Net neutrality and sponsored data — a middle course
Thanks to a court decision that overturned some existing regulations, network neutrality is back in the news. Most people think the key issue is whether
- Telecommunication companies (e.g. wireless and/or broadband services providers) should be allowed to charge …
- … other internet companies (website owners, game companies, streaming media providers, etc., collectively known as edge providers) for …
- … shipping data to internet service consumers in particularly attractive ways.
But I think some forms of charging can be OK — albeit not the ones currently being discussed — and so the question should instead be how the charges are designed.
When I wrote about network neutrality in 2006-7, the issue was mainly whether broadband providers would be allowed to ship different kinds of data at different speeds or reliability. Now the big controversy is whether mobile data providers should be allowed to accept “sponsorship” so as to have certain kinds of data not count against mobile data plan volume caps. Either way:
- The “anything goes” strategy has obvious free-market appeal.
- But proponents of network neutrality regulation — such as Fred Wilson and Nilay Patel — point out a major risk: By striking deals that smaller companies can’t imitate, large, established “edge provider” services may strangle upstart competitors in their cribs.
I think the anti-discrimination argument for network neutrality has much merit. But I also think there are some kinds of payment structure that could leave the playing field fairly level. Imagine, if you will, that:
- Consumers are charged for data, speed of connection, reliability of delivery, or anything else, but …
- … internet companies have the ability to absorb those charges on consumers’ behalf, but can only do so …
- … one interaction at a time, with no volume discounts, via an automated system that is open to everybody.
Such a system is surely technologically feasible — indeed, it is at least as feasible as the online advertising networks that already exist. Further, it would be possible for the system to have nice features such as:
- Telcos could implement forms of peak load pricing, for those times when their network capacity actually is under stress.
- “Edge provider” internet companies could pay subsidies only on behalf of certain consumers, where those consumers are selected in all the complex ways that advertisements are currently targeted.
In such a setup, which discrimination fears would or would not be realized?
- Startups that hope to get adoption first and monetize second might face the cash cost of actually paying their users to try their services. Sorry. But at least they could target their spend on whoever they viewed as being the most important potential adopters.
- Large vendors could not negotiate preferential pricing, reciprocal deals, or anything like that. At least, they couldn’t do so directly.
- Discrimination by type of service — for example telcos trying to hamstring communications services that compete with their own offerings — could be staved off, via fairly lightweight regulatory oversight of the ways pricing plans are structured.
- Regulators could head off sneaky “sweetheart deals” between big “edge provider” companies and telcos in much the same way.
I have no great objections to extreme net neutrality; behemoth oligopolist telcos should be among the last companies to cry “Un-free markets, boo-hoo-sob!!” But as internet pipes are increasingly used for telephony, streaming media or even medical consultations, drawing quality-of-service distinctions could have a certain merit. And so, for reasons similar to those I outlined in 2007, I still lean toward the partial network neutrality described above.
Related links
- Wired articulated some of the dangers of a no-net-neutrality world.
- Tech Republic mapped part of the legal and political net neutrality morass.
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