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What Network Neutrality Is REALLY About
Hey WSJ, 2005 called and wants its talking point back
by Karl Bode 03:23PM Thursday Sep 24 2009
If you've paid attention, you know the modern "network neutrality" debate took off in 2005, when then AT&T CEO Ed Whitacre proudly, though dumbly, proclaimed that Google got a "free ride" on his network. According to Ed, this unfairness could only be rectified by charging companies who already pay for bandwidth money to ensure their traffic reaches AT&T consumers quickly. Such a bizarre statement obviously resulted in fear that phone companies planned to act as trolls under the metaphorical Internet bridge, grumpily extorting passers by. That created a desire by content companies and consumers for laws that would prevent this from happening.

The entire concept of network neutrality is really very simple. It was born out of phone company executive greed, and remains driven by legitimate fear of market abuses by companies with a long history of them. Unfortunately, over the years the debate has been so badly mutilated by PR folk, shoddy journalism and policy wonks that it has become a nonsensical mess. Thanks to said wonks, we're still having the exact same debate we were back in 2005, as this painful editorial in the Wall Street Journal pretty clearly illustrates. Say hello, Mr. Holman W. Jenkins Jr.:
...everything you need to know was contained in the first act, when AOL began bleating about "open access" when broadband first threatened its dial-up empire. AOL's business model depended on free riding on the infrastructure paid for by phone users. AOL users were dialing up and keeping a line open for days or even weeks at a time - yet faced no cost for the disproportionate capacity they used up.
If you thought we were going to make any intellectual progress on the network neutrality discussion you were painfully mistaken, given people still don't understand how the Internet (or bandwidth bills) work, and are still claiming that content operators like AOL or Google get a "free ride" on the Internet. That idea, like most of Mr. Jenkins' editorial, comes directly from the brains of phone company lobbyists who are now fighting new network neutrality rules at both the FCC and in Congress.

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The "free ride" shtick was almost cute in 2005, because you could assume "Big Ed" Whitacre was just babbling. Whitacre, who has amazingly moved on to run Government General Motors despite knowing nothing about cars or innovation, had clearly grown detached after decades of government coddling and duopoly luxury.

But it's almost 2010, and having been deconstructed hundreds of times in hundreds of public forums by thousands of the best minds in this industry, the "free ride" argument has become the pinnacle of idiocy. Yet somehow, the idea remains the cornerstone of the baby bell argument against network neutrality.

It doesn't matter how many times you point out that companies like Google pay millions of dollars for bandwidth and their own infrastructure, the paid talking heads who work for Verizon and AT&T simply keep repeating the same myth. Telling these individuals that AOL dial-up users paid phone companies billions in tolls and long-distance fees will get you nowhere. By demonizing Google and repeating nonsense, Jenkins and AT&T think they can distract unintelligent lawmakers, journalists and the public from the real issues. Unfortunately, they're right.

Yes, companies like Google are not saints. Yes, Google is solely interested in dominating the advertising industry. Yes, companies like Google can and possibly will turn into anti-competitive tyrants over time who violate user privacy and do everything in their power to obliterate competitors. However, the network neutrality debate was not started by Google. It was started by a very confused Ed Whitacre.

Network neutrality has always been about phone and cable companies trying to maintain power in the face of Internet evolution.
If network neutrality confuses you (and it pretty clearly confuses Mr. Jenkins), at least understand one thing: network neutrality has always been about phone and cable companies trying to maintain power in the face of Internet evolution. You can't blame phone company executives for being terrified. They should be.

The evolution of the Internet is strangling decades old cash cows, herded across analog fields by monopoly dinosaurs who've been pampered by Uncle Sam for generations. As voice becomes simply data, charging nine dollars for services like caller ID or call waiting (both of which costs pennies to provide) becomes untenable. Suddenly, programs like Google Voice allow users to send free SMS messages, eroding hugely profitable SMS revenue. AT&T and Verizon, protected from competition for so long, are coming face to face with reality for the first time in generations.

