Losing Net Neutrality Is The Symptom, Not The Problem: Now Is The Time To Focus On Real Competition

from the beat-that-drum dept

For nearly a decade we’ve been trying to point out that the entire fight over net neutrality is something of a red herring. The concept of a neutral network is quite important for innovation. I think venture capitalist Fred Wilson does an excellent job talking about how much of a problem innovators might face in the future if we actually lost net neutrality, in that it would massively benefit legacy internet players over innovators:

Entrepreneur: I plan to launch a better streaming music service. It leverages the data on what you and your friends currently listen to, combines that with the schedule of new music launches and acts that are touring in your city in the coming months and creates playlists of music that you should be listening to in order to find new acts to listen to and go see live.

VC: Well since Spotify, Beats, and Apple have paid all the telcos so that their services are free on the mobile networks, we are concerned that new music services like yours will have a hard time getting new users to use them because the data plan is so expensive. We like you and the idea very much, but we are going to have to pass.

Entrepreneur: I plan to launch a service that curates the funniest videos from all across the internet and packages them up in a 30 minute daily video show that people will watch on their phones as they are commuting to work on the subway. It’s called SubHumor.

VC: Well since YouTube, Hulu, and Netflix have paid all the telcos so that their services are free via a sponsored data plan, I am worried that it will hard to get users to watch any videos on their phones that aren’t being served by YouTube, Hulu, or Netflix. We like you and your idea very much, but we are going to have to pass.

But, just because the court this week struck down the FCC’s weak attempt at forcing net neutrality rules on ISPs without resorting to classifying them as telcos, it doesn’t mean that the answer is to classify them as telcos and give the FCC a broad mandate over them.

And that’s because net neutrality fights have always been the symptom not the problem. A symptom of what? Of a near total lack of competition in the marketplace, a problem that has only become worse over time. Telco lobbyists will argue that we don’t need net neutrality because we have real competition, but they base that claim on the laughably inaccurate data that the FCC has put together at broadbandmap.gov. The FCC has been releasing totally bogus broadband data for years, and among the problems here are that it counts mobile data services as real broadband competitors, even though the big mobile data providers (often the same as the big telcos: Verizon & AT&T) don’t let you actually use mobile broadband as a full time service (not to mention that the speeds and reliability are a lot lower, while the costs are much, much, much higher). The reality is that there is less competition, as you basically still have one cable provider and one DSL/fiber provider in most places, with the DSL/fiber telcos actively trying to get out of the wireline business to concentrate on the more lucrative wireless world.

So, rather than picking a fight that is unlikely to be won (i.e., trying to get a timid Congress and or FCC to back the idea of presenting new net neutrality rules by reclassifying broadband ISPs — something that is seen as politically unfeasible) it’s time to recognize what the FCC should have realized a decade ago, but has always avoided: focus on encouraging real competition.

Two separate articles about this week’s ruling discuss this in more detail, and you should read both. First is Ryan Singel’s post about how the FCC won’t save net neutrality, and we should focus on building real competition. He argues the best path forward is through municipal fiber operations that offer open access to service providers. The big broadband providers have known all along that this is the most effective weapon against their fight for a monopoly, which is why they’ve lobbied hard to outlaw even the possibility of such competition in a bunch of states.

The other piece to read is former FCC staffer, now Wharton professor, Kevin Werbach’s take on all of this, which comes to the same basic conclusion. Congress and the FCC don’t have the stomach to reclassify broadband and put in place net neutrality rules, so it’s time to focus on the real issue, and that’s increasing competition:

The best hope for a dynamic, affordable, and innovative Internet is real broadband competition.

Most of the greatest barriers to broadband competition are at the local level: State prohibitions adopted at the behest of the incumbent carriers, difficulties with zoning and access to rights of way, and limited willingness to invest in the kinds of municipal open access fiber optic utilities that are wildly successful in cities like Stockholm. The FCC has been hesitant to confront these impediments, perhaps because it was so focused on net neutrality.

And the reason it was so focused on net neutrality was because it was unwilling to take on the real issue all along. It would provide lip service to competition, but never make any move to support real competition. But Werbach is correct: local state-level prohibitions have made real competition quite difficult. Getting access to rights of way is the biggest challenge in building a competitive network.

Google Fiber is no solution. It’s only available in a few places, and there are no indications that it will go national. And, despite early promises to run its network on an open access basis, Google has since backed away from that promise. That’s a big problem. Still, what we have seen is that real competition can make a difference. Whenever Google shows up with Google Fiber, boradband connections suddenly, magically get better for customers of competing broadband ISPs as well.

