The catastrophic consequences of the non-Neutral Net will be very hard to spot, until it's too late

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Stanford's Futurity interviews Stanford Law expert Ryan Singel and International Studies expert Didi Kuo about the meaning of a non-Neutral internet, and the pair make an excellent and chilling point about the subtle, profound ways that Ajit Pai's rollback of Net Neutrality rules to pre-2005 levels will distort and hobble the future internet.

The Pai rules allow ISPs to block rival services, but the real impact is likely to be much more subtle (and thus harder to spot in the moment and stop while there's still time).

The ISPs are much more likely to approach the existing internet services like Netflix and demand money in return for a guarantee that their bits will reach you, the ISPs' customers. The services, in turn, will simply raise their prices to make up the difference, resulting in you paying your ISP twice: once to connect to the internet, and a second time to subsidize the blackmail payments the internet services you make are now obliged to make to your ISP.

There's another, even subtler and scarier distortion at work here. The ISPs want to create steady revenue streams from these services, and so the blackmail payments they demand will not exceed the services' ability to pay. But they will limit who else can enter the market: Netflix and Youtube and the other established players were able to start because the capital needs of a video-on-demand service did not include a line item for blackmail to ISPs.

Future Netflix and Youtube challengers will have it different: their startup costs will include millions for hard-drives and marketing and bandwidth -- and millions more for bribes to the telcos.

This is bad news for people who like watching videos, but it's even worse news for people who make videos. With upstarts permanently, structurally frozen out of the market, today's incumbent providers will become much like the telcos themselves: cozy, cooperative, and more interested in colluding than competing. Some of that will take the form of explicit conspiracies, but highly concentrated, stable industries can collude without conspiring: the executives tend to have worked at all the major firms at some point in their careers, know each other socially, understand one-another's turf and territories, maintain out-of-work friendships and even intermarry. Without anyone having to draw up an agreement, these industries are perfectly capable of creating arrangements that are mutually beneficial and that freeze out any new entrants.

The online service providers understand that Pai's rules mean that they're just going to have to divert some profits to the telcos, but will not face an existential threat. They'll always have a seat at the table: but the companies that don't exist yet? They never get a seat at the table.

Here's how to understand Net Neutrality: you get in a cab and ask it to take you to a Safeway, and you notice that it's circling the block for no reason, delaying your arrival. "What gives?" you ask. The cabby explains that Whole Foods has paid for "premium carriage" by the cab firm, and so it gets "fast lane" service -- which means that everyone else gets the slow lane. The cab driver explains that running a taxi is expensive and hard work, and that choosing one grocer over another helps the cab company fund its maintenance, operations and upgrades.

That's nice for the cab company, but you didn't get into the cab to be taken to the most profitable destination for the cab company -- you got in to be taken to the place you wanted to go.

The cabbie says, "Hell, why are you being so particular? Safeway and Whole Foods aren't that different. Besides, Safeway makes decisions about what food you buy: they don't carry every possible grocery item, and they arrange their groceries in the way that suits them, not you. Why do you get pissed off when the cab company steers you toward the stores of its choosing, but you're happy to shop at a store that sends you to the items of its choosing?"

The answer, of course, is that it's none of the taxi's business. Maybe Safeway is gouging its suppliers for endcaps, and maybe it isn't, but that's between you and Safeway. You might choose to tackle that yourself, or it might not matter to you. It's not the cab company's job to tell you where to go: it's their job to go where you tell them.

Singel: The effects we’re likely to see will affect users secondarily. Verizon, for instance, can now go to a Yelp or a Netflix and say, “You need to pay us X amount of money per month, so your content loads for Verizon subscribers.” And there’s no other way for Netflix to get to Verizon subscribers except through Verizon, so they’ll be forced to pay. That cost will then get pushed onto people that subscribe to Netflix.

So what users do online will become more expensive, we’ll see fewer free things, and thus the internet will become more consolidated. Websites, blogs, and startups that don’t have the money to pay won’t survive. I like to think of it as the internet is going to get more boring.

Kuo: The worst-case scenario would be if ISPs blocked access to websites based on their content, but that scenario seems unlikely outside of a few limited applications, such as file-sharing. The ISPs have an interest in being apolitical and letting the internet remain “open,” at least in the ways that will be most apparent to consumers.

More likely, the rollback of net neutrality will have consequences for start-ups and companies with a web presence. It will allow ISPs to charge companies more to reach consumers. While large technology platforms can afford to pay for fast access, start-ups and competitors will have a far more difficult time.

What could net neutrality’s end mean for you? [Futurity]

(via Naked Capitalism)

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