October 14, 2005
Tim Wu, Broadband Debate, 10-14-05
“The Broadband Debate a User’s Guide”
Goal: make clear the broadband debate
Make clear the difference btwn “openists” and “deregulationatists”, and
where that leads them on questions of economics, innovation, vertical
integration,
How this conflicts plays out in certain applications: network neutrality, muni Wi-Fi
Facts about broadband
Duopoly – 57% cable, 41% DSL
United States penetration – #16 per capita (relatively low), #2 in total connections
– ITU data
Openists v. Deregulationists – divide over what we’re aiming for, and
we think the role of a network/telecom infrastructure is in society
Openists
network as “innovation commons” – network is a common resource that inspires OTHER innovations.
Openists are not interested in
network itself, but rather as a means to an end of other innovations.
Subscribe to three points.
1. Infrastructure – same as above; not important in
itself but what other people can innovate on top of it – positive
externalities. E.g., like streets (makes businesses function
better), electric network (we’re not interested in electric current,
but rather in what you can plug into that current – computers, washers,
microwaves)
2. Neutrality is ideal – network should not make
choices as to what it can be used for – those decisions should be as
much as possible in hands of end-users.
3. E2E (stupid network) – in policy context, it
stands for a theory of innovation: decentralized, evolutionary theory –
maximize number of innovating actors in order to breed competition;
more innovation –> better innovation. E.g., Web beats gopher,
only b/c network was not designed to give either an advantage.
Vonage and Skype come from the edge.
Deregulationists
Openists have a different story – Internet is about the government staying out of regulating the Internet.
Three points:
1. Propertization – commons comes with the
word tragedy. Network needs stewards. Innovation comes from
incentives, incentives come from property.
2. Incentives – network deployments are
expensive, and it is only with promise of sufficient returns that they
will make outlays.
3. Primum Non Nocere (“do no harm”) – both
openists and deregulationists are suspicious of gov’t, but the latter
are moreso. ANy effort by government to intervene in any form will be a
disaster. Verizon, Comcast, Cisco are their stories.
Dichotomies
Stupid Network v. Smart Pipe
Applications v. Providers
Edges v. Center
Net-head v. Bell-head
Shared economic faiths – common points between both sides
Faith in innovation in a capitalist system –
innovation is the engine of economic growth. (this is not as obviously
primary as it sounds; price competition is generally the basis of
growth). Schumpterian creative destruction: everything that’s
worthwhile about capitalism is that companies die and new companies
rise, and that accounts for all growth.
Difference between faith: great
firms v. super hero entrepreneurs (late Schumpeter v. early Schumpeter,
deregulationists v. openists)
Wait a second, what’s the
problem? Innovation comes from both. The problem is: what happens
when great firms take action that is designed to kill the super hero
entrepreneurs? Incumbents blocking new entrants.
Vertical integration – the main way in which this debate is expressed
Three layers: application, transport, users.
When a transport provider wants to integrate with an
application provider, is that good or bad for consumers? (E.g., when
comcast begins offering “services” – search engines, VoIP – is that a
cause for concern or not?)
Chicago school of anti-trust says: absent certain
exceptions, vertical integration is good – complementary
efficiencies. Certain services that can only be provided through
bringing different layers together, and then that promotes consumer
welfare.
Contrary line of thought: vertical integration is
made to kill competitors. Not to benefit consumers, but to shut
out other competitors.
Fear of Death
While it is efficient for companies to die, but
companies don’t plan on their own deaths – they fear death. Companies
do not adopt plans that maximize consumer welfare when it includes
their own suicide.
Network Neutrality
In house right now is telecom reform bill with “network neutrality” provision.
Network neutrality: in a regulationary minimal way,
take openists vision of Internet and prevent them from being
destroyed.
Inspiration: Carterfone – non-discrimination: use
phone lines any way they want so long as they are not harmful to the
network or illegal.
A non-discrimination principle – any user has right to access any application using a carrier’s connection.
Deregulationists can like this too, even though it’s
not intuitive – precommiting government and industry to allowing market
entry. This is something deregulationists do
like.
Internet TV?
What will happen when a company (e.g., Apple)
provides you with a television/computer that uses the Internet to
download shows that you want to watch, bypassing your cable provider
etc.? Comcast sees that it’s being leapfrogged. Does Comcast get
to block that?
***Q&A***
TW: There is another school of thought – government is best at planning
the future. E.g., FCC thinking that UHF is the future, and they blocked
cable.
Q: Where does muni wi-fi fit in?
TW: Deregulationists hate the government getting involved, and the next generation of tech needs proper incentives.
Q: Are we citizens or are we consumers? And what are the metrics for
success: private profit or greatest connectivity for greatest number?
TW: There was a strand of openists that was about citizenship and
democratic values, semiotic democracy. We have telecom policy for
those reasons. That strand isn’t very popular right now.
Q: What about blocking in the other direction? Google says: I will only be available on these network providers.
TW: Unlikely, or at least lot less likely.
Filed by Derek Slater at 4:56 pm under
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