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September 09, 2015

Net(flix) Neutrality: Who's Kidding Whom?

There was a great editorial in The Wall Street Journal by Holman W. Jenkins, Jr., on Net Neutrality.  Mr. Jenkins points to the problems that FCC strategies represent. If we are looking to the future and not the twilight of the telecom, then broadcast quality video is the metric. Unfortunately the model for the pricing of this service is totally suspect at the moment.

If, as Disney has suggested, ESPN is vulnerable to Over the Top TV, then the bandwidth for video from cable is no longer being paid for by the subscriber.

Now to review, the Internet has always been about taking advantage of excess capacity. The original documents from MIT about had to add connectivity saw local dial-in numbers as the answer. AT&T and every dial up provider designed their dial up networks for blockage. Triple play services had all the add-on packages for video but at its base for video was the cost recovery for the broadband deployment.

Mr. Jenkins goes on to point out that cable is the only game in town.  ILEC’s have now less reason to update to broadband. 

So instead of promoting competition, we now have less competition and policies that drive competition out of the markets.

I have always felt that Net Neutrality was a red herring in the tradition of bad journalism. Mr. Jenkins points out that Netflix is like recipient of a lot of misguided “I pay for the bandwidth already” arguments.

No one speaks to issue that 12 percent of the users can eat 350 percent of the ingress/egress of the interconnection.

The Internet is ubiquitous and everywhere, but that does not mean that all traffic arrives simultaneously. If no one wants to pay for a better backbone they should experience the joy of Spinning Wheels and true best-effort connections.

Now to be clear, I am only about the cost recovery of the engineering. When Aereo was allowed to run a PVR service on the net, I thought that was fine. The fact that broadcasters killed it may be the shortest shortsighted thinking this century (Reciprocal Compensation won last century’s award).

However, the bottom line is, policy and preference are leading to a perfect storm of unsustainable demand. 

Dagny Taggart should be asking, “Who pays John Gault?”


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