On Tuesday (November 30) Internet backbone provider Level3 publicly accused cable-based ISP Comcast of trying to thwart competing video services delivered through the internet. Comcast was, according to Level3, suddenly choosing to charge it more because of its carriage of Netflix traffic. The accusation was consciously framed to raise net neutrality alarms. It appeared as if a cable TV giant was using its control of internet access to make access to a competing, over the top video service more expensive. Key figures in the NN movement took the bait, accusing Comcast (to combine some of the more colorful phrases, of being a "toll-collecting, nuke-wielding hydra."
Then the full story came out. This was a peering dispute. In peering agreements, two ISPs exchange traffic without paying each other, on the assumption that both parties have roughly balanced traffic and benefit equally from the interconnection. When there is no balance - that is, when ISP A reaps more benefit from the interconnection than ISP B - it is common practice for ISP A to pay ISP B for the service. These interconnection agreements are embodied in privately negotiated contracts and accordingly the market for internet interconnections is pretty robust and flexible. At least, it looks that way to anyone familiar with the 30-odd years of interminable, costly regulatory disputes over telephone interconnection arrangements. By winning the Netflix bid, Level 3 assumed the status of a content distribution network and increased the amount of traffic it would be pumping through Comcast. CDNs typically pay ISPs for carriage rather than peering.
Faced with this information, some NN advocates responded appropriately. Public Knowledge quickly retreated to an appeal for transparency, in effect admitting that "we don't really know what's going on and we wish the FCC would use its authority to find out." Free Press on the other hand has kept in place a rather strident news release saying ""This is just a preview of what a media monopoly will look like in the Internet age — one company, consolidating its media power to squash competitors, stifle innovation and price-gouge consumers."
Both Free Press and PK have done an outstanding job of fighting for the autonomy and freedom of internet users. But their approach to NN has always been saddled with two problems.
Problem one is the pitfall of "bandwidth egalitarianism," i.e., the crazy idea that bandwidth is not a scarce resource that must inevitably be rationed or managed in some ways, including the price system. As we have argued before, net neutrality concerns should never be confused with bandwidth egalitarianism; the bad thing is not "charging for bandwidth" or "tiering" per se, but anti-competitive discrimination and whether the network intermediary uses its market power over access to exert vertical leverage over content, services and applications.
Problem 2 is the idea that public interest regulation is inherently good and can fix anything and everything that ever goes wrong. Increasingly, advocates of net neutrality have pegged their case to a larger and more powerful role for FCC regulation in the internet industry. And thus the net neutrality debate, instead of focusing on developing new institutional arrangements to preserve internet freedom on BOTH the demand and supply side, descends into a replay of the early 1980s, Reagan-era punch and judy show between democrats and republicans, with one arguing for "more government" and the other for "less government." Neither talking much sense about what the government should actually do. While we believe that there should be rules securing end user rights regarding access to internet content, services and applications, we think it is a mistake to equate this with "more FCC regulation" — just as it is a gross oversimplification to equate a complete absence of rules regarding net neutrality with "more freedom."
There is an important lesson to be drawn from this episode about how to pursue - and not to pursue - the goals of Internet freedom associated with net neutrality. The Level 3 maneuver is a good example of what can and will happen with an over-regulated internet: one business interest complains about another about a commercial negotiation and attempts to bring in the feds simply to get a better business deal. Opening up these contractual arrangements to political mediation is a slippery slope. The scope of regulation - and the costs of participating in the industry - steadily rise as more and more aspects of the industry are sucked into this vortex.
In the current political climate, if net neutrality is framed as "more regulation" and anti-net neutrality is framed as "less regulation" who d'ya think will win? And if NN advocates allow themselves to be snookered into being pawns in a bargaining game between telecom giants, who wins from that?
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