June 1, 2015
In the context of the Telecoms Single Market (TSM) package the European Council and the European Parliament are revisiting the issue of net neutrality. Net neutrality is a principle of internet traffic management that says that all internet traffic should be treated equally, regardless of the content, sender or receiver.
As responsible minister I introduced the net neutrality principle into the Slovenian Telecommunications Act in 2012, making Slovenia the second EU member state to guarantee the Internet to remain an open and equal opportunity technology.
Road to serfdom
Neutrality is a principle used in public roads, for example, where the same speed limits apply to rich and poor, and same fees are charged weather a lorry is carrying computers or gravel. We do not believe that the road administration should be getting a cut of the profit that is made by those that transport goods from one end of Europe to the other. Because high priced Gucci bags are on a truck that passes under the Mont Blanc, Gucci is not expected to share its profits with the operator of the tunnel.
Yes, there are exceptions like the ambulances. And there are exceptions like was the trafficking cigarettes from Montenegro to Italy. The operators of the fast boats used to smuggle cigarettes got a cut of the profits. To carry illegal cigarettes was more expensive than transporting tourists. I do not mind an occasional ambulance, but not that internet architecture would borrow business practices from the mafia.
Infrastructure as a public utility is a solution we have since we dismantled feudalism. In medieval Europe it was so that in order to pass certain rivers or mountain passes, the fee was not proportional to the weight or size of the load but to its value. Merchants were charged what they could afford to pay not what it cost the city to maintain a bridge.
That same principle applied to the internet, so they argue, would stimulate growth and investment. As if the arrangements in the middle ages resulted in superior roads, state of the art rafts and bridges. On the contrary.
No bandwidth crisis
Perhaps the greatest poet of the Middle Ages Dante Aligheri wrote: “The darkest places in hell are reserved for those who maintain their neutrality in times of moral crisis”. We could paraphrase that into:
“The darkest places in hell are reserved for those who maintain net-neutrality in times of bandwidth crisis”.
True. But there is no bandwidth crisis. Yes, they wish it would be. Businesses like scarcity. Without scarcity power profits are harder to make. But there is no scarcity of bandwidth.
I did my first service on the internet in 1994. It was a search engine for free software. Entire Slovenia, at that time, was linked to the Internet with a bandwidth of 256 kbit/second. This is the speed at which your mobile phone connects to the internet in some backcountry where 3G or 4G are not available.
Was that scarce? Yes, if you look at it statically, no if you take a dynamic perspective. The bandwidth has been growing over the decades exponentially and there is no technical reason it would not continue to do so in the future.
If some control freak would try to address the scarcity issue in 1994 I am sure my service would not be considered a priority. As would not be a priority a bunch of other things people do on the Internet. But the net was neutral at the time and the local ISP simply doubled the capacity every now and then.
In fact more investment into the internet backbone can be expected if the model continues to support net neutrality simply because traffic demands would be higher.
Shortsighted and local-patriotic
A painful fact for Europe remains its inability to create a Google, Facebook or Apple. And the response seems to be, if we can’t create such companies, we will sue them. Or bend legislation against them. Or we will destroy net neutrality so that our telecoms could tap into the profits of Google and Facebook. At the same time we will protect European culture by giving a fast lane, for example, to European movies and a slower one for American movies.
Had this been the policy over the last 25 years there would be no such thing as the internet but 28 different Minitels, peddling the local services to the local population.
Had Internet not been neutral, we would not be complaining about roaming today as we are. In addition to complaining about 28 different prices for data traffic we would be complaining about 28 different regimes to access each of dozens of different services.
To date, Europe was unable to create a digital single market. But at least the internet forced it to have single digital infrastructure. Breaching net-neutrality opens the doors to further Balkanization of the digital in Europe.
Davids vs. Goliaths
The fight for net neutrality is the fight between Davids and Goliaths. The Goliaths are not just the national telecoms that politicians tend to be patriotic about, but big American companies. They too could benefit immensely if the net neutrality principle is abandoned.
If we do not keep the internet open so that innovation can happen at its edges, European SMEs will stand an even lesser chance of ever growing into a Google or Facebook. The Davids are the small companies where innovation comes from. They are good at innovating not lobbying.
The goal – artificial scarcity
Economists are very clear about this. If net neutrality principle is dropped, ISPs and telecoms will be able to create an artificial scarcity of bandwidth. Artificial, because in an industry driven by the exponential growth under Moore’s law, scarcity is not an issue.
Artificial scarcity is something business like the most. Unlike real scarcity that can be addressed with innovation, artificial scarcity is addressed by legislating, under the table dealings, privileges, quotas and other medieval practices.
Artificial scarcity benefits those with market power. It benefits the existing big players. If Google scares you, imagine, for example, how scary a Google – Deutsche Telekom oligopoly would be to those in the Deutche Telekom’s area of market dominance.
The minute fast lanes are introduced, the innovation and investment in internet infrastructure would slow down. What everyone will try to do is benefit most from the scarcity of the bandwidth. The internet, as we know it – an engine of innovation and a force for equal opportunity – will be over.
Even the libertarians should understand that artificial scarcity in the hands of big business is a bigger danger than some rather straightforward regulation such as net neutrality.
What politician are you?
Tim Harford wrote, that
“a politician who is in favor of markets believes in the importance of competition and wants to prevent businesses from getting too much scarcity power. A politician who’s too influenced by corporate lobbyists will do exactly the reverse.”
Less net neutrality means more scarcity power.
In the next days and weeks we shall be able to see who is who in the European politics.