Net Neutrality

The FCC votes today on adopting Net Neutrality rules. This is an important debate and you can be sure that the telcos and their lobbyist's have been throwing all the money and influence they can at this issue.

One of the arguments from the telcos is that Net Neutrality will hamper investment in the infrastructure. I agree that is a risk. But if the FCC does not set the ground rules and insure open access to the infrastructure for everyone, that will hamper investment in what runs on top of the infrastructure.

That is why I signed my name to this letter earlier this week along with many other leading VCs and entrepreneurs:

Dear Chairman Genachowski:

We write to express our support for the Commission’s ongoing
efforts to adopt rules to safeguard the open Internet.  As business
investors in technology companies, we have first-hand experience with the
importance of a guaranteeing an open market for new applications and services
on the Internet.  Clear rules to protect and promote innovation at the
edges of the Internet will reinforce the core principles that led to its
extraordinary social and economic benefits.  Open markets for Internet
content will drive investment, entrepreneurship and innovation.  For these
reasons, Net Neutrality policy is pro-investment, pro-competition, and

Permitting network operators to close network platforms or
control the applications market by favoring certain kinds of content would
endanger innovation and investment in an investment sector which represents
many billions of dollars in economic activity.  The Commission is
absolutely correct to propose clear rules that require competition.  The
promise of permanently securing an open Internet will deliver consumers and
innovators a perfect free market that drives investment, job creation, and
consumer welfare.  These principles should apply across all Internet access
networks, wired or wireless.

Investment and innovation at the edge of the network will
create not just jobs but also new tools and opportunities for communication,
education, health care, business, and every other human endeavor.

We look forward to working with you in developing clear
rules to protect the open Internet, and in building together a framework to
secure its future and promote its continued growth.

#VC & Technology

Comments (Archived):

  1. gorbachev

    Thank you!Waiting for the results of the vote anxiously…I wonder if the big telcos will sue to protect their interests, if the vote doesn’t go their way?

    1. Ty Ahmad-Taylor

      This isn’t a telco issue, it is a broadband provider issue, and it appears that there is a larger issue: you aren’t guaranteed broadband access. It is a for-profit service that you pay for, and you have options. If one provider engages in discriminatory policies, you can switch to another.Additionally, they should be able to set the rate of return on their product, just as you have the right to not consume that product, given that there are usually three options (four, if you include satellite broadband) in most markets.Lastly, most of this discussion doesn’t consider network dynamics for IP networks, from the perspective that that fastest way to deliver web applications is usually via servers that are placed closest to customers. Those servers cost money, and placing them close to customers costs money, and adds a real-estate dimension to this entire conversation. Cable/telco/mobile wireless companies should be able to charge and privelege partners based on physical proximity and co-location, again, if they are going to be enabled to run their businesses.This is a smart debate, but it seems to eschew some of the principles that we all not-so-presumably embrace in following Fred’s writing.Full disclosure: I have worked at both the biggest cable company in the world and some of the biggest digital application providers.

  2. David Noël

    Big issue in Germany too, kudos for the initiative.

  3. Mark Essel

    It’s an interesting situation to be sure. The businesses building the infrastructure want to control what goes on the infrastructure to protect their other cash cows/revenue streams. They know they can’t possible charge as much for data as they can for voice/SMS because they charge unreasonable rates/surcharges/taxes. Once Internet net neutrality makes it way to wireless access systems the information monopoly can finally be broken, and we can all pay a flat monthly fee for wireless communication access (that will cover phone, text, other data types). We may have to pay additional connection fees to contact users in older networks, but these should be minimal.I like to think of an analogy for several other infrastructures in our nation:1) road builders don’t tell us what kind of cars we can drive2) the railroad developers: they don’t control what gets shipped3) the power lines don’t charge various rates for different electronics in your homeWhy should Internet wireless data be restricted in the types of information that flows through its systems.

    1. Aaron Klein

      I’m not so sure it will be a flat monthly rate. I really hope competition drives it to be such, but we may be headed to a metered Internet (not discriminating on what the bandwidth is used for, but just the amount uesd) similar to water or electricity.I hope I’m wrong, I really do…if open spectrum can drive enough competition to keep rates flat, I’d be thrilled.

