June 9th, 2006
Those Who Pay More Will Get an Enhanced Experience
Those who pay more will get an “enhanced†experience.
This is a from TDavid explaining what will happen to the web now that the House has rejected “net neutrality” — this is representative of the many arguments in favor of net neutrality.
Here’s my question: Isn’t it true everywhere in life that those who pay more get an enhanced experience?
Cars
Restaurants
Hotels
Air travel
Medical care
Legal representation
Cheese
Flat screen TVs
Baseball tickets
Other than love, those who pay more almost always get something better (or at the very least something that can be perceived as better).
It’s deeply naive to expect that the web would turn out to be any different
After all, internet access is a PAID service. (For goodness sake, you have to pay more for broadband than dial-up!)
Unless taxpayers want to provide the subsidy to make internet access a free public service equally available to all, the principle of “those who pay more will get an enhanced experience” will continue to apply.
I’m not saying this is good or bad — I’m just observing that we live in a market-based economy.
UPDATE
TDavid does a fabulous point-by-point deconstruction of my examples above in a follow-up post. There a couple of a key points at issue here:
There is a big difference between offering those who pay more additional features, perks and content then downgrading the basic service people are already using.
Undoubtedly the threat is that the ISPs will essentially rewrite the terms of service to give us LESS than we are currently getting for what we pay.
So what?
Many airlines no longer provide a hot meal. If you don’t like it, you can drive. If your ISP is providing less for the same price, then switch. It’s a FREE MARKET.
But wait, the argument goes…
What is deeply naive is to believe that companies will not try to use and abuse the fast lane to their advantage. Even at the expense of damaging an existing infrastructure that is working and allowing more and more people to access. Toll booths for access to content that is supposed to be free is the big crime here.
“Content that is supposed to be free” — ah, well, there’s the problem. Maybe Google, and Yahoo, and YouTube, and everyone else want to make their content and services free, but they are NOT THE ONLY PROVIDER in the value chain.
If Google wants to provide me with internet access, then they can do whatever they want — make it ALL free.
But as long as internet companies are not providing the entire service end-to-end, then they can’t expect to dictate the terms of service.
UPDATE #2
Billg brings up the other key pieces:
In my market, there’s one cable company and one telephone company. That means two Internet marketers. The entry of competitors into this market is effectively blocked. It is not a competitive market. If I decide to walk away from one of these companies, no other cable company is there to sell me a similar product.
Well, then we should be lobbying Congress to open up the market to competition — if there are monopolies, you don’t fix the problem by telling the monopolies how to operate, you fix it by breaking up the monopoly so that market competition can do what it’s supposed to do.
As others have said, the expectation is not that different kinds of “content†will be available at different prices. The expectation is that entire portions of the network will be unavailable regardless of my ability to pay.
These sense of direct connection to YouTube (for example) and other “portions of the network” is only an illusion — there is a third party in between us. Just because the ISPs never thought about charging me and/or YouTube extra for that “free” connection we have doesn’t mean we should be outraged that they suddenly woke up to a new market opportunity.
And if they can get away with it because competition doesn’t exist, then increase competition.
Topics: YouTube
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That’s true Scott, but isn’t net neutrality about actually getting that enhanced experience you paid for?
The issue is not whether consumers should have to pay for better Internet access, it is that if net neutrality gets nobbled by the carriers, this better access you’ve just paid for as a consumer is then dependent on the backdoor deals the carriers impose. So you might have paid for that shithot 5Mbps line, but because YouTube refuses to pay the carrier ransom, your connection to youtube.com is shaped down to dialup speeds.
You brought up some analogies, and those are always fraught with danger, but if you want to go there… the situation is like paying for a big T-bone steak at a restaurant and then being told that because of supply issues you’ll have to make do with week-old meatloaf.
But Paul, we’re living in a market economy for goodness sakes! If I pay for T-bone and get meatloaf, then I won’t eat at that restaurant anymore. And if there are no other restaurants in town, well then someone is missing a huge market opportunity.
I just don’t understand why of the thousands of instances where people don’t get what they pay for, this one should require government regulation.
And the supply issues are real. Maybe the ISPs are hyping it up and have more supply than they let on, but bandwidth is NOT infinite. Supply and demand does kick in legitimately at some point.
We’re just shocked because we never had video before to push the demand envelope.
I think you (and TDavid maybe)have the issue backwards?
