Obama and Cruz Mislead the Public about Net Neutrality

Let me begin by apologizing to everyone who does not live in the USA. Sometimes, when discussing the internet, you have to discuss what is happening in America.

And let me also apologize to everyone who prefers to avoid politics. Sometimes, when discussing the internet, you cannot avoid politics.

Phew. It is a relief to get the apologies out of the way. Maybe only 20% of you are still reading. I congratulate you for making it this far. The title for this piece includes the name of the current US President, the name of a high-profile Republican Senator who would like to be US President, and the words ‘net neutrality’. These subjects encourage people to have strong feelings, and fixed opinions, sometimes before they acquaint themselves with relevant facts. But if we, as professionals, do not understand how the net neutrality debate is fundamentally about the pricing of communication services, and what the real issues are when setting those prices, then there is little hope that the general public will ever share that understanding, or that governments will make the best decisions. The vacuum of ignorance creates the potential for politicians to say all sorts of things, take all sorts of policy positions, without caring if they help anyone but themselves. And if you are not interested in how prices are set for the internet, and who gets to decide those prices, then perhaps you are in the wrong line of work.

This article is about a very short speech given recently by US President Obama, and the reaction it provoked. But before I discuss Obama’s words, I want to show you an image. It is an image that people saw, before they heard Obama’s words.

This video is buffering - or is it?

This was captured two seconds into the playing of a video taken from the White House’s official YouTube channel. Let me be clear: it is not a graphical representation of any actual buffering that occurred before the video started playing. This is a frame of an animation that is part of the video itself. It suggests that buffering is taking place, but there is no buffering. Play the same video over and over, and this pseudo-buffering animation will always look identical, always last the same duration. It is a simulation of the graphics sometimes displayed when buffering occurs. Why include this animation before a seemingly important announcement by the most powerful man in the world? A generous answer would say it illustrates the speed of the internet, in a way that people can relate to. I think that answer would be too generous. This animation is very short, and no subsequent attempt is made to clarify that people were shown a simulation. Most people will wrongly believe they waited a few seconds for some buffering, before the video of Obama actually began. Public understanding of net neutrality is poor. Leaders should explain complicated issues fairly and honestly. That President Obama’s communication team decided to use this deceptive animation before Obama spoke on the topic of net neutrality creates a very bad impression of their sincerity, and their transparency.

So what did Obama say about net neutrality? Here is the 2-minute video, and I analyse the transcript below.

Hi everybody. Ever since the internet was created, it’s been organized around basic principles of openness, fairness, and freedom.

It would be more accurate to say the internet has been disorganized since its creation. Obama makes it sound like thoughtful people sat around a table, and made a conscious decision that the internet should be open, fair and free. On the contrary, the character of the internet has been driven by the absence of authorities that could impose their values – whether benevolent or otherwise. The TCP/IP protocols direct how data moves around a network; they contain no mystical insight into the concept of fairness. Businesses that laid cables did so because they wanted to charge others for using them, not because of a holy devotion to increasing liberty.

There are no gatekeepers deciding which sites you get to access.

This is no longer true. It was true during the very early days of the internet, but ever since governments started censoring and curbing the use of the internet for a variety of reasons – to stop child pornography, to combat terrorism, to protect copyright, and so on – there have been gatekeepers who decide what content you can access. Maybe you always agree with their decisions, but gatekeepers definitely exist.

There are no toll roads on the information superhighway.

Except for the most obvious one, paid by every consumer. We all pay an access fee, in order to use the internet. What is that, if not a toll? This particular toll road runs over the final mile, connecting our home (or our mobile phone) to the rest of the network. What Obama means is that, after you pay for access to the network, there are no further tolls that might influence your journey.

This set of principles, the idea of net neutrality, has unleashed the power of the internet, and given innovators the chance to thrive.

Or rather, the internet is it what is, and allowed innovators to thrive. Later on, some people started talking about principles, and gave names to them. In this case, the reality of net neutrality existed before the idea of net neutrality.

