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Interesting takeaways from the first day of FTC conference on broadband connectivity

Overall I think the FTC has done a pretty good job of presenting a balanced view of the net neutrality issue.  I commend them for calling the workshop "broadband connectivity competition policy." That is what the issue is all about-- in generic non-loaded terminology.

To be brief, I will highlight just what I thought was most noteworthy.

The distinguished practioner and academic, Fred Kahn, is always a joy to learn from. Besides making his main point that government should resist its propensity to meddle he was particularly critical of many people's use of the term "discrimination." As an economist, he was frustrated that people were using the term discriminatory just if it was differential. For those that don't know or understand economics or competition policy, Mr. Kahn stated simply -- if there is opportunity cost involved, its not discriminatory. What he reminded people of is that there are lots of legitimate economic, functional, and consumer welfare reasons why service and prices can and should be different.

Alan Davidson of Google clearly took a different tack than usual. He further retreated trying to respin Google's grandiose vision of net neutrality to be more "reasonable." He gave Google's blessing to the Internet continuing like it is -- charging differently for different speeds. He also gave America Google's permission to continuing caching and stopping denial of service attacks on the Internet. Thank you Google for your permission, it means so much.

Alan Davidson of Google then went on to say that Google only has a very "small" problem with just "one type" of router discrimination -- trying to appear reasonable. Unfortunately, to anyone that uderstands networks and competiton, his "reasonable" approach is about as "reasonable" as a doctor telling a patient that all the parts of their body are healthy but that he just needs to remove their "small" cerebellum.

Most precious of all was Mr. Davidson referring to Google as just a little eight-year old company, a cute as a button "second grader!" I just wanted to pinch his cheeks!  Unfortunately, he cratered the imagery by signalling that Google has the political acumen of a second grader in endorsing the dysfunctional House Judiciary Committee's net neutrality approach.

John Ryan of Level 3 did a very good job of unmasking the reality that the Internet has always had prioritization and that all sources of prioritization are not anti-competitive. Listening to John gave me an "aha". He reminded me that it has only been recently that routers have had sufficient intelligence to do really deep and fast packet inspection and route packets "intelligently" more like a traditional telecom switch.

  • What this means is that net neutrality proponents are essentially proposing that we don't use or benefit from the innovation in routers. What net neutrality is all about is blessing innovation at the edge and mandating a "dumb" network and banning innovation in the core and banning network intelligence.
  • It doesn't seem to matter that the same force, Moore's law, is enabling more innovation at the edge and in the core of the network, only edge innovation should be able to survive. Huh? How "dumb" is that?

Walter McCormick was especially effective with his concise hammering home of his powerful message. There's no problem; there's competition;  and the market is clearly contestable. For the FTC, that's what should matter. 

Lastly, but maybe most importantly, Marius Schwartz, an insightful economist and former Deputy Attorney General for Antitrust, made a very powerful point.

  • He noted that Google and other's position that only the consumer should pay denies the creation of a potentially more optimal 'two-sided market'.
  • His powerful insight is that broadband is a natural intermediary market between users and content/apps and that preventing broadband from charging for content/apps has the effect of keeping consumer prices higher than they could be and decreasing broadband penetration.
  • Let me repeat this point because Marius gets the real problem of net neutrality -- it artificially keeps consumer prices higher and hence slows progress towards universal broadband!  And that's supposed to be consumer friendly? 
Q&A One Pager Debunking Net Neutrality Myths