      1. Mark Essel

        A tiered structure could work: pay $20 for a 5 gbytes a month, $30 for 10.. etc.I pay $50 at home for 15mbytes/sec down, and a few mbytes/sec up.I wonder what 4G will do (it’s faster than my land line). Can land lines keep up with wireless progression?

        1. alainaugsburger

          It really depends on agglomeration size, it is easy to lay fibre optic cables all over New York, it is probably more difficult to provide the same service in North Dakota. 4G will help bridge the digital divide in the same way mobile phone did give access to phone to billions.The access speed does not influence much the cost of Telcos (as long as the infrastructure is in place), what really matter is the total quantity of Data Transfer a consumer is using. The selling price of a GB of data transfer can probably go as low as 4-5 cents (probably the price Googles pays fo it). It takes around 1GB to stream a DVD quality movie, a user that would watch a movie a day plus a TV show via the internet would consume 40GB per month and cost the Telco… $1.60 to $2.40, numbers seems to speak for a flat rate.

        2. Aaron Klein

          If the promise of 4G comes true that will be world-changing. I really hate the idea of metered broadband but as long as the limits are really high, it would be okay.That being said, so many possibilities in a world of unlimited ultra high speed bandwidth: high def video conferencing without $250K in equipment comes to mind.

  4. Tom Labus

    Without it, we’ll have the same issues that now hamper the openness of cell phones.

  5. reece

    For some reason, I can’t help thinking of Atlas Shrugged and the way the government and “the looters” implemented so much bureaucracy that it strangled competition.I pray that the voices of reason – Fred et al. – are heard.

    1. Kioko Natahashi

      Atlas Shrugged was a fiction written for 12 year olds with severe mental retardation i.e. Greenspan. Please refrain from quoting from this book; it’d look incredibly bad on your resume.

        1. fredwilson

          I was gonna do that but you beat me to it reece

          1. reece

            You’re a busy guy, it’s ok.

      1. mezG

        Kioko clearly thinks other people property is for his own use… name calling is a behavioural characteristic of 8 year olds.. at least 12 yr olds can make logical decisions

      2. mezG

        actually quoting from the book would look bad on a résumé for a politician.. but gtood for a charity organiser, author or philosopher, especially the former who would be scrupulous about proceeds and disbursement

  6. Tom Labus

    This is like the health care debate or national parks deagte a hundred years ago. It’s difficult to move ahead against the status quo. Look at derivatives and the any attempt to regulate.

  7. Comrad

    I paraphrase…Dear chairman, permitting isp’s to restrict access to the 0.2% of users who are engaging in large filesharing, is unamerican and unethical. Despite the occassional bible exchange (the entire text of King James weighing in at less than 1mbyte), we all know that the exchange of these large files consists of illegal behavior: the theft of copyrighted content. It also doesn’t matter that this 0.2% of internet users is actually detracting from the experience of others. Instead, we ask you to force the isp’s to invest more capital such that they can accomodate everyone with no deterioration of service. See how easy that is.To shut down filesharing practice would be a true tragedy, because we all deserve the right to invest and start companies which foster and promote this practice. Once we have made millions and cashed out on these ventures, we fully anticipate that your brethren at the DOJ and FTC to shut down these file sharing schemes.So, you see Mr. Chairman, the system will work and perfectly. Please vote in favor of net neutrality and force the hand of a free market system. To do so would be unamerican.Do your duty sir! By the way, does anyone know where I can find a halfway decent torrent file of Spies Like Us, I love that movie and I cannot wait to see it on my new boxee!

    1. Aaron Klein

      This isn’t about the quantity of data. If these carriers want to put 10GB monthly caps on their plans or charge more for unlimited usage, go for it and see if consumers will pay. But discriminating about what the utility is being used for isn’t okay, whether it’s a broadband, water or electricity provider.We cannot give AT&T, Verizon and the like veto power over innovation on the Internet. If you want to see how that movie ends, please see the 1970s telephone prior to antitrust, and the mobile web today.

