Yesterday, Ben Thompson wrote a post called “Why Ajit Pai is Right”. Ben Thompson is a well regarded analyst and I respect his insight on the tech industry quite a lot. Mr. Pai is the current FCC chair and has made it his mission to roll back the current regulatory framework established to protect network neutrality so broadband providers in this country may not discriminate how content flows over their network.
Ben’s post proposes that the government needs to roll back to the previous law of the land and provide a light touch to ISPs in the form of lighter regulations.
1. To regulate or not regulate.
Business and capital markets have a hard time with regulation to be sure. They see regulation as an obstacle to providing the very best returns to their shareholders. Ben cites the regulatory hassle of opening an restaurant in San Francisco. Well, as an investor in a SF restaurant (Alta CA, lovely place by the way), I can tell you that regulations are not the biggest issues restaurants face. It’s not even on the top 5.
More importantly we the public need regulation. If we allowed business to operate without regulation, it does not take a lot of imagination to consider the cleanliness of the restaurants kitchens or child worker laws in factories or minimum wages in retail stores or how banks operate. Yes, capitalists have issues with regulations and their associated overhead costs — but they serve a valuable purpose to it’s citizens. So let’s avoid making regulations the boogeyman in this debate.
2. The cost of Tittle 2 to ISPs
Ben does a great job describing the current regulatory framework and how Tittle II reclassification works. From his post:
The net effect of this reclassification would be the elimination of FCC rules restricting the ability of ISPs to block or throttle sites or apps or offer paid prioritization of any Internet content. That is certainly a worthy goal! Who could possibly be in favor of ISPs picking-and-choosing what sites you can visit based on what you are willing to pay?
That last statement isn’t quite what you may think if you continue to read the rest of this post. It’s meant to serve up a rationale on why we need to take back this heavy handed regulatory cost to ISPs because this regulatory decision has a cost.
Any regulatory decision — indeed, any decision period — is about tradeoffs. To choose one course of action is to gain certain benefits and incur certain costs, and it is to forgo the benefits (and costs!) of alternative courses of action. What makes evaluating regulations so difficult is that the benefits are usually readily apparent — the bad behavior or outcome is, hopefully, eliminated — but the costs are much more difficult to quantify. Short-term implementation costs may be relatively straightforward, but future innovations and market entries that don’t happen by virtue of the regulation being in place are far more difficult to calculate
But here’s the thing. Ben never offers up a concrete answer to the title of his post and how Comcast and other ISPs are hurt by Title 2. Clearly they are operating under the law right now and just look at their last two quarterly results. Profits are soaring. They are investing in their network. I just got an email from Comcast offering me 150Mbps. That is a 50 percent increase in bandwidth than what they offered me just a short period ago. Not too shabby.
3. The internet needs to be open.
Comcast and other ISPs are interested in controlling how content, services and applications are delivered to their subscribers. They seek to create a fast lane/slow lane model whereby third party content and services pay to get better treatment. But the internet is not a walled garden. It shouldn’t be controlled by the pipe provider. It’s flourished because of it’s openness. And the “trust us” argument doesn’t hold up given their track record (some examples: here, here, here, here).
I’ll end this post with a question. To those opposed to the current network neutrality regulations: can you please tell us, what is it, precisely, that ISPs want to do and can’t do under the current law.
We deserve to know.