Ante Upped Some More: $2,500 For John Sununu And Harold Ford Jr. To Pay Netflix's Broadband Bills

from the crickets dept

On Tuesday, we questioned John Sununu and Harold Ford Jr.'s assertion that Netflix was somehow getting a "free ride" on the internet these days, by asking if they'd be willing to swap broadband bills with the company for the rest of the year. On Wednesday we upped the ante, by offering to give each man $500 if they'd pay Netflix's broadband bill for the final quarter of the year. $500 would come from Derek Kerton who suggested it, and another $500 would come from us at Techdirt. Since then, a few more people have contacted me and offered (anonymously) to put up another $1,500 between them. So we're now up to $2,500 total (or $1,250 each) if John Sununu and Harold Ford Jr. agree to pay Netflix's broadband bills for the months of October, November and December. Or, you know, they could admit that their op-ed was misleading claptrap. Of course, their failure to accept this "free" money sorta makes that statement for them.

Filed Under: bandwidth, broadband, economics, free ride, harold ford jr., john sununu, net neutrality

Let's Up The Ante: We'll Pay John Sununu & Harold Ford Jr. $1,000 To Pay Netflix's Broadband Bill

from the crickets? dept

So we just wrote about a truly ridiculous opinion piece by two ex-politicians, John Sununu and Harold Ford Jr., claiming that Netflix somehow didn't pay for its bandwidth. They complained about the supposed "free ride" that Netflix was getting. As one of our commenters pointed out, this is sort of like the "free ride" that Ford Motor Company gets from the highway system.

But Derek Kerton may have had the best idea of all, noting that Sununu and Ford will almost certainly ignore our request that they swap their broadband bills with Netflix. Derek suggests we up the ante, and offer to actually give Sununu and Ford some money if they agree to pay Netflix's broadband bills for the rest of 2011. He's putting up $500 and we at Techdirt will match his offer and put up another $500. So, that's $1,000 for Sununu and Ford Jr. if they're willing to pay Netflix's braodband bill. Hell, we'll give them some time to think it over, and say they only have to pay for the last quarter of the year. If they'll pay Netflix's broadband bills for October, November and December, we'll give them $1,000 ($500 each). Some others in the comments have also offered to chip in as well, so perhaps we can raise the ante a bit more.

So here we go. According to Sununu and Ford Jr., this is "free money" that we're offering them. Will they take it? Will they agree to pay for Netflix and its very cheap "free rider" broadband bill? I'm not holding my breath.

Filed Under: bandwidth, broadband, economics, free ride, harold ford jr., john sununu, net neutrality

Will John Sununu And Harold Ford Jr. Agree To Pay Netflix's Broadband Bill Next Month?

from the simple-request dept

Not this again. I thought that we were well past lobbyists publishing op-ed pieces in which they flat out lied about how broadband pricing works. Almost exactly five years ago, we called out (then) telecom lobbyist Mike McCurry (a former Clinton press secretary) for his bizarre and ridiculous claim that Google got its bandwidth for free. We asked, if that was the case, if McCurry would agree to pay Google's bandwidth bill. McCurry never responded, though the astroturf group he ran at the time was clearly reading, since they took other comments of mine totally out of context at a later date.

It looks like we're in for a repeat with some other ex-DC folks-turned-sell-out lobbyists. This time, it's former Senator John Sununu and former Rep. Harold Ford Jr., shilling for "Broadband for America," claiming that Netflix gets its bandwidth for free. There are so many things wrong with this particular op-ed piece, which is so dishonest that the Mercury News should publish a full retraction and apology. But, for now I'll just make the same deal that I offered to McCurry five years ago:

If John Sununu and Harold Ford Jr. really believe that Netflix is getting a "free ride" with its bandwidth and this is somehow socially irresponsible and unfair, will they agree to pay Netflix's broadband bills for the rest of this year?

Perhaps they can trade bandwidth bills with Netflix. I'm sure if they're willing to pay Netflix's bandwidth bill, Netflix would have no problem paying for their home DSL lines. Hell, maybe Netflix will even cover their mobile broadband accounts as well.

As for the rest of the op-ed, it's pretty funny. While they play up how Netflix "saves" $0.40 in postage by not having to use the mail, they ignore the fact that in order to stream movies, Netflix has to pay ridiculously high licenses. With disc rentals, it could buy one disc and rent it out many times. Not so with streaming licenses. It needs to pay a ton for those.