      1. Comrad

        Sir, I am sorry, but I really have no idea what you are talking about? Let me ask you a question. If the government starts to control how an investor can monetize their massive investment into broadband, who is going to build broadband plant?It might feel satisfying to declare imminent domain on broadband plant and change the rules to a cute-little-bunny-leftist-regime right now, but I assure you sir, this is self-defeating over the long haul and will leave you feeling more hungry as if you had eaten a single solitary potato chip.It is no secret, cable companies are going to lose non-broadband sources of revenues as the esteemed audience herein divines ways to remove them as the digital middleman. But alas, as the needs of the digital consumer evolves, cableco’s will only be able to afford plant reinvestment if they can seek commercial return on their plant. How do they pay for it?If you restrict their ability to capture economics from the content-side of the internet (effectively what NN legislation does) where internet publishers are minting money exchanging analog dollars for digital pennies, they will have no choice but to turn to the consumer and try to raise rates.Is that really an appropriate solution. You cannot stifle the means by which investors earn a return on their investment. If you do, guess what? no one will invest.

        1. fredwilson

          here’s a bigger question. why do we auction off spectrum in this country to the likes of verizon and AT&T when we should instead making it available for everyone like we do with the wifi spectrum?that would change a lot of things you are worried about

          1. ShanaC

            I’m late in this game, apparently the FCC is writing letters about considering rules.I don’t like Comrad’s tone. I think he has a point though. ESPN 360 did/does(? I don’t watch sports, I’m girly in my spare time) liscences itself to ISPs, not to individuals.…That’s a favorite demographic of a lot of people. There is no reason that depending on the way the ruling/letters in the end are written, why couldn’t it be that certain content is firewalled away by both the pipes and by the content creators because they are colluding in a “net neutral” open market environment. It’s neutral because no one is saying that an ISP has to buy a certain content, nor that a seller has to provide that content. They’re coming to terms by what customers want based on a certain idea that most people don’t create content.* It’s a very neutral and market liquid way to see the internet, it just isn’t pro the average consumer. Both content providers and ISPs would be able to have very cartel like powers over what people think, by being able to control what shows up in a search or what media will be available.Just because that isn’t how it is done now, doesn’t mean that won’t be the case in the future, unless you make it clear that is also not the plan. I mean, it’s implicit in your letter that you want to not aim for selling directly to ISPs instead of consumers, but paternalism can and has been valuable in companies, no?I really can imagine a day where an ISP or Two puts money on a table to the startup that provided content for exclusive control. If it meant less hassles and a better exit, how many companies would turn the money down, and for how long?

          2. Prokofy

            Because they’re the highest bidders?

          3. fredwilson

            We should not auction off spectrum. We should make it available unlicensed for everyone like the wifi spectrum works

        2. Keenan

          There is nothing keeping the broadband providers from developing their own applications. By owning the “pipe” they have a captive audience and therefore a lower barrier to entry with thier own apps. Cable companies have the ability to play on both sides of the economics, apps and pipe.

          1. fredwilson

            That’s true but they have utterly and competely failed at that so now they want to control other’s apps

          2. Keenan

            In agreement, I don’t trust the incumbent Bells to foster any type competiton or innovation. Especially in a reasonable time frame. Their 10 year monopoly on wireless apps (the walled garden before the Iphone) is another example. W/O net neutrality we risk an Internet “walled garden” like that of the mobile providers. Not a good place to be.//keenan

      2. equityval

        It is very much about the quantity of data. There are other issues involved, and there are reasons not to trust the telco and cable guys, but at the end of the day this is about the economics of running data networks. The cable guys can see that a flood of data use is coming at them in the form of over the top video and they realize that a large investment will be required to create the infrastructure needed to support a wholesale change to on-demand viewing. If they can’t restrict the use of bandwidth hogging apps, then the only way to manage the demand for bandwidth is with price.Time Warner saw the writing on the wall with the Comcast situation and decided that rather than restrict the type of application, they would need to implement metered usage. So they announced a rollout of this in a few markets. What happens next? Onto the scene rolls Chuck Schumer with a press conference to denounce tier pricing in Rochester and Time Warner caves and cancels the project.So you are a network operator and you can’t restrict the kind of apps and Schumer is making sure you can’t price usage at the margin. What are you going to do? Your investment program is going to lag demand rather than anticipating it, you will price based on average usage, not marginal usage, and the user experience is going to suck for everyone. But we will have made the world safe for the Torrent junkies.Be careful what you wish for.