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With voice, video and other services all just bits, broadband has made cable and phone company empires as service providers irrelevant, whether they know it yet or not. That leaves them with one purpose: running a network. And while the baby bells make a perfectly healthy fortune simply selling flat-rate bandwidth in this new paradigm, investor pressure and the need for quarter over quarter stock improvement makes simply being incredibly profitable not good enough.

Ma Bell's remnants turned to Internet content and advertising as the solution, but being incapable of content innovation themselves, their attempts frequently wind up with all the sophistication of an unartistic and troubled child trying to draw a pony. One thing they have gotten very good at after years of coddled monopoly living is anti-competitive behavior. That's why when faced with the specter of losing control of content and service delivery, Ed Whitacre's very first impulse was to choke the hell out of the bandwidth supply in order to maintain AT&T's position of power.

If the network neutrality argument is about the biggest phone and cable companies trying to maintain power and control, then what better plan than to set themselves up as unquestionable guardians of a precious and easily exhaustible resource?

With that in mind, what began as muddled musings by Big Ed would quickly evolve into a sophisticated political and PR campaign designed by much smarter men with nearly unlimited budgets. Unfortunately for the phone companies, both bandwidth and the hardware to provide that bandwidth continues to get cheaper, making strict rationing hard to justify to the public. The solution? Convince the public and lawmakers we're facing a bandwidth apocalypse.

Shortly after Ed's comments a PR push known as the "Exaflood" was born, created by a slew of AT&T-funded think tanks and the Discovery Institute, the same PR firm behind intelligent design. Not coincidentally, the exaflood first appeared in a 2007 editorial in the Wall Sreet Journal by the Discovery Institute's Brett Swanson. Swanson warned this collapse could only be avoided by giving broadband companies infrastructure investment support (code for no neutrality laws).

Much to the chagrin of AT&T's army of lobbyists and think tanks, the Exaflood idea has been repeatedly discredited by a little something we like to call actual science. The fact that network engineers around the world keep repeatedly showing how the global Internet is incredibly resilient to capacity demands with just modest investment and some elbow grease also seems to stand in opposition.

All the same, carriers are still trying to sell the public on the idea that this digital apocalypse can only be stopped by a shift from flat-rate to per-byte billing, an idea that's immensely unpopular with consumers but adored by investors. Loyally selling the metered plan, Mr. Jenkins again somehow blames Google, then trots out the scary word "socialism" in order to rally and confuse Journal readers. Don't worry about the fact that socialism in this context makes absolutely no sense, because Jenkins' goal isn't to make sense, it's to get Journal readers in line with metered billing:
Google's trick will be to lobby for the optimum of Internet socialism - "tiered" pricing may be OK, in which some consumers pay extra for a bigger pipe. But usage-based pricing that would give consumers a reason to think twice before clicking on a Google-sponsored ad? It would be the end of Google's business model.
Of course concerns by content companies (be they the giant Google or the tiniest of startups) that strictly rationing bandwidth results in constricted innovation are perfectly valid. Could the nation's largest ISPs implement a per-byte cap and overage broadband billing model that was fair and actually delivered value to consumers? Sure. Will they? Don't be ridiculous. Any new metered billing model proposed by a phone or cable company would mirror the generations of over-priced services they already deliver in marginally competitive markets across America.

The need for quarter over quarter results would result in endless hikes in per-MB overages, hikes completely out of scale with the real costs of providing terrestrial broadband. Conflicts of interest from companies that deliver both TV and content will result in metered billing models aimed at controlling use of third party video and voice services. If you doubt that phone and cable companies will abuse the metered billing model to the detriment of consumers, there's a hundred-plus years of industry history you probably should get busy reading.

However, perhaps the biggest illusion of the network neutrality "debate" has been that there's some kind of middle ground to be reached if all sides of the discussion just keep working through their differences. In reality, we've made no intellectual progress in this debate in nearly half a decade, because the discussion has always been driven by phone and cable company lobbyists. They're not paid to compromise, they're paid to win by any means necessary, which includes the endless repetition of already disproven and sometimes utterly nonsensical concepts.

