Helping the “Haves” at the expense of the “Have-Nots?”

Bandwidth Hogs would Benefit from Proposed Internet Regulations

 

Suppose gasoline were to be sold for a fixed price per tank.  What would be the likely outcome?  Larger tanks, shortages, fewer economy cars?  Crazy?  Of course, but that is the way bandwidth on the internet is priced, and with many of the same results.  Welcome to the world of Bandwidth Hogs.  This ConsumerGram finds that proposed Internet regulations will protect bandwidth hogs at the expense of most other consumers, as well as low-income families, seniors, minorities, disadvantaged and rural consumers.   

 

Bad Public Policy, for Most

A number of special interest groups have called for a major expansion of Internet regulations in what has been innocuously termed as net neutrality.  These proposed regulations would prohibit price, service and priority differentiation, making the Internet look like a “one-size-fits all” dumb pipe.   In effect, proposed Internet regulations would leave innovation and profit incentives in the hands of a few large and profitable web-centric companies that, by no coincidence, support Internet regulations.  In contrast, Internet service providers will have their hands tied by regulations, and will trim network investments accordingly.  Because the proposed Internet regulations would also require that consumers pay for all of the costs of the Internet, and because regulations would prohibit business deals between content/application providers and network owners that would effectively offset higher consumer prices, Internet costs will increase and consumers will lose.  Every study measuring the impact of Internet regulations on consumers has found that mainstream consumers lose, particularly low-income families, seniors, the infirm, minorities, disadvantaged consumers and rural households.  But, there may be one winner among consumers – bandwidth hogs. 

 

The Giga-Glutton

Most broadband consumers use the Internet to communicate, many browse the Internet for research and news, some download video, music and games, and still others do all of the above, to greater or lesser degrees.  Video downloading and peer-to-peer file-sharing programs are increasing the consumer’s appetite for more bandwidth, as evidenced by the 100 million YouTube downloads each day and many companies now selling full feature length videos online. 

 

The Net neutrality speaks of equality and fairness, but network traffic patterns and usage are far from equal.  Duke Magazine reported that, at one point, 90% of its intranet traffic was the result of 10% of the university’s students.  Comcast reported that some consumers use more than 100 times the bandwidth of the average broadband consumer.  Various reports cite a handful of consumers each downloading hundreds of gigabits, or the equivalent of several hundred full length motion pictures per month.  According to data from Ellacoya (shown in the chart below), 5% of broadband users generate 45.3% of traffic on the web, and 40% of broadband users generate only 3.8% of the traffic. 

The concentrated use by a few raises the cost of the network for the many.  Because Internet regulations prevent product, service and priority are differentiation, costs are effectively socialized and borne by only consumers.  This means that a real-time medical monitoring service linking patients and hospital cannot have priority over, say, spam.  This means that consumers who use the Internet less frequently will pay more so that bandwidth hogs can pay less.  Because the Pew Institute shows that consumers with low-income, minorities and rural consumers are somewhat less likely to have broadband services, higher Internet prices will adversely affect these consumers and significantly reduce broadband service demand by these consumers.  In effect, widening what has been a narrowing digital divide.

 

Imposing Internet regulations would favor a handful of web-centric companies and bandwidth hogs by pushing network costs to mainstream consumers and significantly reducing broadband use by these consumers.  This point is echoed by Greg Moore, executive director of the National NAACP Voter Fund (Asbury Park Press, May 11, 2007):

 

 

“The effects could be disastrous for low-income and minority communities, pricing them out of the broadband market by guaranteeing a free ride to companies such as Google and eBay while shifting costs for broadband expansion back to consumers. Although net neutrality activists claim to be protecting free speech, net neutrality regulations would effectively silence many minority voices, as low-income communities drop off the online landscape because they can’t afford the price of admission.”

 

Summary

            This ConsumerGram has shown is that a “one-size-fits-all Internet will help a handful of bandwidth hogs at the expense of most consumers.  Congress and the FCC should discourage self-serving rhetoric and insist on careful analysis – quantitative where the data allow – of the specific impacts on consumers, including

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