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Tim Karr, the campaign director of Free Press that runs much of the SaveTheInternet effort, blogged a personal attack on me today, that I responded to on his blog.

• I include the full text of my response below in case Mr. Karr is not willing to post my comment on his blog.

Tim,

It's not the first time I've been called names by people who wanted to discredit me and my analysis. Among others, you share the august company of the now-imprisoned Bernie Ebbers, who routinely derided me as the "idiot analyst" because I had his number in calling WorldCom "dead model walking" before anyone else in the country figured it out. He too was mistaken that name calling and intimidation could muzzle my views.

The highlight of the FTC Broadband connectivity workshop was Phoenix' George Ford's evisceration of Tim Wu's Wireless net neutralty paper.

• George ably cut through the abject nonsense of Mr. Wu's paper by pointing out:
• The fact that you don't like the result, and can't get whatever product you want at whatever price you want, isn't market failure.
• Kudos to George for clarity of thought and seeing through Mr. Wu's vacuous logic.
• Mr. Wu's paper was essentially a datatopian wishlist of how Mr. Wu thinks business, markets and capitalism "should" work, not as they do in the real world or as FTC competition experts all understand it to be.
• Mr Ford was appropriately very tough on Mr. Wu's total lack of economic intellectual rigor in his paper which I called intellectual rigor mortis is my blog a couple of days ago.

Mr. Ford also eviscerated Mr. Wu's recommendation to apply the monopoly Carterfone decision to the competitive wireless industry.

• Mr. Ford said it was ridiculous to apply a concept to such a non-analogous situation.
• He pointed out how they were completely different factual circumstances:
• AT&T was a vertically regulated vertical monopoly, wireless is competitive and not vertically integrated.
• Consumers had no phone choice with AT&T monopoly, consumers have over 800 choices of cellphones today from competing wireless carriers.
• There was very little innovation vibrancy in phones in the AT&T monopoly while there is vibrant innovation in cellphones of today used by 230 million Americans.

Mr. Wu's biggest mistake was submitting this paper before the FTC an organization well-known for its analytical rigor and expertise in the subject of competition.

Overall I think the FTC has done a pretty good job of presenting a balanced view of the net neutrality issue.  I commend them for calling the workshop "broadband connectivity competition policy." That is what the issue is all about-- in generic non-loaded terminology.

To be brief, I will highlight just what I thought was most noteworthy.

The distinguished practioner and academic, Fred Kahn, is always a joy to learn from. Besides making his main point that government should resist its propensity to meddle he was particularly critical of many people's use of the term "discrimination." As an economist, he was frustrated that people were using the term discriminatory just if it was differential. For those that don't know or understand economics or competition policy, Mr. Kahn stated simply -- if there is opportunity cost involved, its not discriminatory. What he reminded people of is that there are lots of legitimate economic, functional, and consumer welfare reasons why service and prices can and should be different.

Alan Davidson of Google clearly took a different tack than usual. He further retreated trying to respin Google's grandiose vision of net neutrality to be more "reasonable." He gave Google's blessing to the Internet continuing like it is -- charging differently for different speeds. He also gave America Google's permission to continuing caching and stopping denial of service attacks on the Internet. Thank you Google for your permission, it means so much.

Alan Davidson of Google then went on to say that Google only has a very "small" problem with just "one type" of router discrimination -- trying to appear reasonable. Unfortunately, to anyone that uderstands networks and competiton, his "reasonable" approach is about as "reasonable" as a doctor telling a patient that all the parts of their body are healthy but that he just needs to remove their "small" cerebellum.

My core problems with Professor Tim Wu's white paper for the FTC on wireless net neutrality are with his disguised core assumptions.

First, it is clear from  Mr. Wu's top two recommendations that Mr. Wu rejects U.S. competition policy and wireless competition policy as abject failures.

• He recommends caterfone for wireless!
• The simple translation of his oxymoronic recommendation is: foster a competitive market by regulating it like a monopoly. 
• He then doubles down on his Government-knows-best view and recommends monopoly non-discrimination regulations for competitive wireless carriers.
• What he is really saying is abandon competition policy and let he and his brethren decide what's best for everyone.

Mr. Wu should come clean and just say in a straightforward language what his White Paper strongly implies.

• Its obvious that Mr. Wu does not think that competition works in communications or in wireless.
• He does not think competition best serves consumers, and has the datatopian view  that "benevolent all knowing" regulators need to decide what technologies should succeed, who can innovate and who can't, who can make money and who can't.

