Follow this blog:
RSS

Net neutrality dead, how about net competition?

By | April 6, 2010, 10:07 AM PDT

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.

Start your week smarter with our weekly e-mail newsletter. It's your cheat sheet for good ideas. Get it.

Dana Blankenhorn

About Dana Blankenhorn

Dana Blankenhorn was a contributing editor for SmartPlanet from 2009 to 2010.

Dana Blankenhorn

Dana Blankenhorn

Contributing Editor

Dana Blankenhorn has written for the Chicago Tribune, Advertising Age's "NetMarketing" supplement and founded the Interactive Age Daily for CMP Media. He holds degrees from Rice and Northwestern universities. He is based in Atlanta.

Follow him on Twitter.

Dana Blankenhorn

Dana Blankenhorn

Dana Blankenhorn has been a technology reporter since 1982, a business reporter since 1978, and a writer for as long as he can remember. His Schwab IRA has a few tech stocks in it, most notably some Intel and Applied Materials bought over 10 years ago. But the vast majority of his tiny fortune (emphasis on the word tiny) is invested in mutual funds. He presently writes for no one else but ZDNet, SmartPlanet and himself. But if you've got an opportunity let him know. If he takes the gig he"ll first add it to this disclosure page.

He writes for SmartPlanet and is not an employee of CBS.

If you liked this, don't miss...
3
Comments

Join the conversation!

Follow via:
RSS
0 Votes
+ -
Dana: Can't you do any kind of blogging without blaming Bush for everything
Whatever points you had to make, whether good or bad, are often lost when your political agenda gets in the way.

Furthermore, if you are going to place blame, you also need to clarify how exactly Bush or any part of his administration was responsible for the evilness. Your hate for Bush or for anything republican prevents you from thinking straight.

I would otherwise comment on whatever else you had to say in this post of yours, but when your approach is to first place blame, then the rest of your post is worthless. Besides, I already commented on the issue on a ZDNet blog.
Posted by adornoe@...
7th Apr 2010
0 Votes
+ -
RE: Net neutrality dead, how about net competition?
The reason broadband has consolidated into an oligopoly between cable and phone providers is the high costs of providing service to the last mile of the customer. Most telecomm companies spent and lost most of their capital during the dotcom bubble. Comcast owes its? lion share of many markets due to the government regulations which only limited the activities of the Bell?s and not the cable industry. Today these firms compete with the exact same services (using slightly different technology) however they are not competing on a level field. Rather than increasing regulations on cable companies, perhaps the Bell?s should be allowed free market competition.

Allowing the federal government to monopoly power over an industry will not reduce costs or increase quality of service. If anything that would politicize the internet which is something I think we would all rather not see happen.
Posted by gbryantiv
7th Apr 2010
0 Votes
+ -
You are confusing phone and broadband
The problem with the 1996 Telecommunications Act was that the part you are citing was designed with the phone system in mind. For example, from the text of the Act, a "local exchange carrier" is defined as "any person that is engaged in the provision of telephone exchange service or exchange access" and dealt with things such as "dialing parity". While the internet existed back then, it was thought of mainly being conducted over the phone system. The Act clearly was not designed with the separate broadband services we have now as its principal focus.

The FCC has tried to stretch the definition of the Act to fit the current situation, but this is doomed to failure. The fiction has always been that with cable, DSL, and satellite services to the home there has always been a level of competition in broadband that never existed with the phone system. Thus broadband providers always got more leeway than phone companies (though oddly, it was broadband that finally provided competition to the phone companies).

You can talk about what we "should" be doing under the 1996 Act, but we need new laws and better ways of thinking about broadband. As far as I'm concerned, satellite and DSL are no longer viable competitors to cable and fiber. With just one or two providers to the home, broadband service providers need to treated as public utilities and regulated as such. They should not source actual content, but simply facilitate its access.

The first power companies back in the late 1800s provided appliances as well as power. This didn't work, and the current solution of regulated power utilities and separate competitive appliance manufacturers was born. The same thing will work for broadband.
Posted by zackers
7th Apr 2010
Join the conversation
Formatting +
BB Codes - Note: HTML is not supported in forums
  • [b] Bold [/b]
  • [i] Italic [/i]
  • [u] Underline [/u]
  • [s] Strikethrough [/s]
  • [q] "Quote" [/q]
  • [ol][*] 1. Ordered List [/ol]
  • [ul][*] · Unordered List [/ul]
  • [pre] Preformat [/pre]
  • [quote] "Blockquote" [/quote]

Join the SmartPlanet community and join the conversation! Signing up is fast and free. Don't wait -- we want to hear your opinion!