Since its inception, the Internet has been more or less free of government regulation. We all have unfettered and uncensored access to everything posted online. If the Federal Communications Commission (FCC) and President Obama have their way, that will soon change.
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FCC Chairman Tom Wheeler has proposed strict “net neutrality” rules that, if approved by the commission on Feb. 26, will regulate broadband Internet service as a public utility in much the same way the agency regulates telecommunications companies.
Sadly, consumers have been duped into supporting this travesty through misinformation and fear mongering by self-serving government officials, consumer advocates, and corporate executives. And just as with ObamaCare, there will be no walking this back once it’s done.
At the heart of the controversy is Netflix CEO Reed Hastings, who has essentially claimed that Comcast and other broadband Internet Service Providers (ISPs) were intentionally throttling Netflix (NASDAQ:NFLX) traffic in an attempt to extort the streaming video company to pay exorbitant fees for direct connections.
Apparently, none of that is true. What actually happened, according to a great Forbes article by best-selling author Larry Downes, is this:
Netflix had for years been using third-party networks from companies such as Cogent and Level 3 to get its content to ISPs that control the “last-mile” to consumers. That worked fine until Netflix content ballooned to nearly a third of all Internet traffic during peak periods, straining Cogent’s network.
It was never Comcast, Verizon or any other ISP throttling Netflix traffic, it was Cogent. During periods of heavy network usage, Cogent apparently slowed down its big wholesale customers like Netflix in favor of its retail customers, a practice it failed to disclose until recently.
That’s why Netflix traffic sped up as soon as it cut direct-connect deals with Comcast and other ISPs. Cogent was cut out of the back-end network. Problem solved.
Not surprisingly, large Internet content providers like Google (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and eBay (NASDAQ:EBAY), and large content aggregators Akamai and Limelight have long-standing direct interconnection deals with nearly every large ISP. And now Netflix, which generates more traffic than all of them, does too.
That’s why you have no problems getting content from anyone and everyone. The free market worked it out the same way it’s been doing for decades, with new technology and business agreements and essentially no government oversight. And all those back-end deals, also known as paid peering agreements, have absolutely nothing to do with the last-mile to your home.
Meanwhile, all the nonsense about paid prioritization and Internet fast lanes that would favor some content over others is nothing but fear mongering by consumer groups that want government controlled everything.
The truth is, no ISP would ever consider something as ludicrous as discriminating against specific Internet content or prioritizing what comes down the last-mile to your home. Nothing like that has ever happened over the more than 20 years the Internet has been around and nothing like that ever will. The entire notion is idiotic.
When it comes to net neutrality, there are only three questions anyone needs to ask and here are the answers:
Q: Did Comcast or any other ISP throttle Netflix traffic? A: Nope.
Q: Then why is Hastings fighting so hard for the FCC to step in? A: Unlike all the other big content providers, Netflix has a lousy business model. He’ll apparently do just about anything to get a free ride on content delivery and improve the company’s slim profits.
Q: What if ISPs continue to consolidate and increase their pricing power? A: That’s an antitrust issue for the Justice Department and the Federal Trade Commission. Those agencies have the power to approve or kill any such mergers.
Mark my words. If the Obama administration and the FCC manage to pull off this massively manipulative and devious power play and end up in control of broadband Internet service, we will all pay for it in more ways than one. Senator Ted Cruz was right. Net Neutrality is ObamaCare for the Internet.
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