I usually don’t spend a whole lot of time debunking the more crazy conspiracy theories about Net Neutrality because I presume most online users are smart enough not to be suckered into sideshow distractions, usually paid for by providers trying to wave shiny keys at consumers to get them to support things exactly opposite their own best interests.  Unfortunately, there are a few shills out there who insist on trying to conjure up bizarre conspiracy theories about Net Neutrality representing some sort of Obama Administration/left wing takeover of the Internet.

When Newsbusters, a conservative media watchdog group, bought into this (and also sprang for the deluxe undercoatings, fabric protection, and deluxe floor mats), it was time to fire up the Debunk-o-matic once again and set the record straight.

What is particularly insulting is the ongoing effort to try and co-opt conservatives into this corporate protection circus, when truth be told, conservatives should absolutely be in favor of Net Neutrality for the same reasons any other person, regardless of where they fall on the political spectrum, should be — it protects their rights to be able to speak out on the issues that concern them the most, judged on the quality of their content, not on how much money they can pay to be sure those views can travel unimpeded to interested readers across the country and beyond.

Put on the rubber boots, because we’re going to splash through some inch deep puddles:

Enter the similarly-misnamed ‘net neutrality’ movement, which advocates total government control of Internet browsing. Net neutrality would forbid Internet service providers from regulating traffic on their networks, and would place that regulatory control in the hands of the FCC.

While the left bemoans restrictions by private companies on their subscribers’ use of the Internet, progressives have few qualms with allowing the federal government a say in what we can or cannot see, do, or say on the Internet.

The centralized control of Internet use by the federal government would provide a powerful tool for the censorship of websites deemed politically unfavorable. The current administration’s labeling of right-wing fringe groups as ‘extremists’ and potentially national security threats, and the labeling of town hall protestors as ‘political terrorists’ suggests that the realm of impermissible internet use could conceivably include groups that espouse intense opposition to federal policies.

I think author Lachlan Markay has been stuck in a parallel universe, like in that Star Trek episode, because he defined Net Neutrality the exact opposite of its reality.

The FCC can’t even get rational limits on cable system ownership to survive court review.  How Markay believes a naked attempt by the FCC to regulate political content on the Internet will pass muster requires something more than simply writing alarmist claims it will happen because he says it will.

The feeble effort to link town hall protesters and Obama conspiracy theories to the issue of Net Neutrality is a transparent effort to co-opt conservatives into a cause that means standing with the providers waiting to throttle their broadband speeds and charge their favorite websites more money.  I don’t believe for a second conservatives trust the local cable or phone company to do the right thing by them, as they continue to be stuck with ever-increasing bills for channels they don’t watch and certainly don’t want to pay for and phone features they don’t want or use, but end up paying for anyway.

Though no elected net neutrality advocate would ever suggest that the movement intends to regulate content, pundits on the left have been far more forthcoming. In March, a blogger at the Huffington Post lauding net neutrality wrote, “We have a very rare opportunity right now to lock in a progressive advantage in Internet communications, information sharing, and Netroots mobilizing.”

Markay attempts to bolster his argument by linking to a Huffington Post blogger that supposedly lets it all hang out in public — conspiracy revealed, case closed.  He assumes his readers won’t bother to click on the link, because if they do, they’ll discover Markay’s source didn’t have to be linked via HuffPost, he could have just turned around to the guy figuratively sitting at the desk behind him and quoted him directly.  Yes folks, he linked to a “Contributing Editor for NewsBusters.org,” the very site Markay writes for.

Seton Motley isn’t the go-to-guy for the quality expose either.  Indeed, Motley himself quoted from Joseph A. Palermo, another HuffPost blogger who penned a piece that proved he didn’t really understand Net Neutrality either.

Palermo instead advocated that progressive causes use broadband to bypass the “media filter” and talk to audiences directly.  Motley saw the words “Net Neutrality” in the headline and figured he’d done his job for the day.

Not so much. Not one of these people appears to understand what Net Neutrality is all about.

Net Neutrality is completely above the partisan divide because it insists, regardless of content, if it’s legal it should not be impeded by a broadband provider and should be allowed to travel unfettered across their wires.  Indeed, it also demands that the Internet be a true democracy of ideas, not one of entrenched interests with lots of money that can buy their way onto the fast lane while others make due with a potentially slower “free lane” that some providers proposed.

