Wednesday, February 18, 2015

Internet, net neutrality, regulation and business

I, among many, watched the Internet grow up, or at least portions of it.

In the '80s, when I was first exposed to it, it was mostly ARPAnet. Institutions had to apply to get on it, and to be approved you had to be somehow involved in research benefiting ARPA, the Advanced Research Project Agency (renamed after DARPA dropped 'Defense'). Overnight email was common, and you never quite knew whether an '@' address was going to work, or if you had to revert to a '!' path routing. The web was being thought about, but Gopher protocol worked. Anonymous FTP was allowed and popular for file (and, eventually, virus) dissemination. USENET was the information exchange method getting the most use, and it had some very good science and technology discussion groups and a whole bunch of "flame wars."

In the '90s, rules for hooking up to the nascent Internet were liberalized. Internet Service Providers (ISPs) popped up everywhere. Any geek with a rack of modems and a little business sense could open an ISP shop. The telephone company thought this was great, initially. They couldn't install new phone lines to ISPs fast enough. Nationwide ISPs appeared: America OnLine, Compuserve, Netzero... USENET became clogged with idiots, most of whom seemed to be interested in ASCII-encoded binary porn downloads. (Serious articles were written at the time about how the porn industry is always leading-edge in adoption of new technologies: video tape, DVDs, then the Internet. Ugh.)

Though the Internet originally consisted of universities and defense-research holdovers, that sort of melted away in a wild-West atmosphere. Name registrations for new URLs went through the roof. Internet business exploded. Nationwide and worldwide fiber connections were laid, stayed dark during the dot-com bust of the '00s, then lit up big-time.

It was almost exciting when I got a cable modem at the house. I believe it was a 5Mb/s connection, which was screamingly fast compared to my 56Kb/s phone modem (not that I ever got close to 56k). Doing serious work from home became possible.

Now I have a 100Mb/s connection and I think it's pokey sometimes.

Virtue is a cycle

The Internet to date has grown with a light touch from regulators. Recently the FCC has proposed so-called "net neutrality" rules, which fans of regulation say are essential to keeping the Internet open to all. Growing businesses are generally opposed to these rules. The point seems to be whether one data packet can be treated differently than another: Can some data packets be charged more for transmission, or buy a "passing lane" to speed them up?

So far industry has negotiated these things themselves. Netflix, Amazon, and other big and small consumers of bandwidth are buying better deals for themselves, and we're all better off for it. I like my Netflix streaming movies, and I like that they stream smoothly. That's because there are businesses called CDNs, content distribution networks, who will host content in a geographically distributed manner. There aren't pipes fat enough anywhere for Netflix to stream everything out of their home location. (The speed of light isn't a suggestion, it's the law.) So they move chunks of content throughout the CDN, in preparation. Then Netflix or whomever negotiates a fat pipe into local ISPs. Find the bottlenecks, fix the bottlenecks, make your customers happy, make boatloads of money. It's the American way.

Netflix is happy when more people subscribe and stream their video content. Netflix is now one third of all evening data traffic, but they have lots of competitors who want your subscription. Lots of subscribers, lots of data, lots of money. To keep the data and money flowing, Netflix has to pay for bandwidth while keeping the subscription costs reasonable. The CDNs and backbone providers take Netflix money and build out to provide more capacity. We get smooth video at night (and fast data during the daytime) and Netflix grows.  Note that some packets do get preference, in a way, but everyone benefits. This is a virtuous cycle running without regulation.

Competition is a lovely thing

In contrast to the backbone and CDN Internet companies, locally we have the former telephone companies and cable companies who actually deliver the Internet to homes. They are regulated on the telephone and cable sides of their businesses, although they aren't regulated on the Internet side (except perhaps locally or at the state level).

Being, essentially, the phone company or a collection of cable guys, they are historically unpleasant. They raise fees at the drop of a hat, abuse customers, often deliver poor service and generally make pests of themselves. They have municipality-granted duopolies in most parts of the country. Neither the ugly guy nor his brother have to be nice; he knows that he or his brother will get your money.

Unless competition happens.

