Net Neutrality and Carrier Incentives To Invest

An anonymous reader writes "In policy debates before Congress and the FCC, the big ISPs and wireless carriers (Verizon, AT&T, Comcast, Cox, Sprint) argued that net neutrality rules would give them less incentive to upgrade their networks. The reality is just the opposite, says Infoworld's Bill Snyder, citing a game-theoretic work done by two researchers at the U. of Florida's business school. If carriers can charge premium prices for expedited service, they have an incentive not to invest. Hmm, this reminds me of the agriculture business, where prices are sometimes propped up by paying farmers not to grow crops."

Premium service..

[Anonymous Coward]

...is what you used to call 'regular service' yesterday.
Case in point: Data caps. there were no data caps before, services wee running just fine...and somehow, a couple of years later, you need to pay more for the same data transfer.
It's artificial shortage is what it is.

Glad to hear it, but a big "duh!!!"

[MobyDisk]

I am glad that someone did some academic research to prove this, but it seems unnecessary. Isn't the entire point of eliminating network neutrality just so that carriers can charge more for their existing bandwidth? They slow down a site, then charge you to restore the speed back to what it originally was. Or they charge you a fee to make your packets a higher priority than your neighbor's. Either way, no infrastructure changes were required. The highway analogy the article uses is spot-on.

Can someone explain to me why Republicans keep spewing this illogic about Net Neutrality? Why all the hate and rhetoric? It's really a very simple, and should be a non-partisan issue.

Re:Incentive, incentive, this is capitalism?

[shentino]

Being rich enough to buy laws that keep everyone else poor is a profitable move indeed.

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Re:Glad to hear it, but a big "duh!!!"

[0racle]

They slow down a site, then charge you to restore the speed back to what it originally was.

Actually, it's worse than that. In addition to the above, they could introduce internet tiering packages where they went to the content providers and charge them for getting preferential treatment or at least slightly less throttling. They charge you for access, charge you again for faster access and charge the content providers for letting them get your traffic in the first place.

Can someone explain to me why Republicans keep spewing this illogic about Net Neutrality?

You seriously have to ask this? It's about money. Also, I don't believe anti-net neutrality is a partisan issue, R and D are both for it.

Re:Farmer subsidies need to STOP

[stephencrane]

The main problem is that the US -does- sell much of our food overseas, but that price point is based on the subsidized price. The price gap isn't recaptured in the form of tariffs. Many countries don't invest in agricultural and associated legal infrastructure at home because there's no way for anyone to grow crops cheaper than the US can sell them.

Re:Farmer subsidies need to STOP

[Aqualung812]

Cut the maize- grow healthier grains, healthier fruits and veggies- why are my tax dollars going towards making my neighbours into fat pigs?

It gets better. Wait until the USA has national healthcare. They they'll use tax money to make people fat (maize), then use tax money to deal with the health issues from being fat! PROFIT!

Manufacturing scarcity

[Catbeller]

They aren't providing a service; they are manufacturing a scarcity of service. Any producer or provider will ultimately do this if they are not regulated in some fashion. They will build out a minimum of infrastructure for a maximum of profit. And they will never stop raising fees. Our great-grandparents understood this, so electrical utilities and such are government-regulated monopolies. Some things can't be covered by free market economics. Wiring all homes is one of those things.

Let's try logic

[brxndxn]

Here's simple logic on 'carriers' or ISPs:

ISPs either have a monopoly or pseudo monopoly (in practicality) or they have competition. Therefore, there are two types of situations:

1. Monopolistic - Upgrading networks not necessary
2. Market-based - Carriers must upgrade networks to compete or lose customers

In either situation, there are two types of sub-situations:

1. Net-neutral - Carriers must upgrade networks to satisfy bandwidth demand, content decided by individuals
2. Prioritized - Upgrading networks not necessary, low-priority traffic dropped, content decided by corporations

What we have now in most of America is Monopolistic, Net-neutral. Carriers are arguing for Monopolistic, Prioritized. Consumers demand Market-based, Net-neutral. What should we get? Market-based, Either. What will we get most likely? Monopolistic, Prioritized.

The fact we even need a study to prove that the carriers are lying is ridiculous. The best incentive to force ISPs to upgrade their networks is MORE and DIVERSE competition. It is not free-market competition when the only 'normal bandwidth' Internet access at home for a consumer is a choice between either the local cable company or local telco. It is not free-market competition when the only cellular bandwidth is a choice of 1 of 3 major carriers that control hardware and software of the devices and lobby in unison to our government. Carriers are essentially arguing to continue a monopoly and ignore advances in technology that allow unlimited upgrades in bandwidth.

Instead of arguing net neutrality at all, if our lawmakers started making it easier for some competition in the marketplace, ISPs that do not deliver all traffic quickly would die off.

Re:Glad to hear it, but a big "duh!!!"

[spidercoz]

Because the Republicans have been hijacked by a cabal of narcissistic, egomaniacal corporate toadies. They don't want free-market capitalism, they want a guaranteed ROI of infinity+1. They don't want to invest anything, but they demand profit regardless. They want money for nothing, yet they bitch about people who do that. They're liars, cheaters, and hypocrites, you know, the best we have to offer.

