I thought the ruling said they didn't have the authority to do this without classifying ISPs as common carriers. If they're not going to do that (per the end of the article) then what changed that makes it legal this time?
I took "The commission will not seek to immediately reclassify Internet service as a utility. Mr. Wheeler said that the commission will retain the right to do so, however, if its new rules are approved and appear not to be working adequately." to mean that they'll be using the utility-classification as a lingering threat if the ISPs don't follow along.
It's odd to see utility status classified as a punishment for industry. Shouldn't it refer to the technology (water delivery, electricity, possibly internet) and its role in the customers' lives?
It is in a way a punishment. What makes a company profitable? Creating things people want and need. What makes them really profitable? Creating things people really want and need. But if you build something people really need, you get classified as a utility, which limits your ability to profit from what you're building and also drives out most of the spark from the industry. Our water pipes are mostly 100+ years old, our electric grid is ancient, most of our power is provided by plants that are decades old, etc. Chicago decommissioned a 110 year old coal plant in 2012. Our utilities are not exactly places bustling with innovation, new ideas, new technologies. Regulation has effectively killed the once promising nuclear industry, for example.
I'm not sure this is a fair assessment. There's been tons of research into nuclear power, for example. Look at the generation IV reactor designs [1]. And there's been tons of interest and investment in cleaner electric power alternatives [2].
The examples you cite (coal plants staying open forever, water pipes, etc) are massive capital investments. That's the primary reason they've stayed open / haven't changed for so long, once you spend that much money you want to milk it for every penny it's worth.
Utility regulation is burdensome and costly, but I don't think it necessarily kills innovation in industry like you intimate.
> I'm not sure this is a fair assessment. There's been tons of research into nuclear power, for example. Look at the generation IV reactor designs [1].
Research isn't industry. The regulations don't prevent people from designing reactors; just from building nuclear power plants.
I don't think the statement "The Nuclear Regulatory Commission is the reason nuclear power hasn't taken off" is incompatible with the statement "Regulation has effectively killed the once promising nuclear industry."
Nuclear is a significantly more regulated industry than coal and natural gas. Consequently, it is cheaper to run coal and natural gas plants, just because there are large external costs associated with natural gas and coal (emissions, environmental damage) which are passed on to the taxpayer instead of the consumer.
It is quite possible that if natural gas and coal were forced to pay for their externalities (via regulation) nuclear would be more cost-competitive, and you'd see more advancement of nuclear technology in industry.
> Our water pipes are mostly 100+ years old, our electric grid is ancient, most of our power is provided by plants that are decades old, etc. Chicago decommissioned a 110 year old coal plant in 2012. Our utilities are not exactly places bustling with innovation, new ideas, new technologies. Regulation has effectively killed the once promising nuclear industry, for example.
In a privatized scheme, it is unlikely that infrastructure would be upgraded unless those upgrades paid for themselves in some way or were compelled by law. We are already seeing that telcos don't seek to improve the quality of infrastructure in many cases and instead seek a way to increase margins without having to make significantly expenditures on infrastructure.
But if you build something people really need, you get classified as a utility
This is misleading oversimpliication. The issue is the viability of competition, not really the "need" of the consumer. In the case of cable/telcos, competition is precluded by a variety of non-market barriers. These barriers create problems for functioning markets to capitalize competing entities, regardless of availability of capital, technology, or managemnet skill. So, in a sense the government is responsible for the "mess" of limited cable and telco competition. And they are (as a result) on the hook to limit the damage of their anti-competitive public policy. The logic of limiting competition is some variation on the theme of "natural monopolies"; this is the origin of "utility status". In other words, it is almost strictly speaking a supply side issue and a government policy issue. The levele of demand is really only a second-order part of the equation; although internect acesss is being blurred in a sense of becoming a <perceived> public good (like infrastructre). But in a certain sense, it is not really a public good. The latter are typical removed from the market altogether. ie, Roads are for the most part free. Telephone and cable service, have not really been treated this way. What is sort of different is that the Internet has been priced more like a road thank like cable service. The cable companies are of the view they are "entitled" to price it like a cable service because their strategy is to monopolize access and to extract rents from their "entitlements". The public interest, from a cultural and economic perspective, therefore of what goes over the pipes can be sepertated from the pipes themselves. The pipes should and could be treated like "servicies" for which people pay. But the cable companies could and most likely should be denied and access to the data and the economics that flow down the pipes. The government could legislate the cable companies asset value to zero, if they need to. They could pass legislation to destroy copyright's perpetuity value {etc}. There is plenty of leverage to bring the cable companies to bear to a public interest position. At least technically. In reality, we know who is already in the pocket of the cable companies though +D.
Probably the same number that dream of going to work at the intensely-hated digital utilities, aka cable companies.
Who in the world has ever said "My dream is to work at Time Warner Cable"? I wouldn't tell people I worked for them. My house might get egged.
Hell, I wouldn't be surprised if companies that design and operate water treatment plants aren't often more innovative than a company like TWC that has no competition on many of its markets.
