Net Neutrality – The End Of Google's Biggest Subsidy

Authored by Tom Luongo,

Net Neutrality is gone.  Good riddance.

Lost in all of the theoretical debate about how evil ISPs will create a have/have-not divide in Internet access, is the reality that it already exists along with massive subsidies to the biggest bandwidth pigs on the planet – Facebook, Google, Twitter, Netflix and the porn industry.

Under Net Neutrality these platforms flourished along with the rise of the mobile internet, which is now arguably more important than the ‘desktop’ one in your home and office. 

Google and Apple control the on-ramps to the mobile web in a way that Net Neutrality proponents can only dream the bandwidth providers like Comcast and AT&T could.

Because, in truth, they can’t.  Consumers are ultimately the ones who decide how much bandwidth costs, not the ISPs.  We decide how much we can afford these creature comforts like streaming Netflix while riding the bus or doing self-indulgent Instagram videos of our standing in line at the movies (if that’s even a thing anymore).

Non-Neutrality Pricing

Net Neutrality took pricing of bandwidth out of the hands of consumers.  It handed the profits from it to Google, Facebook and all the crappy advertisers spamming video ads, malware, scams, and the like everywhere.

By mandating ‘equal access’ and equal fee structures the advertisers behind Google and Facebook would spend their budgets without much thought or care.  Google and Facebook ad revenue soared under Net Neutrality because advertisers’ needs are not aligned with Google’s bottom line, but with consumers’.

And, because of that, the price paid to deliver the ad, i.e. Google’s cost of goods sold (COGS), thanks to Net Neutrality, was held artificially low.  And Google, Facebook and the Porn Industry pocketed the difference.

They grew uncontrollably.  In the case of Google and Facebook, uncontrollably powerful.

That difference was never passed onto the ISP who could then, in turn, pass it on to the consumer.

All thanks to Net Neutrality.

Undercapitalized Growth

With the rise of the mobile web bandwidth should have been getting cheaper and easier to acquire at a much faster rate than it has.  But, it couldn’t because of Net Neutrality.  It kept rates of return on new bandwidth projects and new technology suppressed.

Money the ISP’s should have been spending laying more fiber, putting up more cell towers, building better radios went to Google to fritter away on endless projects that never see the light of day.

The ISP’s actually suffered under Net Neutrality and so did the consumers.

And therefore, Net Neutrality guaranteed that the infrastructure for new high-speed bandwidth would grow at the slowest possible rate, still governed by the maximum the consumer was willing to pay for bandwidth, rather than what the consumer actually demanded.

And, once obtained that power was then used to punish anyone who held different opinions from the leadership in Silicon Valley.

Think it through, Net Neutrality not only subsidized intrusive advertising, phishing scams and on-demand porn but also the very censorship these powerful companies now feel is their sacred duty to enforce because the government is now controlled by the bad guys.

Getting rid of Net Neutrality will put the costs of delivering all of this worthless content back onto the people serving it.  YouTube will become more expensive for Google and all of the other content delivery networks.  Facebook video will eat into its bottom line.

The ISP’s can and should throttle them until they ‘pay their fair share,’ which they plainly have not been.

The Net effect of Net Neutrality is that your ISP may charge you more in the short run for Netflix or Hulu.  Or, more appropriately, Netflix and Hulu will have to charge you more and we’ll find out what the real cost of delivering 4k streaming content to your iPhone actually costs.

But, those costs will then go to the ISP’s such that they can respond to demand for more bandwidth.  Will they try and overcharge us?  Of course.  AT&T is just as bad as Google and/or Facebook.

But, we have the right to say no.  To stop using the services the way Net Neutrality encouraged us to through mispricing of service.  If the ISP’s want more customers then they’ll have to bring wire out to the hinterlands.

Inflated Costs, Poor Service

Net Neutrality proponents kept telling us this was the way to help keep the internet available to the poor and the rural.  Nonsense.  It kept the internet from expanding properly into the hinterlands.

I live just over the county line in rural North Florida.  To the south is a town with cable and DSL.   Between cable franchise monopolies retarding expansion across county lines and Net Neutrality keeping margins thin, my home was 10 years behind everyone else getting decent bandwidth to keep up with the needs of the modern Internet.

