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What Is the Answer?
As we stated back in the first article, the answer does not lie in maintaining artificial scarcity and then rationing, but rather, in creating more bandwidth. Fiber is like Doritos. Eat all you want. We’ll make more.
Absent Network Neutrality protections, rationing will instead be the preferred option. Rationing in fact creates the market for selling “preferred” access for data to get through the bottleneck and delays. To think about it another way, people who don’t like traffic are more willing to pay for toll roads. That’s about as far as the analogy goes in telecommunications, however. To compare roads and telecommunications, one would have to imagine a world where a four-lane highway costs $10 million but where one could build a 48-lane highway for $11 million. As I described earlier, that’s the benefit of “lighting” more fiber and why new capacity, not rationing, is the answer.
Even worse, rationing actually creates an economic incentive to maintain the bottleneck. If network owners are earning significant revenue from people paying a premium to avoid the bottleneck, why would they choose to build more capacity to relieve the congestion?
Rationing is also bad for national competitiveness. Right now, our networks are slower and more expensive than most other industrialized nations by a fair margin. Upending the concept of Net Neutrality and permitting deliberate scarcity will only serve to worsen our situation.5
What we really need to do right now is the following:
- Develop new capacity that reflects the dynamics of fiber and dispels the myth that network upgrades in the fiber environment cost a lot of money. Beat congestion problems with new capacity, not by bandwidth rationing the creation of artificial scarcity.
- Enact new laws and regulations on service providers that safeguard the future of the open Internet and protect Internet users from discrimination online in any form.
- Provide financial incentives for the major carriers that deploy advanced networks, particularly in rural or under-served areas—not just for creating an artificial scarcity based on outmoded technologies. Incent them to make more Doritos, not just trade the same coconuts. It will pay dividends down the road in growth, jobs and national competitiveness.
Finally, lest anyone say I am an “anti-ILEC” person, let me congratulate at least one incumbent local exchange carrier on getting something right. Upon cursory review of AT&T competitors (whom frankly I fully expected to ape AT&T’s usage-sensitive DSL plan), Verizon seems to be a noteworthy holdout. According to a Broadband DSL Reports article, Verizon says it has no plans to implement a usage sensitive mechanism for either its DSL service or FiOS any time soon.
Verizon spokesman Bill Kula told Broadband DSL Reports: "We have no plans to implement usage-based pricing for our fixed broadband customers."
There, see? Usage sensitive pricing for fixed broadband Internet users does not have to be a foregone conclusion. Hey, AT&T: “Can you hear me now?”
Footnotes5 A June 2009 broadband survey out from Strategy Analytics shows the U.S. in 20th position when it comes to household broadband use, well behind countries like South Korea, Singapore, and the Netherlands.