NYT article on why price discrimination best serves consumers

Today's New York Times article by Robert H. Frank is an excellent and clear explanation of how price discrimination best serves consumers. Mr. Frank is an economist at Cornell. One of his headlines says: "If price discrimination seems wrong, try taking another look."

The neutrality-ites have used buzz-word blackmail in Washington to try and make those who oppose NN as being "for discrimination." Discrimination is understandably a bad word politically becuase a lot of people have been unfairly and illegally discriminated against in our country's history and it still goes on today. 

Defending eBay's right to differentiate and be hypocritical

Scott Wingo's eBay blog points out that eBay is blocking Google's payment service, http://ebaystrategies.blogs.com/ebay_strategies/2006/07/ebay_bans_googl.html  obviously to leverage its own Paypal service.

I strongly defend eBay's right to differentiate their service and believe the market will sort this out over time. If eBay's customers throw a hissy fit and clamor for Google's payment option, eBay will have to adjust. My guess is they have already made that calculation and believe that the vast majority of their users use and prefer Paypal. (Think of this as eBay giving a metaphorical "stiff-arm" to Google's face for attempting to tackle Paypal. Not nice but perfectly within the rules of competition. It will be interesting to see if Google whines about this stiff-arm like it whines about everything else that doesn't go their way.) 

Intel is NOT putting it's money where its mouth is!

Intel, a supporter of Itsournet.org and NN regulation, apparently hedged its NN bets yesterday, investing $600m in Clearwire, which does not have NN and which is Craig McCaw's WiMax venture to offer more broadband competition nationwide to the telephone, cable and wireless companies. Clearwire is a member of the WCA, the wireless broadband association, which recently joined NETCompetition.org as an e-forum member opposed to NN regulation.

This is Intel's biggest venture investment ever. Given the success of WiFi, which Intel strongly nurtured in order to accelerate the replacement cycle of laptops, they clearly see the same opportunity in WiMax. It is very important to note that WiFi has never been subject to NN rules nor has WiMax nor has Clearwire's WiMax-like technology. And to date Clearwire has offered a differentiated offering that it could not do if subjected to Snowe-Dorgan NN rules.

Critique of Wash Post's Sunday NN Article

After speaking with the Washington Post reporter for over a half hour on Friday to help with their Sunday Q&A article on NN, http://www.washingtonpost.com/wp-dyn/content/article/2006/07/01/AR2006070100138_pf.html I was dismayed with the many inaccuracies and the lack of balance in the article. The reporter explained they wanted to present both sides; their attempt fell short. After getting back from the long Fourth of July weekend, I just had to set the record straight.


To be fair, on the positive side, their call-out-box explaining the opposing NN positions was generally accurate and useful. I also commend the Post for trying to share both sides and attempting to better explain this important issue. 


However, on the negative side: The biggest weakness in the article was the very imbalanced introduction that framed and skewed the article for everyone.


The third sentence bought hook line and sinker, one of the main incorrect premises of NN that I clearly rebutted when I talked to their reporter. “Whatever becomes of the concept could affect…the sites you’ll have access to…” Broadband companies have made clear that they have no intention or incentive to block access to legal sites or degrade peoples’ online access. As I told the reporter, these unsupported allegations were at the heart of the NN misinformation. If the article were fair, it should have at least explained on what basis the reporter believed the unsupported allegations to be true and why the companies’ statements to the contrary should be summarily dismissed without reference.


Debunking NN Myth #4

Neutrality-ites claim Network neturality is a principle.

Their defense of it belies the fact that NN is NOT principled.

They justify new NN regulation by asserting there is a duopoly and market failure. If the motivation is principled, why do Snowe-Dorgan and the Markey bills apply monopoly net neutrality rules to competitive broadband providers like wireless, new entrants like WiMax and free services like WiFi? If it is truly a necessary "competitive" principle, why not apply it to Microsoft, which the government ruled a monopoly, or Google and Yahoo which are quickly becoming the defacto duoploists of search? Real principles are not double standards like NN.

Debunking NN Myth #3

The nuetrality-ites are hiding behind the premise that NN regulation is warranted because its a telco-cable duopoly with 98% share; they believe this means there is market failure warranting government price regulation.

This is very lame and misleading analysis.

First, the expert agencies: the FCC the Department of Justice Antitrust Division, and the Federal Trade Commission all disagree with the NN assertion that the broadband market is not competitive and hence warrants regulation. 

Second, the duopoly assertion ignores the context which is highly relevant. While dial-up was essentially a monopoly, the 1996 Telecom Act addressed that by encouraging competition. Cable modems were a new market and cable created massive competitive pressure on dial-up and on DSL which was forced to lower its prices to attract customers. This Market is not a duopoly, it is a very dynamic market that is in successful transition from a monopoly eleven years ago to a competitive market today.  

NN defeated in Senate Commerce Committee

The Snowe-Dorgan net neutrality amendment failed 11-11.

I just released the following statement to reporters.

Industry Expert Applauds Senate Commerce Committee Vote
Scott Cleland, host of NetCompetition.org, calls for full Senate to vote against net neutrality

The chairman of NetCompetition.org commends the Senate Commerce Committee’s responsible handling of the net neutrality issue and urges Senate leaders Frist and Reid to bring the telecom reform legislation to the Senate floor soonest to enable the full Senate to vote on these important issues.  

Debunking NN Myth #2

My friends Paul Meisner of Amazon, and Chris Libertelli of Skype-eBay, whom I personally respect, regularly say NN is not about philosophy in their frequent public defenses of the Net Neutrality. That may be nice and self-reassuring PR mantra, but it does not withstand scrutiny.  

I most respectfully have to disagree with Paul and Chris on this; net neutrality is the classic and central philosophical debate of the techcom era. 

NN is just a techcom version of the constant American struggle between the dual American political values that Americans hold dear: freedom and equality. When issues such as NN put these values in conflict, taking away commercial and individual freedoms to create net equality, it is a philosophical debate. Conservatives and Republicans tend to favor protecting freedom over promoting equality. Liberals and Democrats tend to favor promoting equality over protecting freedoms. 

Debunking NN Myth #1

In my debates on NN I run up against some myths that net neutrality-ites have popularlized. I plan to knock them down one by one over time.

Myth #1: Net neutrality is the way it has always been and NN proponents are just asking for a maintenance of the status quo.

That is only partially true and it gets less and less true every day. That's becuase NN was a monopoly era policy that is being phased out and made obsolete by the emergence of broadband competition. In other words, NN is a vestige of the dial-up world that will continue to phase out as people upgrade from the dial-up slow lane to the broadband fast lane. The FCC, supported by the Supreme Court, ruled that broadband could not be a monoploy market, becuase it was nascent and competitive market. 

Net Neutrality's Pre-cognition

Last week someone analogized net neutrality to the world in the popular movie "Minority Report" with Tom Cruise. (I apologize for not remembering who shared this dead-on analogy with me, thank you whoever you were.) In the scary future-world depicted in Minority Report, "pre-cognition" technology, i.e. mind-reading technology, enabled the Government to know if people were "thinking" of breaking the law before they actually did. This way the Government could intervene and "jail" the offender before the offense occurred! That's freedom for ya!