        1. alainaugsburger

          Interesting point, do you have an idea on how far ISPs are to provide 100GB of monthly data transfer to every house hold in USA?

        2. Aaron Klein

          Proving that the most dangerous place in the world is the space between Chuck Schumer and a TV camera.Tiered pricing is very appropriate. I do not want carriers telling me how to use the Internet, but the market should drive how much of it I can use at what price.In other words, just because Schumer is a blithering idiot doesn’t mean net neutrality is bad.

          1. equityval

            Aaron, The problem is the decision to implement tiered pricing is not going to happen in a vacuum. Unfortunately, in this political envirionment it’s DOA. We’re now regulating the price of executive talent in the financial industry, we have the Fed manipulating the price (interest rate) of mortgages, we have rampant government distortion of pricing signals in the economy now. Do you really think the implications of tiered bandwidth pricing on network investment are going to stop the demagogues in Congress from demonizing the next cable firm that proposes this? Not a chance. Combined with the constrains imposed by network neutrality, this virtually guarantees that the quality of connectivity is going to degrade. If you don’t like our standing in the world bandwidth race, just wait 5 years and see where we are.Of course, such an outcome will be deemed a “market failure” by the folks in Washington, at which point we’ll have the government decide that it needs to compete with the private sector bandwidth providers. We are about to embark on a very slippery slope here.Like I said before, be careful what you wish for.

          2. fredwilson

            Its hard to change government when you are so anti-government

          3. fredwilson

            I’m with aaron. Schumer is pandering to voters. I’ll tell him that to his face next time I see him

        3. fredwilson

          I am all for charging more for more bandwidth. That is what we should be doing. I am against blocking certain apps unless they pay to be on the network

      3. slowblogger

        I thought quantity of data has always been at least a part of this. If not, that’s good. See my new comment at the bottom.

    2. fredwilson

      i get your point Comrad, but this is about a lot more than illegal file sharing

  8. David Ulevitch

    Keep in mind that Comcast got this Net Neutrality issue really rolling when they secretly started to send TCP Reset’s to bittorrent connections that they didn’t like regardless of the legitimacy of the content. That alone is evidence of why intervention is needed.And now Charter Communications, Verizon Wireless, Sprint Wireless and HughesNet all block the ability of consumers to use OpenDNS. And for no reason. Not even an illegitimate one.They block my service, used by millions on other networks around the world. And they do this just as easily as they could block yours tomorrow.That’s why I signed the letter, too.

    1. alainaugsburger

      I am 100% with you on this.I am not sure how far the net neutrality concept goes, but, i am personally believe that it should go behind ISPs and Telcos and also cover TV sets, computers and mobile devices manufacturers. If computers and mobile devices seems to be going the right direction, i am worry that internet enabled TV sets may come with pre-set access to the content Sony, Samsung or HP (and others) may want to monetize. Looking at the first models pushed so far, it is worrying…

      1. scott

        This is precisely the type of argument that many net neutrality opponents worry about – how far down the slippery slope do we go? Where do you draw the line once you accept that certain tech products are public goods to be regulated and others for whatever reason aren’t? Why not regulate all mobile devices too? After all, they can all potentially be preprogrammed with preferential access to content. More to the point, why not regulate Apple? After all, they pick applications for their app store – I’m sure some of the ones that didn’t get picked would say the process is unfair. I think we need a Fair App Acceptance regulation to make sure the process is fair. And Google is allowed to present ads – whatever ads they want! to me while I’m searching. And they can give me any search results they want, to boot, including favoring companies that they like or that pay them – surely that’s not fair. Search is so critical to everyone’s lives these days that I think it too should be considered a utility, and that we should have an Open Search Access regulation with a bureau reviewing search results for “access and fairness”. Too much, you say? Well, that’s just because everybody likes Apple – they and Google are “good”, and the other guys are “bad”. I don’t especially like Verizon and Comcast either, but this is not a basis for policy.