The difference with agriculture

[rsilvergun]

is that there's a good reason to prevent over farming. Over farming tobacco turned Virginia into a desert in the 1800s. Plus in agriculture you sometimes have to get people to grow food that's not profitable but that people need to eat, e.g. it might be a bad year for potatoes, but we still need potatoes.

The trouble with net neutrality, indeed with any concepts on the Web, is that we're brushing up against a post-scarcity economy here. There really isn't any analogy that works because we've never done that before.

Re:Manufacturing scarcity

[cobrausn]

Any producer or provider will not 'ultimately do this' as long as the market barrier-to-entry is not too high. This can occur for a few reasons, one of which is actually the existence of regulations that favor the existing businesses (e.g., Regulatory Capture). Another reason is that the infrastructure required to support the service is incredibly expensive, which serves as a 'natural' limitation to the number of players. It seems in this case we have a bit of both. The only viable solution I see (solution being something that benefits both the market and the consumer) is to not allow the person who owns the lines to also provide service, only rent out the lines in a neutral fashion.

Re:Let's try logic

[fermion]

There is one other thing, a thing that most in the US have lot sight of. All mobile operators use the public space to generate a profit and as such should be required to use that space for the public good. If they cannot make a profit using the public space for public good, that public space should be given to someone who can. Nowhere is it written that profit is a fundemental right, although some conservative wackos want profit to be a fundemental right, I am talking about bush and reagan and the bailouts. Profit is merely something we have the right to persue.

We lost this when TV and radio took over our government and decided they were entitled to the bandwidth loaned to them by the people. The people have every right to take that bandwidth back. Even the cable operators, whose cable runs though and limits the use of public space, has a duty to the public though they too believe they can take from the people without giving anything back.

The argument for net neutrality is simply that the airwaves are public property and the public should make the decision on what it is used for, not the firms who are borrowing them. Like I said, if the mobile companies can't make a profit, then take the bandwidth away and attempted to be let to a new firm that can make a profit. This is what is done in real life. When a firm rents a space and does not make enough money to pay for that space, the space is taken back and rented to someone else. In the US we do say that they space is theirs forever just because they squatted on it and no one else wants it. We let the market work, except when a firm is so big they can corrupt the market by creating regulation to favor them. Which is the purpose of many regulations. To keep competition out.

And as far as sig goes with Ron Paul, remember that instead of letting the market work and allowing his constituents to suffer for bad housing and car choices, or to allow the public to decide what food was best for them, he used tax payer money to build a million dollar bus stop and gave untold hundred of thousands of dollars to his fishing buddies so they could be hired as consultants to push shrimp. This is what is wrong with the market. Even those that claim be hands off will not be able to avoid the temptation of free money and helping their friends steal from the poot.

Re:Manufacturing scarcity

[slimjim8094]

I'm almost a socialist, but you're right on. The classic example is the electrical market - when the utility owned the plants, transmission, and distribution, they made their money by convincing the regulators they had to raise rates. Plant inefficiency actually helped them do this.

And in that form, they were a natural monopoly. But simply splitting up the three parts made everything vastly better, as long as the split was handled properly. But now that production is competitive and the transmission companies are common carriers, a company can pay for power to be created and transmitted to them - and there's competition for that business, so reliability has gone up and prices have fallen.

For anyone who hasn't read up on it, basically there's a graph of quantity vs marginal $/MW, sorted by $/MW so it's monotonically increasing (though not linearly). Things like solar and wind are at the very bottom (since they cost nothing to run), hydro, then nukes, coal, gas, oil, peakers (jet turbines), etc. Every day, they predict how much they'll need for the next day (plus a margin) and tell all the plants below it to be ready. The key is that everybody gets the market rate. The last plant to turn on makes no profit, and the solar plants make (near) 100% profit at any load. So there's an enormous incentive to move down that graph.

It works. It really does, for the past 10-15 years. Prices fall, reliability rises, plants get cleaner. It's because they're not making money by convincing regulators, they're making money by moving down that graph.

I should note that the company with the wires is still regulated, but even they've been split into physical maintenance and procurement divisions - you can swap out the procurement side and the small line fee is still present, but you're not buying your electricity from the local utility any more. You're buying it from someone else. The reason it's cheaper is because the local utility has to be the "provider of last resort"; they pick you up if you don't pay your bill to the other one, so they need to buy a little bit extra. And yes it's all the same power, but the dollars match everything up and if you go through it, it does actually make sense to think about paying for those exact megawatts to get to you (since they're all the same) and it simplifies things.

Re:Farmer subsidies need to STOP

[hedwards]

Precisely, if those nations are unable or unwilling to invest in the infrastructure to feed themselves then it's rather unlikely that they'll invest in the infrastructure to produce goods to trade for food. It's not a lack of people or ability so much as the corruption and war that prevents it from happening. Few populated parts of the world are genuinely incapable of producing their own food for long periods of time.