About once a week, Michael writes on his companies, technology, his Broadway debut, lawsuits ... basically whatever he feels like. His aptly named "Michael's Minute" started as a forum posting back in the MP3.com days and now reaches an audience of several hundred thousand. And he really writes them all himself! Sign up here for the Michael's Minute.
January 20th, 2014
I think it's a positive development that network neutrality is blown up. Fewer government rules equals more freedom and ultimately a more efficient, balanced and competitive landscape.
Part of capitalism is a constant struggle between manufacturers, distributors, and retailers. Each party strives to get the largest portion of the revenues for themselves. Each uses their leverage to push the other parties to charge the lowest prices possible. This drives ever-increasing efficiencies meaning lower prices or more value or both. It's the primary reason capitalism is ever improving our lives and why people today live better than those 10-25-50 years ago. It's why 80% of "poor" Americans have phones, TVs, refrigerators and most own a car and live in houses bigger than anywhere else on the planet.
This battle between companies can be brutal to watch as players get squeezed and change is forced. A recent example is Directv and The Weather channel. Currently Directv pays The Weather Channel 12 cents a month for their channel. Viewership has dropped from 300,000 daily viewers to 200,000 so Directv wants to cut the rate to 9 cents a month. The Weather Channel is demanding a 1 cent raise to 13 cents a month saying they have expanded their content to include realty programming. Until it's resolved, The Weather Channel has been removed from the lineup replaced by a new channel Weather Nation. Is Weather Channel worth 12 cents a month? The tug-o-war of capitalism will determine this. If Directv is wrong customers will complain and they'll capitulate and pay the fees. If people don't care about The Weather Channel then Directv's cheaper replacement will suffice and The Weather Channel will be forced to make more compelling programming or accept a lower fee.
These economic negotiations are commonplace in every industry with participants exercising their leverage. To get a movie carried in a theater may require conceding to stiff financial demands unless it's a popular movie in which case the theater owner may keep as little as 10% of the ticket price. To get a product carried in a commerce catalog typically requires buying advertising. Want your product on Shark Tank? You'll need to agree to give up 10% of your company just for the privilege of being on the show.
Similar dynamics play out for net companies. When Facebook saw Zynga making large revenues in their gaming business on the Facebook platform, they demanded and got 30%. Apple requires app vendors to pay them 30% commission. Google charges companies to be on their network. A good example is Google's shopping comparison service where only vendors who pay are displayed.
Horror stories are painted about what will happen without network neutrality. Fred Wilson writes about how startups won't be able to get investment monies. I find this analysis illogical. ISPs won't target poor startups to extract fees from. Instead they'll go after those making the big dollars like Google, Facebook and eBay. Each of these companies require those using their systems to pay fees. Listing a product on eBay requires a fee. Sending a notice to all those in your network on Facebook requires a fee. Getting your message out to Google's users often means a payment. Nobody seems to recognize the striking parallels of these net giants charging for usage of their network but resists others who ask for the same rights. These net giants have done a masterful job of using startups and economically unsophisticated egalitarians as defenders of this lopsided policy.
Understand that network neutrality is about money not the sympathetic cause you might hear about in the press. Nobody is blocking people from getting to .gov websites to apply for welfare or jobless benefits. Neither will it strangle innovation or prevent startup from raising money or flourishing.(I do net startups like Dar.fm and Radiosearchengine right now so I know and care about this.)
These corporate battles play a vital role in capitalism by fostering partnerships or competitors, increasing efficiencies, and balancing profits. It's undeniable that Google is tremendously powerful. Some are already calling for government regulations to limit Google. That would be unnecessary if competition is allowed to operate unimpeded. Other corporations will demand payment from Google. If they get it, they may use those monies to back a competitor. If they do not get monies they'll be highly motivated to fund and promote an alternative. That alternative must be sufficiently good or consumers will revolt. Such is the natural balance of competition. Just ask the people at The Weather Channel.