The push for wireless net neutrality

If you try to do business on Verizon's network you find out pretty quick that those friendly crowds in its commercials are a lot like the Sopranos.

When advocates talked about "net neutrality" during the Bush years, they were mainly trying to protect what the wired Internet had built.

Rules of the road like transparency, non-discrimination, and letting users control the hardware environment were built into the wired Internet.

Outside the "unlicensed" bands like WiFi, the wireless Web grew up with different values.

Those values include monopoly, carrier control, proprietary everything and no free bits. You can only use equipment on Verizon Wireless that Verizon approves. You can only use software from the Verizon deck. Every bit you send is monetized by Verizon. They get a cut of every transaction.

If you try to do business on Verizon's network you find out pretty quick that those friendly crowds in its commercials are a lot like the Sopranos. For one industry trade show its executives all wore black suits, a subtle reflection of this control.

Under this model the U.S. cellular market has grown. But it has not grown as fast, or as big, as in other countries. They use a different regulatory model.

In Europe each country must have a network running with GSM encoding. This means you can move your phone from country-to-country, often from carrier-to-carrier. In the U.S. you usually change carriers only under a contract, and the phone is tied to the carrier. In Europe you buy a phone, then seek a carrier.

But to make the most of the iPhone, and its growing mobile broadband competitors, we need wireless networks to be more like those in other countries. It would be even better if they were like the wired Internet. We vote for this with our feet. A lot more bits travel, per hertz of spectrum, on WiFi than on any proprietary network.

Getting from here to there, however, will not be easy. That's because the government sold its interest in the spectrum over the last decade, mostly to Verizon and AT&T. These companies benefit hugely from their monopoly powers, and they don't want to give them up.

We know they benefit from monopoly based on last year's spectrum auctions. One block, bought by Verizon, was sold with a requirement that it be open to all devices. Others, bought by AT&T, had no such requirement. Guess which sold for more?

Here's the bottom line:

  • A monopoly is worth more than a place in a competitive market.
  • A monopolist can invest less and make more than a competitive company.
  • The monopolist's benefits are not shared by the market.
  • People pay a monopolist more for less service.
  • A market controlled by a monopolist is less robust than a competitive market.
  • A market controlled by a monopolist is better for the monopolist.

Verizon and AT&T have spent the last decade cutting investments in wired networks, where ISPs compete fiercely and have no control over devices or services, while raising investments in wireless networks where they have this monopoly control. Now the Obama Administration wants to take that control away.

It should. We all benefit more from competitive markets than from monopolies. What's good for the carriers is not the same as what is good for the marketplace, for customers, or the future of technology.

But after a decade of getting everything they want from Washington, don't expect monopolists to admit that, and don't expect them to surrender what they've paid for without a fight.

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