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Net Neutrality and the Free Market
Posted by: Jon Henke on Friday, May 05, 2006

Dale Franks has weighed in a few times on the side of Net Neutrality, but I've remained somewhat less convinced (or at least agnostic) that further regulation of the market would be a good policy. I'm very unconvinced by arguments that we wouldn't like "a tiered Internet", if only because I don't think it's our place to tell a company how to conduct their business. The place to register our opinion is the free market, and not Congress. If we actually wouldn't like a "tiered internet" then there will be a market for that consumer interest.

Dale's preferred policy on NetNeut comes down to...
Regulate the network. Deregulate everything else.
But that's one "solution" too many. If we deregulate the provision of access, opening it up to many carriers, then there will be plenty of choices for consumers. If consumers genuinely do want to purchase censored, tiered access, I don't see much reason to prevent them from doing so. And perhaps — to, e.g., those with an interest in unobstructed streaming video — there are legitimate utilities for that sort of thing. But most people, I suspect, would be more interested in net neutrality, and with access provision deregulated there should be plenty of providers from which to choose.

So if you "deregulate everything else", what's the use of regulating the network? If there's a market for net neutrality, then a free market will route around the damage.

However, with no bill in sight to "deregulate everything else" — and with the "unlimited bandwidth" still a bit off — we come back to the fact that internet carriage is still a government established, legal monopoly for many companies and consumers. So we're really debating the best way to legislate away a potential problem created by...legislation.

But bear in mind, even the most "civic-minded" legislation will not resolve the underlying fact of scarcity. Net Neutrality legislation will not necessarily distribute bandwidth more "fairly". Bandwidth will still be rationed, just on different bases. As Tim Swanson writes at the Mises Institute...
One of the chronic problems plaguing public roads [is] traffic. There is no pricing mechanism to discriminate between off-peak and on-peak times; the roads are a clear illustration of the tragedy of the commons. Internet traffic experiences a parallel phenomenon: throughout the work week, network traffic peaks during the day and declines at night — a cycle also found on public streets.

Whether or not proponents of net neutrality want to acknowledge that scarcity exists, it does. Despite continued increase in bandwidth capacity, a router can only handle a certain amount of traffic. Just like a four-lane highway, it can only supply a certain threshold of traffic and is therefore inherently limited.


Instead of Net Neutrality, yhe optimal solution here would be to deregulate provision...and everything else. Perhaps there is a market for tiered access, perhaps not; perhaps tiered access will open up new online market paradigms, perhaps not. And perhaps variable pricing will even speed the evolution of unlimited bandwidth. Let's find out.

End the monopoly, and let a thousand competitors bloom.
 
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I’m not sure exactly what you mean.

Are you only talking about trunk providers or do you mean local providers too. Do you mean deregulate cable, so we can have some choice or do you mean let the existing cable companies have their way with us? We regulate electricity because its a "natural monopoly". Do we deregulate that too? For electricity, only one company can run the line to our house. Once that line is there the company can extort monopoly profits unless they are regulated. Why isn’t the same thing true for local providers?
 
Written By: cindyb
URL: http://
Why isn’t the same thing true for local providers?
Well, WiMax and similar technologies will provide an alternate means to connect to your house.

After all, you could drop your land line and just go with a cell phone in the voice space. You should be able to do something like that with data pretty soon.
 
Written By: Mark A. Flacy
URL: http://
Jon quotes...
One of the chronic problems plaguing public roads [is] traffic. There is no pricing mechanism to discriminate between off-peak and on-peak times; the roads are a clear illustration of the tragedy of the commons. Internet traffic experiences a parallel phenomenon: throughout the work week, network traffic peaks during the day and declines at night - a cycle also found on public streets.
...and yes, the night time reduced traffic cycle provides windows of time to perform network maintenance and upgrades while degrading user traffic as little as possible.

Not that highways are always maintained that way.
 
Written By: Mark A. Flacy
URL: http://
Jon, here’s a serious policy question.

What happens if you "deregulate everything", but a thousand flowers do not in fact bloom? What if the major players already on the scene with billions of dollars in assets and legal control of large infrastructure networks leverage their vast information and recognition advantage to crush anything resembling smaller competition, and then in a series of margers & acquisitions, eat each other until we arrive at a cartel then proceeds to charge any fee it wants to start any form of website?

Do you believe in cartels, or did liberal economists make them up?

Isn’t this kind of like what Microsoft does to ensure that computers come pre-loaded with Microsoft products, and nothing else? Isn’t it funny how no one has been able to put forth a competitive operating system (that isn’t free) to Microsoft in 1.5 decades? Where, exactly are the flowers there?
 
Written By: glasnost
URL: http://
End the monopoly, and let a thousand competitors bloom.
I used to live in a street in which two competing cable operators had each run their own cables. Sure, having the choice was nice, but it just doesn’t scale to a thousand competitors. The telegraph poles just can’t carry that much cable.
 
Written By: Bitter
URL: http://qando.net/
Isn’t this kind of like what Microsoft does to ensure that computers come pre-loaded with Microsoft products, and nothing else? Isn’t it funny how no one has been able to put forth a competitive operating system (that isn’t free) to Microsoft in 1.5 decades? Where, exactly are the flowers there?
IIRC, Microsoft reinvests billions of dollars into software development and product updates. They release a new version of Windows and of their Office suite quite regularly.

Why would they do this if they didn’t fear competitors in the OS market?

The truth is, they’re running pretty fast just to stay in the game. They’re constantly improving their product just as you would expect if they had five or six serious competitors.

And they’re fighting a battle on several fronts against competitors who are trashing them through the government. They face competition from Apple on several fronts, from free alternatives to their Media Player (WinAmp, RealPlayer, Quicktime, etc.), from free alternatives to their MSN instant messenger (Yahoo! Messenger, AOL Instant Messenger, ICQ, Trillian [which incorporates the other four] and many minor providers), from free alternatives to their Internet Explorer browser (Mozilla Firefox, Opera, etc.), and so on. How about their search engine, facing Google and Yahoo, to name a few?
 
Written By: OrneryWP
URL: http://
IIRC, Microsoft reinvests billions of dollars into software development and product updates. They release a new version of Windows and of their Office suite quite regularly.

Why would they do this if they didn’t fear competitors in the OS market?
How much revenue do you think they get from everybody upgrading to the new versions? Have they really made such substantial changes to Office since 97 that are worth putting down hundreds of dollars to upgrade? Would it be worth it if they didn’t make the new versions incompatible with the old?

Microsoft’s dominance in operating system is very specific: OEM retail sales. You can’t walk into a store and buy a name brand PC with anything but Windows. A while back Be, Inc. offered stores free copies of BeOS if they preinstalled it to dual-boot on their Windows machines. Microsoft used their OEM license agreements to forbid anyone from doing it. Apple is the only company that has a shot at competing with them, and that’s primarily because they make their own computers.

I’m confident the market will eventually correct itself, but I wonder how much better off we would be now if Microsoft was never as dominant.
 
Written By: Adam Lassek
URL: http://

 
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