Cleland served as Deputy United States Coordinator for Communications and Information Policy in the George H. W. Bush Administration. Eight Congressional subcommittees have sought Cleland’s expert testimony and Institutional Investor twice ranked him the #1 independent analyst in his field. Scott Cleland has been profiled in Fortune, National Journal, Barrons, WSJ’s Smart Money, and Investors Business Daily. Ten publications have featured his op-eds. For a full bio see: www.ScottCleland.com.
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The Federal Communications Commission has begun a high profile rulemaking process to undo the net neutrality rules that President Obama’s FCC passed in 2015. So it is imperative to get the basic facts right about the “networks” involved in “network neutrality.”
The entire justification for mandating “the strongest possible” regulation of Internet service providers rests upon the notion that ISPs are unique networks, and that only networks must be neutral. But those assumptions are inaccurate.
Let’s take the four most powerful ISPs: AT&T, Verizon, Comcast and Charter. Compare them to the four most powerful Internet cloud network providers (CNPs): Google, Amazon, Facebook, and Microsoft. The latter four also happen to be the most powerful corporate proponents of net neutrality regulations. By market value, these four CNPs have a market value ($2.066 trillion) three times greater than the four ISPs ($717 billion). The CNPs have far more commercial, social, and political capital than the ISPs.
The CNPs are global. ISPs are based only in the United States. Google and Facebook each have about two billion users; Microsoft over a billion users; and Amazon over 300 million users. AT&T and Verizon each serve around 100 million users, while Comcast and Charter each serve significantly fewer. On average, the CNPs serve around ten times more people than the ISPs.
Looking only at the U.S., the CNPs each serve around 250 million people. That’s in part because they are subject to no ownership or antitrust limits. That is not the case for ISPs, which means they are limited to serving around 100 million users. In the U.S., these CNPs serve at least two and a half times more customers than can ISPs.
In terms of Internet aggregation power, the four CNPs own 21 of the top 50 most visited websites in the world. The four ISPs hold just three, per Alexa stats. In terms of market or monopoly power, the big four CNPs each command monopolies or dominant 50 percent market positions in more than one market.
In stark contrast, the big four ISPs operate in competitive markets. They are limited by FCC rules and antitrust limits, giving them a market share of, at most, 33 percent. Thus if you are a consumer or a business in the U.S., you have more competitive choice for an ISP than any country in the world.
If you are an advertiser, Web publisher, or developer, there is no real competitive choice. You have to use Google for search advertising and Facebook for social advertising if you want to reach the global Internet audience. And if you’re a global seller of goods and services, you have to sell wholesale through Amazon, because it offers access to several times more online buyers than any other online retailer.
Some will object and say these CNPs are not Internet network providers, in part because they are net neutrality allies. But like ISPs, these CNPs lease or own vast networks of fiber and undersea cable connections between their data centers, encryption proxy networks, and video distribution nodes in most every country in the world.
In sum, the big four ISPs are not uniquely powerful Internet networks. The evidence overwhelmingly indicates that Internet giants are vastly more powerful in nearly every dimension.
It’s telling that the most powerful, non-neutral, cloud network providers support imposing the strongest possible regulations on ISPs, while simultaneously making the case that their own industry should have no regulation at all.
Can you say, “rent-seekers”?
[Originally Published at the Hill]