Net Neutrality Summed Up

“Net Neutrality” boils down to Google’s global monopoly versus Comcast’s local monopolies. There are other players, but I’m trying to simplify. Both are bad, but “Net Neutrality” is not the answer to either and makes both worse.

Either take my word or read the linked articles. I suggest always finding out for yourself.

First of all, Comcast and other broadband companies do have near monopolies in many cities. They achieved this by making exclusive deals with local or state governments. Those deals generally appear to avoid monopolistic tendencies by lobbying a municipality to create regulations that price out smaller competitors, thus leaving it open to just one or two larger companies. Those companies are then free to have a wink-wink, unspoken understanding that they should remain competitive through gimmicks without really messing with pricing.

The simplest answer here is to ask why those monopolies are legal. I don’t support the government getting into bed with any company, so I can’t defend it. That relationship should be broken up. That’s all it would take. Granted, the solution isn’t quite as simple to execute, but it isn’t terribly complicated either.

Google, on the other hand, is straight up trying to take over the world, despite their motto of “Don’t be evil.” Of course, in their thinking, their efforts are simply profit-driven with the customer in mind. And this is often true. So there’s nothing inherently wrong with them creating AI that is tasked with making dangerous ethical decisions, finding ways to cheat death, or infusing every area of life with their technology. After all, if it’s all about providing the customer with desired services, let the market decide.

But Google doesn’t make any real money off of those other ventures. Nearly 90% of all Google revenue comes from advertising:

And they and Facebook basically own online advertising:

Now, Google obviously makes money every time they can display an ad, and they’ve determined that even slight drops in speed mean a drop in their reach. They’ve found that a 400ms delay leads to a 0.44 percent drop in search volume:

That’s 8 million searches per day–meaning they’d serve up many millions fewer online ads. That’s a staggering amount of lost revenue:

This leads them to do some crazy stuff as described in this analogy:

Now, you probably already use Google a number of times a day outside of their search engine without even realizing it. They serve ads across the web, provide mapping and other web services, and partner with companies to provide search or one of their other quality tools. All told, Newsweek says that Google and Facebook receive 70% of internet traffic this way:

So now that we’ve established Google’s worldview, let’s get back to the specifics of “Net Neutrality.”

So, internet traffic goes two ways: from content providers to relay points (backbones), then from backbones (and between backbones) to your home. But the shorter distance data has to travel and the fewer backbones it bounces off of, the faster it will get to its destination. So large content providers just setup in ISPs themselves to peer directly and avoid backbones:

Google is one of those companies. They don’t depend on backbones like small websites do, because those relay points are too slow. So they get as close to their customers as possible in an effort to earn those extra billions. But they’re still hampered by the final connections into a user’s home. And those are guarded by those local broadband monopolies like Comcast.

And Google can’t rest easy if you’re being served by a provider who isn’t them, because they can’t guarantee that revenue stream unless they have control of the entire channel. Here is an incredible (and lengthy) article about the wireless stack wars that applies to all telecom technologies:

So in order to have greater control over the stack, Google came up with a novel idea. They decided to control broadband too. They introduced Google Fiber as a means of cracking open those monopolies and gaining control of the stack and subsequently increasing their ad revenue.

Of note, they’re also fighting to become the internet to the rural US and more remote regions of the world, meaning that they’ve made numerous public claims that if they can control the stack from the bottom up in less-developed areas, those people will only know the internet through that lens:

Now, since Google seemed previously content with focusing on advertising, many ISPs saw Fiber as a gambit to force them to improve their decaying systems. That’s great. After all, if Google can crack open local monopolies without cronyism, that’s the free market correcting itself. If left to itself, Google Fiber would force competition and spur a better internet for everyone.

But the ISPs have been calling their bluff. Even if you can get past their local government regulatory barriers, you still have to lay your own cables and set up the infrastructure. Given the sprawling nature of the US, a company has to spend much more to produce quality infrastructure than European countries do. It’s a high cost of entry, and the ISPs believe that Google won’t take it on in a full-scale capacity if they can’t make much of a profit from those services.

