Net neutrality: the electricity analogy

21 Oct

The oblique threats to violate network neutrality coming from the telecom industry essentially come down to one thing: no one wants to be a commodity provider because there’s never an opportunity for turning a commodity into a golden goose. With a commodity, the seller pretty much gets back just what they put into it, never much more. This explains the greater part of the enthusiasm during the tech boom: startups and investors desperately searched for a position of control, where hard work, a good idea, and being in the right place at the right time once could mean that you won’t have to do any of those things ever again to still rake in the dough. Everyone wants their piece of a positive feedback loop, and the telecoms’ desire to make the network proprietary is just exhibit 3452327325 of this.

Currently, there’s a great difficulty in convincing the general public of the danger of this. What’s needed is a good analogy (via dburrows at One for the Morning Glory):

Imagine that your power company decides that it wanted to open a line of supermarkets. At the same time, it sends out an announcement that supermarkets (due to their refrigeration requirements) are particularly heavy users of the electrical system, and as a result, the power company will add a 15% surcharge to the power bills of any building that it deems to be a supermarket. Of course, the power company’s own supermarkets are exempt from this fee. When the existing supermarkets complain, the power company says that they’re asking for special treatment and trying to get electricity “for free” and that if they don’t like its terms, they should buy their power from someone else.

This anonymous response in the post’s comments makes a strange case:

What would be more accurate to say is that the power company has to continually add more infrastructure to keep up with the increasing electricity use by everyone (likened to Bandwidth in this case). Normally the power company increases the price of electricity across the board for every customer to pay for this but noticed that some customers are utilizing most of their infrastructure. Therefore, they decided to charge the heaviest users (beneficiaries in this case) rather than charging everyone.

First, the commentor is confusing flat-fee service (what most home users get these days) with metered service: in a flat-fee service, yes, the heavy users are subsidised by the casual users, but not so in a metered service, which is the kind of service under discussion in the neutrality debate. (It occurs to me, then, that another problem in making the case to the general public is that the general public tends to only see things in terms of home-use services.)

Second, the idea that heavy users can’t be reigned in is silly. If a customer is over-taxing your metered utility, you do a few things:

  1. Cap their usage.
  2. Cut them off.
  3. Charge a premium for going over a usage within a time period.
  4. If your customer base as a whole is communally taxing the network, you can charge a premium for peak-hour usage. With a bit of programming, you can have the per-hour use fluctuate dynamically along with demand.
  5. Expand your capacity so you can sell more and thereby make more money. (Despite what the commenter suggests, the consumer can’t force the provider to provide more capacity.)

In contrast, what the telecoms are threatening to do is to charge a premium for how the utility is used, not for how much of it is used. Of course, in a properly competitive market, the best solution for a provider is to use techniques 1-4 in the short term but focus on expanding capacity for the medium and long term. The telecoms don’t see their business this way. They want to do whatever it takes to capture a market and then sit back and watch their golden goose crap out the golden eggs.

Here’s Lawrence Lessig on net neutrality, yesterday.

Here’s a cute video: Net Neutrality Explained

11 Responses to “Net neutrality: the electricity analogy”

  1. Earl Mardle October 22, 2006 at 3:54 pm #

    A slight extension of that.

    The electricity company (telcos) want to charge me for how I use their electricity (bandwidth) alright, and they will charge me different rates depending on whether I use it to boil an egg, watch a TV or run a heart/lung machine (boy now THERE’S a premium business)

    But on top of that, they don’t produce the electricity AND they want to charge the people who DO for carrying that electricity, AND they want to charge the producers based on the “kind” of electricity they produce.

    So if most of my electricity is used for boiling eggs I get a cheaper rate than if it is used for running heart lung machines.

    This would be because I have a contract with the heart/lung patient for security of supply but I have to subcontract delivery to the line company who, naturally, will charge me more for QOS.

    In other words, these guys want to be the ultimate gatekeepers, or highway robbers.

    Which, incidentally, is whta they should be doing. Profits are, by my definition, unearned income, cashflow without overhead; they owe it to their shareholders to create as much of that as possible.

    Which is why we need regulators with half a clue. Its also why we ban slavery and demand that trucks on the road have minimum engineering and maintenance standards.

  2. realizePhiladelphia December 7, 2008 at 3:05 pm #

    learn more about net neutrality and check out the rest of our blogs by visiting http://web.illish.us!

  3. Emanuele June 3, 2011 at 3:33 am #

    I’ve always tried to explain my audience how important net neutrality is. It’s not an easy concept for most people, and i found somewhat difficult to show the consequences of a non-neutral net environment. The supermarkets analogy is great, i’ll use it on my seminars. Thanks.

  4. Harlan June 3, 2011 at 10:09 pm #

    Depending on our backgrounds, many of us will find analogies that are applicable to the issue of net neutrality. The theme of them all (in my opinion) revolves around the issue of monied interests versus non-monied interests. So often the fox ends up guarding the hen house. There are many foxes drooling over the internet. Foxes are clever. The fox only reveals his identity when the deed is finally accomplished — when he has control of the hen house. So really, I don’t know if a debate over net neutrality is as important as a discussion of how to keep net players transparent.

  5. Jake June 22, 2011 at 12:26 pm #

    not sure that I totally agree with your analogy, there are many services that we pay for that are not based on usage, for example cable TV, some Internet providers.

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