Then there's this bit of economic cluelessness:

Netflix argues that the marginal cost to the network providers of streaming a half-hour TV show to a residential customer is "one penny." This ignores the hundreds of billions of dollars in sunken network investments needed to create that one-penny marginal cost efficiency at the customer's end.

Um, yes, it does. And as most any economics professor will tell you, you're supposed to ignore the sunk costs in understanding how a market prices things competitively. Telling the market to do the opposite is the very definition of an anti-market, anti-efficient solution.

Consumers tend to pay more when they consume more goods and services, and pay less when they consume less.

And, contrary to the claims in the article, Netflix pays more when its users consume more. Again, will Sununu and Ford pay Netflix's bandwidth bill?

The reality is that Netflix and similar services want a free ride on the networks built with more than $250 billion in design, engineering, manufacturing, construction and maintenance -- a system that now provides broadband services to 95 percent of American households.

Hey, you know what? I spent a lot of money building Techdirt. All of you now owe me money. Apparently that's how Sununu and Ford view market functions. If one party spends a lot of money on something, everyone else is just required to pay. Of course, back here in the real world, that's not how things work. Various broadband companies (with massive taxpayer subsidies, by the way) built out broadband networks because they knew it would be profitable to do so. They made their bet and made their deal. Now they're trying to change the deal by pretending that someone's not paying. They're lying. What they really want is for service providers to pay twice for the same bandwidth. Netflix is already paying for its bandwidth. Consumers already pay for their bandwidth. Sununu and Ford (and really, the telcos they represent) are really trying to get Netflix to pay again, pretending that they should pay for the bandwidth that consumers already paid for, even though Netflix is already paying for that bandwidth. This is about trying to double charge.

If broadband providers are so hard up for cash, then just let them raise rates. Nothing is stopping them from doing that. But that's not what this is really about. This is about trying to force Netflix to double-pay for consumers' bandwidth as well.

So, once again, John Sununu and Harold Ford Jr.: since you insist that Netflix is getting a free ride, will you pay Netflix's bills for the rest of the year? Or will you pull a Mike McCurry and simply ignore this simple challenge and go on pretending that Netflix doesn't pay?

Filed Under: bandwidth, broadband, economics, free ride, harold ford jr., john sununu, net neutrality
Companies: netflix

Now, Apparently It's Not Just Content Providers That Are Getting A Free Ride On Broadband Networks, But Consumers Too

from the my-$70-per-month-DSL-bill-doesn't-agree dept

One of US telcos' favorite talking points is the "free ride" that Google and other content providers get on their networks. It's fundamentally wrong, since Google and others obviously pay their bandwidth bills, but it's also conceptually flawed, as telco execs seem to think it's their networks, rather than the content which travels over it, that consumers value. The stupidity isn't bounded by this country's borders, though, with the head of a UK broadband-via-satellite provider saying that "Neither consumers or providers are bearing the cost" of data traffic over broadband networks. With that, we'd like to extend our usual challenge to the exec: if neither consumers or content providers are paying, how about paying their bandwidth bills for a month?

The exec contends that broadband providers will all eventually move to usage-based pricing, and in a letter to the Financial Times, says that when they do, "content free loaders will suddenly find that demand falls dramatically". Perhaps it's just a typo, and he meant to say "broadband providers will suddenly find that demand falls dramatically"? Once again, the exec fails to understand that people don't buy network access from his company just for the sake of it, they buy it for access to content. If he, or any other provider, starts putting walls up between consumers and the content they want to access, whether through walled gardens or usage-based pricing (really just a code word for "much higher fees"), they will reduce the value of their customers' connections, and subsequently what they'll pay for it. So if the end result of a shift to usage-based pricing is decreased usage -- and subsequently no real change in providers' revenues -- what good is the shift?

Filed Under: broadband, free ride

Dear WSJ: Will You Pay Google's Bandwidth Bill?

from the please,-let-us-know dept

And here we go again... The whole "network neutrality" discussion really burst onto the scene in 2005, when (then) SBC CEO Ed Whitacre made claims that Google was somehow "free riding" on SBC's (now AT&T's) network. Of course, that made no sense. Everyone pays for their own bandwidth. The only way that would make sense is if the bandwidth you paid for only brought you to the internet backbone, but never to an end point. Yet, that seemed to be exactly what Whitacre was claiming. You see, the bandwidth you pay for is only supposed to get you onto the internet. To actually reach a site, in this logic, the site owners then should have to pay to let you reach from the internet to their site (never mind that they already pay bandwidth themselves... in this logic, that's only the bandwidth from themselves out to the network, but not from the network for you to reach the site).