When I had a landline from Southwestern Bell, the bill for a simple voice line was around $40/month. Now my "landline" is a voice-over-IP (Internet Protocol) box that answers the same number, but costs under $4/month. I could get it cheaper if I wanted. Competition is a lovely thing.

The cable company that delivers my Internet was very happy to give me 50Mb/s speeds at around $50/month (until my "special" ran out and it became $70/month). The top speed available was 100Mb/s. Then Google mentioned they were coming to town with Google Fiber, which will deliver 1Gb/s Internet for $70/mo. Suddenly the cable company decided to double my speed at the same price, with top speeds of 300Mb/s available.

Competition went from being lovely to being a smokin' hot babe.

Regulation is an un-lovely courtesan

Now comes the FCC with their proposal to regulate (and under Title II, tax) the Internet. Mind you, there haven't been any serious instances of nasty stuff that would require "net neutrality" policies. The arguments for net neutrality are theoretical.

From my point of view, the potential evil in the Internet landscape is from regulation. Regulation is what got us sclerotic telephone companies that had to be beaten into little pieces before they finally let some progress happen.* Regulation stifles innovation, stifles competition, and locks us into the 1950's telephone environment: Everyone gets their choice of a nice over-engineered black bakelite dial telephone, or nothing, at painful prices.

This regulation thing presumes that our political betters understand what is needed, and will encourage good stuff and forbid bad stuff. Usually this does not happen. What ensues is the buying of influence by the monied incumbents, and the freezing out of the upstarts. Government is not noted for its ability to pick winners.

What we have now has worked well, right up to where the Telco and cable company get the data. If congress and the FCC want to do something positive, they should deregulate the remains of the telephone companies and cable companies, all the way down to the municipal level.

No, no, no, don't tug on that. You never know what it might be attached to.**

One of the more amazing stories of the Internet is about the woman in the country of Georgia who, in 2011, was digging with a shovel and cut a buried fiber line, thereby knocking the country of Albania off the Internet for 12 hours. It was a government backbone fiber with no redundancy. You didn't build that, government did. Poorly.

The Internet doesn't need government "suggestions" on how to do things. The Internet works, probably because it is mostly unregulated. Please don't tug on that, Mr. Regulator. You really have no idea what it's attached to.

Addendum, 1 March 15: I'm not all that excited about a panel of university economists, but such a group was asked their sentiment on this statement:
Considering both distributional effects and changes in efficiency, it is a good idea to let companies that send video or other content to consumers pay more to Internet service providers for the right to send that traffic using faster or higher quality service.
Despite the liberal bent of the average member of the academy, 44% agreed with this statement, 11% disagreed (the rest were uncertain). Two on the panel rated the statement a "strongly agree," one noting that we require higher payments for higher quality soap, wine and haircuts, "why not the Internet?" Indeed, why not?

Addendum, 23 November 17: The Obama administration's FCC enacted net neutrality in
June, 2015. At the time of this addendum, the Trump administration's FCC is proposing to roll back this rule. There are now, of course, all sorts of Internet memes misrepresenting the issue: The big bad companies will charge more, slow your speeds, cause Netflix to stutter. There are some companies that may attempt this, but these are mainly the cable/telecom incumbents. The solution is not a new web of regulation or even keeping the current net neutrality rules, but increased competition: Allow cheap access to "last mile" poles. Break up sweetheart deals between cities and telecoms which are designed to limit competition. The likes of Spectrum, AT&T, and Comcast (or whatever they're called now, since they're all buying their competitors) are quite comfortable under net neutrality rules; none of them likes the idea of competition. A bit more deregulation and antitrust enforcement might well make us consumers happier.

* 20-20 hindsight here: The Bell Telephone family of companies, which were a North American telephone monopoly, did a lot of impressive research through Bell Labs. Who, pray tell, would have the buckets of money and great brains to do such wonderful research if Bell Labs didn't exist? As it turns out, lots of people, including former Bell researchers who now work at places like Google. Also, as it turns out, Bell companies lacked incentive and motivation to productize much of that wonderful research (with the arguable exception of Unix, but that's another story) so not much came from it. Others picked it up and ran with it, and we're all better for it, I think.

**Buckaroo Banzai

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