My understanding is that net neutrality advocates want to make sure that the companies controlling the last mile aren’t allowed to degrade or block packets based on source or typeâ€â€which has nothing to do with customers “paying more for faster serviceâ€Â.
I wanted to add, I’m not entirely sure I’m comfortable with businesses being regulated this way– EXCEPT for ILECS and cable companies that owe their historic or current livelihood to government-granted monopolies. When those companies are not acting in the public interest, they need to be slapped down.
[…] But first, Mr. Karp proceeded to ask a curious question: Isn’t it true everywhere in life that those who pay more get an enhanced experience? […]
I am talking about the same thing as you, Ross. Did you read the full post? If not, I’ve made a follow-up post where I went through each of the items that Mr. Karp mentions above (except the absurd cheese analogy). I have to wonder if Karp is playing devil’s advocate.
Scott, the restaurant business comes a lot closer to approximating a true free market than the telecom industry does. If one restuarant starts selling bad food, chances are it will, indeed, go belly up because its customers have many other alternative restaurants to dine at. That’s called competition.
But, in any given market area, there is little or no competition in the telecom business. This is similar to the situation in many parts of the American economy. In those instances, exhortations to buck up and accept the free market amount to little more than shilling for a few entrenched oligarchic corporations.
In my market, there’s one cable company and one telephone company. That means two Internet marketers. The entry of competitors into this market is effectively blocked. It is not a competitive market. If I decide to walk away from one of these companies, no other cable company is there to sell me a similar product.
I’ll add that, in keeping with the telecoms view of the Internet as a medium via which they can market content, and not as a network, I can only buy the programming my local cable company decides to sell me. If I want to watch something they don’t market, I can’t, regardless of price.
As others have said, the expectation is not that different kinds of “content” will be available at different prices. The expectation is that entire portions of the network will be unavailable regardless of my ability to pay.
billg/TDavid, see my response above.
And Tdavid, if you mean “devil’s advocate” as in disagreeing for the sake of disagreeing simply to get attention (what others call “trolling”), that accusation is too often use in Swift-Boating manner — a smear that you just can’t get out from under even if it’s really not true. I stand by what I say here and will admit when I’m wrong when convinced of such. So believe and insinuate whatever you like.
But businesses ALREADY pay more when they use more bandwidth. Where do you get the idea that there’s a free ride somewhere?
If the telcos want to raise their rates, that’s fine, but what they’re talking about it something different– something where there is a tiered service which means only the big players with the big budgets can get a fast connection. That means that in theory, small to medium sized web companies, the ones sometimes doing the most innovation, will have to pay a much greater share of the their revenues to get on the faster tier, or otherwise suffer from being slow to reach.
Tiering off the internet is a type of practice which does not benefit the essential utility of the network– which allows anyone from a single blogger with a server to Time Warner to create something useful and important. And like the transportation industry, the food safety industry, and others, congress can and should do something to ensure that this utility, much of which was built with public money, is not changed into a system where only the biggest can afford the same service we all have now. This is about not stifling innovation, not about any ‘free rides’. Again, the big bandwidth sites, like YouTube, ALREADY pay more because you pay for bandwidth.
Ted, I complete agree on the greater good of the network, enabling innovation, etc. I’m questioning the best route to get there.
The fact that public money was used to build the infrastructure is key, but the bigger problem is that the entire system was built out, no surprisingly, without any foresight. Nobody thought about the fact that we were building a network that creates value through its open and unfettered interactivity and that we left for-profit companies in charge of access to the network.
I go back to what I said in a previous post, which is that we need to go all the way and declare that internet access is a public utility, continue to finance it with public money, and then we can regulate it to our heart’s content for the good of the network.
With respect, Scott, I was replying to your “response above”.
You’re talking about a free market, but from a customer’s point of view there is no free telecom market. Nor is there at the corporate or political level: just a very few large corporations who share an interest in blocking the entry of new competitors.
The result? If I want to watch Gilligan’s Island reruns, but my local monopoly cable provider decides not to program it, I can’t watch it even if I pick up my phone and pay more for an upgraded package. Nor can I call the competition. There is no competition.
I expect that same scenario to play itself out vis a vis the Internet, which the telecoms (and a lot of other people who ought to know better) clearly see as just another way to deliver more of their content to my TV. That means if someone like Microsoft or Yahoo pays them to “carry” their search engine, I won’t be able to use Google. Or vice versa.
So, it isn’t a case of “pay more and get an enhanced experience”. It will be a case of “Take What We Give You”.