That’s how competition works. It drives investment and innovation. I have tremendous respect for Marc Andreessen, but I think he is wrong in thinking that there can’t be significant investment in broadband with net neutrality in place. Everything else he says in that link is correct though: faster, better broadband is key to all sorts of economic opportunity, but there’s no evidence that we get that when there’s no competition (and no net neutrality). Instead, what we need to do is to drive real competition.

That can be at the network level, but making it easier for local providers, whether municipal or (better yet) locally owned, or it can be at the service level. We’ve talked before about Australia’s efforts to build a fiber network across the entire country, but then let service providers compete on the network. Those are all plans that can work. The focus needs to be on competition, because once you have real competition, the net neutrality issue fades away.

Why? Because any service provider that tries to double charge Netflix or Hulu or Spotify to get to you becomes an option that users will leave. Competition keeps broadband providers honest. But dishonest broadband providers have spent years making sure there is no real competition, and since the government refused to take on this real issue, it instead focused on some weak net neutrality rules.

Those rules are gone.

What they’ve left exposed is a broadband market that’s massively lacking in competition. It’s time to fix that problem.

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Comments on “Losing Net Neutrality Is The Symptom, Not The Problem: Now Is The Time To Focus On Real Competition”

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Ninja (profile) says:

Interestingly it’s exactly what happened here in S?o Paulo. There were 3 main broadband providers with one being absorbed by one of the other 2 main ones and then the data caps started kicking in. Recently we had a 3rd and a 4th bigger join in, one of them offering blazing fast speeds without caps, for a reasonable price and without the need to have a cable tv plan attached then suddenly the speeds soared up with prices being pulled back to sanity. It is different in the countryside though where usually there’s only 1, at most 2 providers…

Ninja (profile) says:

Re: Re: Re:

It’s kind of a mess to explain but there are quite a few infra structure guys around in the bigger cities but only one or 2 when you go to the countryside. Here in S?o Paulo most of them have their own infra-structure (some of it shared) and there’s the public infra from Telebras (State owned). Telebras is everywhere being a stat company and so. There are plans to let the operators use its network to offer their services at popular prices (ie: cheap) but so far I don’t know how far it has developed. From my experiences on the coastal cities it’s still not quite there.

out_of_the_blue says:

COMMON CARRIER. The answer is to classify them as telcos and give the FCC a broad mandate over them.

Gosh, how do you manage to so consistently be wrong? Existing common carriers rules are adequate, and actually work fine for telephony, so why not for teh internets?

People are already suggesting that your precious Google and Netflix will be charged for extra traffic! Is that what you want, Mike? Your precious Google to be specifically charged for net traffic? — Actually, I LIKE that idea a whole lot.

“Google Fiber is no solution.” — Oh, of course, FIRST pops into your mind that mega-monopoly Google might solve this with its unlimited beneficence! NEVER enters your mind that Google IS a monster already demonstrating that it’s far from neutral. Man, you’re comically predictable: Google GOOD. — And that’s why I’m the opposite, kids, just to point up Mike’s consistency about promoting Google.

The only time competition exists is when corporations are kept small and highly regulated. BIG IS BAD. So throw out all thoughts of tweaking, and just CHOP the existing large corporations into small chunks, as was done with AT&T. That worked fine for telelphony.

“Libertarianism” isn’t a coherent philosophy: in practice it just asserts your “right” to be exploited by the ruthless and privileged in a “free” market.


Bengie says:

Re: COMMON CARRIER. The answer is to classify them as telcos and give the FCC a broad mandate over them.

What law are you proposing that will limit the size of a corporation and what scientific evidence should we use to determine the “correct” size?

How are you planning on keeping corps from working together after they’re split? They’ll still be owned and ran by the same people, just different accounting.

Are you planning on making a law that keeps people from owning more than one company?

It’s a really messy idea.

Anonymous Coward says:

Re: COMMON CARRIER. The answer is to classify them as telcos and give the FCC a broad mandate over them.

“Google Fiber is no solution.” — Oh, of course, FIRST pops into your mind that mega-monopoly Google might solve this with its unlimited beneficence! NEVER enters your mind that Google IS a monster already demonstrating that it’s far from neutral. Man, you’re comically predictable: Google GOOD. — And that’s why I’m the opposite, kids, just to point up Mike’s consistency about promoting Google.

Blue, not sure of your reading comprehension, but I read that as the exact opposite. If Mike was supporting Google, wouldn’t he say that Google /was/ the answer. Instead he says it’s not. Furthermore he then points out that Google failed to actually live up to its promises to be an open network.