There you have it, straight from the horse’s mouth. The left is seeking net neutrality as a means of consolidating control over the Internet, the same way it sought consolidated control over the airwaves with the Fairness Doctrine, and the same way it is now seeking that same objective in the guise of ‘diversity’ and ‘localism.’ Those on the center-right should not be fooled into thinking that ‘localism’ or ‘net neutrality’ promote free enterprise or free speech.

Yes, three people who completely misunderstand the basic premise of Net Neutrality have weighed in and passed judgment on Net Neutrality. Palermo wasn’t writing about Net Neutrality and it should have not been in his headline.  Motley went along for the ride and assumed Palermo knew what Net Neutrality was, and then reflexively attacked just because Palermo plays for the blue team and Motley plays for the red.  Markay just provided the frosting for this big cake of wrong and added even more rhetorical sprinkles on top.  All that’s missing from this recipe for disaster is a provider to come on by and overcharge everyone for a piece.

The true risk of consolidation of control of the Internet isn’t coming from the federal government, it is coming from the providers themselves.  Where Markay has no concrete examples of actual government abuse, I do have real world examples of what happens when Net Neutrality protection is not guaranteed by law.  Providers in Canada, where Net Neutrality does not exist, uniformly throttle the speeds of certain content, and at least one provider directly blocked access to a website because of a political/business dispute the site had with that provider.

What should really scare conservatives is not having Net Neutrality.  These policies guarantee the right for all Americans to speak their minds and share their views, even those polar opposites Glenn Beck and Janeane Garofalo.  Let the best ideas win.

Back in the mid-1980s, I first got involved in the fight against the cable television industry’s consumer abuses.  Cable had gotten cocky, and began to use their monopoly position to extract ever-increasing amounts of money from consumers, providing lousy service and engaged in anti-competitive abuse all over the marketplace.  Back then, competition for the overwhelming majority of consumers came from just one place – giant 10-12 foot satellite dishes.  These were the days before Direct Broadcast Satellite providers like Echostar/DISH and DirecTV (and PrimeStar, the cable industry’s own satellite provider that claimed to ‘compete’ with cable) provided competition to cable.

In the mid and late 1980s, your choice was a giant TVRO (TV-Receive-Only) satellite dish in the backyard or you hooked up to cable.  A tiny handful of communities had wireless cable, a service that was supposed to compete with cable but was seriously limited in channel capacity (in many communities, wireless cable ended up providing access to ‘adult’ content that cable wouldn’t carry as their biggest selling point) and quickly faded from view by the mid 1990s.

The abusive practices were all over the place back then:

• Cozy arrangements between cable companies and local governments resulting in outright bans of satellite dishes for aesthetic reasons, using zoning laws either prohibiting their installation or requiring landscaping to hide them from view (to the neighbors and to the satellites they were trying to receive, making them useless), or requiring expensive permit fees;
• A rush to scramble/encode satellite signals and then require consumers to purchase, outright, a costly descrambler from General Instruments called the VideoCipher II for $399 (or have it incorporated within a satellite receiver that typically cost $800-1000 and was available only for purchase), only to be replaced a few years later by the VideoCipher II+ (which consumers were also forced to purchase).
• Cable companies, which had ownership interests in most cable networks (which was nearly a pre-condition for getting your network on cable systems), often had exclusive rights to sell that programming, and frequently provided it “only on cable” or to satellite customers who could not subscribe to cable.  Some networks refused to sell to competitors, including dish owners, at any price.
• Anti competitive pricing was by far the biggest problem.  Prices for programming packages encrypted on satellite were sold to consumer dish owners in small or large bundles at pricing comparable or above what cable subscribers paid, despite the fact all of the costs to provide, install, and service reception equipment were borne by consumers.  No cable TV company overhead, no infrastructure or staffing and support costs, yet satellite dish owners were expected to pay the same high costs that cable subscribers paid, and also purchase their own equipment.  That was quite an investment: a 12 foot dish, satellite reception equipment, decoder, and installation routinely ran well over a thousand dollars, depending on the equipment and installation complexity, and that was before programming costs were factored in.

Rural consumers really got the short end of the cable stick, not able to buy cable even if they wanted to, and forced to spend big money, upfront, just to get satellite TV.

That inspired the consumer groundswell of support for legislation to stop the abuses, which overrode a White House veto by President George H.W. Bush.  Among other things, the Cable Act of 1992 put a stop to exclusive programming contracts which denied competitor access to cable networks.

Without that legislation, there would be no DirecTV or DISH today.

Now the cable industry is back, high-fiving over their victory to have the 30% ownership cap dispensed with, and are now taking on the next provision of the 1992 Cable Act they don’t like — the ban on exclusive programming contracts.

