Thread by @titudeadjust

With news that Jessica Rosenworcel will be chair of the FCC, it's time to begin questioning what will undoubtedly be her quest to restore #netneutrality regulation. I invite @skeptech to this thread.

2/N
The issue I have with net neutrality is that it's a solution looking for a problem... and not a viable solution to some of the things it purports to solve. Broadly, we can consider two areas of telecom - distribution (esp residential) and back-end interconnect.

3/N
Telecom distribution has odd economics that were recognized in early in the wires-on-poles era. In short, these are:
1) With high fixed cost and little marginal cost, there's a "natural monopoly" for the first mover.
2) Costs vary with population density, so rural is

4/N
prohibitively expensive on its own.

For POTS,
1) is solved by heavy regulation, including price controls. It would be great if competition made that unnecessary, but "natural monopoly." We'll come back to that.

2) is solved by subsidies paid by sub/urban consumers to

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rural consumers through a required government program.

But now come to the present. What's changed since two-wire telephone-only was all there was?

6/N
Data, for one thing, and every-growing demand for it. And wireless, including a lot of people "cutting the cord" of wireline POTS.

Data is interesting - it set the cablecos and telcos against each other, while streaming is rapidly killing the traditional cableco model.

7/N
But data still has that weird economics: there is competition on installed plant, but not a lot of incentive to build more and compete more. Add to that a long, strange history of who owns the plant, municipal regulation on building more, etc.

7a/N
An aside: "telephone poles" are a complete mishmosh. Some are owned by the telco; some by the electric co. They tend to be regulated irregularly by the municipalities to ensure the cablecos can get a slot. It's so bad, Google Fiber trenched streets instead!

8/N
And what about wireless? That opens all sorts of interesting issues. For instance, the telcos need to buy the licenses at great expense. The government has an incentive to keep prices high. But then the telcos need to be able to monetize. The good news is that wireless

9/N
Has better distribution economics - usually - and fewer permit issues - usually. But in all of this, rural isn't served well. And you get the double whammy that cord-cutters are not paying into the fund to subsidize rural wireline services.

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So how does net neutrality help here? tl:dr; it doesn't. In fact, it may hurt the incentives for distribution competition and/or remove desirable cross-subsidies. (e.g., Grandma can get cheap broadband if it's bundled with specific streams).

11/N
Rather than net neutrality, we need innovation and investment. Like this

I pause here to let @skeptech contribute thoughts on distribution and neutrality.lightreading.com/satellite/veri…

12/N
But let's shift gears to the back end. This is a land of enormous media companies and enormous tech companies doing business with the telcos to get distribution. For most people, "peering agreement" does not mean anything, but here it matters.

13/N
"Peering" is how Internet providers connect. This is a complex topic, but a short version is that money flows with net traffic. If you are a large media provider, you pay others to carry your traffic, eventually to consumers. Makes sense, right?

14/N
Well, except that these are not agreements just among telcos. One of the largest peers is Alphabet because they own YouTube. And (wisely, because that's the incentive) they built their own high-bandwidth data transport. So... Google is a large media source but

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in fact pays little to distributors because it also transports their traffic to other distributors. And that's just one case of a very complex arrangement. Netflix has a program to cache content with distributors, for instance, so it all does not back-end transport.

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Net neutrality purports to protect the little player, the startup without enough scale to play this game. Noble. But the network already is neutral - anyone can put up a website. It's just that they may not be able to get the same levels of transport... as those

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who have INVESTED to have that improvement. And, really, do they need that level of service to deliver a website? If they do - for some new service - they should gather investment and pay to try. VCs will be happy to fund.

18/N
So what does net neutrality accomplish? Very little. As envisioned under Obama, it was extremely heavy-handed and not very future-looking for things like fixed wireless broadband (backhaul by satellite - nice!). Obvious abuses in the market can be regulated more narrowly.

19/19
I invite others to debate here. If you support NN, fine, but tell us what you expect it will accomplish and how that's the most economical way of accomplishing that.

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