        1. alainaugsburger

          Mobile devices seems to be heading the right direction as, so far, there seems to be no issue accessing any url from any mobile device (even if they try to push content). Google or Bing seems to have rules on search criteria and based on SEO experience, it seems fair, but, it is definitely not transparent. Apple is becoming a growing concern as their market share increase (imagine the noise it would create if Microsoft would select what application can run on Windows?), but, when it come to television, the few demos i have seen were almost exclusively giving access to selected services. Knowing how much time we spend watching TV daily, the potential market size and the influence content can have on public opinion, it is really worrying. On the other hand, not putting a regulation on search and mobile devices because it seems to work so far, may be putting a lot of faith in the ethic of for profit organizations, especially when it come to search that has two players dominating 90% of the market. Finding the right balance between too much or too little regulation is a very difficult thing to do, but, It is definitely a debate that need to take place.

        2. fredwilson

          I like your idea about regulating apple. I’ve proposed that in the past. I’ll suggest it to Julius

  9. Nick Giglia

    Thank you, Fred. I am a big proponent of Net Neutrality and sincerely hope today’s FCC vote goes the right way. The communications infrastructure needs to remain open and equally available.It’s especially important when you consider the large spike in web and cloud services that will only grow over the years – we need to keep that pipeline open and flowing.

  10. Aaron Klein

    This is an issue that cuts across political lines. I’m fairly conservative, but I agree with you 110%. Internet bandwidth is a utility like electricity, water and telephone service. You can’t discriminate providing service of a basic utility on the basis of who is using it or what they are using it for.Imagine if AT&T of the 1970s could do five minute waiting periods before they would connect telephone calls for 5-employee Microsoft, but IBM got instant connection to its customers when they dialed.I’m all in favor of the telecom carriers making money, but when you are in the utility business, these are the rules of the game and they have to play fair.

  11. Alex Popescu

    Even in a perfect world, this problem would remain thorny :-). Let me exemplify it through a couple of different arguments:1. Why would I have to suffer from all that illicit/illegal traffic? The reason here is that all the illegal traffic has an impact on the internet and that’s influencing the lifes of others. Plus there are already other level 7 services doing it (think Google and spam)2. The moment we start judging in absolute terms (illicit traffic), that very same principles would ask us to include other things in our absolute rankings: is YouTube generated traffic better or worse than linux distributions available through torrents? Is a YouTube video better or worse than a Hulu video? etc.Fortunately, we are living in an imperfect world… and that makes things even more complex.

  12. Michael Walker

    This is a big step in the right direction. We have needed this for a long time. The harder the companies fight against this, shows how much it is needed.

  13. Chris Motes

    Just checkin out disqus!

    1. fredwilson

      what do you think?

      1. kidmercury

        i’m having a developer i work with grab the disqus API and allow people to login to sites via disqus (similar to how you can login here via twitter and stuff…i wonder if this will eventually be like social bookmarking, where eahch site will give you like 20 different login options?). anyway the developer i’m working with dissed disqus’ API, as he said it was not easy to grab the user’s avatar and do some other things. he did like the UI and thought the concept filled a need.anyway, just some feedback, for what it’s worth.

        1. fredwilson

          feedback sent on to disquskeep it coming!

  14. Glenn Gutierrez

    I will be eagerly awaiting the vote results. Fingers crossed for Net Neutrality.

  15. Mike McGrath

    I’ve been following this from a friend at I’m hoping now the Supreme Court can start making Constitutional judgments on the internet. It took them almost a generation to even hear a case about radio communications; this space moves too fast to let it linger without a stand.

