Consumers Want Discrimination & Prioritization – Let’s Ditch Net Neutrality

by Mike Wendy on May 14, 2013

Last Friday it was widely reported that ESPN was looking to work with an un-named wireless carrier to subsidize smartphone users so that they could watch more of its programming without affecting the users’ data cap limits.  Groups like Public Knowledge immediately cried foul, calling it a clear Net Neutrality violation.

Let’s get this straight – it is not a Net Neutrality violation.

To be sure, on the wired side of the equation, Net Neutrality regulations are more stringent, potentially banning an ESPN-like arrangement.  On the wireless side, however, the rules are more relaxed, allowing (or even encouraging) this type of pro-consumer “discrimination.“  Consequently, if the ESPN deal is real, it simply reflects a practice widely employed in most all other segments of our economy to enhance consumer welfare – one likely envisioned by the Net Neutrality rule itself.

This fact really gets the “consumer interest” groups all in a lather.  They wanted rules so confined that the ecosystem (other than edge provider Google) couldn’t swing a cat.  The suggestion that network providers should be allowed to operate like any other aspect of the economy – that is, as they see fit, as long as they don’t plainly harm consumers – just flips their lid.

Don’t network providers know their place?

You see, the pro-Net Neutrality groups firmly believe that America’s broadband carriers are not part of the Internet.  To them, they are mere conduits, “dumb pipes” or digital sherpas, indentured to the service of the edge, ‘cuz that’s where all the innovation happens.  Moreover, the Net Neutrality rules (for wired and wireless providers) mean they may never stray from that role, remaining conduit-only companies…

…Forever.

Anti-free market advocate, Tim Wu, describes this Net Neutrality-imposed cage as some kind of benign bargain, noting:

Think of it this way: net neutrality, which sets all these prices at zero, is effectively a grand truce between the big app firms and the infrastructure providers. It eliminates an unnecessary middleman: consumers deal directly with content vendors and app firms. That’s a much healthier market dynamic than one driven by hidden, passed-on costs…

But what it really does is not so benign.  The rules place an outright ban on otherwise legal business models, agreements and partnerships that benefit consumers.  It puts such arrangements in a category of contracts that are so “evil” that they must be banned as a matter of public policy to “protect” the public.

Nothing could be further from the truth.

FTC Commissioner, Joshua Wright, seemingly agrees.  In his view, there’s simply no evidence in the Internet space that such arrangements harm consumers.

As Wright states:

At its heart, the Net Neutrality Order seeks to prohibit broadband providers from entering into vertical contractual relationships out of fear that they have an incentive to disadvantage rivals and ultimately harm competition…[But the] fundamental failing of the Net Neutrality Order is that it creates a categorical prohibition against vertical contracts without acknowledging the vast economic literature and empirical evidence that support the view that such vertical arrangements are usually precompetitive…[Further,]  there is no evidence that sufficiently shows that vertical contracts in broadband markets…are more likely to be anticompetitive than precompetitive…

The freedom to reach ESPN-like deals – or similar “discriminatory” agreements with other content, applications, device and service providers – should be the rule, not the exception.  We should want companies with the drive and resources to innovate as far as they can, unfettered by needlessly prophylactic regulations.

Why just today it was reported that ESPN and Twitter are working on an arrangement to bring video sports clips to the 140-character medium.  Gosh, wouldn’t it be great to see that in full 1080p (or higher, when that technology arrives) in a manner that both pleases consumers and manages limited bandwidth?  Wouldn’t it be cool if YouTube came to us without all the jerking, halting and jitters in 1080p – all the time, without any of those persistent QoS concerns?  Wouldn’t it be awesome if…

…You get the point.  Wouldn’t it be pretty darn terrific if Internet companies could be treated just like regular companies, allowing them to “discriminate” or prioritize their services as consumers demand?

Net Neutrality hogties the whole ecosystem – from the network providers on down to the content, app, service and device makers.  Man, what a waste of a policy lever based on nothing more than fear.  We pay for “discrimination” / priority in every segment of our economy, like the mail, the airlines, shopping clubs, hot lanes, etc.  It makes these services better.

The Internet should be so lucky, too.

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