Big Ern Blogging and Vlogging

Things like parks are considered a public good.  Public goods cost society money to maintain and abuse by a couple could result in the public good being ruined for the rest.  So as I think about the debate of net neutrality and think about the recent Google and Verizon pact as reported by The New York Times, I wonder, is the Internet a public good?  Who should be able to make money from the Internet?

Google and Verizon had long been at opposite sides of the net neutrality debate. Google, which makes its money on the web, wants the government to ensure that any website is not blocked by ISPs (like Verizon) from pushing content to Internet users.  Verizon, which make money providing access/connection to the web, wants the government to allow it to charge website owners for the “excessive” data that the website owner pushes to the internet.  Legally Verizon could charge website owners now, but Verizon knows that socially and politically that move would be costly.

The internet (especially the TCIP protocol) was developed as a government project with hundreds of millions, if not billions, of taxpayer dollars.  Wouldn’t this make the Net a public good?  Yes it does.  Verizon is seeking tiered pricing for website owners. Verizon already makes money by offering different data speed plans to consumers and would like to do the same for website owners like Google, Yahoo, maybe even NYU.edu.  If Verizon and other ISPs are given permission to charge website owners, those with money could buy their way to the top of “natural” search results.  Wealthy website owners could perhaps even pay to have competitive websites blocked (or website experience to be substantially downgraded).   The Internet, a public good, would eventually be limited in content (websites) from anyone anywhere.  This limitation would result in the “tragedy of the commons.” 

ISPs do and should be able to charge for consumption.  Verizon customer that are ‘bandwidth hog’ (some one that watched a lot of video, downloads music, movies and other large files), could and probably should be charged on tiered plans based on data consumption or based on download/upload speed plans.  If not, bandwidth hogs would themselves pass on an externality to the rest of the internet users. 

It seems to me that Verizon is seeking to create a positive externality for itself by passing the cost of maintaining its network on to website owners, but it’s the end user that determines the websites she visits, it she that should be responsible for the data that is consumed.  Verizon wants to pass the cost of providing bandwidth streaming video, peer-to-peer sharing and other “heavy” data activities to website owners.  This would prove to be profitable for Verizon.    But the real cost would really be to the society, in the form of less choice to content on the internet.   Website owners don’t have a free ride now, it very hard to generate substantial sales the web in addition, website owners must pay hosting fees and bandwidth transfer fees to CDN (Content Delivery Networks).  To this day, even the super popular YouTube website is not profitable because of the hosting and CDN fees.

Verizon’s plan would create additional barriers to entry for content providers.  Barriers to entry slow innovation on the web for new comers, since new consumers would need more capital to pay ISP for “real estate” and access to the ISPs users.  Eliminating net neutrality serves only the interests of the ISPs and large profitable website owners.  Government regulation would provide political and legal cover for Verizon and Google.  This would result in greater profits for both those organizations.  Google could pay Verizon to give YouTube, a Google property, preference on the Verizon service.  Verizon might even be incentivized to reduce, even, block access to YouTube competitives sites like Hulu, Dailymotion, Vimeo and other video site.

After many years, Verizon may be finally getting its wish by having Google buy into Tiered Pricing.  So the question becomes, why did Google have a change in policy?  Well, Google has branched out from it core search engine business and now offers services and products that rely on Verizon carriage, for example Google’s mobile operation system Android, as well on the Google phone (hardware that need to be carried Verizon). Google feels like it needs to give a little to get its other products carried by Verizon.

It’s clear that Verizon is doing a good job creating externalities for itself.  What’s not clear is whether the FCC and the public at large understand the ramifications?  While Verizon is making legal and political head way, I presume that ultimately website owners will continue to be free to launch and operate without barriers from ISPs.  Net neutrality should pertain to any device (computer, portable devices like mobile phones, TV sets, etc) that uses TCIP internet technology.

 Socially and ethically I cannot see society allowing net neutrally to be eliminated, that pressure from society lead to political and legal failure for Verizon and Google.