  16. kevinms

    i agree with aaronklein

  17. mezG

    this is about using one man’s (or companies’) resources for another’s gain, and the equivalent of slavery..”Imagine if AT&T of the 1970s could do five minute waiting periods before they would connect telephone calls for 5-employee Microsoft, but IBM got instant connection to its customers when they dialed.” ??that is what private property is about.. dictating conditons of use..welcome to hell.. whre we are all slaves of the bogus majority

  18. kevinmurphy

    While I do understand the significance of this, I haven’t followed it closely enough to understand what is behind this move by McCain (besides PAC $’s that is…)…

  19. kidmercury

    my big beef with net neutrality, and why i have gone from from pro net neutrality to anti-net neutrality, is that this seems like pre-emptive legislation. what is the problem this solves? my ISP is not discriminating against me in anyway. no ISP i have ever had has. some may say i am lucky. old-timers like me, though, tend to think the free market is self-regulating, and that market competition is what will keep ISPs a rule of thumb, if there is no problem, there is no need for a second rule of thumb, if there is a problem, we can ask ourselves did government create this problem?telco concentration is a problem. wealth concentration is a problem in general, and is the reason why we really do not live in a capitalist country, but rather a fascist one, in which the state is owned by big business. reforming monetary policy is the real solution to ensuring the free market is the top regulatory authority and that there is no unfair allocation of wealth that results in a distorted economy.i recommend shelley roche for more on the topic of net neutrality:

    1. fredwilson

      There is a problem and that is the telcos (wired and wireless) have technology that will let them determine what apps will run on their nets and which ones they can blockWe need a policy that makes the deployment of that kind of thing impossible

  20. PPC Tips

    We need net neutrality. We need to know we can use whatever applications we want without having to worry about them being blocked by ISP’s.

  21. Chris R

    Sorry, I am not on the ISP’s side on this one. We have given them billions to build their networks and they are profiting from it. Now they want to control the traffic? Screw them.

  22. Alex Popescu

    Just another crazy thought against FCC regulation. If FCC imposes these rules, ISPs may consider dropping altogether their R&D investments in flood protection. In the case of a cyberattack (hey it happened quite recently in Lithuania, Estonia, etc.), US might be caught bare naked. And I’m really afraid to imagine what that’ll look and feel like

    1. fredwilson

      access is a competitive business. If one ISP stops investing, they will lose customers to others who don’t.Net neutrality is not about regulating what isps can charge and how they can charge customersIt is about insuring all apps can run on all networks

  23. Brian

    Good article on how the representative of the folks who create real content (songwriters, singers, actors, and producers) feel her voters think about net neutrality.…It seems this debate pits property owners (isps, telcos, songwriters, producers) against web 2.0 companies that build services that aggregate (and sometimes steal) content.As a property owner, I think I side with property owners. I think kidmercury is right that we need to limit concentration, but not create dictates.

    1. fredwilson

      There are many content owners who support net nuetrality. What if an isp decided they don’t want to allow your content on their network?

      1. Brian

        So what?If the content is good, do you really think the isp would block it? If they want to destroy their business, go right ahead. Is any ISP really going to block google search on their network?We should have Washington block mega mergers to encourage competition. As long as we have competition, there is no need for net neutrality.The iPhone is the perfect example. Verizon did not want the traffic on their network. ATT picked up the iPhone and now Verizon is being pressured by their subscribers to have an iPhone or iPhone android clones.The market works when you let it. Excellence will find a way to break through. Mediocrity will not, but so what?

        1. fredwilson

          Do you think the carriers want skype traffic on their networks?Bing is almost as good as google. What if they got in bed with microsoft and blocked google?These are fundamental issues. The internet needs to remain open to all apps

          1. alainaugsburger

            Skype is using telcos infrastructure for free… Why should they be protected by law? Why Twitter, Youtube and Facebook should pay for data transfer when Skype does not?

          2. fredwilson

            Their customers pay for the infrastructure. That’s the model. User pays

          3. Brian

            I do not think you have made the case why the internet needs to remain open for all apps.I get as an investor in internet start ups why it matters to you (and the entrepreneurs who read your blog), but I do not see why as a consumer it really effects me.From the comments I read, it seems google et al are just playing the same game you accuse the telcos of doing, using the power of the state to get their way.I am a big fan of espn360. I do not believe it is available from all isps. In the future, I will consider having espn360 (so I can follow my miserable Vanderbilt commodores) when choosing an isp. As long as I have a choice of isps, what does it matter? Cable providers are able to charge different prices for different channels, why should the isps be any different.I think we are just going to have to agree to disagree on this one.

