Why Google, Facebook, The Internet Giants, Are Arguing For Net Neutrality

The FCC is having a busy time of it as their cogitations into the rules about net neutrality become the second most commented upon in the organisation’s history (second only to Janet Jackson’s nip-slip which gives us a good idea of the priorities of the citizenry). The various internet content giants, the Googles, Facebooks and so on of this world, are arguing very loudly that strict net neutrality should be the standard. We could, of course attribute this to all in those organisations being fully up with the hippy dippy idea that information just wants to be free. Apart from the obvious point that Zuckerberg, for one, is a little too young to have absorbed that along with the patchouli oil we’d probably do better to examine the underlying economics of what’s going on to work out why people are taking the positions they are.

Boiling “net neutrality” down to its essence the argument is about whether the people who own the connections to the customer, the broadband and mobile airtime providers, can treat different internet traffic differently. Should we force them to be neutral (thus the “neutrality” part) and treat all traffic exactly the same? Or should they be allowed to speed up some traffic, slow down other, in order to prioritise certain services over others?

We can (and many do) argue that we the consumers are paying for this bandwidth so it’s up to us to decide and we might well decide that they cannot. Others might (and they do) argue that certain services require very much more of that bandwidth than others, further, require a much higher level of service, and it would be economically efficient to charge for that greater volume and quality. For example, none of us would mind all that much if there was a random second or two delay in the arrival of a gmail message but we’d be very annoyed if there were random such delays in the arrival of a YouTube packet. Netflix would be almost unusable if streaming were subject to such delays. So it might indeed make sense to prioritise such traffic and slow down other to make room for it.

You can balance these arguments as you wish: there’s not really a “correct” answer to this, it’s a matter of opinion. But why are the content giants all arguing for net neutrality? What’s their reasoning?

Here we need a modicum of economics: profits flow to whoever controls the scarce resource. As long, that is, as those who control that scarce resource are able to vary their prices so as to monetise that scarce resource. The owners of the latest must see movie are able to charge Netflix very much more for the rights to stream it than the owners of Rocky XXII are. We wouldn’t be surprised that Led Zeppelin gets a better deal from YouTube than my sister’s choir does.

Move forward to the time when bandwidth providers are able to discriminate between different traffic and its providers. If bandwidth were unlimited then, it being not a scarce resource, net neutrality would be the normal order of things. If we all had 100 gigabit cables into our homes then there would be no possible argument about whether that Netflix movie should arrive faster, or less interrupted, than the email. However, that’s not the world we are in, bandwidth is, to some extent at least, a scarce resource.

Thus, if those who own that bandwidth were able to price discriminate then they would: and this would mean some portion of the revenues of those services would move over from the content providers to the bandwidth providers. Some part of your Hulu or Netflix subscription would be paid to the internet providers, some part of Google's YouTube advertising revenue would move from Google’s coffers to, say, Comcast's. And quite clearly this is something that those content providers would prefer did not happen: thus the arguments in favour of net neutrality.

You might think that this is a slightly cynical analysis and you might even be correct. Perhaps they really are up there with the ideals of the Haight Ashbury generation. But that’s generally not the way to bet when money is at stake as we can see from Facebook’s attitude. The company (and Mark Zuckerberg) has long argued that access to the internet is simply essential in this modern world: maybe they’re correct in this. Thus there should be some minimal level of access that should be free to all. Maybe they’re also correct in this. Yet it’s interesting that they argue that access to Facebook should be one of those services which should be free to all. Not YouTube, not Hulu or Netflix, but Facebook should be free to all.

That is, they’re perfectly happy with not having net neutrality when Facebook is one of the privileged services to which people gain greater access. But they’ll argue in favour of that same net neutrality when it might be Facebook that has to pay for people to gain access to the service.

It doesn’t all have to be about the money, of course. But money is certainly driving some of the argument, as it always will when such rivers of cash are at stake. The content providers are at least in part arguing that they should get to keep ahold of that money and that the broadband and mobile airtime providers shouldn’t be allowed to charge them different amounts for different levels of access or service to us, the consumers. Money is almost never the only argument about anything but it’s a useful way to bet that money is usually one of the arguments about anything.

It is going to be very interesting what the next 10 years will hold in terms of how the Internet is going to progress. These times are much more important than the masses realize.