I read both of those points as knocking Google, not supporting them.

But, then again, I can read and I don’t kneejerk into trolling against everything on this site. YMMV.

Anonymous Coward says:

Re: COMMON CARRIER. The answer is to classify them as telcos and give the FCC a broad mandate over them.

And the lobbyists come out of the woodwork…adding their typical response and ignoring the facts. Atleast we know the machine won’t stop unless we kill it.

I say no mercy. I’ve been finding against these issues for 10 years. Localized monopolies have to stop.

Anonymous Coward says:

Of Course

“Getting access to rights of way is the biggest challenge in building a competitive network.”

Of course it is. Always has been. Always will be. Unless, that is, there are some monumental changes that are very, very unlikely.

Those that give up on network neutrality regulations are giving up on the last thing that there is that has any hope of making the situation any better at all.

Anonymous Coward says:

I still don’t understand why we insist on creating faux competition for wired and wireless communication. Carrying bits over a wireless or wireless infrastructure involve massive sunk costs and are just ripe for allowing a regulated natural monopoly. All competition in the communications industry seems to have bought us is ungodly amounts of money spent lobbying and advertising with very little actual competition actually occurring.

jilocasin (profile) says:

Natural monopoly

The problem of course is that internet access, like phone, cable, water, sewer, electric, and the road network is a natural monopoly. The only reason we even have the limited duopoly in many cases is due to the re-purposing of other existing networks (telephone and cable television). It doesn’t make sense to have every would be competitor run duplicate networks to everyone’s homes.

Back in the days of dial up, ISP’s all shared the telephone network and the telephone network was classified as a ‘common carrier’. We had lots of competition, rates were reasonable, anyone got too obnoxious you could easily switch to a competitor.

Broadband _should_ have been the same. Unfortunately lobbyists and lies have lead us to monopolies (or cooperative duopolies) with all the attendant high prices, low quality, and terrible customer service that inevitably follows.

The only solution, as far as I can see, is to;

Reclassify existing broadband providers as ‘common carriers’. With all the regulations and oversight that entails.

Split the network from the access. One company maintains and sells access to the network, another sells access to the internet.

The network is open to any all companies that want to run an ISP.

Eventually the network company will most likely end up being a municipal or non-profit entity with it’s costs being used to maintain and upgrade the network. The other option would be like the dial up days, Ma Bell owns the network and is highly regulated, AOL, Earthlink, etc. offer internet access over that network and are less heavily (though there should still be basic consumer protection) regulated.

Michael (profile) says:

Re: Natural monopoly

I agree, it is a natural monopoly, just like roads. Access to the global information economy is just as important as access to the economy provided by roads. Aside from possibly gated communities (in which the final leaf road(s) is(are) accessible to the community alone) we don’t stand for places that can only be reached via private road.

The present situation is akin to the insanity of having fuel providers own the roads you’re driving on.

Mike Masnick (profile) says:

Re: Natural monopoly

The problem of course is that internet access, like phone, cable, water, sewer, electric, and the road network is a natural monopoly. The only reason we even have the limited duopoly in many cases is due to the re-purposing of other existing networks (telephone and cable television). It doesn’t make sense to have every would be competitor run duplicate networks to everyone’s homes.

And this is why some people suggest either local ownership (ownership by the citizens) of a network, that allows competition of the service provider on top of it.

You get competition, no control by a monopolist company, and the infrastructure in place…

TheResidentSkeptic says:

Competition is NOT in the government's best interest

As government “programs” invest heavily in the stock of these companies – anything which would cut into their profit-making potential can not be tolerated. The massive return on investment enabled by the government granted monopoly given by the left hand enables the other government program on the fight hand to make what it needs to…

gov’t->monopoly rents->paid by public->monopoly stock value->gov’t

Why would this be allowed to change? No one “important” is getting screwed by this plan…

Erik Grant says:

The author makes a point about how speeds get magically faster when Google shows up in town. I just wanted to add that I’ve witnessed it personally. We have a new fiber provider in town, a local service named ITV-3. A few months before I heard of them, I got a letter from Comcast telling me how my speeds were being increased free of charge. I remember thinking “Well that’s weird, not a very Comcasty thing to do….” Later on I started researching ITV-3 and realized what had happened.

I hate telecommunications companies.

Anonymous Coward says:

The problem isn't lack of competition, it's that the free market DOESN'T work in cases like this

While the free market works MOST of the time, situations like the Internet are cases where the free market simply DOES NOT work.

