David Cowan with the Contrarian View on Network Neutrality

Congratulations to David Cowan of Bessemer Venture Partners for his willingness to write a thoughtful post taking the "dark side" view of the religious war over Network Neutrality. The first post I ever did on this blog made it clear that I am on isen's side of the debate, and a post I wrote almost a year ago about bad VOIP performance on my Comcast cable modem service continues to attract new comments. 

But that doesn't mean that I'm not willing to listen to the other side, and David makes some compelling arguments that are worth considering. I'm a believer in free markets, and his suggestion that companies should be free to innovate as they see fit is appealing.

But the Internet is different. David makes the point that it is not a public utility, and he is technically correct...but in practice, it has evolved into something that resembles one. All businesses, large and small, rely on the Internet today the way they relied on the telephone in the past...and on the US Postal Service before that. At various points in our history, government regulation has had to step in to ensure universal access to critical services even to those users who can not be served profitably.

David's example of Federal Express is an excellent case in point. For the first several years of FedEx's existence, only the largest cities were served. Then gradually service was rolled out more broadly. It was with great fanfare that FedEx announced after several years that they would deliver to all zip codes, but even today, their express service (10:30 am delivery) is only available to certain areas, while others can't receive packages until mid-afternoon. For certain special regions (big cities), even earlier delivery is available.

FedEx is able to make a profit because they cherry-pick the most lucrative part of the Post Office's business while ignoring the astonishing infrastructure needed to deliver a letter locally overnight, and pretty much anywhere in the US in two or three days, for $.39.  I'm not suggesting that FedEx shouldn't be able to do what they do. I am suggesting that it only works if there is a "utility" in place to assure that the "basic" service is still available.

David mentions Akamai and Netli, two companies (uh, well, now it's just one company) that "accelerate" the internet for "premium" customers who pay them. That seems to work pretty well. In fact, Akamai's caching services actually help us to use the backbone more efficiently, so the existence of this "premium" service has a positive effect on the speed of "basic" traffic.

But premium services can't come at the expense of making sure that everyone's packets can move quickly and efficiently. If Telcos are allowed to become "Fedex" without a "Postal service" in place that provides universal access, they will by definition head toward the lowest hanging fruit, which will be large businesses that can afford to pay for these premium services...just as the CLECs did in the early days of telecom deregulation.

David leaves us with a dire vision of the US losing market share to competitors due to an over-regulated broadband carrier market that leads to "creaky, petrified infrastructure". I submit we're already there, and it's not because of regulation. Other countries with far more regulation routinely offer bandwidth rates to the home that businesses in the US can only dream of. Let's focus on building the fattest pipes in the world, so we don't have to spend time debating the need for a "fast lane". If we can't do that, then I believe regulation will be needed to ensure that there is a slow lane at all. 

 

Comments

[Richard Bennett]

I met you at Dave Winer's dinner party in Frisco before his blogfest last year; we sat at the same table.

I think Cowan is right and you're wrong about this issue, and I'll tell you why. Forget about Fedex, the USPS offers different classes of service. Their main business is first class mail, but they also carry bulk mail in their trucks on a space-available basis. They literally load the first class mail first, and fill in any unused space with bulk mail, charging various different rates depending on how much work a mailer is willing to do in terms of pre-sorting. It's a totally public service that reaches the entire country at prices that are appropriate to the urgency of the package and the amount of work the mailer is willing to do.

The multi-services model that Telcos, Cablecos, and other fans of network diversity favor is necessary for the Internet to mature into the first multi-service network in history. In the old days, we built separate networks for voice, video, and digital data (Telex and telegraph) because these applications have different service requirements and we didn't know how to accommodate them on the same wire. Cable showed us one way to do that, using FDM, and now we know how to do it on IP networks with loose TDM based on priorities. WiFi networks use priorities and we're all happy with them. Network diversity is simply evolving the Internet from one big Ethernet into one big WiFi network.

In the priority model, we pack bits on the wire the same way the USPS loads their trucks: short shelf-life VoIP packets first, then video packets, then Web packets, and as space is available, e-mail (most of which is spam anyway) and BiTorrent. So people get the stuff they need right away right away the stuff they can afford to wait for they wait for. The carrier has to ensure that he has enough bandwidth that nobody has to wait too long or they'll go somewhere else with their business.

There is nothing un-American or anti-democratic about this scheme, whether it's administered by the Post Office or by AT&T. Any system can be abused, and if this one is, we have a Federal Trade Commission to deal with the abuse.

Network neutrality is the stupidest, made-up-out-of-thin-air issue I've ever seen, and the people who ginned it up are going to be embarrassed they lent their names to it.

And incidentally, your comments about the high regulation in other countries aren't factual. In Korea, the 100 Mb/s nominal bandwidth (the real download rate is closer to 20) service blocks VoIP from anyone but the network provider, and similar restrictions are found in other countries with very high nominal signaling rates; that's how they pay for the network upgrade.

Nobody is going to focus on building faster pipes if he can't make money operating from them.

[oren michels]

Hi, Richard -

Thanks for visiting!

Hmmm. I actually see a kernel of agreement in your comments. At the risk of pushing the USPS metaphor a bit harder...

You are absolutely right about the way the USPS loads its trucks, but remember - a standard, democratic, affordable means of transport is still available, which does have "reasonable" QoS - first class mail (overnight locally, 2-3 days across the country).

If the USPS were to have introduced Express Mail as a replacement for First Class Mail, Congress would likely have stepped in, and regulation would have served its purpose.

Your point that "any system can be abused, and if this one is, we have an FTC to deal with the abuse" is one I can agree with, although I think the FCC is the agency in this case.

I'm not going to say that "Network Neutrality" is the only regulatory policy that can work. I will say that left to their own devices, the telcos will take the path of maximum profit and most narrow service, and that would be a bad outcome.

As for your concern that nobody can build faster pipes unless they can make money operating them, I agree...unless the pipes are built or subsidized by public funds, as many utilities are.

The Internet is not a public utility today, but given its importance to our lives and our economy, the need for large capital outlays to improve and expand it, and the benefit to society and the economy that cheap, easy and universal access to high-bandwidth Internet would provide, perhaps it should be.

[Richard Bennett]

I'm not getting your analogy. As far as I know, the Telcos aren't proposing to eliminate standard Internet access.

They're proposing to sell TV programming delivered over the same wire as your Internet access. The Verizon FIOS system, for example, is a triple-play that allows you go buy any combination of TV, phone, and standard Internet over one fiber, where the Internet service is as fast any in the world in terms of honest download speed.

What's wrong with that?