That’s right, it’s Back to the Future as Comcast and Cablevision take their legal business to the same friendly DC Court of Appeals that savaged the 30% cap, now seeking an immediate repeal of the exclusivity ban as well.

Oral arguments start September 22nd.

Most amusing of all is the argument made by Comcast and Cablevision, who claim despite the time and attention they are spending on overturning the law, not to mention the legal expense, the practical effect of an end to exclusivity bans would be… absolutely nothing.

“Widespread withholding is now implausible,” said the attorneys in the filing. “[T]here are proportionally fewer services to withhold. The limited withholding that may still occur will not threaten competition: most vertically integrated services have closely similar substitutes, and, when competitive MVPDs [multichannel video programming distributors] have sunk massive investments, withholding can no longer cause market exit.”

That’s right.  Big cable companies throw money away on attorneys who will presumably fight this case and the inevitable appeals for the next few years for no practical change whatsoever in the current competitive landscape.  The believe people will accept that an industry that had to be forced by regulation to compete on a level playing field will continue to respect that playing field once they plow it up.

Just trust us.  We’re your cable company.  You love us.

So it could be “nothing” as they suggest, or it could be a defensive response to challenges of their business plans from telephone company TV and online video competition.  Would you subscribe to a competitor that didn’t offer the networks you wanted to see because they were “exclusively” available only from the cable company?

Be it usage caps, consumption billing, exclusive contracts, “price protection agreements” that hold customers in place for 12-24 months (or longer), the war to keep consumers from choosing when, where, and how they access content is becoming fully engaged.

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Satellite television in the mid-1980s was highlighted by Granada Television

Phillip “Doesn’t Derive a Paycheck From Writing This” Dampier

I see it took all of five minutes for George Ou and his friends at Digital Society to be swayed by the tunnel vision myopia of last week’s latest effort to justify Internet Overcharging schemes.

Until recently, I’ve always rationalized my distain for smaller usage caps by ignoring the fact that I’m being subsidized by the majority of broadband consumers.  However, a new study from Robert Shapiro and Kevin Hassett at Georgetown University is forcing me to reexamine my personal bias against usage caps.

There’s a shock, especially after telling your readers caps “were needed.”

As I predicted, our astroturfing and industry friends would have a field day over this narrowly focused report that demands readers consider their data, their defined problem, and their single proposed solution.  The real world is, of course, slightly more complicated.

I used to debate some of my economist friends on why I thought metered pricing or more restrictive usage caps were a bad idea, but I couldn’t honestly say that my opinion was entirely objective.  My dislike for usage caps stems from the fact that I am a heavy broadband user and an uncapped broadband service is very beneficial to me since everyone else pays a little more so that I can pay a lot less on my broadband service.  But beyond self interest, I can’t make a good argument why the majority of broadband users who don’t need to transfer a lot of data should subsidize my Internet requirements.

Your opinion is still not entirely objective, George.  Your employer has industry connections.

Our readers, many of whom are hardly the usage piggies the industry would define anyone who opposes these overcharging schemes, all agree whether it’s 5GB or 150GB per month, they do not want to watch an Internet “gas gauge” or lose their option of flat rate broadband pricing that has worked successfully for this industry for more than a decade.  George and his friends assume this is an “us vs. them” argument — big broadband users want little broadband users to subsidize their service.

That’s assuming facts not in evidence.

What is in evidence are studies and surveys which show that consumers overwhelmingly do not want meters, caps, usage tiers, or other such restrictions on their service.  They recognize that a provider who claims to want to “fairly charge” people for service always means “everyone pays more, some much more than others.”  To set the table for this “fairness,” they’ve hired Washington PR firms to pretend to advocate for consumers and hide their industry connections.  Nothing suspicious about that, right?

Although George can’t make a good argument opposing usage caps, that doesn’t mean there aren’t any.  Among the many reasons to oppose caps:

• Innovation: Jobs and economic growth come from the online economy.  New services created today by U.S. companies, popular here and abroad, would be stifled from punitive usage caps and consumption billing.  Even the broadband industry, now in a clamor to provide their own online video services, sees value from the high bandwidth applications that would have never existed in a capped broadband universe, and they are the ones complaining the loudest about congested networks.
• Consumer Wishes: Consumers overwhelmingly enjoy their flat rate broadband service, and are willing to pay today’s pricing to keep it.  The loyalty for broadband is much greater than for providers’ other product lines – television and telephone.  That says something important — don’t ruin a good thing.
• The Fantasy of Savings: As already happened across several Time Warner Cable communities subjected to “experimentation,” the original proposals for lower consumption tier pricing offered zero savings to consumers who could already acquire flat rate “lite” service for the same or even lower prices.  Even when tiers and usage allowances were adjusted after being called out on this point, consumer outrage continued once consumers realized they’d pay three times more for the same broadband service they had before the experiment, with absolutely no improvement in service.  Comcast and other smaller providers already have usage caps and limits.  Pricing did not decline.  Many combine a usage allowance -and- lower speed for “economy” tiers, negating the argument that lower pricing would be achieved with fast speeds -and- a usage allowance.
• Justifying Caps Based on Flawed Analysis: The report’s authors only assume customer adoption at standard service pricing, completely ignoring the already-available “economy” tier services now available at slower speeds.
• Speed Based Tiers vs. Consumption Based Tiers: Consumers advocate for speed-based tiering, already familiar to them and widely accepted.  New premium speed tiers of service can and do already generate significant revenue for those who offer them, providing the resources for network expansion providers claim they need.
• Current Profits & Self Interested Motives: Broadband continues to be a massively profitable business for providers, earning billions in profits every year.  Now, even as some of those providers reduce investments in their own networks, they claim a need to throw away the existing flat rate business model.  Instead, they want paltry usage allowances and overlimit penalties that would reduce demand on their networks.  That conveniently also reduces online video traffic, of particular concern to cable television companies.
• Competition & Pricing: A monopoly or duopoly exists for most Americans, limiting competition and the opportunity for price savings.  Assuming that providers would reduce pricing for capped service has not been the result in Canada, where this kind of business model already exists.  Indeed, prices increased for broadband, usage allowances have actually dropped among some major providers like Bell, and speed throttles have been introduced both in the retail and wholesale markets.

More recently, building our colocation server for Digital Society has made me realize that usage caps not only has the potential to lower prices, but it can also facilitate higher bandwidth performance.  Case in point, Digital Society pays $50 per month for colocation service with a 100 Mbps Internet circuit, and at least $20 of that is for rack space and electricity.  How is it possible that we can get 100 Mbps of bandwidth for ~$30 when 100 Mbps of dedicated Internet bandwidth in colocation facilities normally costs $1000?  The answer lies in usage caps, which cap us to 1000 GBs of file transfer per month which means we can only average 3 Mbps.

One thousand gigabytes for $30 a month.  If providers were providing that kind of allowance, many consumers would consider this a non-issue.  But of course they are not.  Frontier Communications charges more than that for DSL service with a 5GB per month allowance in their Acceptable Use Policy (not currently enforced.)  Time Warner Cable advocated 40GB per month for $40-50 a month.  Comcast charges around $40-45 a month for up to 250GB.  Not one of these providers lowered their prices in return for this cap.  They simply sought to limit customer usage, with overlimit fees and penalties to be determined later.

Of course, web hosting is also an intensively competitive business.  There are hundreds of choices for web hosting.  There are also different levels of service, from shared web hosting to dedicated servers.  That is where the disparity of pricing is most evident, not in the “usage cap” (which is routinely more of a footnote and designed to keep Bit Torrent and high bandwidth file transfer services off their network). There is an enormous difference in pricing between a shared server environment with a 1000GB usage cap and a dedicated rack mount server located in a local facility with 24 hour security, monitoring, and redundancy/backup services, even with the same usage cap.

So the irony of a regulation intended to “protect” the little guy from “unfair usage caps” would actually force our small organization onto the permanent slow lane.

Actually, the Massa bill has no impact on web hosting usage caps whatsoever.  George’s provider friends would be his biggest risk — the ones that would “sell” insurance to his organization is he wanted assurance that his traffic would not be throttled by consumer ISPs.  I’d be happy to recommend other hosting providers for George if he felt trapped on a “slow lane.”  That’s because there is actual competition in web hosting providers.  If the one or two broadband providers serving most Americans had their way, it would be consumers stuck on a permanent slow lane with throttled service, not organizations like his.

So, who is in agreement with George on this question?  None of his readers, as his latest article carries no reader responses.  But fellow industry-connected astroturfers and providers themselves share their love:

• “This is the story that ISP’s have failed to tell effectively — that consumption-based billing may, in fact, be fairer for consumers.” — Michael Willner, CEO Insight Communications
• “Ars Technica reports on an interesting theory being floated by former Clinton economic advisor Robert J. Shapiro and Federal Reserve economist Kevin A. Hassett” — Brad, astroturfer Internet Innovation Alliance
• “The only way … is to introduce some form of equitable pay-as-you-use pricing.  And I could not agree more.” — Ulf Wolf, Digital Communities Blogs (sponsored by AT&T, Qwest, etc.)

