Congress

Lost in the debate over net neutrality is the inexorability of convergence and the futility of trying outlaw convergence by the government fiat. Net neutrality proponents intuitively understand that digital/IP convergence means more change, competition, and vertical-integration of products and services -- and they have a kneejerk fear and opposition to it.  Their bias lets them see only problems and blinds them to the many consumer benefits of convergence.

My big aha! moment was realizing why net neutrality proponents are so stubborn in denying the reality of inter-modal competition. To accept the reality of inter-modal competition -- they would have to accept the reality of Â "INTER-LAYER COMPETITION" -- what I have long called "techcom," the convergence of the technology and communications sectors -- but what they call "vertical-integration." 

Tech companies routinely vertically integrate. Google loves to vertically integrate and compete accross the layers of the technology "stack" with Gmail, Google talk, youtube, as does eBay with Skype and PayPal, Microsoft with MSN and XBox and Intel with WiFi to name just a few of the many instances of tech vertical integration. Inter-layer competition/vertical integration has been a hallmark of innovation and value creation for consumers in the tech sector. Inter-layer competition fuels innovation and benefits consumers Big Time!

I had a friendly and informative debate last night with Ben Scott of Free Press on a National Public Radio show Digital Spin hosted by Mario Armstrong out of Baltimore on WEAA.

What I found interesting in Ben Scott of Freepress' account of the debate was how this debate has become more about the activists themselves and their self-congratulating grass roots movement than the issue of net neutrality or the benefit of the consumers they allege to represent. 

When asked to describe how the net neutrality debate was going, I recounted the facts of winning 269-151 in the House, 11-11 and 15-7 in the Senate and that it was uncertain what the fate of the overall telecom bill would be. What I found fascinating was how Mr. Scott chose to explain it. In wrapping up his position last night Mr. Scott basically described in self congratulatory terms how a ragtag group of underfunded grass roots movement has fought to a standstill the heavy lobbying of the communications giants.

As often happens in battle combattants get so caught up in the fight that they can forget what they are fighting for. Liberal Free Press and its Moveon.org activists are so focused on the tactics of blocking the Telecom Bill that they have lost sight of what they say they are all about -- supposedly protecting consumers. They are obviously more interested in promoting themselves and their organizations' prowess than they are in delivering actual tangible results and protections for consumers.

Net neutrality proponents like Free Press seem to have totally forgotten that there is no net neutrality now and that THEY need to pass legislation to get the protections they claim are needed so direly. How comical it is that they have taken themselves hostage and they don't even get it!

Google's $1.6 billion purchase of youtube dramatically affects Google's leadership position in the net neutrality debate.

First, Google can't continue to claim its business "neutral" in the debate -- it now has its own dog in the fight -- its now a vertically integrated media company. Before Google liked to wax eloquently that their motives on net neutrality were "purely altruistic;" they said they were fighting, not for their own gain, but for the little Internet entrepreneurs toiling away in garages that needed protection from capitalists and market forces.

Now it is clear that Google is simply using the public policy process to leverage commercial negotiations for Google's commercial advantage with youtube. People need to remember that key to Google's exceptional finanical success is their abilty to dump most all their normal distribution costs on the consumer. Its by shifting their biggest cost to the consumer, that they enjoy 80+% gross profit margins, have ten billion dollars in cash, a hundred billion plus market capitalization, and can afford to pay $1.6 billion for a company that has no profits and little revenue. Remember these numbers when Google is publicly indignant about having to pay more for new innovative Internet bandwidth that can better carry video.

The Department of Justice Antitrust Division approved the AT&T-Bell South merger today without conditions. What this means is that the expert agency responsible for preserving competition believes the various markets these companies are engaged in are competitive: broadband data, voice, wireless and internet access.

The key quote from the DOJ announcement included below is:

• "The proposed acquisition does not raise competition concerns with respect to Internet services markets or 'net neutrality.'

This effectively stuffs those net neutrality proponents trying to argue that there is a "broadband duopoly." 