But the ISPs face the same barriers. They already have cables in place, and to replace them or lay new lines would be expensive. I’m sure they’d love to, but they’d have to dig. I read a great summary once on a forum that said, “Once you’ve dug up a road it doesn’t matter if you are laying fiber, copper, or string cheese. The expensive part is the construction.”

But since ISPs don’t have advertising revenue, they would have to pass along those construction costs to either consumers or content providers. They tried to gain additional capital by selling user data, but Obama’s administration explicitly hampered ISPs from doing that while leaving Google open to keep doing it. That got overturned, fortunately, as it’s either better to have everyone hampered or no one.

But since broadband companies already have near monopolies, they have limited impetus to improve existing services. They’re entrenched and can keep calling Google’s bluff, because sooner or later Google will run out of money. Or so they think.

But they didn’t take Google seriously enough. Google decided to try and break a monopoly by creating their own. They appealed to government support, receiving levels of access to the Obama administration not seen since Rockefeller created his oil monopoly through cronyism:

And they pushed through this concept of “Net Neutrality,” which was coined as a term describing how the government should stay out of the internet. They just reversed its meaning. And they found a juicy case that was able to spark the controversy they needed to get it implemented.

The juicy case was a dispute between Comcast and Netflix. Netflix is responsible for 30-40% of all internet bandwidth:

Comcast wanted them to pay for the additional load they were creating. In theory, this would have provided the capital Comcast and other backbone services would need to improve their existing infrastructure to get that data. Then they could dish it out on old systems or use some of that capital to improve those systems:

But some traditional backbone providers that had already been pushed out by Google and other new tech were getting worried that this would lead to more haggling and decreased competition:

They weren’t exactly wrong, as the internet had already been heading that route. Consolidation would mean fewer choices, but only because of existing local monopolies. But traditional backbones wanted to keep their existing business without innovating or paying extra to deliver content, which is an attempt to control the market, which is impossible.

But this all benefited Google, so they ran with it. But broadband was under the FTC’s control, so all that could be regulated was trade practices, which this never really violated. However, if the FCC took control of it as a vital public communications utility, greater restrictions could be placed.

But FCC chair Wheeler was hesitant to take broadband under his jurisdiction, so Google appealed directly to the White House. Obama then suggested it, and being the boss, the FCC pressed Congress to give them that authority.

But if we look back at history, the FCC was created for a similar purpose. They were trying to stop AT&T’s old monopoly and protect phone services from decaying or being subject to price inflations, since it was such a vital means of communication. Unfortunately, price controls are precisely what cause monopolies, especially when it comes to telecom services. The high cost of infrastructure construction means that there have to be high profit expectations for a startup to risk the investment. Thus this regulation, while well-intended, only served to further entrench that monopoly:

More detail:

But as the articles above point out, AT&T became too powerful and the government had to break them up. Unfortunately, they could only do so after decades of control. Additionally, many of those existing systems were already in place and were the natural entry point for the new technology of the internet, so that government-backed monopoly is a large part of the reason we don’t have better internet today.

All of this is why many economists, data analysts, and tech insiders feared FCC control. Broadband companies, on the other hand, feared it because they already had a monopoly, and this would limit their profits in that corrupt crony system. Google, however, loved the idea, because by controlling profits (which they don’t care about in that particular service), they can further break the broadband monopolies and control the stack for their own ends. After all, who wants to upgrade or enter the market unless they’re making money some other way?

Further, while “Net Neutrality” was touted as being a means of protecting the consumer, it did the opposite. Because authority was moved from the FTC, consumer protection became less of a priority. As such, AT&T was able to get away with actually throttling user data because the FTC didn’t have its old bite and the FCC doesn’t generally handle trade matters:

Further, the “Net Neutrality” regulations actually have a “reasonable network management” loophole that has let Google and all the broadband monopolies actually throttle or block service:

tl;dr: Monopolies are bad, both locally and nationally. Throttling, blocking, and higher consumer costs were not a real concern before “Net Neutrality,” but were created by it.

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