Since 2002, the internet speed at my parents' house in Virginia has increased from about 256 kbps (SDSL) to 50 mbps (fiber). That increase of 100x isn't quite in keeping with Moore's law, but it's pretty damn impressive and talented people at those "intensely-hated digital utilities" are the ones behind it, backed up by the tens of billions of dollars those companies are throwing at the problem.
256 kbps was pretty slow even in 2002. Using that as your baseline is like bragging that you doubled the wealth of somebody who previously had one dollar to his name — big percentage improvements on small numbers are not huge accomplishments in the grand scheme of things.
My personal situation: My Internet is the worst it's been in years, more expensive than it's ever been, and I have no other option than Cox in my area. I know very few people who have seen any notable improvements in the past 10 years.
Lucky them. Since the late 1990's, the internet speed at my parent's house in Alabama has gone from 38.8kbps to... 38.8kbps. The house is in the sticks, in a bowl, served by ancient, poorly maintained telephone and cable lines.
The future has been here for decades (see South Korea, or much of Europe, or...), it's just very unevenly distributed.
One of the things that led to the current situation is municipalities granting favorable franchise agreements to get companies to serve places like that which the market wouldn't have served to begin with. I don't think we want more of that.
The future is here, in the U.S. too: http://www.akamai.com/dl/documents/akamai_soti_q213.pdf?WT.m... (see page 13). The U.S. ranks 8th in average connection speeds. It can't compete obviously with places like South Korea, where half the whole country lives in the Seoul metro area, but is better than much of Europe.
I agree that we don't want to provide favorable terms to companies who aren't interested in managing telecommunications infrastructure as a public utility.
I've heard the population density argument, before.
It's bunk. If it wasn't, we would expect to see reasonably priced 100mbit+ residential fiber service in NYC, SFO, SEA, and other densely populated metro areas. Instead, we see somewhat reasonably priced 1gbit residential service in Chattanooga, TN (1/10th SFO's population, and 1/20th NYC's), wherever Google deigns to pick a fight, and places like Sebastapol, CA (with a population just under 8,000 people).
I had a ~5mbps cable modem connection in southwestern Washington State miles from the nearest thing that could reasonably be called a city in 1999. 50mbps represents a 10x increase in 16 years.
I know of at least one in my circle of acquaintances, who is a highly intelligent and accomplished engineer. There's lots of fascinating stuff to do at a water company: industrial control systems (software and hardware), large structure engineering, resource management, etc.
Lots, it's an entire subdiscipline of civil engineering. So by that token, maybe we can also ask how many talented people dream of becoming legislative lawyers.
Yeah, there are many things that killed the nuclear industry, but I've never heard anyone claim it was too little regulation.
( I mean, yes, the regulations outlawing new nuclear plants obviously, but those regulations came about because most people judge the previous regulations to be inadequate. I don't agree with them, but I don't think deregulating the nuclear industry would help anyone. )
Too much regulation. The process made it inordinately expensive to bring new nuclear technology to market.
I'm not knee jerk opposed to regulation. But the best regulation identifies a market failure and addresses it in targeted way. Net neutrality regulation doesn't do that. It just implements some group's ideal of what the industry should look like.
Hang on a second, in what way is "last-mile connectivity providers cannot selectively extort content providers based on business considerations" NOT identifying and addressing a market failure?
I pay for the pipes on my end, I want the same data-rate regardless of whether the data originally came from a netflix server or a NBC-affiliated company's server.
If netflix needs to beef up their peering arrangements in order to get the data to comcast's network, that's one thing, but they absolutely should not have to pay an additional fee to comcast to protect themselves from being penalized.
That's not a market failure, but that's rather using a market failure as a hook impose a particular ideology about what the internet should look like. Hypothetical: say there was no last mile monopoly. The coax into your house was owned by the municipality, which allowed competing providers to plug in and provide the rest of the network. Would that eliminate the need for net neutrality regulation? No: companies could still pay ISP's to prioritize their packets all the way up to the municipally-owned coax into the customer's house. In other words, the regulation has nothing to do with the market failure ostensibly justifying it.
Being able to pay other companies to give you better service is an intrinsic advantage to being big, and is not the product of a market failure. For example, Amazon works out a special deal with the USPS for Sunday deliveries. That still gives a huge benefit to Amazon versus smaller competitors who can't afford to pay up. Being small comes with penalties, and the FCC shouldn't impose an ideological view of the internet that artificially removes these disadvantages.
I don't understand this argument at all. You're conceding that last-mile extortion is a market failure, then turning around and saying legislating against that last-mile extortion is "imposing ideology" rather than just addressing the market failure?
When I purchase internet connectivity, I want internet connectivity. I don't want varying grades of speed depending on who I'm talking to, I just want a dumb pipe. That's what I'm paying for. How is legislating the dumbness of the pipe 'imposing ideology'? The market is allegedly $/gb/mo, let providers compete on service, price and speed. If they can't deliver those GBs for those $s, they're free to charge more to consumers. The only ideology there is capitalism. What am I missing?
