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Free market Internet pricing and diversity of choice

The reality of market pricing for Internet usage is naturally gaining more attention.  

  • The New York Time's had an informative Sunday page one story: "Charging by the Byte to curb Internet traffic." 
  • Today the Wall Street Journal highlighted why market pricing for Internet usage is evolving with dramatic changes in the Internet marketplace in its story today: "Cisco projects growth to swell for online video."  

The big economic takeaway here is that in a free market Internet, where users have very different demand: i.e. needs, wants and means for speed, usage, mobility, latency, immediacy, reliablity, flexibility and other attributes -- suppliers (ISPs, application providers and content providers) must have the freedom to innovate, experiment and provide a diversity of choices, at a diversity of prices in order to meet the diversity of demand from users.

The big political takeaway here is that Internet "fairness" is not legislated/regulated net neutrality or a one-tier Internet where all bits must be treated the same and where light Internet bandwidth users must subsidize heavy Internet users -- but real and practical Internet fairness comes from users paying their way, paying for what they use above a certain amount and not expecting others to subsidize one's extreme bandwidth usage.

U.S. remains #1 in 2008 World Competitiveness Yearbook -- The U.S. isn't falling behind

The 2008 World Competitiveness Yearbook just came out and the U.S. is ranked #1 in world competitiveness again -- for the fourteenth year in a row.

  • This ranking by the Swiss IMD is the third major, world-respected, independent ranking that concluded the U.S. is not falling behind the rest of the world in competitiveness.
  • These three different independent assessments are in stark contrast to broadband critics' call for abandonment of free-market competition policies in favor of a more regulatory broadband industrial policy. 
    • In November 2007, the U.S. ranked #1 in the World Economic Forum's Global competitiveness Report for 2007-2008.
    • Last year, the Economist Intelligence Unit's latest Global Digital Rankings had the U.S. tied for second in the world.

Bottom line: Pro net neutrality and pro-regulation proponents love to jump on isolated data or studies like the OECD broadband rankings to justify a reversal of free-market competition policies in favor of more command and control government industrial policies.

However, facts are pesky things.

Signs of calculated retreat by net neutrality proponents at House hearing on Markey Bill?

I have to admit that I was surprised by all the back-pedaling and calculated retreat by net neutrality proponents at the House Internet Subcommittee hearing on Chairman Markey's net neutrality bill HR5353.

Net neutrality proponents were clearly on the defensive, proactively responding to criticisms of the bill and not spending much time touting its benefits.

Read Cato's Timothy Lee's "Changing the Internet's architecture isn't so easy"

Kudos to Timothy Lee of Cato, for his post in Techdirt: "Changing the Internet's architecture isn't so easy." 

Mr. Lee challenged Professor Lessig's assertion at the Stanford FCC hearing that network owners have the power to change the Internet's architecture.

Why his insightful analysis is so devastating to Professor Lessig's core assertion underlying the need for net neutrality legislation is that it exposes some "inconvenient truths" about the reality of trying to change the Internet's architecture:

  • First, Mr. Lee brilliantly points out that to control which devices got what content like Professor Lessig posits, would require instituting some type of handshake protocol that would be extremely difficult to get adopted by device manufacturers.
  • Second, he points out how difficult it has been to change the Internet's architecture to IPv6, something there is a lot of consensus around to do.
  • Third, he explains that these changes in architecture Lessig posits would be extremely expensive and take a long time.

I recommend you read his full post, it's brief, well-reasoned and fresh.  

Takeaways from Senate net neutrality hearing; & proposed FCC framework on network management

The big surprise of the hearing was that Chairman Martin was a last minute witness. The Committee created a new first panel for just Chairman Martin, which ended up consuming about 60% of the allotted time for the whole hearing, and which was also the prime time when most of the Senators and press were in attendance. This surprise testimony practically relegated the other panel, which was expected to be the main event, to more of sideshow status.

Overall, this hearing was slightly more balanced than its House counterparts. Chairman Innouye continued his very measured and balanced approach, in that he said things that each side wanted to hear.

