How Google, Amazon profit from net neutrality
By: Timothy P. Carney
Examiner Columnist
October 28, 2009
Liberals love a good fight against powerful corporate interests, and they're spoiling for a punch-up to defend President Obama's push for "net neutrality" regulations on how phone and cable companies deliver and charge for Web data.
For the Obama-allied Center for American Progress, and for liberal MSNBC host Rachel Maddow, net neutrality is a way to protect consumers from telecoms, pitting Obama against bought-and-paid-for Republicans.
In truth, the net neutrality fight is between the telecoms and the giant content providers such as Google and Amazon, which heavily funded Obama's campaign. The networks in this case want the freedom to change their business model as the Internet changes and profit angles change. The content companies friendly to Obama want regulation to preserve the current business model that maximizes their profits.
Here's a simplified model of the Internet to clarify the issue: Some companies make, gather or present digital stuff you want, including content (such as YouTube's videos), communication (such as the new Google Voice service) or applications (such as eBay's auction software). Other companies deliver these digital "goods" over wires or through the air to your computer or iPhone -- such as AT&T, Verizon or Comcast. In brief, there are content providers and there are networks.
Currently, customers pay networks for a month of Internet service, and content providers ship their content over the wires (usually for free). Further upstream, there is no money exchanged between content providers and networks, which operate hand in glove: Without the networks, nobody could get the Web; and without good content out there, nobody would pay AT&T for a month of Internet.
Another key principle has guided the business of the Internet so far: nondiscrimination. In the complex web of servers, wires and computers, every bit of information is considered equal by the machines and programs routing requests and data to and from customers -- nobody's data gets to skip in line. This voluntary principle is called "net neutrality."
Obama's Federal Communications Commission has proposed to codify net neutrality into law. This would prevent networks from charging content providers or giving preferential treatment to certain content -- new business models that could make sense as we begin use the Internet in new ways.
For instance, more people could soon watch live high-definition video online. The current network of wires cannot support half of Bowie live-streaming the Redskins game over the Net. For downloading a book or a photo, a slow connection is merely annoying. For streaming video or audio, a slow, choppy connection is disastrous.
One solution: Just build massive amounts of new bandwidth. A better solution: Networks could build special "express lanes" for content that requires lots of bandwith. Express lanes -- especially if the networks wanted to charge the content producers for access to them -- would probably violate net neutrality regulations.
Amazon, Google, Expedia, Skype, Flickr, Facebook, eBay, EchoStar and other content providers, which don't want to pay to use AT&T's wires, have allied to lobby government to set net neutrality principles into law. It's comparable to a manufacturer lobbying for price controls on shipping companies.
To the Left, however, the profit motive is visible only on the anti-regulation side. Liberal MSNBC host Maddow recently ran a segment titled "Net Profits" pointing out that John McCain, who has proposed a bill to block the FCC from creating net neutrality regulations, was "the single largest congressional recipient of campaign contributions from the telecom industry" over the past 30 months.
But at least one politician has outraised McCain from this industry over this period: Barack Obama. Maddow also omitted that Obama's No. 5 source of funds during the 2008 campaign was Google, the lead lobbying force for neutrality regulations, giving him more than $800,000, about 40 times what McCain raised from the company. From Amazon employees and executives, Obama outraised McCain 13-to-1.
So Obama is pushing federal regulations that would profit companies that generously funded his campaign, but when Obama's chums at the Center for American Progress wrote about it, they described McCain as a "long-time friend of" the networks while omitting Obama's coziness to Google and crew.
This one-sidedness is typical in regulatory battles: Businesses that lobby for and profit from big government are given a free pass, while those who oppose regulations as damaging to profit are assailed for their corrupting influence.
There's money on both sides. The only question is whether the flow of money will be determined by the market or by Obama's bureaucrats.
Timothy P. Carney, The Examiner's lobbying editor, can be reached at tcarney@washingtonexaminer.com. He writes an op-ed column that appears on Friday.