Bandwidth needs artificially inflated, I might add, by the misaligned cost structure engendered by Net Neutrality in the first place.

It took forever for my phone provider to upgrade the bandwidth across the county line.  I begged them for a second line for internet service, they wouldn’t even talk to me.  Why?  The return on that new line wasn’t high enough for them.

If Google was passing some of the profits from Adwords onto the ISPs I’d have multiple choices for high-speed internet versus just one DSL provider.

As always, whenever the political left tries to protect the poor they wind up making things worse for them.

The Ways Forward

The news is good for a variety of reasons. With Net Neutrality gone a major barrier to entry for content delivery networks is gone.

Blockchain companies are building systems which cut the middle man out completely, allowing content creators to be directly tipped for their work versus being supported by advertising no one watches, wants or is swayed by.

Services like Steemit and the distributed application already built and to be built on it point the way to social media cost models which are sustainable and align the incentives properly between producers of content and consumers.

Steem internalizes the bandwidth costs of using the network and pays itself a part of its token reward pool to cover those costs.  So, all that’s left is content producer and their fans.  Advertisers are simply not needed to maintain the network.

Net Neutrality was a trojan horse designed to replicate the old shout-based advertising model of the golden age of print and TV advertising.  It was a way to control the megaphone and promote a particular point of view.

Look no further than the main proponents of it.  George Soros and the Ford Foundation are two of the biggest lobbyists for Net Neutrality.  Only the political left and its Marxian fantasies of evil middle men creating monopolies fell for the lies, as they were supposed to.

The rest of us were like, “Really?  This is not a problem.”  And it wasn’t until you looked under the hood and realized all they stood to gain by it.

Now, with Net Neutrality gone the underlying problem can be addressed; franchise monopolies of cable and phone companies in geographic areas.  These laws are still in effect.  They still hang like a spectre over the entire industry.  Like Net Neutrality, these laws concentrate capital into the hands of the few providers big enough to keep out the competition.

So, instead of championing the end of franchise monopolies, which county governments love because they get a sizable cut of the revenue to fund non-essential programs, the Left made things worse by championing Net Neutrality.

That also needs to end.  Even if you believe that franchise monopolies were, at one point, necessary.  They are not now.  IP-based communication is now fundamentally different than copper wire for discrete services like phone and cable.  Let people run all the copper and fiber they want.  There’s plenty of room in the conduit running under our sidewalks and streets.

Let a thousand flowers bloom, as the great Lew Rockwell once told me.

Then and only then will the Internet be free.

Comments

Sudden Debt God Emperor Sat, 12/16/2017 - 16:30 Permalink

It's totally not about that. Look, every person who surfs the internet gives away their private information for free.The total worth of your private information is about 920 dollars a yearNow they want the money from google and facebook who are stealing it and it's okay to take it away from those bastards BUTIt's just other bastards with even darker agenda's who will now steal your information.In fact, the consumer should get 2 options:Do you want to give away your private information?1. YES: Then you should get all the services for free.2. NO: and no means no, for every website that dares to send you a "cookie request" you should get a 1000 dollar incentive. There's so much money being stolen from people by stealing their private information that it would make your head spin.I really want to pay for it, and it really pisses me off that there's no option out where when you block all that shit, you don't even have internet.SO THE INTERNET IS TOTALLY NOT FREE RIGHT NOW!!!And now it's only getting worse. Who would want to invest in normal internet while "the high speed" internet will make so much money?THE NORMAL INTERNET SPEED WILL GO DOWN!!AND WHICH NEW COMPANY WILL BE ABLE TO COMPETE AGAINST GIANTS LIKE FACEBOOK AND GOOGLE NOW???YOU NEED LIKE 50 BILLION JUST TO START A COMPANY NOW IF IT BECOMES POPULAR!

In reply to by God Emperor

shitshitshit Sudden Debt Sat, 12/16/2017 - 17:14 Permalink

Stop whining and start educating yourself and your family.Use an ad blocker, remove browser history regularly, and get a VPN and you should be good to go. Stop using anything Google farcebook etc.  Prefer private services which are available for vey cheap prices. This should allow you to regain your privacy.  