However, I recognize that you could take a different view, and argue that net neutrality means nothing more than implementing networks so they manage the flow of traffic in a neutral manner. In that sense, I would agree that the internet was designed to be neutral. However, the neutrality of a network is not the same as the neutrality of all networks. Some confusion can occur here. Suppose I build two, completely separate, neutral networks. One has high bandwidth, one has low bandwidth. They are both neutral, in the original technical sense, because no traffic prioritization occurs on either network. Now suppose I choose to connect person A to the high-bandwidth network, and put person B on the low-bandwidth network. The political and economic issues that Obama refers to as ‘neutrality’ have more to do with this scenario – who is serviced by which network, and whether that leads to some inequality of practical outcomes – than by the conception of neutrality in its original technical sense.

These arguments get very confused because we can be very unclear about the subject of conversation, when we talk about a network. In some senses, the internet is just one network. But by analogy, that would mean I should think of the North American road network as just one network, and not as many different roads. I can drive a car from any part of the road network to any other part of the road network, and the internet is similarly connected. However, concepts like fairness cannot be realized simply by asserting that the same rules should apply to every part of the North American road network. I must also understand that if an inadequate highway connects two towns with growing populations, that road will get increasingly congested. At the same time, some authority might decide to waste money by building an unnecessary road elsewhere. It is meaningless to talk about the rules being fair, if the practical reality is that one driver speeds along a road which only he uses, whilst many other drivers are stuck in jams for hours on end. Managing the relationship between infrastructure and use requires more sophisticated thought than that offered by dogmatic, but ultimately meaningless demands for fair rules. In this context, fair treatment is tied up with practical issues that cannot be reduced to a few simple rules.

Abandoning these principles would threaten to end the internet as we know it. That’s why I’m laying out a plan to keep the internet free and open.

Which is fine and dandy. Except it is not clear who, exactly, is threatening to ‘abandon’ these principles. Or whether there is any evidence that they intend to do so.

Note the importance of what we mean by ‘net neutrality’, and how different meanings are given to the phrase by different people. If we stick to the original, narrow, technical meaning, then two customers could be connected to two neutral networks, and be charged very different amounts for very different quality of access over those networks. When Obama talks about ‘abandoning’ net neutrality, he is talking more about prices and economics than about the technical aspects of neutrality.

Please keep in mind that if we treat neutrality like a religious dogma, then we would never discriminate between a personal email and unwanted spam, between a video of cats falling over and the streaming of hardcore porn, or between the purchase of an ebook via Amazon and the purchase of heroin via the Silk Road 2.0. We need to ask hard questions, about what politicians mean, when they use words like ‘free’ and ‘open’.

And that’s why I’m urging the Federal Communications Commission to do everything they can to protect net neutrality for everyone.

They should make it clear that whether you use a computer, phone or tablet, internet providers have a legal obligation not to block or limit your access to a website. Cable companies can’t decide which online stores you can shop at, or which streaming services you can use.

Forgive me, but at this point I can no longer take Obama seriously. The history of electronic communications, and the commercial interests of the businesses involved, has yielded no evidence that communication providers want to censor or restrict communications. They make money by selling access, not by limiting access. The few times that comms providers have experimented with restrictive models, such as when mobile providers pushed users on to walled gardens, the free market has rapidly forced them to abandon their foolishness. Internet providers give unfettered access not because of government protections, but because customers want it, because rivals will offer it, and because customers can switch suppliers if they do not get what they want.

On the other hand, there are plenty of examples of internet providers being criticized for being too free in allowing access. Who criticizes them? Who wants to impose restrictions upon them? Very often it is politicians who want to limit access. In some cases those politicians are backed by other kinds of big business. Whether we are talking about anonymous online financial transactions using crypto-currencies, or controls that stop youngsters from seeing pornography, or darknet markets for illegal drugs, or obstructing P2P traffic in order to reduce piracy, typically communications providers are vilified for not doing enough to control the traffic that flows over their networks. Many times they have been accused of indirectly profiting from crime, if they do not stop their customers from doing unlawful things. At such times, politicians often present themselves as white knights, riding to the rescue. But then it makes no sense to damn internet providers for interfering too little, whilst whipping up fears that the same companies may interfere too much.

And they can’t let any company pay for priority over its competitors.