PC Magazine reported even Robert Shapiro, one of the report’s authors, is not advocating for usage caps:

“We’re not talking about a bandwidth cap,” Shapiro said during a call with reporters. “We were looking simply at the different pricing models and their impact on the projections of broadband uptake based on these income sensitivities.”

The report does not specify how ISPs should implement pricing, Shapiro said. “The most important thing to me as an economist is the flexibility – that is, Internet Providers can better determine than I can the particular model that works best.”

That’s not the message astroturfers are taking forward, as they try and sell this as “pro-consumer.”

A new version of our site’s theme has finally been released, which will make us be able to swat some additional bugs and make some minor changes around here.  There may be some minor downtime over the weekend as the update and our revisions to it are tested and implemented.

There was quite a buzz this week over a story in The Business Insider reporting that Hulu reaches more viewers than Time Warner Cable (the nation’s second largest cable operator) has subscribers.  They found 38 million Americans watched Hulu and just 34 million Americans are Time Warner customers.

It’s interesting trivia, but really doesn’t mean all that much… yet.  In fact, Comcast, the nation’s largest cable operator has 62 million subscribers, so Hulu has a long way to go to beat Comcast, not to mention websites like Google Video and YouTube, which have more than 120 million combined viewers.

More importantly, Time Warner Cable has no trouble monetizing its business, as any cable subscriber knows when that ever-increasing bill arrives every month.  The same cannot be said for Hulu, which originally depended on an advertising model to sustain itself, at the same time the domestic online advertising marketplace imploded with the near-economic collapse last fall.  If television networks and newspapers can’t sell their ad inventories, the online advertising market, still a novelty for many advertisers, is in even worse shape.

Time Warner Cable is not losing any sleep over Hulu at the moment, and if they do become a nuisance, that consumption billing concept (or hard usage cap) is always an option to deter people from watching too much.

Broadband providers who pass along video content to their customers, without any ownership interest in those videos, are stuck in the position of owning “dumb pipes.”  In the month of July alone, comScore estimated that more than 21.4 billion videos were viewed on American-owned video websites.  Those videos ranged from the five minute karaoke performance from the guy in Des Moines who posted his performance to YouTube, to hour long dramas watched on a network TV website.

What people didn’t watch were all of the most popular shows from cable networks.  Dedicated viewers who needed to watch the entire second season of A&E’s Crime 360 show had to head to Usenet newsgroups or Bit Torrent websites to ferret out someone’s personal recording collection uploaded to share.  A&E only streams one episode from the second season at a time.

That explains why the cable industry is in a hurry to test their TV Everywhere project.  Cable and other pay-television customers will discover a lot more videos hosted on cable network websites suddenly “authenticating” their subscription status, and locking out those who don’t have a subscription (or offering teaser videos or a much more limited menu of viewing choices).

The upsides for TV Everywhere include pleasing existing pay television subscribers with more online videos.  They also get to sell advertising to accompany these on demand videos.  Those cable network websites may also have ads on them and can also promote their other programming.  Perhaps even more importantly, the industry will have a new tool in their subscriber retention arsenal — the ability to delicately remind subscribers wavering over whether to continue their cable TV package that they can forget about replacing it with watching shows online for free. Owning or controlling the content (and the distribution network) is always better than simply being used to transport someone else’s content.  You can’t giveth and taketh away content you don’t own — you can just make it prohibitively expensive to watch with Internet Overcharging schemes.

The downside, at least in their eyes, is the amount of bandwidth these videos will occupy on their existing distribution platforms.  In 2008, the “big threat” that demanded usage caps and/or consumption billing came from Bit Torrent.  In 2009, it’s online video.

Of course, two of the nation’s largest providers that have “appreciated” consumption billing and usage caps — Comcast and Time Warner Cable — are also enthusiastic founding partners of TV Everywhere.  That presents a problem.  A video platform like TV Everywhere, which may one day usurp Google’s dominance in online videos, is being run by the same people trying to convince Americans of broadband capacity problems and the need to cap usage or switch to consumption billing schemes.  TV Everywhere effectively takes the wind out of that argument because, as any consumer will ask, if your platform is too congested to handle online video, why in the world would you seek to make the “problem” much worse?

That’s a rhetorical problem astroturf groups are being hired to explain away.  They apparently couldn’t sell it to consumers during focus group testing, so now they’ll try the sock puppets instead.