Net neutrality dead, how about net competition?

The U.S. Court of Appeals has ruled 3-0 against net neutrality rules imposed by the FCC in 2007 against Comcast.

I disagree on the merits, but can't say I disagree on the law. Even phone companies should have some property rights.

(The Monopoly Man, aka Rich Uncle Pennybags, has gotten a makeover since Hasbro acquired the original Parker Brothers game.)

But there's another approach that deserves to be looked at, and even though present FCC chair Julius Genachowski has explicitly rejected it, maybe he will re-examine that in the wake of this ruling.

Demand wholesaling.

Wholesaling was an essential element in the 1996 Telecommunications Act. The companies providing the service even had their own acronym -- Competitive Local Exchange Carriers (CLECs).

Wholesaling is still the law in many countries that followed our example, which we discarded during the Bush years. Countries that are now way ahead of us in providing broadband offer wholesaling.

Under wholesaling, a phone or cable provider must allow other companies to re-sell their services. They must provide facilities for sharing the bandwidth. They can collect a wholesale price from the re-seller or a retail price from the consumer.

In practice this means you can have lots of different Internet contracts. Some might specialize in censoring the data stream, so your kids or employees only get data you approve of. Some might restrict bandwidth, providing low-priced services. Others might cache video content close to your home.

The basic Internet infrastructure is stupid, as David Isenberg (now an FCC adviser) wrote in his groundbreaking 1997 article. The network's intelligence is at its edge, not at its center. He wrote this soon after the 1996 Act.

A stupid network provides incentives to core providers to increase core bandwidth, because the more bits they run the more money they make. It provides incentives to innovators to create edge services of all kinds. And it provides big profits to infrastructure providers -- that's what cable and phone companies really are.

But that's not what they want to be. They want to sell bandwidth as "services" -- voice services, video services, data services, wireless services. Fair enough, but they also insist their ownership of infrastructure gives them a shared monopoly over what services can be sold to the public, and at what price.

That's why we're falling behind in broadband. The Bells and cable companies have no real incentive to provide more bits at any end of their pipe. Instead, they have incentives to push services, to "control the customer." And they do.

The Obama Administration has proposed spending billions of dollars to deliver broadband everywhere, to everyone. The effort will fail unless everyone in the bit market has an incentive to sell more bits, not fewer.

Instead of throwing this money away as the Bush Administration did, on promises by Bell companies that won't be followed because there is no reason for them to follow them, the FCC should use it to guarantee wholesaling. Pay Bell and cable companies the costs of opening their networks to competitors.

Everyone can win. Right now everyone is losing.

This post was originally published on Smartplanet.com