  • Given that the Senate Commerce Committee is historically quite bipartisan, and that this committee remains split largely down the middle, I doubt if we will see much real movement on Dorgan-Snowe's net neutrality bill this session.
  • If Chairman Inouye actually thought net neutrality legislation should make progress, he wouldn't have waited fifteen months since the introduction of the Dorgan-Snowe bill to hold the first hearing on it.
  • It appears the real purpose of this hearing was basically to let off steam and throw the net neutrality activists a bone. 

The real import of the hearing was two-fold: 

Dick Armey's clarity of thought and perspective on net neutrality

Be sure to read Dick Armey's succinct analysis and perspective on net neutrality in his op ed: "Spare the Net."

  • I am a big fan of Former House Majority Leader Dick Armey -- he is one of the true free-marketeer giants of our era.

My letter to Senate Committee on Net Neutrality asking: Why now? Why worsen recession?

Below is the full text of the letter I sent to all members of the Senate Commerce Committee and the Senate leadership questioning why of all times -- now -- for pushing net neutrality?

April 22, 2008

The Honorable Daniel K. Inouye

722 Hart Senate Office Building

Washington, DC 20510-1102

ATTN: Telecom Legislative Assistant

Dear Chairman Inouye:

U.S. Not falling behind world on broadband/Internet -- must read New York Times on new study

Kudos to John Markoff of the New York Times for a excellent, informative, and balanced article about the ongoing debate over where the U.S. really ranks in the world on Internet/broadband infrastructure.   

  • The article, "Study Gives High Marks to U.S. Internet," does a good job of letting both sides of this fierce and ongoing debate get in their best points.

First, the article shares the news of the seventh annual World Economic Forum report produced by a French Business School which shows that the U.S. ranks 4th up from 7th last year and which contrasts with the more narrow OECD study that focuses on broadband penetration and shows the U.S. ranking lower and falling.

Second, what I most appreciated was that the article candidly explored that there are two opposing world views at work trying to use statistics and studies to promote their world views.

Google unabashed about gaming the FCC auction process to fleece the taxpayer of ~$7billion

Many have broadly swallowed Google's "spin" that Google really "won" by losing the 700Mhz auction -- without digesting the serious implications of Google's public admission.   

  • So needy to convince everyone that Googlers, yet again, proved themselves to be the smartest people alive, Google hasn't realized that they have unabashedly admitted to de facto gaming and manipulating an official Government auction statutorily-created to fully reward taxpayers for commercial use of public airwaves. 
  • Miguel Helft of The New York Times has the best coverage of Google's actions in the auction in his article: "An Auction That Google Was Content to Lose." 
    • Our primary goal was to trigger the openness conditions,” said Richard Whitt, Google’s Washington telecommunications and media counsel."
    • The article goes on to explain its nonsensical bidding strategy of bidding against itself: "For much of the first week, Google gradually topped its own bids. With no competitors emerging, anxiety grew."  

So what's wrong with what Google did?  

First and foremost, Google's flagrant manipulation of the auction rules and process fleeced the American taxpayer out of at least $7 billion, by my estimate.

Of course the FCC will deny the Skype-Carterfone petition for open access regulation of wireless

It was very welcome, but not surprising news, that FCC Chairman Martin and a majority of the FCC plan to deny eBay-Skype's petition to apply 1960's "Carterfone" monopoly regulations on today's wireless competitors.

This was not a close call. Carterfone regulations were appropriate forty years ago with a monopoly and no competition. However, dusting off ancient regulations for a bygone monopoly era have no business or relevance today. 

The facts are that Americans enjoy more wireless competition than most any country in the world, enjoy the lowest or near lowest wireless prices in the world, and use about four times more wireless minutes than our european counterparts, because of the dramatically lower prices -- all per the American Consumer Institute

  • The market is serving consumers excellently, and vastly better than regulators could ever hope to.

The Skype petition is an excellent evidence that the net neutrality movement does not believe in competition policy or a free market Internet, but believe in a government managed Internet.

  • The FCC majority rightfully understands that government control and regulation of the Internet would be an unmitigated disaster for all concerned.  



Q&A One Pager Debunking Net Neutrality Myths