Everybody likes freebies. New York renters often seek apartments advertised with “utilities included.” Why? So they can run their air conditioners 24/7.
Similarly, a lot of people are pushing for something called “Net neutrality.” We must guarantee a “free and open Internet,” they say.
Sounds good. After all, “free” is a good deal, if you can get it. But “free” comes at a cost. “Not having to pay for it” can become “paying through the nose” pretty quickly.
Here’s the problem: The rise of VoIP, streaming video and audio, and similar broadband luxuries has strained the Internet. Regulating the Net for “neutrality” prevents price and quality-of-service discrimination by owners of the Net’s infrastructure.
Might as well require all landlords to provide all utilities “free” … distributing the costs of extra usage via basic rent charges. That would be “Apartment neutrality.”
It would also be a big waste, and not just of electricity.
When suppliers of goods aren’t allowed to price and move product to their advantage, we get something like the “tragedy of the commons.” The term comes from the medieval commons, a field that all villagers could use. They were, historically, overgrazed. Devastated. Hence the need to divvy up the fields into private plots, allowing trade to increase wealth, to the benefit of all.
U.S. regulators, tackling Net neutrality this month, should be wary of laying waste to the Net in the name of “openness.” Never confuse “free” of price with freedom itself.
This is Common Sense. I’m Paul Jacob.
8 replies on “Neutrality or Tragedy?”
[…] Paul Jacob offers some common sense on net neutrality … and on apartment neutrality. […]
Paul,
You have your analogy all backwards. You cite the moral hazard of flat rate electricity, then propose a solution equivalent to the landlord charging the utility company for the privilege of using the wires on his property.
If you want usage based QoS discrimination, the best solution is to charge the consumer for it. In fact, Comcast already does this for their own phone and cable TV offerings, which receive priority handling on the exact same network that carries Netflix streaming video to their internet customers.
Comcast’s problem with Netflix isn’t their network getting “unfairly clogged.” The very fact that they can threaten Netflix implies the technical capability to throttle that bandwidth if necessary, and to charge individual consumers for the privilege of unthrottling.
The problem is they can’t get the consumer to buy into that at the price they want. Netflix’s entry into the market has lowered the value of Comcast’s TV service more than it has increased the value of its internet service. Just like any entrenched near-monopoly who suddenly finds itself out-innovated, Comcast prefers thuggery to keep its current price point rather than competing on features and price.
I don’t get Karl’s point, frankly. I understand PJacob’s point. But not Karl’s.
“Entrenched near-monopoly” strikes me as a way of avoiding the idea that companies should be able to “move product” with price discrimination (PJacob’s terms) as they wish, for their own profit. Net Neutrality is a regulation excplicitly preventing “price and quality of service discrimination,” the essence of markets. When you deny businesses the opportunity to price and move product freely, it transforms them into someting like a commons, as stated by PJacob. What changes if Comcast decides to push its own product line at the expense of (Karl’s example) Netflix?
is it the “near-monopoly” status that excuses the regulation?
Well, isn’t that a local thing? Shouldn’t the response to local natural monopolies be local regulations — or maybe deregulation = not a national commons-inducing scuttling of freedom to price and choose products to push?
Maybe I’m just confused.
The idea that all data transmitted over the internet should be of equal priority is absurd. It’s equivalent to saying that the United States Postal Service should handle in an identical manner overnight letters, magazines, first class mail, and parcel post packages.
Internet users expect web sites to load quickly; voice-over-internet telephony, chat sessions, and video playing to function smoothly; and e‑mail to be transmitted with minimal delays. File downloads can tolerate short interruptions and slowdowns. Bit torrents can tolerate longer interruptions and slowdowns. It makes sense for internet service providers to assign different priorities to different data so that overall internet service is optimized. “Net neutrality” will result in worsened service and increased costs to customers.
[…] was going to say that this post (via Don Boudreaux) was a helpful summary of “Net Neutrality”, and helped me understand […]
As customers, we should expect and demand that if we have to watch and listen to constant advertising why not just had a surcharge for each advertisement, letting the advertisers pay for us.
This would do two things (1) cut down on the number of advertisement I must endure (2) raise money for keeping the net infrastructure up-to-date. This surcharge should not be collected by the government; let the companies providing the services collect the advertising surcharge.
@Dr. T
Your analogy to physical packages is flawed.
On a technical level, every kind of traffic over the internet (or a local network) is identical. Each file or data stream is broken into equal size packets, sent and reassembled on the receiving end. There is no cost relative to each file, only the total number of packets sent in a given month.
For many people the notion that a corporation can decide that packets from Netflix’s servers could be throttled or even blocked over ones from Comcast owned servers is concerning.
That would be equivalent to DVDs sent in the mail from Netflix could be blocked by the USPS if the USPS started their own DVD rental service.
I know that many of the proposals in the name of Net neutrality are quite the opposite, but many of us who make our living from the internet don’t want free as in beer but free as in speech.
One thing Paul misses here, is that politicians and bureaucrats love to meddle in the free market. It means bribes (I mean campaign contributions) for the politicians and jobs/influence for the bureaucrats.
Jacob is right that once government gets involved, you’ll soon be “paying through the nose”. And often, it’s a result of what’s called “regulatory capture” but should be called political capture of an industry. This is because decisions become political, rather than based on economics and free enterprise.