          4. fredwilson

            Yup. But john mccain agrees with you. You’ve got company

  24. Joe Tighe

    The US government is proposing broad new regulations for telecommunications and cable internet service providers.The new proposals appear to target specific providers for regulation and government oversight. Specifically, Massachusetts Senator Ed Markey has proposed the Internet Freedom Preservation Act of 2009, or the “Net Neutrality” bill, outlining government policies to impose new governance and restrictions targeting telecommunications and cable providers AT&T, Verizon, Time Warner and Comcast.The proposed is based on the unfounded fear that service providers will “control who can and cannot offer content, services and applications over the Internet utilizing such networks.”The Markey bill indicates the vast majority of consumers receive services from only one or two dominant internet service providers. And, the bill says the national economy could be harmed “if” these providers interfered with access to internet applications.The bill proposes regulations imposing equal treatment (eg price/performance) of all internet traffic and content, regardless of content type and delivery costs. Specifically, the legislation proposes internet service providers could not sell prioritized internet applications or services.One of the main problems with the proposed legislation is the lack of recognition of costs to provide internet services. Some applications, such as video are bandwidth hogs and require significantly greater network infrastructure and associated costs to deliver when compared to the network infrastructure costs to deliver email access. Under the proposed legislation, services providers would have to charge the low bandwidth users (casual browsers and email readers) more to offset for the higher costs of the video users. One result of the proposed legislation would be less consumer choice and a hidden “bandwidth hog tax”. Today, most service providers offer tiered products and pricing to consumers and businesses to account for the additional costs to deliver bandwidth intensive applications. You pay more if you use more under the tiered pricing model. These are not “discriminatory” practices. Rather, tiered pricing and application prioritization are sound business models delivering reliable, profitable product choices and unburdened internet ecommerce. Consumers and businesses currently have choices. The proposed legislation takes away choice and increases costs to consumers and businesses.Another problem with the legislation is, certain applications such as voice and video over the internet require prioritization and special treatment to work properly. The proposed legislation makes existing application prioritization products and networking practices illegal. Internet service providers would have to dismantle these services to make all internet applications “equal” with no prioritization schema. The new legislation would kill off reliable voice and video over the internet as we know it.The other problem with the Net Neutrality legislation is anti-trust and federal trade regulations are already in place to protect consumers and business from monopolistic practices and unfair trade. For example, when AT&T disconnected MCI customers in 1974, MCI filed and won a successful anti-trust lawsuit resulting in breakup of the AT&T monopoly. Another example is, the Federal Trade Commission recently investigated possible antitrust violations caused by the Apple and Google sharing two board directors. Arthur Levinson has since stepped down from both Apple and Google boards.The US government would better use taxpayer dollars and valuable legislation time by asking two questions:Which companies are hiring lobbyists and launching advertising campaigns promoting Net Neutrality legislation?What is their agenda?Net Neutrality legislation is not needed. Consumers would have less choice and higher costs. Internet service providers would incur additional costs and compliance overhead. Taxpayers would pay higher taxes to create and support additional government oversight organizations.What business and consumers need is effective interpretation, oversight and enforcement of existing laws and regulations.Disclosure – Joe Tighe has no paid relationships, products or endorsements from any company, political or government organization cited in this article.

    1. fredwilson

      Those fears are not unfounded. They are real and presentAnd the isps should charge the customer more for bandwidth heavy usage, not the provider of the video serviceOtherwise the internet is no longer an open platform for developers and content creators

  25. Keenan

    Are there any Bell Heads in this discussion thread? Have any of you worked with Bell Heads. The Telco’s don’t think like most business. They are slow, lumbering, bureaucratic cultures where change is fought to the death.Let’s remember, if it weren’t for Rhythms Net connection and other early DSL start-ups the delay in introducing broadband would have been even longer. The telcos were not going to offer DSL for fear of cannibalizing their dial-up business. It took others in the market to force them into the market.Telcos will always work in their best interest. If they can control what apps ride their network, they will keep out those that threaten them. We would be naive to look to the Telco’s for innovation, unless they are forced to by the market. They aren’t built for innovation and growth, they are built to maintain the status quo, it’s what they know.Don’t give em the tools, they’ll bury you with them

    1. Brian

      All successful businesses become slow, lumbering, and bureaucratic. It is a function of becoming large.All businesses always work in their best long term interest. It is their fiduciary duty.The telcos are no different. The key is to encourage many players in the isp market not build huge barriers to entry with governmental red tape to discourage new companies from entering the market.Net neutrality will kill broadband internet. The capital outlays are too big to risk being broken by a government bureaucrat whim.

