Deconstructing the Debate

Last week, I promised to expound on the net neutrality debate. After doing some reading, I learned that the question is somewhat complex, and that both opponents and proponents have, through public advocacy, oversimplified, overdramatized, and ultimately obfuscated the issue.

Proponents of net neutrality (internet companies, venture capital firms, etc.) argue that allowing telecom companies such as Comcast and AT&T to give preferential treatment to certain internet traffic would put smaller, unfunded companies at a disadvantage and seriously hinder innovation (this is the part that gives pause to VCs). As Tim Wu, professor at Columbia and well-known net neutrality supporter puts it, without net neutrality, telecom gatekeepers will be able to charge every website, from the smallest blogger to Google, for delivery of their content. This, according to Tim, will transform the internet from a market “where innovation rules to one where deal-making rules.” Theoretically, smaller companies will not be able to pay internet providers in order to ensure premium delivery of their content, while the bigger, more established companies will. This, in effect, will make the internet more like cable TV, where a small number of large, well-funded companies control content being delivered to consumers.

From the opposition’s perspective, the net was never neutral, and certainly isn’t now. Google, Yahoo, and Microsoft use a lot more bandwidth than smaller websites, yet they don’t pay anything extra for the use of AT&T’s switches and routers. In some respects, Google is freeloading on the network that telecom providers have spent billions of dollars to build. If net neutrality passes in Washington, the AT&Ts of the world will not be able to charge companies like Google any more than anyone else for usage of their networks. Put another way, telecom providers will be forced to pay for all upgrades themselves, such as the build-out of advanced fibre-optic networks, if they are not allowed to subsidize these upgrades by charging preferred access fees to major online content providers such as Google and Facebook. Doesn’t that hinder innovation, too?