Wednesday, December 01, 2010

Net Neutrality

For many, mainly on the left, net neutrality is an ideological battle akin to free speech. It is the struggle to keep the mega-corporation from strangling the little guy. In practice, it is a replay of the Tragedy of the Commons.

The Tragedy of the Commons is based on the old idea of the commons - land that is held in common by everyone in a village and available to everyone for grazing their sheep. In this example, the commons can only support 100 sheep but there is more demand. Each time a villager adds an extra sheep to the commons he hurts the entire herd a little but profits by an entire sheep. Driven by relentless logic, the villagers keep adding sheep to an overtaxed commons. In this simplistic model, the villagers are unable to cooperate to limit the size of the herd and thus doomed to keep adding sheep until the entire flock starved.

Net neutrality works a lot like this.

Take Netflix and their new web-only version. That sucks up bandwidth. If too many customers start subscribing to Netflix then customers are going to start complaining and demanding action. But they will not be complaining to Netflix. They will be complaining to their internet provider, expecting the provider to increase bandwidth. That's why one of the providers, Comcast, wants Netflix to pay for the bandwidth they are using.

It gets more complicated, though. Comcast has its own streaming movie business that is competing with Netflix.

So, is this an example of Comcast trying to throttle competition? Not really. If Comcast's streaming business eats up so much bandwidth that customers complain then it is Comcast's problem. They will have to pay for the upgrade but the costs will be offset by the profit they made by streaming the movies in the first place. If Netflix causes the same problem then Comcast still has to pay but this time they don't get any of the profits. Netflix is freeloading. It's as simple as that.

No comments: