Ev Ehrlich's Everyday Economics

Question Number One

Five days after his State of the Union address, the President of the United States gave a live interview on YouTube (Google) in which viewers nominated and selected questions for him.   So much for Walter Cronkite.  To their credit, viewers eschewed questions about whether the President was born in a mud hut somewhere or how the death panels would work.  But in a nation with over 10 percent unemployment, record and growing home foreclosures, a deficit that tithes the economy, and  -- gosh darn it, I’m going to say it – 46 million people without health insurance before the recession – here was what the YouTubers (dare I call them couch potatoes?) selected as the “number one question” to ask the President about the “Jobs and the Economy” category:

An open Internet is a powerful engine for economic growth and new jobs. Letting large companies block and filter online content and services would stifle needed growth. What is your commitment to keeping the Internet open and neutral in America?

Well, skip that other stuff about the unemployment and the deficit and the people losing their homes and so on (I think I’m unconsciously writing like Governor Schwarzenegger).  Let’s get right to it – large companies have the desire to block and filter online content and services, and make the Internet other than open and neutral.

The President got right on it:

…we don’t want to create a bunch of gateways that prevent somebody who doesn’t have a lot of money but has a good idea from being able to start their next YouTube or their next Google on the Internet.

Well, that’s quite an exchange.  But my worrying about whether somebody’s going to block and filter on-line content is considerably further down the list than my worrying about being killed on the road by a runaway Toyota or whether the writers of Lost really have a plan to end this thing in a way that makes sense.

I’m not sweating this “filtered” Internet because it’s not going to happen.  Yes, an open Internet is good, in fact, let me be more specific – really good.  And if large companies blocked and filtered online content, that would probably be bad.  For example, Comcast wants to buy NBC so they can meet Alec Baldwin at their corporate retreats – perhaps they think he’s one of them.  And in the minds of the people who are agitated about the question posed to the President, the danger is that Comcast is going to start muddying your ability to get, say, competitors to Hulu.com (an NBC venture) or perhaps the on-line feeds of the other networks.

Yes that would be bad for you, but it would be even worse for Comcast.  Are you telling me that there’s anybody who would pay $43 a month for the privilege of letting Comcast deny you your right to watch The Simpsons?  OK, aside from Jeffrey Zucker.

So the questioner might as well have asked the President if the Coca-Cola company was going make us all drink New Coke.  That part of this debate simply eludes me.  It argues that companies that have invested tens of billions in broadband distribution networks are going to jeopardize those investments by giving consumers what they don’t want.  There are probably some people who want “branded” Internet – only show me Rachel Maddow, only show me the Creation Channel (no, it doesn’t exist yet, but do you want to bet against it?), let me buy music from iTunes but not from Rhapsody and eMusic  – but the right place to address their problem is at the FDA, not the FCC.   It reminiscent of Congressman Bobby Rush’s description of “net neutrality” as “a solution in search of a problem.”  

So the question itself has a kind of word salad feel to it, particularly the comingling of two descriptions of the Internet – “open” and “neutral.”  To me, “open” means you can find anything you want, so long as it’s legal.  That’s unequivocally good – it’s what I pay a provider to do for me.   But neutral means that everything that’s carried on the Internet travels on the same speed and the same terms as everything else, and I’m not convinced that’s as good as seeing everything I want to see.

I’ve talked about this before –not everything should travel at the same speed and on the same terms.  I’ve used the example (in other postings) of a medical device that’s attached to me at one end and a hospital on the other via the Internet, and how I want that signal to travel faster than a download of a cat playing the xylophone.   I thought I was being literary – you know, cats can’t really play the xylophone – but then I found this clip, which isn’t exactly the same thing, but nonetheless a good example of something that I want my heart monitor to go faster than.    Are you telling me that the economy would be worse off if companies like Comcast or Verizon or ATT or Clearwire or whomever else could let the hospital pay to have an uninterrupted connection to my thorax and let that connection take priority over the cat video if there’s congestion on the Internet?  That’s awfully hard to believe.

And then there’s the President’s answer.  Specifically, he’s concerned that if you could buy your way to the front of the Internet line – like a heart monitor, or a live broadcast of a concert or sports event, or perhaps a videophone-for-a-fee service that provides a better-than-Skype connection for my wife and I to talk to our kid who’s playing football in Spain this Spring and writing a sensational blog about it  that you can read here   -- that would somehow be bad, and that somebody with a good idea but no money wouldn’t be able to find his audience on the Internet.

The people who worry about that don’t get the fact that big websites, or as Theodore Roosevelt would have called them, Big Website, already can smoke their upstarts because they use caching.  Caching is remarkably close to ka-ching, and for the Googles of the world it is based on the same idea.  When you go to Google.com, you don’t go to some remote citadel of Googleness off on an island somewhere (attention, Lost!).  Instead, you’re directed to any one of a number of servers that have been placed around the world so that there will be one close to you.  That way, Google stays fast, just like consumers like it, because they’ve put these servers everywhere on the Net.  The only difference between spending a lot of money to cache your content and paying for a premium (non-neutral) broadband connection is that the non-neutral one is quicker and probably cheaper to achieve.  In fact, neutrality doesn’t allow new challengers to compete with Google and its dotty step-child, YouTube – it protects Google by making it harder for competitors to replicate its size advantage.

The President is a very intelligent guy and I’m a big fan of his.  But he doesn’t get this.  I have three theories about this – supporters always have theories when their leaders don’t go in the direction they want.

One is that Big Website is well-connected and often popular – Google, EBay, and so on, everybody likes them.  So when they walk around Washington and announce that they support a policy that makes it easier for competitors to challenge them, people think they’re saints and figure if it’s “neutral,” it’s good. 

A second theory is that it’s easier to talk about theoretical issues like neutrality – I mean, tell me a bad thing that’s ever happened because the Internet hasn’t been “neutraled” yet – than it is to address the real problem – closing the digital divide.  The Administration has a process in motion to create a plan that will get us closer to that goal, but it’s late in coming and will cost more than the amounts now set aside for it.  So an alternative is to focus on the neutrality issue and slow-steam extending the Internet to the unserved.

Even if that’s not the intent, that’s the result.  If “an open Internet is a powerful engine for economic growth and new jobs” then shouldn’t the first thing we do be extending the Internet to neighborhoods where people need jobs, so they can start using the resources they find on it?  I’d like to think that’s what Bobby Rush is thinking when he stays away from the theoretical angst about openness.  Instead of having the debating team argue about “neutrality,” we could be building a true “universal” Internet our priority.

And then there’s a third theory.  It’s that the people in the Administration who know better – the economists – Summers, Geithner and his folks like Alan Kreuger or Lew Alexander, Jason Furman, Christine Romer, Peter Orszag, or Commerce’s Becky Blank – all are focused on saving the country from its worst crisis in a lifetime and can’t really be bothered right now with this stuff.  So long as nothing happens – no new rules enacted, no new meddling undertaken – they’re happy to let debating points be made while the real agenda is elsewhere.

Or at least so I hope.  Because the “number one question” about jobs and the economy today has nothing to do with what happens to a video of a cat playing the xylophone.