Ev Ehrlich's Everyday Economics

Letter to the Editors (2)

The old saw – first attributed, to my recollection, to Howard Dean – goes like this; Democrats love jobs but hate the people who create them.     For many Democrats, it’s true.  But an editorial in this week’s New York Times confirms a close corollary – liberals (certainly more than Democrats) love the Internet, but hate the people who built it. 

The Times editorial decries a suit filed by Verizon and Metro PCS that challenges the Federal Communications Commission’s right to impose “net neutrality” rules on the Internet.  Once again, “net neutrality” is the proposition that everything that travels the Internet must do at the same speed and on the same terms.  Nothing else on Earth works that way, of course, because individual needs and circumstances are always different consumers everywhere else are allowed – encouraged – to match up price and quality.  But the Times seems to buy the garbles logic of the neutrality crowd, particularly in remarks like these:

The suits could potentially free Internet service providers from regulation — allowing them to treat their own content better than that of rivals, and block content that they didn’t like or competed with. Verizon and AT&T have about 60 percent of wireless subscribers. And 80 percent of Americans live in areas with only two wireline broadband providers.

You get this often – now that it owns NBC, Comcast will stop you from watching Modern Family or Glee on your cable-based broadband, or that cable and telcos like Verizon will block content like Hulu or Slingbox, the current vehicles for Over-the-Top television that threaten cable-type operations.  Or that they won’t let you see either Keith Olbermann, or Glenn Beck or, ideally, both.

The idea that consumers would tolerate this kind of nonsense seems firmly embedded in the Times editorial board’s mind, but not in the reality of markets as we know them.  Yes, most people live in areas with two wire-based broadband options.  And yes, Verizon and ATT have a combined market share of 60 percent of wireless.  But with 4G penetrating the market, we are quickly approaching a state in which the vast majority of households have access to two wired and four wireless broadband providers.  And, unlike almost every other nation, the U.S. market has competition among platforms – among large, fixed cost systems that have to drive use and yield to recoup their massive investments.  That’s entirely different from places where the several broadband “competitors” all rent space from the national phone company, as happened in the U.S. during the DSL era, when no one invested and the entire wave of “competitors” disappeared in an instant.

Think about where you get your broadband from right now.  What if they decided to stop your access to any type of content, or any competing service?  Would you keep doing business with them, or would you find alternatives?  My guess is the latter, and when you put it that way, competition seems more formidable than the Times makes it out.

Or try this – let’s say Facebook (brief aside: I’ve seen the movie and yes, the guy who played Larry Summers did a better job than my choice for the role – Jon Lovitz.  But they shouldn’t have let Jesse Eisenberg be Zuckerburg; they should have given the part to the guy who plays Abed on Community    I mean, isn’t he the real deal?  Otherwise, the movie wasn’t as interesting as, say, whether Harvard beats Princeton in basketball on Saturday night and goes to the Dance for the firsttime since nineteen thirty seventeen or something… OK, brief aside over, continue sentence) decided to offer you a special network card that picked up a ubiquitous, proprietary national wireless network that allowed you to see “special” Facebook content  -- don’t ask me what it is – it’s so special I can’t tell you.  But you get the “Facecard” and you get lots of other stuff with it, including mail, a series of cloud applications, and all sorts of other stuff, but not everything – certainly not other social networks, maybe not even Google stuff, since Google and Facebook is the Ali-Frazier fight of the digital future – sooner or later these two guys – both legitimate champions -- are going to slug it out for who gets to be the organizing framework for the entire Internet experience.   But Facebook gives you all sorts of “extra” stuff in exchange for being on their network. 

Is that anti-competitive?  Would the Times oppose it?  it’s extra stuff and if you don’t want it, you can cruise down the street.   But it violates the Times’ dictum that you can’t have a provider pick and choose what you get to see, so I guess they’d oppose it.   It’s open because that’s how consumers want it.  So some things can be other than "open" and still pro-competitive.  "Competitive" often means open, no doubt about it, but more importantly, it means responsive to consumers.  And that's the real meaning of the "facecard" example -- the  Internet isn't open because regulators demand it.  It's open because that's what consumers want.

Let me use a second excerpt from the Times editorial to make this point.  Here we go:

                The choice for American consumers is between the open broadband they have come to expect — in which they can view any content from sources big and small — and a walled garden somewhat like cable TV, where providers can decide what we can see, and at what price.

This is a deft piece of writing on the Times’ part.  Industry types regularly talk about “a walled garden” as a metaphor for a system that has a policed boundary, but they usually use that phrase about the mobile telephony network.  So why did the Times switch the conventional usage and go, instead, to cable television as an example of such a system?  My guess is because they – or the advocates they’re talking to – know that consumers like having their mobile phones be a “walled garden.”  Do you get endless marketing calls on your mobile phone?  Robocalls?   Solicitations?  No, and the reason why is because that’s how consumers want it.  “Open” – meaning no boundaries – works on the Internet, but doesn’t work on mobile phones, and no one complains.  Moreover, as phones become the Internet – a point the Times seems to have lost on the way to the linotype machine – they’re going to have to keep customers happy on both sides of the equation – an open Internet and “walled garden” phone co-existing in the same device.   And that’s exactly the point – consumers are getting what they want, including the level of openness in the system.

Two last points: if net neutrality were to be dispensed with, broadband providers would, in essence, be operating in a “two sided market,” like credit card companies (which balance charging merchants and charging you) or…give me a minute…wait, I know!  The New York Times, which charges advertisers to put “premium content” in the newspaper and then charges crossword puzzle junkies like me to read it.  Isn’t that it?  If I want my heart monitor to travel across the Internet faster than a video of a cat playing the xylophone, then someone’s got to pay.  Or if Netflix wants to dump all the movies ever made since The Great Train Robbery on the net, meaning everyone else’s traffic has to slow down, then they’ll have to pay, too.  Stopping my cardiac monitor or allowing Netflix to clog up the system doesn’t make things “fair” – making them “fair” means posting the prices for these services on the wall so that we all know then and whomever wants to pay them has the chance.  Just like the price of a newspaper and the price of a full-page ad.  For the love of Pete, if advertising in the Times – paying for premium content – was “unfair,” then Bloomingdale’s would be the greatest perpetrator of injustice in civilization.

And the last last point goes to this in the Times editorial – a lament over “a swirl of antiregulatory fervor among Republicans on Capitol Hill.”  Whether or not Phillip Corbett thinks this is good writing http://topics.blogs.nytimes.com/author/philip-b-corbett/ is one thing, but it’s poor thinking to lump the debate over “net neutrality” together with the obstructionists who are either in denial over climate change or the pocket of the financial institutions who think Dodd-Frank would be a good thing not to implement.  Our planet’s carrying capacity is changing rapidly and the public is still being held hostage by financial institutions that are too big to fail.  What exactly about the Internet poses a similar danger?  I can’t think of it, either.