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[Click to enlarge] Want the web? Well prepare to pay. Wireless carriers are plotting per page monthly or data-based fees. And net neutrality legislation looks unlikely to pass, thanks to their healthy flow of lobbyist money.  (Source: Fierce Wireless Semina via Wired)
Leaked slides reveal that net neutrality advocates worst fears may soon be realized

The topic of net neutrality is a thorny issue.  After all, the American public is increasingly adopting the stance that the less government meddling in the private sector, the better.  On the other hand, advocates of the government adopting net neutrality restrictions have long laid out a dystopian vision of the future in which users have only partial paid access to the internet and smaller independent websites fold under the inability to draw paying customers.

Such visions could have been dismissed as alarmism -- until now.  A presentation from Allot Communications and Openet, two wireless industry giants who supply the likes of Verizon and AT&T, leaked out onto the internet and verifies that the wireless industry is plotting just such a scheme.

I.  Want the Web?  Prepare to Pay

At its web seminar the pair revealed a stunning plot in which wireless customers would be forced to pay additional monthly fees per web page accessed and -- in some cases -- per MB used.  The slide suggests a $0.50 USD/month YouTube access fee, a $0.02 USD/MB Facebook access rate, and a 3€ (appr. $3.95 USD) Skype access fee.

Aside from the payoff from immediate fees, the leaked PowerPoint presentation (1.5 MB/PDF) reveals a double benefit to carriers, at consumers' expense.  The slides suggest that top UK carrier giant Vodafone (who partially owns Verizon Wireless) create its own websites -- such as social networks and video sites -- and offer customers free access to them.

By forcing customers to pay for external sites, but offering free internal sites, carriers could attempt to force customers onto its own sites.  While such knockoffs would likely offer inferior quality to carefully crafted services like YouTube and Facebook, carriers wouldn't mind that -- they would be to busy reaping the additional ad revenue.

II.  The FCC Won't Let Me Be

It is unclear whether the leak is coincidental or is meant to test the U.S. Federal Communication Commission's resolve, a week ahead of its planned meeting to discussing net neutrality.  

Current laws do not clearly grant the FCC the power to regulate wireless internet traffic or enforce net neutrality over wired and wireless service providers.  The FCC's attempts to enforce net neutrality regardless were struck down in the spring by a federal court.  The FCC now hopes to draft legislation to present to Congress.

But the legislation faces serious political resistance.  While some Republicans are supportive of net neutrality, much of the Republican party opposes net neutrality.  And the Republicans in January will gain control of the U.S. House of Representatives.  

Among the staunchest opponents of net neutrality regulation is former presidential candidate, U.S. Sen. John McCain (R-Az.).  Sen. McCain, like many Republicans, has previously opposed net neutrality legislation due to a stance against government regulation.  However, Verizon and AT&T bequeathed $237,600 upon his 2008 presidential campaign.  AT&T and Verizon lobbyists also raised from various donors – $2.3M USD and $1.3M USD, respectively – for his campaign.  They also offered free services to his 15-acre Arizona ranch.

Sen. McCain is obviously not alone, however -- such contributions are common in Washington.

Thus net neutrality legislation faces tenuous prospects.  And as our computing heads increasingly into the mobile sphere (with smartphones, tablets, laptops, netbooks, etc.) that may soon mean that customers will be paying a lot more for a lot less.  And in the process any government censorship of the internet will likely pale in comparison to that which the "free" market is cooking up.

Many refer to the current generation of web businesses as Web 2.0.  Well if these developments are any indication, we may soon be greeting Web 3.0 -- the transformation of the internet into a series of toll roads.



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RE: Good idea if...
By geddarkstorm on 12/20/2010 2:40:23 PM , Rating: 3
You are also forgetting some of your basic economics. Some commodities are more or less insensitive to price changes. For instance, changes in the price of crocs would greatly affect demand, while wild changes in the price of gasoline has almost no affect on demand. Why? Because gasoline has nearly no alternatives and is a needed (rather than wanted) commodity by many people.

However, did you like it when the price of gas was nearly $4 a gallon? The market surely could sustain it since there were no viable alternatives for the majority of the market, but it certainly caused a massive amount of disruption throughout the economy.

The internet has become sort of on par to gasoline these days. Some bills and paycheck statements are solely online (paperless). Purchases can be done all online, maps and information found, and then there's the productivity and collaborative benefits of cloud programs, the social networking, and yes even the entertainment of movies and games.

Due to the internet's integration at nearly every level of our society now, the market has no choice if the ISPs all decided to charge us outrageous prices. We'd be stuck and trapped. If you want, go look back at the late 1800's for a demonstration of how this works in the wild, and why it was a very bad thing. Moreover, such metered based on site pricing would have profound repercussions throughout the economy. Google, for instance, makes the vast majority of its money on marketing. If people now have to choose which sites they can visit based on how much they have in their pocket book, that damages Google's and other companies marketing models. Which in turns damages what sites can even afford to be on the net.

Yes, the free market would regulate itself, but that doesn't mean it won't go through wild swings till it finds balance. And that doesn't mean those wild swings can't greatly damage other economic segments and the consumer. And if those wild swings get wild enough, the entire economy can go into a depression and recession as we've recently seen in 2008! There was a wild economic model swing in the subprime housing market which nearly brought down the developed World's economy. So, don't take such matters lightly, even the best economists were taken off guard by 2008.