Anyone looking for an extremely cogent editorial opposing net neutrality could do no better than the Harrisburg Patriot News of today "Net Neutrality will create endless litigation."

Interestingly it was written by two former chairmen of the Pennsylvania Christian Coalition. It's interesting because Save the Internet loves to tout that the national organization of Christian Coaltion backs net neutrality. What they are silent on is that the net neutrality position has caused a growing national-state rift for the Christian Coalition causing some state Christian Coalition organizations like Georgia and others to change their name and disavow the national organization.  

Watching the nine minute preview of "Moyers on America" "The Net @ Risk" I was struck with how unabashedly biased they were is presenting only one side of the net Neutrality debate. This was a new low in media bias on the issue.

• In the nine minutes of preview that is available online, I counted a full eight minutes and forty five seconds that were devoted to regurgitating the views of FIVE of the most ardent net neutrality proponents like: Tim Wu, Ed Markey and Earl Comstock, while the anti-net neutrality side got ONE person that was relegated to a measly 15 seconds of air time -- House Chairman Fred Upton.
• In the interests of fair representation, the show should have a disclaimer at the bottom of the screen that it is a paid infomercial for SavetheInternet.org and Moveon.org.

It is supremely ironic that this show waxes eloquently about how net neutrality is important to democracy and free speech, yet Mr. Moyers and his production team make no attempt to democratically or freely present both sides of the issue. Where have ethics and professional standards in journalism gone?

This show is part of a clear pattern, that net neutrality proponents seek out undiscerning, fawning and intellectually lazy forums (i.e. Newsweek) where they can frame and discuss the issue unchallenged.

Broadband competition is increasing! Just listen to what T-Mobile USA President Robert Dotson has to say as quoted in Communications Daily today:

• "We are now at parity with competitors" he said because they nearly doubled their spectrum holdings in the U.S.
• Dotson also believes T-Mobile has a new competitive advantage because his $4.2b acquisition of spectrum was at bargain prices, roughly 39% cheaper per pop (potential user) than the price paid previously for this type of spectrum.  
• Dotson also highllighted the benefit of declining costs to enhancing T-Mobile's competitiveness: "The next generation of 3G handset will cost carriers like T-Mobile anywhere from $150 to $300 on average versus the $250 to $500 our competitors are paying today. The same can be said with regard to 3G infrastructure."

Not only is wireless broadband becoming increasingly, rapidly, and directly competition to DSL and Cable, but wireless broadband competition itself is getting increasingly competitive!

It's very interesting what people will slip and say when they are being lionized by a reporter. Salon's recent piece: Telecom Slayers, describes Ben Scott as "one of the SavetheInternet's coordinators," "a leading advocate for net neutrality," and "the closest thing to a field general in the grass roots campaign to ensure net neutrality."

It must have been pretty heady stuff for Ben Scott to hear the liberal icon: "the Salon", compare him to the biblical David that slayed the telecom Goliath!

Kudos to Hahn/Litan Directors of the AEI-Brookings Joint Center for Regulatory Studies for their editorial in The Hill opposing Net Neutrality. 

It is very helpful for two well-respected regulatory thinkers and two well-respected Washington Think Tanks to write a cogent and to-the-point editorial opposing net neutrality.

My favorite sentence is:  "...one truth is clear while both sides are prone to hyperbole and exaggeration, net neutrality enthusiasts are also just plain wrong." Well said. and well worth the read.

I continue to hear net neutrality proponents say "keep the Internet Free" but really want the Internet to be without cost. Freedom and no cost are two very different concepts.

I think one of the biggest reasons the two sides of this debate talk past each other is that broadband companies view this as a marketplace and a business where value is provided through products/services in return for a fee. Provide more value, get more payment.

However, many on the other side just assume that the Internet is a "right, a pillar of democracy and a public good/gift and that everyone should have and not have to pay any more for.

Why this debate has polarized so much is that the world views supporting each side are planets apart...