This is the real issue: who pays for what. Obama misled the public, by pretending that corporate censorship poses a threat to net neutrality. His real concern is over payment, and if he really wanted to explain the issues to the public, he would have concentrated on this topic.

To put these protections in place, I’m asking the FCC to reclassify internet service under Title II of a law known as the Telecommunications Act.

Title II is economic in character. It follows a long-established model used in other sectors, as well as telecoms, to prevent monopolistic behaviour by controlling prices. For all Obama’s guff, it would be unbelievably crude to deploy this mechanism just to prevent websites from being blocked. There would be a hundred better ways to impose rules to make every websites available to everyone – and whatever the rules are, they would need to be reconciled with those occasions when the government mandates the blocking of websites.

The FCC is the US communications regulator. If the FCC applied Title II to the internet, they would have far more control over the prices and payment for internet services. Obama wants them to control prices. If Obama wants the public to understand the issues, he should make an argument for increased price control, not by telling scary stories about websites being blocked.

In plain English, I’m asking them to recognize that for most Americans, the internet has become an essential part of everyday communication and everyday life.

In plain English: yada yada. I think the FCC is already aware of the importance of the internet, without needing to be told by Obama.

The FCC is an independent agency, and ultimately this decision is theirs alone. But the public has already commented nearly four million times, asking the FCC to make sure that consumers, not the cable company, gets to decide which sites they use.

It is true that the public has strong opinions. But if the public was asked to explain net neutrality, they would give four million different explanations, and many of them would be wrong. The public has a right to express all sorts of opinions on all sorts of topics, from how election finance laws should be changed, to who should win this year’s Nobel Peace Prize. Politicians often choose to ignore opinion, just as Obama did when the public was outraged by revelations that America’s secret services had extensively spied on private electronic communications, using them to track millions of law-abiding American citizens, and to monitor foreign allies like German Chancellor Angela Merkel.

Having torn into Obama’s verbal manipulations, I now want to succinctly state the key issue, which Obama omitted from his speech. The nature, and future of the internet, will be determined by whether differential pricing can ever be allowed. The point is not whether a packet gets treated the same as the next packet, but what is the right way to charge for the flow of those packets. At the moment, ISPs may charge the same monthly amount to two neighbours, though one uses the internet far more than the other. Meanwhile, charging for internet use differs greatly, depending on whether the final connection involves a wire or radio. If we want a society where the same prices are applied to all internet traffic, we must agree consensus answers to sensible questions about what it means to say one service is the ‘same’ as another. That has not happened yet, and most politicians have avoided such intelligent debate.

A simple but mistaken assumption is that the only conceivable reason to permit differential pricing is to allow internet providers to charge differential prices to their consumers. But this does not match the real-life examples raised by network providers. They argue that they want to negotiate fees from the big businesses that encourage traffic, not the individuals who consume the traffic. That way, a big business which requires a lot of bandwidth to thrive – such as Netflix – can be charged for having its needs satisfied. Instead of focusing solely on the final mile, as seen from the consumer’s point of view, pricing might better reflect the source of content. Obama’s intervention implies he does not want businesses like Netflix to receive tailored bills for a tailored service. Such a development would contradict neutrality, as Obama sees it, because it means not all users of the internet are treated the same.

Obama suggests that net neutrality is necessary to protect the little guys, in a struggle of consumers vs. big business. The truth is that this debate is more of a struggle between consumers, big businesses, and other big businesses. Aside from the network providers, there are many other large corporations who profit greatly from the internet, and who perceive neutrality regulation as a mechanism to keep their costs down. I will not express an opinion on how these businesses have influenced the debate, and whether their interests should be protected. However, I do believe it is despicable for Obama to use an emotional topic – censorship!!! – to justify price controls without clearly stating how some big corporations might benefit from price controls. In particular, if internet providers could levy higher charges from big businesses that rely on the internet for their profits, that would imply consumers would represent a smaller share of total revenues. Wherever the revenues come from, those revenues will ultimately determine the investment that is made in the internet.