In reply to by Sudden Debt

RAT005 zerocash Sat, 12/16/2017 - 11:59 Permalink

I've got to get caught up with this Net Neutrality, hopefully it means the folks in town will loose some of their bandwidth so I can have more living so far out of town.....it's only fair!I remember when this was being passed that the key topic was that successful right wing media was going to get throttled back in the name of fairness so less popular left wing media would be made to look more popular.  I mean talk shows, bloggers, things like that, not Hollywood.  So now, I need to understand why going back is the scariest thing...

In reply to by zerocash

Ex-Oligarch RAT005 Sat, 12/16/2017 - 13:56 Permalink

I thought the larger issue when the rules were initially debated was the extent to which the federal government has the power to regulate internet information transmissions, and in particular the extent to which such regulations could be based on (1) the content of the data and (2) the identity of the sender.  The underlying concern was that if an administrative agency (or agencies) had jurisdiction and discretion to mandate equal treatment of content and senders, it could also regulate to distinguish between content and senders. 

In reply to by RAT005

RAT005 Ex-Oligarch Sat, 12/16/2017 - 14:22 Permalink

Ex-Ogligarch, that is a great explanation.  This is what it is about.  This is why it came with the Obamanation, and left with Trump.I hope I'm not so bad at communicating that you thought I was describing something significantly different.  So people, pay attention, I don't think Netflix and Facebook are the center of the discussion, but what do I know, I don't have either.

In reply to by Ex-Oligarch

Endgame Napoleon RAT005 Sat, 12/16/2017 - 14:03 Permalink

The first time I heard about this, I thought it probably meant more decent-paying jobs for men who do the IT, lay the fiber optic cable and other tech jobs, as opposed to the low-wage call centers, which are full of moms.

But then they talked about rate hikes, and those are always dumped on the people who do not benefit from the crony-protection rings in the many mom-gang jobs across multiple industries.

Rate hikes are always shoved onto those who do not have extra money via spousal income, child support checks that cover rent, free EBT food, subsidized rent, monthly cash assistance and child-tax-credit welfare that tops out at $6,444.

I am talking about the individual accounts, not the family accounts with steep discounts.

Unlike the soccer mom, entertaining her kids with the digital babysitter of videos, I hardly ever play streaming video, but my internet service is more expensive than it was when I first got a smartphone, years after the first smartphone I saw in the hand of a teenager whose mom was getting signed up for more than I made in a week in just free EBT food.

This was back when I was working as a college grad for $12 per hour at the Department of Human Services, barely able to afford an apartment, with no cable and no internet. Nor did I have my own cell phone, much less a smartphone.

I also do not notice faster internet; my internet is often slow. Maybe, that is due to net neutrality, and maybe, that is due to being a low-priority individual account.

It is good that they will expand into rural areas, although it will probably mean even more competition for 1099 gig jobs with twice-as-high SS taxation, which is often the route that childless, single people with individual accounts must take, when the salaried jobs with benefits are always taken by moms with unearned income from either welfare and child-tax-credit welfare or from a spouse who also has a job with benefits, meaning they double up on something that costs the government an absolute ton due to the $260 billion tax exclusion to provide employer-based healthcare.

Of course, some of these jobs advertise as the best place to work for childbearing-age moms, offering as part of their low pay package free child care. This does not do single, childless individuals who must cover all household bills, including rent that absorbs half of their pay, any good.

Likely, the end to net neutrality will do some good for the same groups who are always the beneficiaries of anything that costs single, childless people more, namely the sex-and-reproduction crowd. Net nuetrality / No net neutrality.....Funny how that crowd always wins out, with the emphasis on one or the other side of that hyphenated word.

In reply to by RAT005

Utopia Planitia RAT005 Sat, 12/16/2017 - 15:21 Permalink

It's very simple - because the vast majority of simpletons simply take a concept by its title.  Net Neutrality sounds like a wonderful thing, but the title tells you nothing about what the law actually does.  And Mr/Ms Simpleton is not interested in investing the time to understand what the law says.Like all things demonrats do they chose a clever title (that is a complete LIE) for the law. And simpletons believed them.Like many things in life the only way for Mr/Ms Simpleton to get a clue is for their stupid decisions to get shoved right into their face (and wallet).  Short of that they will learn nothing. Hence the bawling fests that are taking place all across the country. It's like somebody offered to remove a leach that is sucking the life out of them and they scream NO!