So if you're a consumer awash in neutrality jargon, don't let Mr. Holman W. Jenkins Jr. or other industry vessels take your eye off the ball by recycling idiotic, disproven talking points about "free rides." Take a minute to understand, whether you support network neutrality rules or not, that network neutrality isn't about "free rides," "socialism," how evil Google is or even political parties. It's about giant telecom conglomerates doing everything possible to maintain their historically-abused positions of monopoly and duopoly power in the face of Internet evolution.

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reply to karlmarx

Re: Not news; Human nature + corruption

*This may be viewed as OT... but here's my $.02*

The fundamental problem with EITHER side of this so-called debate is this; human-nature. The innate "corruptness" of the human leads to "greed" and "tyranny." These are innate traits, shown through the HISTORY of time to be apparent in EVERY form of "society," and in raw nomadic tribes and general wanderers.

HISTORY again will back my statements that NEITHER pure govt, nor "corporations" can be trusted PERIOD... I would lean more on the side of a govt in control Vs a Corp, but our govt (in theory) CAN be controlled by votes, which are essentially "free." A corporation cannot be controlled except for monetarily (the customer + shareholders)... But as we all know, MOST people are sheep; too lazy and uninformed (or stupid) to actually pay attention to what's being served to them Vs being proactive and controlling their votes (since many don't/or improperly vote off things like emotion etc.) So with people being so stupid and devoid of knowledge b/c of social distractions such as TV/sports/gambling etc... the people elected (some falsely), aren't so stupid as we may think and know HUMAN-BEHAVIOR, as it's their job to know how people think.
So with these people at the helm, with a myriad of advisers and other professional advising groups; they play the game based off people's EMOTIONS and passions, which leave many confused and voting illogically and irrationally from which they make money. The govt AND corps prey upon the masses' income, like a giant fish ball in the sea being probed by predators.

What I'm getting at is PEOPLE are the problem in general; a corporation is nothing more than the modern equivalent to a king and his land, whom feud with the other neighboring "kings and vassals." This is ALL merely the feudal-system-matrix, but throw in things like "technology" and "medicine," suddenly we've some how left these age-old hierarchical structures of society? There ARE many living descendants from Pharaohs, kings, barbarians and other such human "elite" (self- prescribed), just WHERE do you think their money and social status went? Society is STILL structured with Elites at the top, and sub-groupings at many proceeding levels...

All this rambling seems off topic, but in-fact; when you LOOK at these squabbles between diff corps/govt groups etc... you're looking at the same old system, but with a polished and refined mask of technological advances. We are still in the same Kings and SERFS (most of us) system...

Just think logically about the way things are. They are this way b/c people ALLOW them to be so. If people got as upset about how their TAX dollars are going to building machines to simply destroy others and their land; as they do about the NYGiants losing to the Cowboys... society might just be a little better for the serfs/everyone else. Corporations and govt are doing simply what humans as a group-think collective do; trick, treat, hustle—prey upon other humans for life essence, aka money/goods. Some are less malicious than others, but in general the reason we're still arguing about Telcos fighting Ad-Co.s is people aren't voting to change the system. It would have LONG been changed if people got together and pro-actively voted.

"2-party system?" HAHA are you kidding me; TWO very smart and clever "parties" know that it's far better to PRETEND to be against one another, trading blows and titles to appease the cheering sheep; while they shake hands in private and BOTH make off with OUR money. This has been going on since the dawn of man. People in power, SHARE it in ways many down below cannot see nor comprehend. STOP voting for either party, b/c just WHAT has either party accomplished in the name of the "little people?" NOTHING! Individuals are largely the cause for great innovation and increased quality of life; NOT your beloved "2-party" system. You keep voting in the same hustlers and Charlatans for decades - that's FACT. ONLY the RICH can hold higher office (in nearly every case) in this country, WHY? B/c that's the way corruption and control/influence of the law (corrupted) works for the RICH and not for US... Try voting for a diff "party," what do you have to lose, your "vote" so you claim; then SHOW US just what your past votes have been worth? SAME old BS hustle of OUR taxt dollars...

