IPUrbia

This is part three of a three part series (outlined below) dealing with Net Neutrality; sections 1 and 2 are recommended reading before continuing.

1. Why is Network Neutrality essential?
2. Problems with Network Neutrality?
3. How to achieve Net Neutrality: the regulation question?

How to achieve Net Neutrality: the regulation question?

This is perhaps will be the most controversial section. Regulation is a hard matter and it is a rare occasion in regulatory history that does not create a bigger mess than originally existed.

In many ways, I do agree with the FCC in their basic premise that the markets should be allowed to sort the issue out. Still, for the markets to be effective (Economics 101), there has to be sufficient competition; a monopoly destroys the ability of the markets to self-correct. In this case, the problem is not a lack of Network Neutrality regulations and guarantees, it is a problem of too little competition in the last mile market that allows a provider the power to leverage one monopoly to build vertical monopolies. The end solution, then, is not regulation, but fostering competition, which will do more for Net Neutrality than legislation could ever hope to do, for reasons discussed in section 2. For a rare change, I tend to agree with the FCC in theory on their general approach right now; nevertheless, whether because of stupidity, ineptness, corruption, or some mixture thereof, the substance of their direction somehow is consistently at odds with the professed theory behind their rulings.

The question as to increasing last-mile competition is perhaps best developed another time; still, I will venture a few brief ideas. It is especially on this point that I am interested in generating discussion. Unfortunately, I don’t see wireless networks as particularly interesting in this regards simply for reasons tangential to the concepts involved in part 2 of this discussion: they can’t carry large amounts of bandwidth and are therefor limited in applications.

The fundamental problem that I see–and a relatively quick-fix–is the FCC ruling not requiring the telcos to lease out fiber. The economics of fiber build out mean that it is very economically inefficient to build multiple, competing fiber networks in the same city. Even if 5 companies raise capital to build out a fiber network in a market, at most 1-2 would survive, leaving a lot of dark fiber and no competition in the area. In this sense, building the infrastructure creates a natural monopoly; the only solution is to socialize the infrastructure (ala Muni Wifi, but with fiber) and lease access or to allow it to remain privatized but with requirements to resell unbundled fiber loops. I have many reservations about even this path, as touched on here, but I don’t really see an alternative, viable path to market competition. The only other approach is heavy, heavy regulation: if one is going to rely on the market to self-correct, one has to encourage a vibrant, active market with enough competition to start the process.

Please discuss below; if you have alternative viewpoints or would like to explore this further, make a note. I welcome guest bloggers regardless of standpoint as long as they don’t just rely on dogma.