Net Neutrality (continued)

I posted my thoughts on the debate raging in congress several months ago.

And I still largely think that whatever congress does on this issue is going to be irrelevant because entrepreneurs and market forces are so much more powerful than government regulation in terms of what actually transpires in the marketplace.

But I got an education on Net Neutrality from some really smart and knoweldgeable people at our Union Square Sessions event last week. And I’ve received a bunch of emails from readers requesting my views on the subject. So hear goes.

We have four companies that largely control the last mile into our homes in this country, two telcos and two cable companies each control significant market share. Some of their CEOs have gone on record that they want to use tiered pricing to fund new development on their networks. Sounds good, but its crap.

First because the telcos and the cable companies have not done much to improve their networks here in the US. At best, we have 6mpbs service into our homes in the US. There are countries in other parts of the world that think that 6mpbs is so slow they don’t even offer it anymore. 25mpbs is the standard and they are headed to 100mbps while we are trying to figure out how to get to 6mbps.

So putting more money into the telco and and cable pockets is not likely to result in higher bandwidth networks.  It’s more likely to result in more golf courses and G5s for their CEOs.

In our country, all the innovation has happened in the startup world. The startup ISPs and CLECs are the ones who first rolled out the services that the telcos and cable operators are now making money with. But would they have rolled them out if they hadn’t been put at competitive risk by the startups? I think not.

So first and foremost, we need a competitive network. That was what we were supposed to get with the telecom deregulation act in the 90s. But somehow we didn’t get competition. We got effective duopolies in telcom and cable. So the fight I’d be fighting is not Net Neutrality, it would be getting telecom deregulation right. The funny thing is that our deregulation formula was copied in other parts of the world, most notably in the UK. And they made it work there. But we didn’t.

And if we are not going to get a competitive network, then should we settle for some kind of Net Neutrality regime?  I have my doubts that we’d get what we want because our congress is in the pocket of the telcos and cable companies. The companies we love and use all day long; Google, Yahoo!, eBay, Amazon, Skype, etc aren’t spending any time or money in Washington.

That’s why they build great services we love. They focus on the product and the customer instead of the corrupt politician. After we posted about our Sessions event, I got an email from a friend who has spent the past 5+ years inside a large corporation and he said, "you’d be amazed at how much time is spent on these issues in large corporations". No I am not surprised at how much time is spent on these issues. And I hope they keep spending time on them and ignoring their customers.

Because I will fund entrepreneurs all day long to take their customers from them while they are wining and dining corrupt politicians on their golf courses and G5s.

But there is one thing that I think we *must* protect with regulation. We cannot allow the telcos and cable operators to discriminate traffic on the basis of what is in the packet. That is the central issue in Net Neutrality in my mind. My friend John Mahoney makes that point in this excellent post on the subject.

I can live with the telcos and cable operators being able to price based on services offered. They do that today and nobody gets hurt. But if they start saying "for filesharing you must pay another $10/month" or "for porn you must pay another $20/month", the Internet is screwed in this country. I am no fan of illegal file sharing or porn, but the fact is that our current network architecture is "dumb". It doesn’t care what application runs on top of it. And if we change that simple fact, the Internet in our country will cease to be a viable platform for innovation. The action will move to Estonia, India, China, Israel, Korea, or wherever else they understand the power of a dumb network.

TomIt’s pretty clear that our government doesn’t.

For more reading on the subject, including two awesome posts by Tom Evslin, go to my delicious tag on the subject.

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