      1. Keenan

        Disagree, the demand for Broadband is too high. Its not just going to go away. Plus, they’ve invested too far much to turn around. I can’t believe a single Telco broadband business case has some sort of “walled garden” advantage built into, that if it didn’t materialize the business case would be upside down.Every buildout happening today is supported by an open web business case. They would have been foolish to build out there network assuming they could have controlled access and applications and had a walled garden. The fios and other business case do just fine with out control of content. Don’t believe the hype.The infrastructure that supports there ability to even be in the place to have the network comes from there monopolistic heritage.If anyon choses to get out of the broadband game because they can’t control the network, someone will gladly fill the void.Google anyone.It’s time for the Telcos to pay attention to their customers and develop the apps and content that will allow them to compete.

  26. slowblogger

    I am interested to see where this goes in the US, as Koreans tend to benchmark the US when it comes to regulation. They demonize the US (“The age of wall-street capitalism is over!”) when they don’t like it, and praise they like it (“Hey, even the US did it.”).There may be other issues, but it comes down to two questions to me.1. Should the ISPs be allowed to charge differently based on network usage?2. Should the ISPs be allowed to block certain dada (or applications)?I think the answer to #1 is easy. Yes. The freedom to pricing is probably the most important freedom after freedom to entry (that is, to start a businss that you like). When you cannot determine how much you want to charge for your product, you are not much different from a bureaucratic government service. Plus, price regulation will distort the resource allocation. For example, it will benefit heavy loaders, whether their contents are popular or not.#2 is a bit more tricky. My sense is that when consumers don’t have alternatives than the an ISP, the regulation of not allowing blockage may be justified. But when consumers have alternatives, it should be left as a businss decision. Theoretically, there could be different ISP business models purely based on such discrimination. One hypothetical model I can think of is a child-friendly ISP, of which value proposition could be “No more worries. We block porn contents.” For parents who are not techy, this could be a very good solution.If the competitive situation differs by regions, perhaps #2 decisions could be delegated to states or below? Just an opinion.

    1. fredwilson

      I agree it comes down to those two issues. And I agree that the answer to #1 is yesI think the answer to #2 is no. There isn’t that much competition and switching costs can be high

  27. Prokofy

    No, not just the telcos and the people with money to throw at advertising but me, too.There isn’t a grander hoax these days than the “Net Neutrality” agitprop which should be called “Net Consumption”.Who is going to pay for all the bandwidth, Fred? The government? Out of what pocket? Where do you get this idea that innovation is something that is automatically bred by free-ness and/or low costs? If anything, people value something more when they pay its real costs.Bandwidth is a scarce commodity, ultimately.Basically, what this is all for is the ad agency Google, so they have little or no cost to stream their ads to you. Oh, and it’s for all those engineers of i-phone apps, too. Free work tools! The idea that bandwidth is like electricity is great. When I use more electricity heating my apartment, I pay more. If my son uses more bandwidth playing World of Warcraft than me, just looking at news sites and reading email, then he should pay more. Exactly.Another canard is this idea that the ATT phone message system is such a huge cost. Not everyone uses ATT and not everybody listens to messages. In fact, they mainly pick up the phone. It’s exaggerated.

    1. fredwilson

      You and me will pay for the bandwidth one way or another. I just want it to be upfront and obvious

  28. Aakash

    How did the FCC vote go?Please check out this article from Americans for Tax Reform, about this very issue! This is also a particularly interesting piece.I wish I had more time to look into, and write about, this important issue. Thanks for your coverage.