In reply to by RAT005

Endgame Napoleon 847328_3527 Sat, 12/16/2017 - 14:13 Permalink

Under Obama’s net neutrality, the porn industry thrived, according to this article. So, Obama’s definition of “bad for you” must be pretty libertine [or] naive, like his ideas about pay-per-birth welfare and $6,444 child-tax-credit checks, which, when rent and groceries are covered by taxpayers, are often spent to finance beach trips with boyfriends or $800 tattoos. The moms will be getting even bigger child tax credits under this upcoming tax bill. A max child tax credit that is big enough to finance 9 / paid-in-full / cellular iPads was just not enough to reward sex and reproduction for citizens and immigrants with kids. On a cold day in July, maybe, they will charge them more to finance the new projects.

In reply to by 847328_3527

pods troubadourcapital Sat, 12/16/2017 - 12:59 Permalink

NN is better for customers of companies that cost shift bandwith to non customers.It was pitched as a way to protect content. In reality, it was merely a cost shift. Just like Obamacare was.It was a great scam though. I was a big believer that my ISP was gonna throttle ZH in favor of some mainstream sites. Total BS. ISPs can now tell these hogs to pay up for clogging the pipes.Only downside is streaming porn, but I rarely get to see that anymore. Most is just disgusting Jewmiliation of white girls anyhow,  so good riddance.pods

In reply to by troubadourcapital

pods Xena fobe Sat, 12/16/2017 - 13:35 Permalink

Sure they will. They will make NFLX pay for the bandwidth they use, forcing NFLX to raise prices, leading to fewer subscribers and less bandwidth sucked away from the pool making my experience a more pleasant one.Full disclosure, my new ISP is great, and they do look out for me. I pay a fair price, and no longer have bandwith issues. Of course it's not TW, so that helps. I pay for it though. Laying fiber ain't cheap.  At the rate things were going, everyone would merely toss out worthless "content" to be streamed at my expense. Videos are cheap to make. If there is no feedback via bandwidth cost, things get clogged up. ISPs don't care much about content, they manage bandwidth. And streaming video during peak time really stresses bandwidth. It was easy to test. Now the ISPs can tell they to pay up for their unlimited 4k streaming. Having market forces involved is a good thing.pods

In reply to by Xena fobe

TwelveOhOne scouzi Sat, 12/16/2017 - 15:02 Permalink

Exactly.  Saying "[server provider] gets bandwidth for free" is disgusting to me.[Server provider] pays so much more for their upstream than I do for my downstream!Bandwidth is being paid for at both ends of the spectrum.ISPs want to charge more?  That's abuse is what it is.

In reply to by scouzi

Col_Sanders TwelveOhOne Sat, 12/16/2017 - 17:42 Permalink

You're both right - and you're both wrong.Netflix (and other streaming content providers) *do* pay transit providers for bandwidth.  But they pay the *same* for bandwidth that the "normal" non-streaming services pay.  This is *because* of NN.The transit providers aren't allowed to charge them any more even though their streaming services are a greater strain on the networks.So the transit providers simply shifted the added costs down to *all* consumers so those who don't use Netflix end up paying part of the transit fees that Netflix should be paying and allow Netflix to keep their own customer's fees cheap.Removal of the NN rules will allow transit providers to charge different rates for different classes of service  Want to stream HD?  Pay more.  Want to host text-based HTML?  Pay less.  So those who aren't hosting bandwidth-intensive services may see their access costs go *down*...And  yes, this may mean that Comcast, who has a competing stream service, may charge Netflix more than they pay for it themselves.  What's wrong with that?  Would you tell Kroger that they aren't allowed to charge Lay's more for shelf space for a bag of chips than Kroger pays for the space for their own bag of chips?  Kroger *owns* the shelf space - they can charge what they want for it.  Lay's doesn't have to pay it.

