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It becomes much harder to violate net neutrality in the face of competition. Here's an example: Say you have two ISP options at your home. Firm A forces Netfli

It becomes much harder to violate net neutrality in the face of competition. Here's an example: Say you have two ISP options at your home. Firm A forces Netflix to pay $1/month for access to enough bandwidth to stream movies in HD to your house, because they want you to use janky-streams.com, which they own. Firm B keeps their peering infrastructure up-to-date without charging Netflix. Where does this leave you as a consumer? All else equal, you'll switch over to Firm B. Why? Because Netflix works there even without paying a ransom for their data. It costs Netflix more money to provide their service to you on Firm A. They could pass that cost along to you directly (increase Netflix bill $1/month) or reduce the stream quality and blame the ISP. The end result is that you're paying more or getting worse service because of the Net Neutrality violation. However, Firm A understands this logic. They know that charging Netflix would push consumers to Firm B. Thus they decide to play nice and pass along the data you already pay them for.

bsbechtel 13y ago
That's what I was suspecting, just wanted to be sure I understood things correctly. 'Your margin is my opportunity' -Jeff Bezos I guess that only holds true when there aren't artificial barriers to entry into a market.
VLM 13y ago
To complete the analogy, even more comically, to enforce the punishment by firm A against netflix, they probably had to make a capital investment in sabotage gear of perhaps 75 cents per month TCO. Thats kind of how it was in telecom before they gave up on detailed long distance billing. You'd spend 4 cents/min on billing infrastructure which was OK when a LD call from CHC to NYC was $4/minute, not so great when Sams Club was selling LD cards for 5 cents/min. Never forget that creating false scarcity of a non-scarce good takes a lot of time, effort, and money.
a_c_s 13y ago
The problem is that instead, Firm B could just follow the lead and also charge $1/month for Netflix, leaving the consumer with no choice. Or they could charge $1/month for other streaming services and leave Netflix alone, so the consumer gets to choose between slow Netflix or slow Hulu & Amazon, with no chance to 'vote' with their wallets for fast everything. This is the danger of oligopolies - even when they don't collude, their interests are in not competing 'too hard' to gain customers. If there are two firms, and each has roughly half of the customers, then the most money Firm A could get with no competition is 2x what they already have, so getting into a price war could easily result in lower total profits. For example, if they have a 50% profit margin, then lowering consumer prices by 25% (and thus cutting profits to only 25% margin) only breaks even if they are able to sign up every customer of their competition. Free markets work best when there are many players and markets are easy to enter, as there is much more incentive to compete, which is not the structure of broadband markets.

bsbechtel 13y ago

That's what I was suspecting, just wanted to be sure I understood things correctly. 'Your margin is my opportunity' -Jeff Bezos I guess that only holds true when there aren't artificial barriers to entry into a market.

VLM 13y ago

To complete the analogy, even more comically, to enforce the punishment by firm A against netflix, they probably had to make a capital investment in sabotage gear of perhaps 75 cents per month TCO. Thats kind of how it was in telecom before they gave up on detailed long distance billing. You'd spend 4 cents/min on billing infrastructure which was OK when a LD call from CHC to NYC was $4/minute, not so great when Sams Club was selling LD cards for 5 cents/min. Never forget that creating false scarcity of a non-scarce good takes a lot of time, effort, and money.

a_c_s 13y ago

The problem is that instead, Firm B could just follow the lead and also charge $1/month for Netflix, leaving the consumer with no choice. Or they could charge $1/month for other streaming services and leave Netflix alone, so the consumer gets to choose between slow Netflix or slow Hulu & Amazon, with no chance to 'vote' with their wallets for fast everything. This is the danger of oligopolies - even when they don't collude, their interests are in not competing 'too hard' to gain customers. If there are two firms, and each has roughly half of the customers, then the most money Firm A could get with no competition is 2x what they already have, so getting into a price war could easily result in lower total profits. For example, if they have a 50% profit margin, then lowering consumer prices by 25% (and thus cutting profits to only 25% margin) only breaks even if they are able to sign up every customer of their competition. Free markets work best when there are many players and markets are easy to enter, as there is much more incentive to compete, which is not the structure of broadband markets.