Network Neutrality And Natural Monopolies

Predictions

from the follow-along-now dept

In the last few months, the telcos have become especially bold in asserting their rights to do away with network neutrality, and create special tiers of service, where providers have to pay them to reach internet users. It’s no surprise that they want to do this, even if it is clearly double charging and decreases the value of their network. It’s the telco mentality, and the only reason they’re able to do it is because the FCC has more or less done away with any attempt at building real competition. Broadband Reports points to a post by Larry Lessig about the importance of real competition and network neutrality in our networks — a point echoed in a New York Times article as well. As Lessig points out, “Broadband is infrastructure — like highways, if not railroads. If you rely upon “markets” alone to provide infrastructure, you’ll get less of it, and at a higher price.” That’s rather simplified, but is mostly right. The issue isn’t that it’s infrastructure — but that the infrastructure is a natural monopoly, where the effort to build more than one of the same style of infrastructure does more harm than good, and the value is only in having the same infrastructure reach far and wide (network effects).

For example, look at the highway system. It makes little sense for private entities to compete to build multiple highway systems to “let the market decide.” There may be some cases (private toll roads) where you can add to the natural monopoly, but the core needs to be built only once and then open to all. The same argument can be made for broadband. Have one full fiber system built (not the limited stuff the telcos are working on now) and let private companies compete using that network. If companies want to opt-out and offer a different kind of broadband (say, wireless) then that’s their decision too. But, without that real competition we get the messy process of the telcos building a limited network, at high prices, where they attempt to control every bit of it and charge extra for it. In other words, more expense and less infrastructure. The NY Times piece linked above points out what we’ve said in the past, that this attempt to charge extra for what the broadband providers promised us (unlimited broadband) simply shows that they’ve been unable to deliver on their own promises — something that broadband providers in other countries have been able to deliver on. Lessig points out that bandwidth for dollar we get in the US is well below other countries that have open networks, but it’s even worse than he states. He uses the $15/month DSL number, which AT&T is suddenly promoting again after dropping it late last year. However, as a customer of their DSL (I’d go elsewhere if I could, but I can’t because… yup, there’s no competition at my home, right in the middle of Silicon Valley), I can say for certain that after the promotional rate runs out, they jack up the prices to ridiculous levels (in my case, it was $60/month including all the various fees). Add to that the $15 for a bundled phone line I don’t want, don’t use and can’t unbundle, and suddenly I’m paying $75/month for slow broadband from a company that wants even more money if I want to use VoIP or a search engine.