No Room For a Net Neutrality Grand Bargain?

May 29th, 2012 by · 4 Comments

In the continuing debate over net neutrality, what strikes me as most ominous is that there is no debate. Rather it all seems to echo the current odious political environment, as there are only talking points and non-negotiable positions. It's very hard to find anyone seriously looking for a cooperative solution to the underlying economic problem.

We need to break out of the rut that the net neutrality discussion has gotten stuck in, because as Timothy B Lee said over on ArsTechnica over the weekend, current US broadband policy is failing.  FTTH has largely stalled and competition is faltering.  The industry needs sufficient incentive to build bigger pipes to the consumer the way it is now building out more rapidly to the enterprise.

Net neutrality advocates seem to be stuck in a single position, which is that last mile providers must build out for the good of society and if they can't find a way to make money off it in a net neutral way then too bad. And on the other side, we continue to hear the drumbeat against freeloading OTT traffic, and blatant end-runs around what rules do exist in a damaging way (e.g. Comcast/Xbox and Comcast/Level3).  All proposed solutions I have seen are unilateral, and that's a bad thing.

As video goes mobile where the tenuous rules imposed for wireline bandwidth do not apply, things are quickly going to come to a head. Verizon's new Viewdini solution is poised to hit the market, and we don't yet know on what terms. But it seems rather unlikely not to turn out to involve a new revenue stream for Verizon that will elicit howls of outrage from the other side.  In fact, what it looks like so far is an exclusive toll booth for video providers to avoid data caps. For OTT operators like Netflix to reach Verizon's customers, there will surely be a fee.

But as I rambled on about last month, this does not necessarily have to be the end of the competitive world. It does not necessarily end in the strangling of innovation on the internet with small providers unable to compete. And it also doesn't necessarily mean that OTT providers will have to bear the full brunt of cost increases.  It certainly *could* go there, but what we need is an industry structure everyone can work with and invest in.

For instance, Verizon and its fellow mobile operators could agree to structure things so as to encourage innovation. There could, for instance, be an entry-level traffic threshold for content providers which is free or less expensive per bit.  That would give new entrants some runway to work with before  breaking out the checkbook.

OTT operators could simply charge the way they currently do, while turning things around by adding additional 'mobile data packs', specialized for (and blamed on) each provider.  That way a Netflix user who wants to watch his videos on his iPhone can choose to buy the additional 'VZ mobile pack' or not based on the price, knowing exactly what cap his traffic is not counting toward as a result and where the money is going to.  Others would be unaffected, while different pricing for different mobile operators would keep them competing with each other.

That is not to say everyone will be happy or there wouldn't continue to be ways to abuse the system. The biggest problem comes in cases like that of Comcast on the wireline side, where the last mile provider also offers content - and thus can set pricing so as to favor its own. There probably is no way to avoid some sort of regulation there in the end, and there probably never was.

It's rapidly becoming time for the talking points to end and for some innovative ways to make something that actually might work to be put forth.  There are ways for everyone to win here. There are ways to make it profitable to build last mile bandwidth without damaging innovation and freedom of choice.

We need to think creatively about what we can do, and not simply about what we can stop the other side from doing.  Is there no room in the current climate for some sort of grand compromise?

Categories: Government Regulations · Internet Traffic

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4 Comments So Far


  • CapEx says:

    Rob,

    Grand bargains make sense when each side has something to gain and something to lose.

    Unfortunately, cable’s traditional linear TV cash flows dwarf cash flow from broadband access and will for the foreseeable future. For Comcast et al, OTT means all lose and no gain. Given that cable has the means to slow OTT adoption, it seems unreasonable to think that they will do anything but attempt to do so.

    This situation may not be good for US broadband deployment but I don’t expect Comcast, TWC, Cox, etc. to suddenly be overwhelmed by patriotic fervor.

  • CapEx says:

    Maybe. WiFi cellular offload competition may goad the wireless service providers into abandoning the “scarce bit” mindset. However, absent some external prod, its hard to see why the T&VZ duoploly would do anything but keep paying huge dividends and underinvesting in capacity.

  • Tom dick Harry says:

    Using white space spectrum on adaptive RF devices with GPS to a database, is the only solution to bring in competition to kill off the Bells and cable guys. Bandwidth needs throughput and the old gate keepers need to be put to death. T-Rex is from the dark ages, Level 3 has the new light, so America open your eyeballs to IPTV.

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