That’s the real problem, and here’s why real competition won’t solve this problem.

1) It’s simply TOO EXPENSIVE to get into the market. If you want to become a serious competitor to AT&T or Verizon you need billions of dollars of infrastructure and years worth of investment to simply build that infrastructure.

That’s too much money and too risky for any serious person to want to invest in it. Plus it would take too long to turn a profit even if it works.

2) Another problem is the Internet isn’t the kind of thing these days that you can say “all these options suck/are too expensive, I’ll go without it”. The Internet is simply NEEDED on a day to day basis now. You need it just to find and apply for jobs these days, you need it to do your job at work, you need it to do basic research on all sorts of stuff, and you can get better deals from online stores/etc you can’t offline.

Combine this with item #1, and ISPs can charge whatever the hell they want without fear of new competition emerging. All they need to worry about is the government going after them for breaking the law with their business practices, and right now they’ve successfully beaten back the government on Net Neutrality’s limits.

3) So if the free market doesn’t work for the Internet what will? I think the Internet should be treated like utility companies, like electric and water companies. Utility companies sell something that’s necessary on a day to day basis, and tend to be in a situation where for logistical reasons they effectively have a monopoly over you, and the Internet has moved into the category of electric and water for it’s necessity these days, as well as in lack of competition in the market. Many utility companies are government run, though not all of them.

Electric & water companies basically have a monopoly over you by controlling the electric wires into your house, but they don’t charge crazy prices, why? Because utilities are heavily regulated to prevent that. Whenever their prices are high it’s because electricity or water is simply scarce in the area (because of a drought for example).

Paul Korolov (profile) says:

Natural Monopoly is a myth.

It’s hard to have a rational discussion on the topic when almost everyone believes that in a free market there is something called a natural monopoly. This is a myth. No such thing existed until competition was limited by govenment regulation. Until goverment regulation there were multiple electric, gas, and telephone companies in every city. As an example there were 45 electric light companies in Chicago in 1907. See http://mises.org/daily/5266/ more examples.

Paul Korolov (profile) says:

Re: Re: Natural Monopoly is a myth.

There are certainly cases where propery will have private roads and also public access roads. However in general roads will be held in common by the property owners in a block or subdivision. However they might have competing road management companies to maintain the roads. Of course if there is no demand for competing companies, and the landowners have an informal arrangement among themselves this whole point in moot.In any case historically monopoly road ownership has never been a problem.

Paul Korolov (profile) says:

Re: Re: Re:2 Natural Monopoly is a myth.

Public lands are a monopoly of the govenment kind, govenment enforced monopolies are the only kind that actually limit competition. In a free market if someone builds a road or bridge that generatees a large profit competing roads and bridges will be built right next to them. There might be cases were the profits are too small to justify another road or another broadband cable, but just the threat of potential competition will keep prices in check.

If natural monopolies actually do exit then there would be no reason to have laws and regulations to enforce them. Of course this is not the case, govenment franchises were created to keep away competition from politically connected enterprises and to allow them to gouge their customers.

John Fenderson (profile) says:

Re: Re: Re:3 Natural Monopoly is a myth.

In a free market if someone builds a road or bridge that generatees a large profit competing roads and bridges will be built right next to them

No, they won’t. In the case of bridges, there are limited spots where a bridge crossing is possible. The majority of the time it’s physically impossible to build another “right next to it”.

In the case of roads, there simply isn’t enough room for multiple parties to build roads to the same spot.

These are physical limitations, not artificial ones. They are natural monopolies.

But we’re just going around in circles, now.

Paul Korolov (profile) says:

Re: Re: Re:4 Natural Monopoly is a myth.

Of course there are competing bridges and roads. And there were a lot more of them when competition was allowed. For a recent case see here:

Besides, roads and bridge builders aren’t considred natural monopolies even by most statist economist since it’s obvious that there is not an economy of scale that is a barrier to entry. All your need to do is purchase land next to an existing road or bridge. And even if there isn’t land available you can build a elevated road on top of an existing one or a tunnel under one.

toyotabedzrock (profile) says:


Sorry you are wrong. Even when the telcos where broken up there was regulation of prices for interconnection.

Your argument is that a swarm of angry bees is less likely to sting you than a single bee.

Not to mention that competition is not possible because of infrastructure costs in rural areas and even populated areas it is prohibitive due to local laws and fees. There are only so many wires that can run on the poles.

Greevar (profile) says:

Re: Wrong

Well then, the system needs to be restructured, doesn’t it? Create a single public network that ISP’s are permitted to sell access in exchange for administering the network. So the network is the public, but the ISP’s provides the service of running it for the public’s benefit.

