Tuesday, July 14, 2009

Media: Get the Economists out of the Internet

TORONTO, ONTARIO - I get very wary when economists weigh in on something other than economic policy. Economists try to put a value on a human life to justify environmentally or otherwise egregious actions by companies, try to convince us that proper health care is unaffordable, and perpetuate the idea that government is to be disdained by not considering government spending to be part of certain macroeconomic activity figures. Yet another example has come up of late in Canada, as Terence Corcoran, editor of the conservative National Post newspaper, has argued in a column that the Internet is like a swimming pool, and that the people that built the pool should be able to manage it however they want--in other words, "Net Neutrality" should be scuttled and Bell and Rogers should be allowed to only allow their products to work at normal speed on the Internet. Corcoran thinks this will lead to greater competition and hence better Internet service for Canadians.

I'll mostly defer to TVO's Jesse Brown, host of the Search Engine podcast, for the refutation of the swimming pool argument. Extending Brown's arguments, if the Internet is a swimming pool, Bell and Rogers at most built some of the ladders into the pool, not the entire pool. They have some right to the management of those ladders, but seeing as the pool itself was publicly funded and should be--whether it legally is at this point or not--a public utility, then government regulation of the entrances to the pool--the private ladders--is entirely rational.

I definitely agree with Corcoran that the primary reason that Internet access in Canada is worse than in most other developed countries is because of a lack of competition. In some cases, there isn't even a choice between Bell and Rogers--only one actually offers service to an address. Only in a selected few places are there any other broadband choices besides Bell and Rogers. It is absolutely true that the reason Bell and Rogers can get away with customer-unfriendly practices is a lack of competition.

The main reason for the lack of additional players is that there are too many barriers to entry. While some are political, the main thing is the simple cost of building the "last mile" to where people want service--only large companies like Bell and Rogers really have the ability to invest in that. The way to get more competition is not to increase the profitability of the connectivity providers at the expense of "Net Neutrality"--which is really what Corcoran is arguing--but to work on those barriers to entry. One way to is allow re-selling, which commonly occurs on DSL lines in the United States and is allowed in certain circumstances in Canada, and other ways involve subsidies or new technology. None of those require the scuttling of "Net Neutrality," or the treatment of all Internet traffic as equivalent, rather than favoring certain content, such as services that the connectivity provider owns.

The whole competition aspect really has nothing to do with "Net Neutrality," no matter how Corcoran tries to argue that it does. The only reason people like Corcoran want to do away with "Net Neutrality" is that it allows Bell and Rogers to force people to use more of their products and hence make more money. The real competition occurs when there is "Net Neutrality" and people have real choices, not when their access only works when using their connectivity provider's products. How this aspect of the issue is missed by supposedly free-market-loving individuals has never ceased to amaze me.

These kind of strange economic arguments that in the end would benefit only large businesses and not actually create purported competition are yet another reason why I want to keep the economists out of debates about the Internet. Now, how about debating additional economic stimulus packages by the government?

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