Reality behind the 'Net-neutrality' debate - Providence Journal

Lee Drutman: Reality behind the 'Net-neutrality' debate

01:00 AM EDT on Tuesday, August 29, 2006

BERKELEY, Calif.

IN RECENT MONTHS, there has been an increasing amount of excitement in Washington, D.C., about something called "Net neutrality." If one is to believe the frenetic rhetoric on both sides, the future viability of the Internet depends on either enacting it or not enacting it.

If only it were that simple. And if only somebody would talk about the real threat to the viability of the Internet.

The current debate dates back to last November, when AT&T's impolitic chairman, Ed Whitacre, complained that Internet content providers should be paying more. "They use my lines for free -- and that's bull," he told Business Week. "For a Google or a Yahoo or a Vonage or anybody to expect to use these pipes for free is nuts!" Needless to say, the content providers were taken aback.

The argument of Internet service providers (ISPs) like AT&T has since become a little more nuanced. They say that the time has come to invest in a faster Internet, but to do so they need to be sure that they can recoup the costs. And they want to do this by charging content providers more for guaranteed fast delivery, since, after all, they're the ones taking up the bulk of the bandwidth with their streaming video and whatnot.

Not surprisingly, the top content providers (Google, Yahoo, Amazon, etc.) don't like this one mega-bit. Neither does the blogosphere or online groups like MoveOn.org, that live and die by the Internet. They say it amounts to discrimination. What makes the Internet free and beloved, they argue, is that it's neutral: Anybody can put up a Web site. But once you let service providers charge for priority delivery, who knows what favoritism and gouging may ensue?

Hence "Net neutrality," a proposed legislative fix to prohibit service providers from establishing the multi-tiered Internet they seek, and to protect against potential content discrimination.

So far, the ISPs (who argue that any such regulation will stifle investment and is entirely unnecessary because they have no plans to discriminate) are winning in Washington. Net neutrality has been voted down on the House floor and failed to make it out of a Senate committee, partly because the telecoms have spent a lot more money lobbying the issue and have lots of support from Republicans, who happen to be in the majority (whereas content providers have won support only largely among Democrats). But Net neutrality does seem to be gaining momentum.

So who's right? First off, telecom companies are correct in noting that Internet service in the U.S. is in dire need of investment. We rank 16th in the world in both broadband penetration and in broadband growth. The U.S. is rapidly falling behind its competitors in Asia and Europe, and given the importance of technology in the 21st-Century economy, this should be an enormous economic-competitiveness issue. For example, American Internet users pay 10 to 25 times more per megabit than our Japanese counterparts.

As it turns out, we have no national policy to promote broadband growth. In fact, we are the only industrialized country without one. And why should that be? Well, perhaps it's because the telecom giants like AT&T like things just the way they are, with almost no competition, and they spend hundreds of millions of dollars a year lobbying to keep things this way. According a recent Governmment Accountability Office report, the median number of high-speed Internet providers available to a given household is two. No wonder Internet service is so expensive and bad.

But how did Japan, which actually was behind the U.S. in broadband service as recently as 2001, get so far ahead? Well, the Japanese government decided that high-speed Internet was a national priority and did something about it -- the country's telecommunications ministry made the sector very competitive through careful regulation (forcing regional telephone companies to open up their lines to competition, something big telecoms in the U.S. have fought tooth and nail). The ministry also used targeted subsidies to stimulate investment.

Were our government to develop and implement a real broadband policy and actually foster competition (as opposed to letting current oligopoly essentially write its own rules), Net neutrality would be less of an issue. Companies who huffed and puffed about how they ought to be able to externalize their costs would be blown away by competitors who instead just went ahead and innovated. And any service provider that threatened discrimination would quickly find its customers going elsewhere.

Both sides in the Net-neutrality debate claim that the viability of the Internet in America is at stake. In that, they are both correct. Too bad nobody is talking about the real reason why this is even an issue in the first place: the fact that instead of joining the rest of the industrialized world and developing a real broadband policy that includes actual competition, our government remains all too happy to let large telecoms enjoy all the benefits of oligopoly -- while forcing the rest of us to bear all the attendant costs.

Lee Drutman, a frequent contributor, is the co-author of The People's Business: Controlling Corporations and Restoring Democracy. He may be reached by e-mail at ldrutman@gmail.com.

Online at: http://www.projo.com/opinion/contributors/content/projo_20060829_ctlee.31ed540.html