Why is net neutrality a more complex issue than what you think? (Part I)
Net neutrality, what?!
Net neutrality is the premise that public authorities or communications regulators require Internet service providers (ISPs) to treat all data flows and accesses to Internet the same way, without discriminating. The term was coined by Tim Wu in 2003. In his paper “Network Neutrality, Broadband Discrimination”, the Columbia University professor shows the emerging tensions between the “private interests of broadband providers” (the ISPs) and the “the public’s interest in a competitive innovation” (more or less everyone else).
As detailed by Wired, “at the time, some broadband providers, including Comcast, banned home internet users from accessing virtual private networks (VPNs), while others, like AT&T, banned users from using Wi-Fi routers. Wu worried that broadband providers’ tendency to restrict new technologies would hurt innovation in the long term, and called for anti-discrimination rules.”
Since then, there have been several other net neutrality violations.
Here are some practices from ISPs which lead or can lead to broadband discrimination (i.e. opposite of net neutrality):
- Bandwidth throttling: ISPs intentionally slowing (or accelerating) network traffic, leading to smaller (or larger) users’ bandwidth usage. This can be achieved by discriminating IP addresses (e.g. Orange charging Google to use its network in France — The Verge) or protocoles (e.g. the Comcast vs BitTorrent case which will be discussed in Part. II)
- Bandwidth cap: ISP limiting the data access speed or limiting the amount of data that a user can download per month for instance. This practice is well-known as it affects most Internet end users. After passing the cap, the user sometimes has “unlimited data” with bandwidth throttling to reduce access speed to the Internet. Bandwidth capping is also referred as usage-based billing or fair access policy by ISPs.
- Tiered service or Bandwidth partitioning or Paid prioritization: ISPs charging different prices for bandwidth usage, resulting in favoring traffic transmission from users paying a premium.
- Port blocking: ISPs intentionally denying transmission of traffic. For instance, in 2009, AT&T decided to block VoIP (Voice over Internet Protocol) to favor its telephony network.
In 2006, Tim Wu was then followed by Tim Berners-Lee, founder of the World Wide Web, reiterating on the importance of net neutrality. He emphasized on two points to describe what net neutrality is not: “asking for the internet for free” and “saying that one shouldn’t pay more money for high quality of service.”
Net neutrality in the news
In April 2015, the FCC (US Federal Communications Commission) reclassified ISPs from “information services” under Title I of the Communications Act of 1934 to “common carrier telecommunications services” under Title II, thus enforcing net neutrality and considering ISPs as public utilities. One of the main requirements for “common carriers” is that they can’t discriminate.
On December 14, 2017, the FCC, led by chairman Ajit Pai, voted to repeal net neutrality rules, established by the 2015 Open Internet Order.
On March 12, 2018, Tim Bernes-Lee published an open letter asking for a “legal or regulatory framework” to maintain innovation and creativity on the Web.
It looks like this vote in December brought massive public interest to the net neutrality debate (for a tiny period of time only?).
Net neutrality economics
Ajit Pai explained to PBS that net neutrality could have a negative impact on the economic incentives of ISPs and their investments: “[his] concern is that, by imposing those heavy-handed economic regulations on internet service providers big and small, we could end up disincentivizing companies from wanting to build out internet access to a lot of parts of the country, in low-income, urban and rural areas.”
Likewise, according to Mark Jamison, who served on the FCC transition team for President-elect Trump, “rarely is an economic regulator so confident of its economic reasoning and yet so pilloried by economists, as has been the case of the Federal Communications Commission’s (FCC) 2015 decision to subject internet service providers (ISPs) to Title II regulations.”
With a group of economists, he analyzed the economic research that has been done on the 4 following topics in the top 300 journals:
“1. How would regulations restricting ISPs from offering enhanced network features, such as fast lanes, to content providers affect (a) total welfare, (b) network investment, and (c) the variety of content on the internet and content provider investment? (Note: “Total welfare” is value that consumers receive from what they purchase minus the cost of providing the products.)
2. How would prohibitions on network termination fees affect total welfare?
3. How would prohibiting ISPs from blocking content affect total welfare?
4. Are ISPs like the telecom companies for which Congress wrote Title II?”
They found different conclusions between all the economic articles analyzed, however according to Jamison, “most articles found that the regulations [from restricting enhanced network features] decrease welfare.” Jamison’s personal conclusion is that “ex ante net neutrality regulations stop more good things than bad things, so ex post regulations are a better option. And Title II is the wrong instrument.”
Image Credit: Telecomsense.com
Other major economists have also claimed to be against the net neutrality regulations like Michael Katz, former FCC chief economist for President Clinton and now economics professor at UC Berkeley.
In his 2016 paper “Whither U.S. Net Neutrality Regulation?”, Michael Katz concludes that:
- “The Commission has made several claims about the benefits of its [net neutrality] policies that economics does not support.”
- About “Commission’s prohibition of paid prioritization […] there is a substantial risk that it will be a Robinson-Patman Act for the 21st century (i.e., a policy that seeks to limit competition under the guise of preventing anticompetitive price discrimination)”
- “The logic of net neutrality would also argue for banning e-commerce sites from purchasing faster delivery from FedEX or UPS, or from offering free shipping.”
- “Although the Commission claims to be seeking to prevent exclusionary behavior, its rules may actually increase the incentive for a vertically integrated BIAS provider [Broadband Internet Access Service] to engage in foreclosure against competing edge providers [Content providers and Internet services].”
According to Katz, low income individuals could probably benefit from the end of net neutrality. He states the example of “Binge On” from T-Mobile where “a consumer can choose to connect to one class of edge provider services at slower speeds in return for having the traffic associated with those services not count in the calculation” of their monthly data usage. However, “Binge On” like Free Basics from Facebook have “been attacked as violations of net neutrality, despite (or because of) the fact that they provide consumers with additional options.”
Not to be mistaken, Katz is no against regulation for the Internet like in other economic sectors. He just does not see any “significant incremental benefit over existing state and federal antitrust policies” from net neutrality rules.
However, New York University economist Nicholas Economides explains that: “Right now we don’t see companies like Microsoft, Google and Amazon coming to AT&T begging for prioritization.” Economides is not in favor of repealing the net neutrality rules, because you don’t break something that works.
In Lisbon, telecommunications service firm MEO released different mobile packages tailored to specific apps. The biggest economic risk here is favoring established firms in spite of startups, innovation and emerging companies. Nevertheless, there is no information at this point that the companies in the packages have paid to be part of those packages.
Anyway, it will come as no surprise that ISPs and telecom companies still rank very low in customer esteem (IMB survey).