Note that I said in my original post, if Netflix doesn't have good enough peering arrangements on their end, then that's their problem and nobody thinks there should be legislation guaranteeing them cheap bandwidth. But most of us think they should be able to buy bandwidth to the consumer networks, via peering, at the market rates that everyone else pays, maybe with discounts for volume.
The last mile monopoly is the market failure, saying that internet connectivity should be just a "dumb pipe" is the ideology. Legislating wireline providers into being "dumb pipes" doesn't do anything to directly address the last mile issue, but instead uses the last mile issue as a hook for imposing an idealistic vision of what internet services should look like. There's no nexus between QoS or prioritization or the other sorts of things an ISP might want to do and the last mile monopoly.
A better legislative approach would be something like having municipal utilities own the last mile coax, and allowing different ISPs to plug into it. That would eliminate the market failure directly, and allow the industry to evolve into whatever structure makes sense. I think you wouldn't see them end up as dumb pipes in a competitive market. Some ISP would come along and make a deal with the NFL to have high quality streaming only on their network, etc. Just like how there's no monopoly in shipping but Amazon still has an advantage by being able to cut special deals.
Ok, that's our disagreement then. When I buy internet service, I and 99.999% of customers are trying to buy a dumb pipe. That's what it's marketed as, that's what the provider tells us we're buying.
I'd consider a patchwork of different providers with the same problem ("well, sprint has fast netflix but comcast has fast amazon") to be just as much of a market failure. That's bringing huge distortions to internet business, whether or not there's a monopoly on the last mile.
How about if we split it like so?
* Content-neutral QoS and prioritization isn't a market failure.
* Throttling netflix because they strategically threaten NBC (owned by comcast) is a market failure.
Would you agree with that sort of categorization?
How about the following?
* Throttling whichever service your customers are using the most so that you don't have to provide the bandwidth you sold to them under a contract, also a market failure.
Being out of compliance with what you think the internet should look like does not make for a "market failure." There has to be some sort of economic explanation: the existence of a negative externality, free-riding, etc. Even in competitive markets, companies still get together and cut deals and customers face choices like "Sprint with fast Netflix" versus "Comcast with fast Amazon." The mobile OS world is quite competitive, yet I still face choices like "Windows Phone with Office" versus "Android with Youtube." The restaurant industry is highly competitive, yet most places serve Coke or Pepsi but not both.
If you eliminated the last mile monopoly, which is an economically valid reason to regulate, with a targeted regulation, I still think you'd see a lot of the sort of activities that HN-ers dislike. There would still be a huge incentive for ISPs to vertically integrate and buy up content companies and cut special deals. What does Comcast care if they don't own the actual coax into my house, just everything leading up to it? Who can compete with them when they have a "killer app" like Hulu and their competitors don't?
So, if which ISP I happen to be a customer of completely dictates which streaming service I wind up using, then the actual merits of the product have become divorced from which product I buy. That's textbook market failure, right? Dollars aren't flowing to the best product or the cheapest, they're flowing to the product approved by someone in a completely different industry. The invisible hand isn't doing shit for me in that scenario.
Is the next phase of this discussion "the free market will create incentives to start new telephony companies that don't throttle your favorite website"?
For an analogy, should the electric company have a say in which brand CPU I use? Or should they just sell me watt/hours?
Is it a market failure that I can't use Nokia Maps on iOS, or Apple Maps on Android or Google Maps on Windows Phone? I'm no proponent of invoking the "magic market fairy" but to me situations like that fall far short of "market failure."
I guess it all comes down to you not seeing internet conectivity as a utility. Personally, I think it has a lot more in common with sewer/electricity, from the near impossibility of market entrance right down to the sewer/electric/phone lines being physically next to each other, than to putting a phone in a box and selling it to someone.
Heck, I'd even put mobile service as being closer to a normal consumer good than wired internet. Wireless they just need one tower every few miles.
There are some similarities, and a lot of differences. Most households have a fixed demand for power and water. Meanwhile, bandwidth demands have exploded in just 10 years. That's a blink of an eye in utility timescales. 100 year old water pipes are still usable. 10 year old network infrastructure can be obsolete. Public institutions simply aren't able to bring to bear the kind of capital investment necessary to keep up with changing internet technologies and growing demand. People complain about telecoms not investing enough in infrastructure upgrades, but our public infrastructure is has accumulated trillions of dollars in maintenance debt. Even as demand is stable, its a challenge to just maintain existing levels of service in our water, sewer, and power systems.
That's not a market failure, but that's rather using a market failure as a hook impose a particular ideology about what the internet should look like.
The ideology is what you think is the result of the market failure, whether it's being used as a "hook," or something else. Heck, whether it can even be defined as a market failure can been argued to be a value judgement these days.
You should probably back up your extraordinary claims with evidence, if you want to be believed (by anybody who isn't already anti-regulation/government).