For all the principles, platitudes and emotional language, it is not logically obvious that consumers must benefit from net neutrality, in the way Obama understands the idea. Consumers might be better off if more internet investment was fuelled by revenues from the big businesses that run the most popular, and most bandwidth-intensive, websites and services. At the very least, this is not an argument that can be resolved by loose talk about ideas, fairness and freedom. This is fundamentally a question of economics, and the relationship between prices, supply, demand and investment. In other words, this is the kind of topic that lots of people might express an opinion about, but unless they have some data that supports a coherent economic model that predicts investment in network infrastructure, then we should not be listening to them.

At this point I should mention the intervention of Senator Ted Cruz, who responded to Obama’s speech. Sadly, the Texan legislator and favourite of the Tea Party did not share an economic model that will forecast investment in network infrastructure. But he did tweet about net neutrality, and here it is.

The problem with this tweet is that it responds to Obama’s lousy analogies about net neutrality (we need to protect the principles espoused by the mythical internet founders by massively increasing regulation!) by offering an equally lousy, though opposing analogy. Obamacare was the President’s attempt to reform the provision of US healthcare. It essentially shifted some of the costs from those who most need healthcare, to other people who did not want to purchase health insurance. Because Obamacare is a kind of government intervention that influences the price of healthcare, there is a tenuous analogy to one implication of applying Title II to the internet. But beyond that, the two policies have little in common. One reason that Obamacare is unpopular is that it forces people to buy a service, even if they do not want it. Nobody is suggesting that people should be forced to invest in network infrastructure, even if they do not use the internet. Obamacare changes how much consumers pay for healthcare, and finds a new balance in who pays for what. The best objection to Title II is that it would prevent internet providers from shifting more of the cost away from consumers, and on to big businesses.

As a result of his poor analogy, Cruz has strengthened his opponents more than he has weakened them. Thousands of self-appointed net neutrality advocates have flocked to the web, to ridicule Cruz’s understanding of the internet. For example, The Oatmeal lambasted Cruz for not understanding net neutrality. That author made the following statement:

I’m going to… explain to you exactly how net neutrality works.

The author then proceeded to give a ludicrously simplistic explanation. This only proves:

  • it was written by a pompous clown with no idea of how net neutrality works; and
  • that it is impossible to give an exact description of net neutrality because so many people are so obviously talking at cross-purposes.

However, there are very many pompous clowns like this author. They believe they are experts because they have a computer and they like to use it. At the same time, they are clueless about the economic issues entwined with net neutrality. Many of them are so busy delivering sermons that they never hear valid opinions that differ from their own. That is why they make time to crucify Cruz, but seemingly failed to notice any errors or oddities in Obama’s speech – including that peculiar buffering animation. If Cruz wanted to exert a positive influence on the net neutrality debate, he should have taken time to explain the issues surrounding price controls in simple terms, and made them relevant to consumers. It is unfortunate he did not, preferring to throw out an attention-grabbing but unhelpful soundbite instead.

Is this net neutrality debate relevant to you? You are reading this on the internet right now, so you must care a little bit about it. And whilst you may not be in the US, you will be conscious of America’s influence over the internet, as well as the possibility that other governments will follow the example set in the USA. What makes net neutrality so significant to our line of work is that lots and lots of people – including the President of the USA – have revealed themselves to be complete asshats, spouting wild opinions about what fuels network investment, what leads to improved internet services, how to efficiently manage traffic, and how to set prices, without showing any data to support their beliefs. One reason they can get away with this nonsense is because the communications industry has traditionally been lousy at gathering and interpreting the relevant data for itself. Many important investment decisions have been justified by little more than gut feelings and guesswork, or by a herd instinct where one telco takes a lead, and every competitor follows. This is not a great way to run a multi-billion dollar collective enterprise that connects every person on this planet. We claim to be intelligent; we should use more intelligence when making decisions.

At the core of our difficulties is trying to understand the relationship between investments, and the returns they generate. Building network infrastructure is a long-term activity. Customers purchase communications services on a much more short-term basis. Infrastructure decisions will have lasting consequences, but a YouTube video is watched on a whim. For all the talk about Big Data in the comms industry, there can be no better use of data than to improve our understanding of which network investments will yield the best returns, and which prices generate the best profits. The debate about net neutrality sits right at the fulcrum of these issues, because it has the potential to change the dimensions of who makes which decisions, and why. Whoever makes these decisions, whether it is a private company or a public servant, the quality of the decision will depend on the quality of the data they used. To get the best results, we will need more than fine talk about principles, and simplistic analogies about fairness and openness. We need lots of data, and sophisticated forecasting models. Without them, we are all guilty of coasting in neutral, unable to drive investment in the right direction. That is because we lack the substance to back our talk, and to justify our decisions.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.