Is the prospect of getting yet more bad television shoved down your Internet connection really all that enticing?
billg,
As I said, if lack of competition is the problem, then the focus of legislation should be to enable competitors to enter the market.
Telling the monopoly companies how they have to operate does not fix the underlying root cause problem — and if we don’t fix the root cause, then there will be more problems down the road from monopoly control.
No, I didn’t mean “devil’s advocate” in a trollish type of way, I meant in how you wrote the piece above to sound as if you were asking a question and yet seem to be on the side of the Republican party in supporting this. As I read more of your comments on this, however, you do seem more open-minded than what I read.
The comment was not meant as a slam, but simply wondering aloud. Thanks for answering it. I’m in the middle of a live radio show at the moment, so will have to answer the other points when it’s over on my blog.
I’m actually enjoying the conversation
Scott, the root problem is that the telecoms industry, like much of the broader IT industry, really isn’t amenable to functioning in a free market. Left unregulated, the tendency will be for 2-3 very large national providers to emerge. The situation will be a direct parallel to today’s POTS providers. That’s competitive only if you’re a CEO who dreams about monopolizing the industry.
The proper role of government in such an environment is not to open the doors to restrictive oligarchy in the name of competition. Instead, government should mandate that all levels of service are available to all customers, regardless of location.
Like you, I have no problem with companies selling different kinds of products for different prices. But, as I’ve said, I don’t think that’s where we are headed. We’re headed to certain products and certain kinds of network access being unavailable to certain customers at any price.
[…] Scott Karp has a good discussion going about the House’s rejection of net neutrality. His headline — “Those Who Pay More Will Get an Enhanced Experience” sums up his opinion: In a market economy, you get what you pay for. […]
In essence: if you are one of those people for whom an everlasting faith in the divine wisdom of laissez-faire free market ideology consumes all rational thought, your foolishness is exposed when you start talking about telecom.
Great post. This is a scary fact, but also somewhat exciting. I’m curious to see what options will come about and I’m ESPECIALLY curious to see the initial backlash these “pioneers of NON-net nutrality” will face.
Paul, did you actually read everything I wrote before you decided to engage in an ad hominem?
Does that sound like laissez-faire? I support a government solution to the situation — what I question is whether the approach proposed by net neutrality will fix the root cause problem and whether it won’t in fact leave the door open to further shenanigans by the entrenched telecom monopolies.
Scott, I did read your post. I was not making an ad hominem attack on you, I was talking in general terms.
However, you have trotted out some laissez-faire cliches like “If your ISP is providing less for the same price, then switch. It’s a FREE MARKET” which, as billg says, is useless rhetoric in relation to telecom because most consumers don’t have real choice in broadband. This conflicts with your statement supporting a government-mandated solution. Do you like free markets in telecom, or not?
Those who pay more do not always get an enhanced experience. In Australia we pay more not just because we live in scattered population centres far away from net hubs and thus our infrastructure costs are unavoidably higher. We also pay because Telstra controls the local market, and recently we have had to pay even more to offset Telstra’s disastrous investments in Asia, which lost billions of dollars, to keep their profits at high levels to satisfy mum & dad swing voters who bought privatised Telstra stock. Our local government is too scared to attack Telstra’s monopoly for fear of tanking the stock price, not just because of the voters but because they want to flog off the 51% of the company they still own. Thus we get ludicrous market outcomes like Telstra selling retail ADSL to consumers for less than they charge wholesale to other ISPs. Now maybe you understand why I detest overly simplistic free-market attitudes to telecom problems.
Also, competition is not always the singular determinant of market health. Sure, it would be good for competition if every house had FTTH from 6 different providers so that you had 6 different plugs to choose from. However, the expense of building 6 separate billion-dollar national FTTH networks would be wasted expenditure that would be passed on to consumers in the form of higher prices.
I get the feeling we’re actually in violent agreement on this one, but I need to hear that you don’t sleep with a copy of Inquiry into the Nature and Causes of the Wealth of Nations under your pillow.
[…] Scott Carp: […]
[…] Never, it seems, has an issue been so neck-deep in BS on both sides as “net neutrality.” Andy Kessler has a great piece in The Weekly Standard where he rips the disingenuousness of both sides and proposes what I’ve advocated for in the past: government usurpation of the networks to create a competitive marketplace by force, i.e. eminent domain for broadband. Network neutrality won’t be the laissez-faire sandbox its supporters think, but more like used kitty litter. We all know that regulations beget more lobbyists. I’d rather let the market sort these things out. […]