Call it socialism, Darwinism, corporatism... I call it FEUDALISM, aka modern human nature. Both sides are corrupt and cannot be trusted so long as there's MORE "money" to be made (always).

Agree or disagree; thanks for reading.

Karl Bode
News Guy

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reply to KodiacZiller

Re: Socialism

The ironic thing is that these failing schools are a result of socialism.
As the son of a 40-year school social worker, schools are failing in part because we as a culture place a low priority on intellect and critical thinking. Money from the private sector also lures the smartest teachers away from schools (that would be a case of too little funding). Which, ironically, leads to people not having any idea what socialism even means.

ObamaCare Kills Americans

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reply to rit56

Let's keep the conversation on track and leave the public option health care crap that will allow the government to euthanize our senior citizens for another thread.

Government regulation has its place, just as government has its place. Government's function should be very limited in role and scope in our lives, not the lumbering behemoth that needlessly pokes its nose into everything from executive compensation to whether you're changing your child's diapers properly.

A relatively weak central government that left most power to the states is what our founding fathers envisioned. The primary role of our government should be protection (i.e. defense, police, fire, etc) and infrastructure (i.e. roads, bridges, etc).

Now, I would argue that the definition of "infrastructure" has changed somewhat over the past couple decades when it comes to what is important for commerce in the United States. Today's definition of "infrastructure" should include at least a cursory role in regulating companies that provide access to the internet. Such actions not only help to ensure that consumers aren't wholly taken advantage of-- they also help ensure that our citizens have access to technology and information to put us on a level playing field with other nations.

Based upon the importance of broadband in our lives today, I might even be tempted to elevate broadband internet connections to the level of a utility. Just like electricity, water, phone, and gas, broadband can be an important part of people's lives. This argument, coupled with little to no active price competition in many markets, and high costs/barriers to entry, could justify a certain amount of government oversight and regulation of the industry.

As always, the devil is in the details. I'm sure that the Obama leftists and the capitalists on this site will find plenty of room to disagree on just what the correct amount of oversight and regulation is.

See-- the answer isn't always pure socialism or pure capitalism. I think Obama is an idiot and just plain wrong on most things, but his ideas around creating a broadband infrastructure might turn out half decent.
After listening to his UN speech, I'm convinced that Obama has a major self esteem problem and is projecting it upon the United States. He is more concerned with winning popularity contests than with keeping us safe.

Milford, NH
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reply to openbox9

Re: A little dial-up history

said by openbox9:

Maybe because after the tolls disappeared, people disproportionately consumed more of the limited resource????
I think the dial up experience is a great example of the interplay of business interests and regulatory regime acting in the public good..

The Bell's rightfully complained about the long connect times of dialup users and that the FCC forbid them from differentiating between voice and data calls. The PSTN was designed for much shorter average call times.

So what was the effect of this ruling? Once a person invested in a computer and modem there was no incremental cost. This encouraged experimentation. Studies have shown that consumers prefer fixed pricing and even relatively small incremental cost discourages use. Because use was in effect free lots of people got online and lots of businesses were started (and many failed) exploiting this new technology. This resulted in a fortuitous cycle of increased value and demand for faster connection speed.

FCC rules encourage folks to experiment with the Internet. As perceived value increased it drove demand for faster connections. As faster connections became ubiquitous entrepreneurs developed services that were not possible over low speed dialup. This created an entirely new market for communication companies, selling multi-megabit connection to every household. If it had not been for free local calling, people would not have experimented as much, delaying interest in the Internet and demand for high speed Internet access.

Ideally net neutrality will have the same effect. Well crafted regulations will force companies to do what they would not do on their own. Keeping the Internet open will lead to ever greater usage, ultimately benefiting the same companies chafing under Federal regulations.