Innovation, Emerging From Chaos
Following up on Friday’s internet innovation post, I’d like to clarify a few things: First, net neutrality is about regulating a set of regulated monopolies, whose services and profits are protected by the state against new entrants. The regulatory apparatus has fairly clearly been captured by the regulated. The discussion about larger packets misses the point that the carriers would like to charge not by the packet, but by the value of the packet, such that you’d pay more for the same number of pages sent to the patent office than to your girlfriend. Or perhaps vice-versa.
More important is that the internet protectionists are the latest in a long line of telco attempts to create smart networks. Smart networks sound like a great idea. Why wouldn’t you want a smart network? The trouble is smart networks need to know about what they carry. Smart networks are also about billing for what they carry.
If you paid tariff A for packets to the patent office, and tariff B for packets to your girlfriend, what tariff do you pay for packets to Emergent Chaos? Is there a “web server” tariff that we can sneak in under? What about those many of you using RSS readers? What tariff would Tim Berners-Lee or Marc Andressen have come in under, before there was a web? Would you be charged the FTP rate for your RSS blog traffic? Going back, what was a fax? How about ICQ, or other innovative instant messenger services? Skype? The list goes on and on, and continues to, unless you happen to think that all the worthwhile things have been invented. (Me, I’m still waiting on chocolate toothpaste.)
The need to spend time working with the telcos to roll out new services slows the rate of innovation in two important ways. First, it decreases the rate of innovation, by involving companies who are perfectly happy with their current, regulated, rates of profit. Secondly, by decreasing the rate, it increases the cost. While a firm waits to get Bell blessings, it continues to pay salaries, rent offices, etc. These two brakes combine to effectively slow the development of telecom services to what it was from 1920 to 1950: We got dial tone and touch tones. After the bells were broken up, we got answering machines, faxes, modems, that internet thing, etc. We didn’t get ISDN because only the telcos want it.
When things emerge from the chaos, they do so because innovation exists in a free world. I think that’s great, and the telcos don’t. They like their regulated world with regulated progress and insane prices for calling internationally. Give me chaos, and I’ll happily take what emerges.
Besides, weren’t we hearing just five or six years ago about there being a glut of fiber capacity? Has that really all been consumed already? I smell an attempt by the telcos to create an artificial scarcity of bandwidth, in the same way Enron created an artificial scarcity of electricity or BP created an artificial scarcity of propane.