Adam Thierer has an interesting post about network neutrality over at Tech Liberation Front. He is reacting to a recent Wall Street Journal story about how some home broadband service providers (BSPs) are starting to modify their networks to block or frustrate network applications they don’t like.
Why would a BSP discriminate against an application’s traffic? The standard scenario that people worry about is that a BSP hinders traffic from Vonage or some other VoIP application, because the BSP wants to sell phone service to the customer and VoIP competes with that phone service. One can cook up a hypothetical like this whenever a BSP wants to sell an application-level service. The standard response to this worry is to suggest “net neutrality” regulation, which would require BSPs to carry all traffic on an equal footing, regardless of which application or protocol is used. There is a complicated literature about the economics of net neutrality; for now, suffice it to say that net neutrality regulation can help or hurt, depending on the precise circumstances.
Thierer opposes net neutrality regulation. He seems especially worried that neutrality might require BSPs to treat all customers the same, regardless of how much network traffic they generate. If a few customers use lots of bandwidth this will leave less for everybody else, or alternatively will require the BSP to upgrade the network and pass on the cost neutrally to all users. It’s better, he argues, to let BSPs price differentially based on bandwidth usage.
It’s hard to argue with that proposition. I don’t think any reasonable net neutrality advocate would object to a BSP discriminating or pricing based solely on bandwidth usage. They would of course object if a BSP blocked a particular app and rationalized that act with vague excuses about saving bandwidth; but a real bandwidth limit ought to be uncontroversial.
(Technically, customers already have bandwidth limits, in the sense that a given class of service limits the maximum instantaneous bandwidth that a customer can use. What we’re talking about here are limits that are defined over a longer period, such as a day or a week.)
It’s already the case that some customers use much more bandwidth than others. Thierer quotes a claim that fewer than 10% of Time-Warner customers use more than 75% of bandwidth; and another BSP makes an even stronger claim. This isn’t a surprise – this kind of business is often subject to an 80/20 rule (80% of the resources used by 20% of the customers) or even a 90/10 rule.
But will ISPs actually apply bandwidth limits? Here’s Thierer:
This raises the most interesting issue in this entire debate: Why is it that BSPs are not currently attempting to meter broadband usage and price it to account for demand and “excessive” usage by some users? In my opinion, this would be the most efficient and least meddlesome way of dealing with this problem. Per-minute or per-bit pricing schemes could help conserve pipe space, avoid congestion, recover costs and enable BSPs to plow the savings into new capacity / innovation. Despite this, no BSP seems willing to engage in any sort of metering of the pipe. Why is that?
I think there are two reasons that BSPs have so far been unwilling to price discriminate. Frist broadband operators are probably concerned that such a move would bring about unwanted regulatory attention. Second, and more importantly, cable and telco firms are keenly aware of the fact that the web-surfing public has come to view “all you can eat” buffet-style, flat-rate pricing as a virtual inalienable right. Internet guru Andrew Odlyzko, has correctly argued that “People react extremely negatively to price distrimination. They also dislike the bother of fine-grained pricing, and are willing to pay extra for simple prices, especially flat-rate ones.”
So if BSPs aren’t willing to bandwidth-discriminate now, and doing so would anger customers, why would we expect them to start discriminating in the future? It’s not enough to point to a 90/10 rule of bandwidth usage. If, as seems likely, a 90/10 rule has been operating for a while now, and BSPs have not responded with differential pricing, then it’s not clear why anything would change in the future. Perhaps there is data showing that the customer-to-customer imbalance is getting worse; but I haven’t seen it.
Ultimately, BSPs’ general refusal to bandwidth-discriminate would seem to contradict claims that bandwidth discrimination is necessary. Still, even net neutrality advocates ought to support BSPs’ freedom to bandwidth-discriminate.
Alert readers have surely noticed by this point that I haven’t said whether I support net neutrality regulation. The reason is pretty simple: I haven’t made up my mind yet. Both sides make plausible arguments, and the right answer seems to depend on what assumptions we make about the markets and technology of the near future. I’ll probably be talking myself through the issue in occasional blog posts here over the next few weeks. Maybe, with your help, I’ll figure it out.