This, of course, makes no sense at all. And yet, PR people and telco lobbyists know that it makes for a good soundbite. Mike McCurry, a former Clinton aide who went on to run a telco lobbying group (and now runs an entertainment industry lobbying group) declared in 2006 that Google was getting such a free ride that they "never have to pay a dime no matter how much bandwidth they use." In response, I challenged McCurry and his organization (Hands Off The Internet) to pay Google's bandwidth bill. While the group clearly read (but did not understand) Techdirt, they never responded to the challenge (shocker), and Google had to go on paying its own bill -- though, McCurry assures us that it's not even a dime.

We had thought that such ridiculous reasoning had finally been taken away from the debate, but with the FCC back to pushing for net neutrality, we're seeing the argument pop up again. Holman W. Jenkins Jr., a WSJ editor has an editorial making the same bogus free rider arguments yet again, and accusing Google of wanting "internet socialism." Karl Bode, over at Broadband Reports provides a rather epic response (this is just a snippet -- read the whole thing):

It doesn't matter how many times you point out that companies like Google pay millions of dollars for bandwidth and their own infrastructure, the paid talking heads who work for Verizon and AT&T simply keep repeating the same myth. Telling these individuals that AOL users paid phone companies billions in tolls and long-distance fees will get you nowhere. By demonizing Google and repeating nonsense, Jenkins and AT&T can distract marginally unintelligent lawmakers, journalists and the public from the real issues. Unfortunately, they're right.

Yes, companies like Google are not saints. Yes, Google is solely interested in dominating the advertising industry. Yes, companies like Google can and possibly will turn into anti-competitive tyrants over time who violate user privacy and do everything in their power to obliterate competitors. However, the network neutrality debate was not started by Google. It was started by a very confused Ed Whitacre.

Network neutrality has always been about phone and cable companies trying to maintain power in the face of Internet evolution. If network neutrality confuses you (and it pretty clearly confuses Mr. Jenkins), at least understand one thing: network neutrality has always been about phone and cable companies trying to maintain power in the face of Internet evolution. You can't blame phone company executives for being terrified. They should be.

The evolution of the Internet is strangling decades old cash cows, herded across analog fields by monopoly dinosaurs who've been pampered by Uncle Sam for generations. As voice becomes simply data, charging nine dollars for services like caller ID or call waiting (both of which costs pennies to provide) becomes untenable. Suddenly, programs like Google Voice allow users to send free SMS messages, eroding hugely profitable SMS revenue. AT&T and Verizon, protected from competition for so long, are coming face to face with reality for the first time in generations.

With voice, video and other services all just bits, broadband has made cable and phone company empires as service providers irrelevant, whether they know it yet or not. That leaves them with one purpose: running a network. And while the baby bells make a perfectly healthy fortune simply selling flat-rate bandwidth in this new paradigm, investor pressure and the need for quarter over quarter stock improvement makes simply being incredibly profitable not good enough.

I have to admire one trick, however. Jenkins did flip one of the common stories. Usually the anti-net neutrality stories focus on the massive rise in internet growth and the threat of some non-existent "exaflood." Jenkins admits that's bogus: "Broadband growth is leveling out in the U.S." But... rather than note how telcos have been using the exaflood story to push for the right to break net neutrality, he pretends that this also is a reason to break net neutrality, because it means that broadband providers have to compete to steal customers from each other, and can't risk pissing off customers by blocking sites. Of course, that only works if there's real competition. And, in most markets, people have at most 2 providers. If both of them break net neutrality... then what?

While some will now insist that I support the legislation being proposed, let me make it clear that I do not. I am worried about the long term impact here. But, I do believe that the principles of network neutrality should be preserved, even as I worry about how the government might do it. And I am most certainly not convinced by the ridiculous arguments put forth about such "free riding." So, let's make the same offer to the WSJ that we made to Mike McCurry all those years ago. If you honestly believe that Google is "free riding" thanks to net neutrality, will you agree to pay Google's bandwidth bill? How about you exchange yours for theirs and make it a fair trade? Since they're doing so much free riding... it's cheap, right?

Filed Under: ed whitacre, free ride, holman w. jenkins jr., mike mccurry, net neutrality