Net Neutrality Hypocrisy and Government Toll Roads

Large sellers with attractive video packages want reinstatement of Net Neutrality so they can continue wedging bandwidth-intense content down broadband lanes.  One might think that video packagers like Google (market cap $395 billion), Netflix (market cap $24 billion), Viacom ($37 billion) and Disney ($128 billion) are not delicate startups in need of subsidized bandwidth.

Despite a loss in appellate court, they continue reciting the myth that net neutrality is needed by start-ups unable to pay for premium bandwidth to deliver their wares to the retail marketplace.  But if net neutrality were reinstated and did favor small startups, the big video packagers would be shrieking for the appellate court to overturn that version of net neutrality. 

The self-interest of video packagers and ISPs is obvious.  ISPs want a competitive return on the bandwidth they built, and a fair return on future bandwidth construction.  Video packagers want to constrain the future prices they face to deliver the ever-increasing bandwidth their content consumes.

Ninety-eight percent of consumers live in homes that have access to broadband and 70% buy broadband for their home.  Another 10% have smartphone but don’t buy broadband.  That said, most consider wireless 3G or 4G to be broadband.  Today, broadband users are accustomed to short video messages, video news clips, video chats and video adverts.  Full length TV programs or movies (such as from Netflix) require sustained fast broadband. 

When broadband is not fast enough or when consumers clash with other consumers who need fast broadband, users’ screens can pixilate or halt for buffering.  In these bandwidth contention clashes, consumers feel the ugly downside of network neutrality regulation – regulation that undermines an ISP’s incentive to build more bandwidth.

As Netflix and other streaming movie competitors gain customers, consumers will more often experience the starts and stops of bandwidth congestion.  Investing in enough bandwidth to satisfy consumers can be done collaboratively, but investments will not proceed under the threat of confiscating ISP’s investment in bandwidth.  Populist rhetoric from kleptocratic politicians and the disingenuous moaning of video packagers are no substitute for honest investment.

States and municipalities have faced a similar clash of interests in highway congestion.   Highway lanes are always expensive and sometimes impossible to expand.  In urban areas, heavy transport is slotted into the rightmost, usually slowest lanes.  Regular traffic can move nimbly in any lane.

All vehicles pay fuel taxes to fund highway construction and maintenance.  Drivers electing to pay more for speed can use the toll lanes.  Voluntary payment of tolls is an effective and rational way to allocate resources.  Since governments have important uses for any extra revenue, chronic complaining isn’t a ticket to freeriding the toll lanes.

Highway toll arrangements are similar to rational bandwidth pricing.  When pricing is done right, it serves everyone well.  Time-sensitive products the consumer regards as high value could cost slightly more for faster Internet carriage.  This serves the consumer’s needs and incents more broadband investment where bandwidth congestion Impedes internet delivery.

If the government sees tolls as rational pricing for the fast lane, then why not allow differentiated pricing for private broadband investment?

Alan Daley is a retired businessman who writes for The American Consumer Institute Center for Citizen Research

 

 

FacebooktwitterredditlinkedinFacebooktwitterredditlinkedin