It’s like this, we have this road that the people built. We need someone to provide transportation on that road because we don’t want to do it. We ask that businesses provide transportation on that road, for which the businesses will have the opportunity to sell such a service to the public. Basically, you can use our stuff for your profit if you make it useful to us.

toyotabedzrock (profile) says:

How long should we wait for someone to build that millions of miles of fiber network needed? Who will fund this? Remember if there is competition there will be less money to make and it will take over a decade to see returns on the investment.

Not to mention the telcos will sue at every step reguardless of any law Congress passes. And you will die before Congress passes something to help the people.

Your idea is a dream based on ideology that doesn’t fit reality.

Clownius says:

Re: The answer is MESH NETWORKS

Basically because wireless sucks as a network for heavy work. Its good as a temporary low bandwidth solution but not much more.

Point to point wireless is a huge step above everything you have mentioned. But even it doesnt have a snowballs chance in hell of meeting our main data needs. Not to mention the spectrum required will come from where?

Here in Australia Vodaphone and Optus 2 of our 3 networks use point to point wireless backbones for a lot of their mobile towers. Its cheap. Their service is also slow as crap because of it. When an area slows to a crawl their only solution is Fibre.
Telstra on the other hand mostly uses Fibre (helps they inherited the entire telephone network when privatized) and there service is so many levels better than the other 2 its just not funny.

trinsic says:

Get off the sinking ship.

I appreciate the idea and the post. From my understanding since the Clinton administration The FCC has not and will not be in a position to encourage competition. The FCC was suppose to be a independent federal institution. As far as I can tell its run by corporate executives who veil there decisions through double-speak language to look like they are doing good, by using vague statements like “Using our authority, we will readdress the concepts in the Open Internet Order, as the court invited, to encourage growth and innovation and enforce against abuse.” Tell me you can have trust in someone to take action that cannot speak plainly about what he intends to do and I will shut up. Its almost as if he is afraid of offending someone.History has shown and will continue to show that they actually don’t have any interest in making real change.
If they did you would here much stronger language and REAL action.

I’m really trying to point out that we have to stop putting our trust in federal institutions and start putting energy in making changes at the state level. Sometimes I get the feeling that most of the people that post here on Ars, and many others think we can just sit back and talk about how bad things are while deceiving ourselves that we can actually make a difference by appealing to our federal government over the internet, while slapping each other on the back at how smart we all are that we know whats going on, while nobody does anything real on the ground. I’m not pointing this last statement at your post obviously, its more of a frustrated sense of doom. The more I read the more I realize that we care more about impressing each other than we do of talking about real change that can be separated from what we were taught in school and by establishment mindsets. Mindsets that keeps us stuck in a loop of thinking that we can continue to appeal to our masters all the while we don’t see the power we have have to effect real change outside our entrenched ideologies. We have to start at the local level. Forget about the federal government its a sinking ship, lost at sea. We are on that ship. We need to get off and swim to shore. find another way to survive whats coming. The sooner you come to the realization the better.

Finally, im going to post a video about the psychology of control. Too all of you that want to wake up. Realize that we need to break out of these current mindsets that we have that we can continue to use the same tactics we have always used, and that those tactics are some how going to bring us the change we want. That’s a myth. We have to step outside of our current thinking and find something completely different that doesn’t involve our established views, given to us by a mainstream education and mainstream media controlled by few who have a direct interest in controlling our habits and behaviors. The federal government is not going to act on our behalf. The couldn’t even if they wanted to.

Anonymous Coward says:

Re: Break them up.

The Big Telecom Provider (Maybe 2 if a country is lucky) is too big an entity for the hapless retail customer to deal with, They will get overwhelmed by such a big Marketing/Sales machine. The best Solution is multiple smaller retail tel-com providers, A law preventing the big network provider from taking over the small fry. the big network provider is heavily regulated when only a monopoly or duopoly exists.
Individuals can deal with the smaller retail tel-com providers, and the smaller retails are big enough to deal with the Backbone Provider, if there is proper supervision of the backbone provider. Some simple incentives can be in the system to keep the small players from colluding, to encourage the small fry to compete for customers, the trick is not allow the backbone providers from owing the retail outlets and “consolidating” them to increase profits.

In the developed world our business environment is easily distorted when a company gets too big, No-one is bothering to discover any new worlds so there is a ultimate limit to the size of a company that can operate while keeping the market place distortion free. We have to limit the size of companies to keep the free market operating smoothly and the political system corruption free.

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