Second, Professor Wu analysis suffers from what I call the "perfection fallacy."

Just got back from New York where Dan Brenner of NCTA and I faced off against NN proponents Professor Susan Crawford and Skype's Chris Libertelli.

It was a different format less washington-ish and more finance-ish given the audience and Eli Noam's deft moderating hand.

The quip of the day goes to my colleague Dan Brenner who summed up the net neutrality proponents views as "love the carriage, hate the carrier."

• So true, they just want to assume that the network will always be there and not have to pay for it.

I framed my views in an MBA context, explaining what was really going on competitively and commercially in the NN debate.

• I explained that the dominant dynamic in the sector was the collision of the converging tech and com sectors;  (My techcom thesis.) and that net neutrality was simply the politics of that violent collision..
• I also framed it as a huge clash between the very different business models of the software industry  that wants bandwidth to be abundant and free, and the hardware/network sector that have to invest, build and make the Internet work and that have to keep up with the exploding demand of bringing video to the net.
• I reminded them of the exaflood point that a 30 minute sitcom consumes 7,000 times more bandwidth than visiting a website,
• You can't wave a magic wand and have the Internet handle video without lots more investment in capacity -- that someone has to pay for -- and why should it just be the consumer that has to pay that bill.

The best question was how could one bridge the gulf between the polarized sides.

I was delighted to see Mark Goldberg's post alerting us in America that the Canadian Government is opposed to embracing net neutrality regulation as well.

I love Mark's no apologies free market stance. He knows the Internet's growth, vitality, and diversity has come from free citizens, freely interacting and cooperating, free of government intervention. As he said, let freedom reign!

This is more evidence that the rest of the world is not pro-net neutrality despite the balderdash NN proponents toss  around.  

What do the following three stories of the last few days have in common?

• Yesterday, Reuters quoted Google's head of TV Technology, Vincent Dureau, saying: "the Web infrastructure, and even Google's (infastructure) doesn't scale. Its not going to offer the quality of service that consumers expect." in an article that highlighted new Internet TV services of Joost and YouTube.
• Tuesday, USA Today had a front page story that WalMart was launching a service in conjuction with major studios to allow downloading of movies the same day as DVDs are released and the next day for TV shows through WalMart.com.  
• USA Today also reported Tuedsay that TiVo and Amazon were launching a new service for letting online users download movies to their DVRs and then watch them on their TVs rather than their computers.

What's the common thread? Its obvious that the capacity of the Internet will have to increase exponentially and rapidly to handle the coming exponential increase in traffic generated by Internet video.

I have attached the link to Esther Dyson's important interview on net neutrality.

• Her real life experience and leadership in dealing with ICANN and government regulators is worth paying attention to.
• Esther is very widely respected in the Internet community and always thoughtful in her approach to problems.
• She has even been dubbed the "Internet High Priestess".

Wired has an interesting article on how Microsoft's new Vista operating system has had to make some tough and restrictive design calls that some could misread as "discriminatory".

• The Wired article by Michael Calore, explains how Microsoft restricts or "cripples" users ability to use virtualization technologies to get certain content and how Microsoft's Defender will search for spyware and in some cases automatically delete applications.
• it looks as if Microsoft has legitimate business reasons for this blocking, degrading and impairing of certain content and applications.  

Why this is relevant to net neutrality and Microsoft is that:

• Microsoft has 90% share of the Internet browser market which is a potential Internet access technology bottleneck and gatekeeper that net neutrality proponents conceptually fear;
• Microsoft as explained in this Wired article is clearly exercising its freedom to:
• discriminate against users to force them to buy a higher priced product if they want to do certain things; and
• design its product and service as it sees fit.
• Microsoft clearly wants to preserve its right to differentiate and to control its product/service, something we at NetCompetition understand and support.

 Why this is relevant to Microsoft's departure from ItsOurNet is that Microsoft evidently understands that regulation can be "unreasonable" and "unjust" as I explained in a previous post.

The evidence continues to pile up that Google is well on its way to achieving a 50% share of the search market, a significant antitrust threshold where a company is considered "dominant" and subject to "stricter scrutiny" for potential anti-competitive practices.

• Google's ~50% market share is highly relevant to the Net neutrality issue because:
• Search is now the leading Internet access technology, and
• Google's national and international scale and market share dwarf the potential gatekeeper role of any U.S. broadband player.

Microsoft's recent earnings call showed how badly Microsoft is doing in search.