I was reviewing this Forrester brief from May 2014 to realize that it's still terribly current in light of the recent presidential blast on net neutrality. It expresses a point of view missing from the public debate and Twitter rants in my view. It raises the bar on what consumers should expect, vendors should invest in, and governments should manage.

Original title: Debate Internet Regulation On Market Principles: Transparency, Choice, And Freedom

Published on May 15, 2014

The debate over broadband regulation — why there should or shouldn't be fast lanes and slow lanes on the Internet — has spurred outrage from nongovernmental organizations like MoveOn.org; energized the entrepreneurial juggernaut; triggered the frantic lobbying of major broadband providers like AT&T, Verizon, and Comcast; and wound up in federal court to take down a Federal Communications Commission (FCC) regulation. On May 15, 2014, the FCC proposes to allow content providers like Netflix and Google to do deals with broadband providers like Comcast and Verizon to ensure a quality service experience for consumers. Let the response be rational and not virulent. The worst outcome would be to hastily create or reject a policy based on old thinking. Managing the Internet for all requires new policy thinking. Forrester understands and respects the positions of the players in the debate, but in service of our CIO and CMO customers, we believe that it's time to reframe the debate on the basic principles of markets: transparency, choice, and freedom.

The Internet has become vital infrastructure for delivering business and consumer services. It is the foundation technology for economic growth. Entrepreneurs and innovators take cheap, unlimited broadband capacity for granted. CIOs and CMOs shifting business services to the cloud need to know that their customers and employees will have unfettered access to those services. And broadband providers must be able to make money off the infrastructure they install, or they will stop investing.
Net neutrality — the idea that the Internet should be open and undifferentiated for all — lies at the heart of this debate. (see endnote 1) We do not take a position on Net neutrality, but we do believe that hastily applying old thinking and old laws to the Internet will do more harm than good. It's time to reframe the debate on broadband regulation around the principles of an efficient market. We will use Netflix to make our points, as it consumes 34% of Internet bandwidth by one measure and it's familiar to all. We propose three principles:
  1. Transparency in cost and capacity so consumers know what to pay for. Consumers watching their Netflix feed spinning deserve to know what's going on. Is it their last-mile broadband connection or something else that's holding it up? The first principle of efficient markets is complete information transparency so buyers and sellers are seeing things in the same way. We propose that broadband providers and Netflix voluntarily open their databases to show consumers how the bandwidth is utilized and where the costs in delivering the capacity lie. US utilities must now do this. The same concepts applied to local broadband will create an informed market of buyers, sellers, and entrepreneurs thinking about entering the business.
  2. Freedom for content and business service providers to differentiate their offerings. A market for content and business service providers will thrive if market conditions prevail. But market conditions don't prevail today. Even if Netflix wanted to charge more for higher-quality service, it can't do so. Consumers can't pay to get better service from Netflix. That's absurd. Any reasonable regulatory framework would allow a content service provider like Netflix to differentiate its product on things like quality of service, just as a broadband provider like Comcast or Verizon can. This principle has immense repercussions, some of which the entrepreneurial juggernaut abhors. We believe there can be a middle ground between completely undifferentiated and market-driven differentiation in services delivered over broadband. Let customers decide how much to spend.
  3. Choice over broadband service providers. Markets work when competition thrives. We recognize that local broadband franchises are terribly difficult to come by. We further recognize that it takes massive capital investment in wires, poles, servers, and myriad other infrastructure to deliver broadband to the home (or in cell towers to blanket a region). But we also recognize that the US lags far behind other nations in providing quality broadband to all. The principle is clear: Encourage local broadband competition so consumers have a choice in providers based on characteristics like quality of service and price.

The coming debate over Internet regulation should not be about Net neutrality or aiding and abetting any one company. It should instead be about what regulatory environment — or none at all — will create the most fertile market for immediate and long-term innovation and service over the Internet. There is a market for Internet services. And the Internet is a market for business and content services. Both markets must be efficient. Keeping that at the center will keep the discussion rational, balanced, and productive. The US government should keep these principles in mind as it creates an environment in which the vital infrastructure of the Internet can grow and thrive. Companies, consumers, and the economy rely on it.