In my understanding, allowing ISP to throttle sites that use a lot of traffic is just price discrimination. The ISP will charge sites like Netflix, which will then pass the cost to Netflix consumers. So basically people who use a lot of data will get charged more--seems perfectly fine to me.

I understand the argument that in practice, the ISP won't build new infrastructure but simply put up roadblock to slow down the current speed. However, this seems like a problem only in the oligopolistic market of US internet providers. In a competitive market, putting up roadblock will cause an exodus to competitors.

So, am I correct in thinking that preserving Net Neutrality is not important in a competitive telecom market? Instead of fighting to preserve Net Neutrality, may be the correct fight is to encourage more ISP to enter the market.

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    ISPs ARE a kind of oligopoly everywhere, not just in USA. – Luis Masuelli Mar 10 '15 at 23:48
  • Even if the answer is yes, this doesn't help us set policy unless we examine the costs and feasibility of encouraging competition. We might as well ask, "Is net neutrality not important in a world where cost of entry to the telecom industry is zero?" Maybe it isn't, but we don't live in that world, so my question isn't so helpful. – usul Mar 13 '15 at 3:46
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    I think the question misses the utility aspect of NN, which AFAIK is the central issue. I.e., is having access to a digital communication platform important enough that it should be regulated? If yes, treat Internet as an utility and regulate away until market forces cannot break it (compare to drinking water on tap). If no, treat the Internet as any kind of service and let market forces completely lose. – flindeberg Dec 15 '17 at 0:27
up vote 13 down vote accepted

Yes, if there were more competition then net neutrality would not be such a big issue. Any throttling would cause an ISP to lose customers to competitors.

Competition is a main assumption behind why markets work. However, in this case an ISP has market power which breaks the assumption. The market power allows them to easily put smaller ISPs out of business.

Here is a link to a rather long article on how ISPs get this market power. Essentially, the reason is that starting an ISP is entering an economy of scale, which requires a large amount of capital to start: http://arstechnica.com/business/2014/04/one-big-reason-we-lack-internet-competition-starting-an-isp-is-really-hard/

The viewpoint is this. The ISP is responsible for relaying internet traffic to their customers - they have different models for this, by "speed", by amount of data, etc and this is working reasonably well.

Then new suppliers of content arrive, heavy 4k streaming - content which is far more susceptible to "errors" in transmission than in ye olde days. Streaming of near lossless, high resolution video requires both low latency, high average throughput and high instantaneous throughput. This puts a different kind of stress on the system, people streaming 4k video consumes more resources than what the same amount of data would require in a different setting. The main problem is that the supplier of content (i.e Netflix) has no incentive to avoid these issues, to design their content optimally. Quite the opposite. This can put a lot of stress on specific parts of the network - and again the supplier and customer both can just blame the ISP. The ISP will take steps, certainly improve transmission, maybe work out some caching or storing at different sites, but the cost will be evenly distributed on all customers. Charging extra for "unthrottling" allows for the customers that consume the service to pay for it.

Now, this is a minefield - there are huge pitfalls everywhere and throttling can certainly be abused in a number of ways, especially when we know that the service provider market has a significant barrier to entry and has had problems with near monopoly situations in the past. However, the argument against net neutrality is simple - why should the general customer pay for a service (from the ISP) that only benefits customers of certain content suppliers?

If Netflix were to offer airline passengers the option to watch Netflix during their flight, pass the cost of satellite usage on to United Airlines, making the tickets more expensive for everyone - it is to me obvious that we should allow United Airlines to charge Netflix for this inconvenience.

In closing, as I started understanding this from the other perspective my view of Net Neutrality changed. I still believe in a free, neutral and open internet - but we need to make the ISP service providers work in a reasonable environment as well or else we dig the grave even deeper. Not allowing for price differentiation will make the barrier to entry even higher. The market could use some regulation, and it needs to be good regulation in order to serve both customers, service providers and content providers.

A lot of commentary seems to focus on monopoly and oligopoly among ISPs. I am of the opinion that the real issue behind net neutrality is not about market power. If this is really an issue of antitrust, why isn't the solution one of antitrust? (at least directly?)

The real issue at stake seems to be one of ensuring the survival of the democratic nature of the Internet. It perhaps seems more likely that an ISP with market power might shape the Internet in ways that we don't think are "democratic", but this could very well happen in a competitive market as well. But it's hard to say, since we can only speculate.

The important point to realize is, which is what your question is getting at, is that net neutrality is not solely about monopoly or oligopoly.

  • I disagree. There is a lot of evidence for (say,) vertical integration, which creates problems if there is a lack of competition on one of the levels. In Germany, one of the major telco providers also provides a lot of digital content / collaborates with content providers. Naturally, this creates tensions with other content providers. – FooBar Mar 11 '15 at 18:18
  • In a competitive market, what would be the incentive that lead to ISP restricting certain information? In an oligopoly, I can see that happen if politicians give ISP market power and ISP tacitly give politicians control over information. To take an extreme analogy, websites are newspaper and ISP are printing shop. There are so many printing shops that we don't worry about them refusing to print certain newspapers. – Heisenberg Mar 11 '15 at 18:35
  • We know that vertical restraints are only really problematic in the case of foreclosure. But major content publishers are in an excellent position to use exclusive prioritization contracts to foreclose potential entrants. For me, this risk of floreclosure in the content market (where there is often considerable market power) is the main cause for concern with a relaxation of net neutrality. But I agree that this could be handled with existing competition policy without the need for a special net neutrality law. – Ubiquitous Mar 11 '15 at 19:21
  • I agree with @jmbejara's observation that applying a utilitarian efficiency criterion to the issue of net neutrality falls most likely short of the diverse set of reasons brought forth by advocates for net neutrality. Thus, it is not only the competition aspects that matter here. Excellent point. – HRSE Nov 11 '15 at 6:36

Real freedom on the internet would mean that you or any “democratic” group would not force an ISP to deliver content (or not) on the hardware he installs, maintains and owns. It would also mean no one could forcibly prevent his competitor from extending services in any area or jurisdiction it chose to serve. The resulting freedom would allow a competitor to provide that which the first ISP does not. Forcing an ISP to be a common carrier introduces all the nightmarish regulations and geographic restrictions that limit competition, stifle innovation and encourage industry protectionism. No one wins when freedom from coercion is surrendered.

  • This answer is not supported by any scientific reference. It also seems really dogmatic. – denesp Jul 13 '17 at 7:03

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