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Let’s talk about net neutrality

The battles are raging over net neutrality again. Conservatives generally are against it; liberals are generally for it. I think the battle is more over misunderstanding than anything else, so I want to try to clear up that misunderstanding.

Net neutrality is in no way, shape, or form related to the political slant of the data in transit. It is not the Internet equivalent of The Fairness Doctrine, the old law that forced television and radio programmers to alternate left- and right-wing content, or equal time, which forces programmers to give equal time allotments to political candidates from both major parties. It’s completely unrelated to both of those things.

What net neutrality is really about is double-billing.

Here’s the thing. You and I pay for Internet connections. We pay $25 a month, and that lets us check our e-mail, shop, maybe read the news occasionally, argue with people we’ve never met in person and look at pictures of cats.

What you may not realize is that Netflix, Google, Amazon, Ebay, your local newspaper, and everyone else pay to be on the Internet too. Large companies pay insane amounts for huge connections to the Internet, because the bigger, faster, and more expensive the connection, the more customers they can serve.

Internet service providers are looking for ways to bill those companies for connecting to you and me. If they don’t pay, they’ll get slower access speed. Amazon has calculated that a one-second delay in page loads across the board would cost it $1.6 billion per year in lost sales, so companies the size of Amazon are inclined to pay if they have to.

Of course, those companies will do the same thing they would do if the government suddenly raised their taxes: they’ll recover the expense by passing it on to customers. Netflix won’t be $8 per month anymore. Ebay will raise their fees, driving sellers from the market or limiting what they’re willing to sell due to decreased profit margins. Amazon will have to raise prices as well. With Google and Facebook, the user is the product, so they won’t raise prices, but they’ll look for more creative ways to make money to make up the difference, and the users aren’t going to like some of it.

The bigger problem is that startups will suffer. Most startups begin on a shoestring. They can get started with a virtual private server that costs $5-$10 per month–the Internet equivalent of starting in your parents’ garage–and then ramp up to bigger and better things as their userbase grows. It’s a great time to be a startup right now, because it takes so little to get started. Amazon founder Jeff Bezos probably would have been willing to sell his soul in exchange for being able to rent a server for $5 per month in 1996.

But if these startups suddenly have to start paying to talk to each subscriber as soon as they get big enough for the ISPs to notice them, that’s an extra expense–and it’s not hard to imagine it becoming their biggest expense. Given that it can take some time to reach profitability, that extra expense might keep them from ever making it there. Or trying in the first place.

That, to me, is a big problem. Amazon is a a Fortune 50 company today–bigger than Coca-Cola or UPS or McDonald’s–but their start was tenuous. It took six years for them to turn their first profit. There was a time at the turn of the century when people questioned how much time the company had left. I remember people asking me. After all, many other promising startups flamed out in 2000-2001.

By misunderstanding the problem, and consequently just handing money over to Internet providers without thinking about unintended consequences, we’ll have unintended consequences. It’s not a question of whether we’ll strangle the next Amazon. The question is how many Amazons we’ll strangle.

But wait, there’s more! It could just as easily strangle the next up-and-coming conservative talk show host too, since the fees could make it cost-prohibitive for that person to get started on the Internet. Talk about unintended consequences.

As a society we need innovation to keep moving forward, and I don’t see how manipulating billing models to essentially allow double dipping does anything to help innovation. I certainly see how it gets in the way of it. Leaving things the way they were in 2013 at least stays out of innovation’s way.

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