Ode to a louse

With apologies to Robert Burns for the English translation, his 1785(?) ode contains the following: 

“And would some Power the small gift give us
To see ourselves as others see us!
It would from many a blunder free us…” 

Anyone following this blog will know that I’ve never been a big fan of network unbundling.  Indeed, I’ve even shown some scepticism towards the argument that LLU might obviate some (most?) of the concerns regarding network neutrality.  This latter view was articulated as long ago as 2010, when Ed Richards  of Ofcom addressed that year’s Cable Congress: 

“In the US, limited competition, both at the network and at the ISP level, means that the potential for consumer detriment through traffic management is greater. In Europe, as recent research for the FCC indicates, the mixed model – investment in infrastructure complemented by unbundling of the local loop - has delivered a more competitive market structure from the exchange back into the network… Where competition thrives, the case for a highly interventionist net neutrality policy is harder to justify on the grounds of consumer protection.” 

It seems that this European view, which sounded rather complacent at the time, is gaining increasing acceptance in the US.  There, the debate over network neutrality has, if anything increased in intensity, several ‘experts’ arguing that the neutrality proponents have got it all wrong, while others contend that the ‘experts’ themselves have misunderstood the debate.  But the European argument, that regulatory intervention may be the answer, appears to be gaining ground. An op-ed in last week’s ars technica, admittedly by a British expat, explains the recent shenanigans between Netflix and Comcast/Verizon like this: 

“The reason that these ISP policies are so troublesome, and the concerns over network neutrality so grave, is that the ISP market in the US is remarkably uncompetitive… The solution is to attack the monopolies head on…” 

The article then goes on to rehearse the familiar arguments for service-based competition, even citing the UK as a good exemplar of its benefits: 

“This is a model for telecommunications regulation that works. It provides the safeguards against poor performance and ISPs trying to promote their own services (or punishing competing ones) that the net neutrality proponents want, and it uses market power to do so”.  

While I retain my scepticism, I have to admit that two recent findings have rather dented my confidence in the argument that deregulation encourages network investment.  First, Vox magazine has been looking at what appear to be declining levels of recent infrastructure spend by the US Cable operators.  Its findings are quite likely to be challenged by the industry trade body (NCTA) but Vox makes the following assertion: 

 “Now needless to say the fact that investment is falling doesn't prove that NCTA is wrong about net neutrality regulations. But if you think the light regulatory touch is working because it's leading to an investment boom, you are mistaken. The industry is acting like a low-competition industry, scaling back investment and plowing its profits into dividends and share buybacks and merger efforts”. 

The second piece of evidence concerns the level of congestion in the access network (the source of the original Netflix dispute), specifically whether this is related to the nature of the local ISP market.  Might not similar congestion problems arise in the UK, for example?  Some very enlightening data from Level3 suggest otherwise: 

“We have [only] six peers with congestion on almost all of the interconnect ports between us…where our peer refuses to augment capacity. They are deliberately harming the service they deliver to their paying customers… Five of those congested peers are in the United States and one is in Europe…All six are large broadband consumer networks with a dominant or exclusive market share in their local market. In countries or markets where consumers have multiple Broadband choices (like the UK) there are no congested peers”.  (Emphasis added) 

As the man said:

“O…to see oursels as ithers see us!”