy a share in the company so you get a share in the profit. I’d also add that the more pressing issue in my mind is that a strong majority of consumable media is controlled by a short list of individuals. So, make sure to fight for the survival of all content creators, even the ones that you don’t agree with, and especially the ones that are not already subsidiaries of some billionaire’s life’s work.
P.S. I'll add some graphs later, probably.