So, should we give the ISPs a chance and room to instigate such absurd ideas as we see in this article (for the sake of my argument, I'm assuming the exact details we see in the slide are what would occur, which is realistically highly unlikely)? I don't believe so. As if they did do this, it would require the entire internet and economy around it to fundamentally change and rearrange. That means chaos and trouble until a new equilibrium can be found.

And quite frankly, the ISPs don't need an even more absurd profit margin to make all the pain we consumers would go through worth it.


RE: Good idea if...
By guffwd13 on 12/20/2010 2:54:44 PM , Rating: 2
Your response is very similar to mine above.

For the geeks out there, inelastic goods is the econ101 term we're referring to. The market can't regulate these by definition. Thus a third party (governing body) must step in or we all get stepped on.


RE: Good idea if...
By bah12 on 12/20/2010 6:05:01 PM , Rating: 2
quote:
Due to the internet's integration at nearly every level of our society now, the market has no choice if the ISPs
I would stop you there. Although I agree that an inelastic good should be regulated. The very fact that you had to put and "s" on ISP means there are choices. The internet today IS NOT inelastic, and arguably not a necessity.

My point is we have a mechanism in place for dealing with what everyone is concerned about, and that is price fixing.

This is where the oil price analogy fails. Sure there are more than one provider Exxon, Chevron, Shell however it is quite clear that organizations like OPEC are actively engaged in price fixing. Since they reside outside of US borders we are essentially held hostage by them, as our laws would be difficult if not impossible to enforce.

That situation is not comparable to ISP's they are within our borders, and easily regulated under price fixing laws. Most importantly there is no 1 main ISP there are dozens if not hundreds.

The false assumption is that these could all get together and fix pricing, completely unchecked by existing laws. My contention is that is pure tin foil hat thinking and until that time there is no need to further interrupt the free market.

So yes if you are saying that a company cannot legally choose it's own price, then it is obvious you are anti-business. The tin foil hat fear that one day...maybe...sometime they will come together and fix prices AND that we would let them get away with that; is paranoid at best.


RE: Good idea if...
By Noliving on 12/20/2010 6:41:32 PM , Rating: 2
but the problem though is that it isn't price fixing, its a new business model that charges based upon usage instead of a flat rate for unlimited usage or for certain amount of data.

So for example lets say comcast charges 1 dollar per visit of youtube but qwest charges $.20 for youtube, that isn't price fixing but it will make internet browsing much more expensive. now obviously the prices are lower but those lower prices will still most likely make current internet usages much more expensive.

Again it isn't about price fixing its the new business model that is being proposed.


RE: Good idea if...
By MrBungle123 on 12/20/2010 7:16:31 PM , Rating: 2
It doesn't matter if they charge by the website because people will regulate their usage in response to such a pricing structure. IF they charge too much people will find another ISP that doesn't charge so much in which case the ISP with the outrageous pricing structure starts losing money.


RE: Good idea if...
By Noliving on 12/20/2010 10:14:30 PM , Rating: 2
but that other isp that doesn't charge so much will probably be more expensive under this proposed business model then under the current model.

It's the samething with gas, they are all high prices no matter which one, gas station, you go to.

under this new business model the internet will be more expensive no matter what isp you go too compared to the current business model.


RE: Good idea if...
By bah12 on 12/21/2010 9:55:11 AM , Rating: 2
That is pure speculation (aka tin foil hat) on your part. You assume if one goes this route they all will. There is no hard evidence that is the case. Some ISP will most likely continue the current model because it will mean more customers. Take Sprint for example they've elected to still offer a truly unlimited service, and as such their customer satisfaction ratings have exceeded their competition.

But all that is besides the point even if they all switched to this model, again what right do we have to say a business cannot choose how they market and price their goods. As long as no anti-consumer/competitive laws are being broke, let the market at least try first we can always regulate it later.

That is my #1 problem with net neutrality, it is based on paranoid what-if situations by the tin foil hat wearing fools. They are looking to pass legislation on a problem that MAY happen, not IS happening. And most of them use the flawed analogy to the oil and gas. IT IS NOT THE SAME. We are dealing with local entities that reside in our borders. The government would have no issues seizing control of ATT or Verizon and forcing them to comply if new legislation is needed in the future. There in lies the difference, with oil and gas we are essentially powerless against the foreign (illegal by our system) companies controlling the supply.


RE: Good idea if...
By Noliving on 12/21/2010 3:31:34 PM , Rating: 2
How is sprint doing by the way in market share?

Why wouldn't all the ISP's go that way? profit margins will be higher meaning happy share holders, then you factor in that all ISP's want to do this, show a single ISP that doesn't want to have tiered internet.

but why should one always wait till it happens before regulating it. like for example building codes or environmental rules or medical laws, a lot of those were made after tragedy struck. the vast majority of oil and gas that the US gets is from non opec nations. Besides the analogy maybe flawed but it is accurate in showing how dependent US population is on the internet. The argument is that it should be regulated before companies have implemented a tiered internet. I mean why wait?

Here is a question for you, at what point would you argue the government would need to regulate companies like ATT or Verizon?

Keep something in mind, there are millions of Americans that only have access to one ISP, meaning there are no competitors.


"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer














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