Hands up if you can see the problem

February 27th, 2008

Net Neutrality is one of the biggest hot button issues among the nerd illuminati of the Internet right now. The simple question is whether all internet bits are equal, or should ISPs be allowed to privilege some bits (from their customers or people who pay them) over others.

There are some side issues here, but a big part of it is peer to peer. Which brings me to this story from today that online video distributors can save a lot of money by using peer to peer protocols

In the example given, Democracy Now saves $1,000 (of a $1,200 bill) by using BitTorrent. My question is – who ends up paying that $1,000? If we assume (and it’s not a great assumption) that everything is competitive, then that $1,200 represents the cost of pushing that many bits to end users. If it goes down, then it must mean that $1,000 worth of bits are now being pushed by someone else – in this case, the upstream bandwidth from the users.

So who pays?

At first, probably the ISP of the end users. Their bandwidth out gets used up, costing them money.

They’ll pretty quickly pass that on to the end users. Which means they’ll increase prices for everyone.

So what’s DemocracyNow really doing here? They’re pushing the costs of distributing from themselves on to end users. Which, due to the way pricing is set up, will be borne equally by everyone, regardless of how interested they are. In fact, people who have no interest at all in the video probably end up paying for this too.

I’m not arguing against net neutrality – there are other reasons why it’s a good idea. This is probably more an example of how the pricing for internet access is set up wrong – flat rate charges create strange incentives across the Internet, not just for the end users.

But that $1,000 saving? That doesn’t exist. You’re just making other people pay it.