In reply to by TwelveOhOne

quesnay pods Sat, 12/16/2017 - 13:50 Permalink

I pay for my bandwidth. Google pays for their bandwidth. There are no free rides or subsidies. Google, FB, Netflix, etc use more bandwidth because people use those services more. They (and consumers) paid for that bandwidth. There is nothing 'free' about. Don't believe me, try creating your own video streaming website. You'll quickly see how expensive bandwidth really is.If ISPs decide to shake-down Google,FB, Netflix, etc, I don't see how that benefits me. If anything I'm likely to see sites 'disappear' who refuse to pay the robber barons blocking the pipe.

In reply to by pods

lew1024 J bones Sat, 12/16/2017 - 17:39 Permalink

Google, Facebook, etc. all own their own fiber or buy it from the people who provide bandwdith.ISPs are routers and physical links in the last mile to the customer. I pay my ISP for traffic. We pull that traffic, Google and FB and etc. don't push it. It is our traffic, not Google, FB, etc's traffic.Network neutrality applies to that part of the internet.How is Google being subsidized by ISPs?No, the ISPs want to over-subscribe, to sell the same bandwidth on that last mile to many more people. They do that routinely, it is the reason that the network is slow on Weekends when everyone is watching Netflix.Abolishing network neutrality rules merely allow the ISPs to sell the same bandwidht again.

In reply to by J bones

Col_Sanders lew1024 Sat, 12/16/2017 - 17:52 Permalink

Google owns the fiber for the *first* mile.  They don't go from there directly to your ISP.They go from there to a Tier 1 provider like Level 3.  From there, it's routed and may cross one or more transit networks before it drops into your ISP network and then the last mile to your houes.The bandwidth in question resides on these transit netowrks - those between your ISP and the content providers.There is one big case in particular between Level 3 and Comcast.  The two of them had an agreement for "in kind" payment - they allowed traffic to freely cross each other's networks becuase it was almost a 1 to 1 trade.  Netflix signed a peering agreemint with Level 3, and suddenly Comcast was looking at a 20 to 1 ratio instead.  They told Level 3 the agreement they had was off and that Level 3 would have to start paying - and paying more for the streaming content becuse it was so network intensive.  Level 3 sued and claimed that NN didn't allow them to charge them more for streaming content.In th end, they made an agreement because neither side wanted to set any precedent that could hurt them in the future.

In reply to by lew1024

lew1024 Col_Sanders Sat, 12/16/2017 - 19:18 Permalink

Do I fail to understand content distribution systems, where Google delivers the respons from the most-local source, as close to my last-mile ISP as possible, and does so over their own fiber?In any case, it is the same argument: data is pulled from my computer through that chain from Google.  My last-mile ISP pays Level 3 for access, otherwise Level 3 wouldn't let them connect.It isn't FB's traffic, it is my traffic. If My ISP isn't paying enough to Level 3, why should we kill net neutrality for any level?And don't fool yourself, AT&T will figureo ut how to charge smart phones more. 

In reply to by Col_Sanders

Pool Shark Sat, 12/16/2017 - 11:51 Permalink

Good riddance to So-called "Net Neutrality"!

I'm sick and tired of cost-shifting and subsidizing all the fat welfare recipients who have nothing to do but sit home and binge-watch movies on Netflix!

You want to use other people's bandwidth? Fine, but YOU pay for it!

Pool Shark Stripey Magee Sat, 12/16/2017 - 12:46 Permalink

Yes, they are (at least in Kalifornia).
They also have "free" cellphones, cable TV, hair weaves, and custom nails.
Oh, did I mention they also have "free" healthcare, and their kids get "free" school meals IN ADDITION TO Food Stamps, and "free" daycare?
Oh, and they also get a $6,000 check every year from the Feds (EIC), which will be increasing courtesy of Rubio's REFUNDABLE child tax credit...

A single mother of 3 on welfare would have to get a job earning around $75,000 a year just to break even with all the free benefits she receives.
So, how many do you think actually go to the trouble of working for a living?

In reply to by Stripey Magee

XanII Sat, 12/16/2017 - 11:55 Permalink

Karl Denninger wrote like this years and years ago. And he was right i just can't understand why we need to subsidize Netflix. Now we will see if it's a hero or a zero. Too much smack talk of "disruptive" business. when in reality the business models rely on piggybacking and cost shifting