Net Neutrality Doesn't Go Far Enough To Rescue the Internet

The Internet and everyone who depends on it are in big trouble, and political tinkering like the Federal Communication Commission 3 to 2 vote to begin re-regulation of broadband and reverse the 2002 decision to deregulate Internet access will do squat to fix it.

Broadband carriers and information-based industries are locked in combat for money. Each is under tremendous pressure limiting its ability to adequately grow. Each assumes a zero sum game in which its gain means the other's loss, and every advance in some aspect of the Internet pushes back on another. More information services mean more pressure on electronic networks. Greater control over the networks means more restrictions on data and information services.

The reason is historic. Information industries come from the lineage of publishing and broadcasting. Companies brought advertising-subsidized news and entertainment to people. Consumers paid little to nothing for what they got. Carriers came from the tradition of telegraphs and telephones. The companies built infrastructure that let people communicate. People directly paid to send and receive messages.

So long as business fell into one camp or the other, things were fine. But the lines started to come down when cable TV companies started to provide television programming to people who, for reasons of interference or remote location, couldn't get normal broadcast signals. Eventually cable spread as the carriers realized that they could make a greater amount of programming available than the typically three or four stations most homes received. Cable was a cross between telephone lines and broadcast television. Although cable companies still essentially charged consumers like telcos for a communications line, the strict wall between creating information or entertainment and carrying data began to crumble.

The Internet finished off that division. In the span of a few years, there was an explosion of information: first Web sites, then the initial information services like search engines, followed by music and video, and eventually sophisticated services like hosted applications. To get the information and services, people needed connections to the Internet. Generally cable and telephone companies provided the lines (and even wireless access).

But there was a problem. True to their heritage, the information companies tried to provide services without charging the consumer. How could they do otherwise? People had become used to highly subsidized and free information -- plus, between regular telephones, cell phones, television, home Internet connection, and even mobile data service, consumers could pay carriers $250 or more a month. At those rates, people felt entitled to what they found on the Internet, especially as there were always free alternatives, so few sites could push for significant payment.

There were always online ads, but vast inventory made them ridiculously cheap and left companies without enough income. Many of the businesses also fell pretty to the atomization of content. People could pick and choose the information and services they wanted. Instead of having to get a whole newspaper or album, they could pick a single article or song.

However, the carriers don't have it easy. They're stuck with explosive use of data and the conflicting pressures to expand networks and reduce spending to keep more profit for investors. Carriers find their networks strained (just ask people who use AT&T (T) in California).

The problem for the Internet has been the us-versus-them of the information and carrier camps. That explains the net neutrality fight. Carriers want to make more and think that the information companies get a free ride, even though the carriers already charge for the traffic they carry. Information companies say the carriers are greedy, even though all of the traffic needs massive investment in infrastructure to transmit it. You can see the destructive results on both sides through some examples:

• Wireless carriers force users into continued business relationships through equipment locked to a specific carrier and punitive early termination charges.
• AT&T has put a lower cap on wireless data and Verizon (VZ) is considering one as well.
• Such companies as Google (GOOG) and Facebook that try to parlay consumer customer data into better advertising continue to draw significant attention from regulators, increasing the chance that someone in government will watch over their shoulders.

There is a solution. Companies need to bridge the gap between information and infrastructure. On its good days, Google can be an example. It's an information services company that has also embraced a role in communications, with significant data servers and infrastructure itself, interests in mobile computing, and a new push to become a high-speed broadband ISP. Google acts out of self interest, but at least it can be an enlightened type that understands both sides of the divide.

Ultimately, it will take that kind of view to make the Internet what it could become. Otherwise, the two sides will continue to slug it out over the next five or ten years through regulatory agencies, the courts, lobbying politicians, and full court press PR campaigns to try and win consumers to their view.

Related:

• Why Online Ads Are Not Going to Save the Media
• AT&T, Amazon, and the Atomization of Computing and Content
• Why Online Marketers Didn't Police Privacy While They Still Could
• What's Wrong With Net Neutrality: Counterarguments to the FCC