Net neutrality is about relationships and barriers

Stan Beer
Wednesday, 14 June 2006 19:32

Opinion and Analysis

The issue of so-called Net neutrality is a sticky one. Not only is it difficult to understand, it cuts across political boundaries and it is not at all clear at first glance who the good guys are and who are the baddies. However, when you look at the issue closely it becomes crystal clear why Net neutrality is essential.

A lot of left leaning liberals support Net neutrality but so do a lot of gun-toting red necks and conservatives. You can’t even delineate the issue along the lines of the big guys versus the little guys. It’s true that the rich and powerful telecommunications and cable carriers oppose Net neutrality. However, the equally rich and powerful large IT and internet players support Net neutrality, alongside nearly penniless bloggers and small web players.

Both sides claim to support online innovation and the free flow of information. And it is at this point where it is possible to glimpse the issue with some semblance of clarity. What the carriers wish to do is introduce a tiered pricing structure, where larger content providers will pay more and in return receive a superior level of access.

Under a tiered-system of internet access, the likes of Google, Yahoo, eBay and Microsoft, who can afford to pay, will be able to deliver richer content to consumers at lightning speed. Meanwhile, the lesser lights of the web could very well find themselves on the outer, only able to provide sites with relatively small bandwidth content and with much slower access for consumers.

In effect, what this would create is a barrier to entry to the delivery of rich internet content, similar to the huge barriers to entry to TV and radio broadcasting. There would be high performance broadcast quality internet that only the biggest players could afford to deliver and the feature poor, low performance internet for the rest of the content providers.

On the surface, this might appear to be a good thing for the big internet players. However, they know better which why they’re against it. It is in the interest of companies like Google, Microsoft, Yahoo and eBay to have an egalitarian internet. In fact, their internet business models depend on it.

How does Google make money? Google generates huge online advertising revenues from both its AdWords and AdSense businesses. In both cases, its customers are businesses with websites. In the case of AdSense, Google’s customers are actually web publishers, content providers who would be severely disadvantaged by a tiered internet. If web surfers don’t visit the content providers then Google’s business suffers.

In fact, many of the big web players have some sort of affiliate system in place, which is mutually advantageous to both smaller websites and themselves. Much of Amazon’s book sales come from referrals from affiliate sites.

The very reason the internet works so well is that it is a huge ecosystem of symbiotic relationships between the web powerhouses and the smaller players. If the smaller players were suddenly relegated to a second-tier low-bandwidth back road, the relationships would be broken.

According to the carriers, market forces are enough to dictate that they not deny access to websites that consumers want to visit. How do they know which websites consumers want to visit? What about brand new low budget websites – what sort of a chance would they stand under a tiered structure where they sit on the bottom rung?

The argument presented by carriers that Google and Yahoo should have to pay more for piping all that content over the internet is baloney. They already do pay more. They pay more for their huge server and storage farms. They pay more for the amount of content they generate. They pay more for the development they do to provide new web services.

Finally, carriers themselves are starting to get into the content business. Therefore, creating a tiered internet where they get to decide whose content they carry is a clear conflict of interest. Regulation is usually not a good thing in free market economies. However, history has shown that if there are two sectors of the community that need to be regulated it is providers of essential services and monopolies. Telecoms and broadband carriers neatly fit into both categories.