2 Comments on "Obama and Cruz Mislead the Public about Net Neutrality"

  1. Michael Lazarou Michael Lazarou | 17 Nov 2014 at 10:16 am |

    We all know that most people’s understanding on these issues is about this much.

    On the other hand, I also believed it was mostly about “no gatekeepers”, i.e. we are not in China, you can access anything and at the “same” (price) rates… I believe that for the average consumer this is all that matters: let me access the internet at decent speeds without blocking any sites or snooping around.

    Whether I choose to pay to travel business class on BA or to hop on to Ryanair is an underlying issue here that most people will not grasp or (unless your business depends on it) care about. Obviously you are pointing out that this is the core issue and that at the end of the day and allowing both models to exist without suffocating either one is important.

    This is where the subtlety lies… If I am streaming video to 200 thousand customers that are paying for this service (NOT simply internet access) then I will charge a premium. I really doubt there can be more than the herd instinct of one leading and the rest following in this case… Viber and the like are killing voice and SMS but can anyone block them without an outcry (or a significant loss to the competitor who provides free access to it)? So this change from the traditional streams to data for telco’s is something nobody planned or governs. I’d love to think someone can at least provide the correct incentives to guide it but it will not happen. Telco’s will charge for cloud services and business will get the premium branded (and premium charged) version, but maybe the service will be free for subscribers and charged for business or “power users” that need it. So yes, we should not impose price controls … Google gives so much for “free” but in the end they are buying an audience for their ads.

    The problem is, as you mention, that the internet is not governed by anyone. There is no way to know the direction it is going or to really guide it. As most things that involve politicians as well as economic decisions, it is not what is the best economically or even for society but what’s best for the public’s perception of politicians. Removing focus from the business to subscriber side is important as a lot of the business to business side operations manages to pass below the radar…

  2. @ Michael, that’s a great link and a great comment. I think you’re absolutely right about the public perception: no gatekeepers + fixed price + decent speeds = neutral network. The problem is that (1) there are gatekeepers, and many people want those gatekeepers, and (2) the public have no conception – or refuse to admit – that a fixed price for access can lead to over-use and congestion, just as occurs when everybody hops into their car and drives to work in the morning.

    I think part of the problem is that most of the public are almost completely passive when it comes to the internet. That is why they don’t complain that upload speeds can be so much slower than download speeds. The vast majority treat the internet like television, and their understanding isn’t much more sophisticated than that. So of course they want to ‘flick the channel’ without anybody interfering in their choice. They want all the channels! But then, they expect those channels to be sanitized too, just like TV channels are. So they want the freedom to flick the channel, but they also want gatekeepers to keep those channels clean and safe. Obviously the analogy has broken down at that point – but that doesn’t mean the public isn’t thinking like that.

    The other thing with TV channels is that consumers aren’t very conscious of the bandwidth they are consuming. After all, in traditional TV, it’s all being broadcast at once. It’s out there, whether you’re watching it or not. The internet isn’t like that, so there is some confusion in the idea of a fixed price for eating an unlimited amount. If I go to an eat-all-you-want buffet, it is possible to run out of various dishes because some other people ate as much as there was, leaving none for me! It’s not reasonable to expect the restaurant to have an infinite stocks of food, just in case people they are needed. And maybe we’re mature enough to recognize we don’t want restaurants to overstock food either, because ultimately that causes waste, and drives up the cost of food, one way or another. But if the public eats all the bandwidth available, the complaint is that the provider is at fault – for saying the bandwidth is unlimited. Partly the problem is caused by marketing and the expectations that it raises, but ultimately the issue is that it’s easy for consumers to be angry if they do not get things they take for granted. However, higher consumption must inevitably lead to additional costs, and the approach of just increasing the flat rate paid by everyone isn’t going to be the fairest way to spread the burden, no matter what net neutrality advocates say.

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