Odlyzko: Neutralità e non neutralità

15/4/2011

"La maggior parte degli attuali dibattiti sulle politiche delle telecomunicazioni non sembra partire da una prospettiva corretta, sia economicamente che storicamente. Esistono discussioni di ampio respiro sui diversi approcci alla neutralità della rete, 
con molti osservatori europei che la respingono, come se si trattasse esclusivamente di un problema americano. 
D'altra parte, alcuni osservatori americani non capiscono per quale motivo gli europei considerino importante il problema delle tariffe dei servizi di roaming internazionale mobile. Contemporaneamente, 
in settori apparentemente diversi - come quello farmaceutico - si sono aperte aspre polemiche sull'estrema variabilità dei prezzi praticati nei diversi Paesi su uno stesso farmaco dal medesimo produttore. A livello globale, si sente la mancanza di una prospettiva che permetta di vedere tutte queste problematiche con un unica visione coerente. Eppure non dovrebbe essere così difficile".

Questa premessa apre la riflessione firmata da Andrew Odlyzko su neutralità e non-neutralità nei mercati

       Neutrality and non-neutrality, from the past to the future
Andrew Odlyzko Most current discussions about telecom policy appear to lack proper perspective, from both economic and historical points of view. There are extensive discussions of different approaches to net neutrality, with many Europeans observers dismissing it as just an American issue. On the other hand, some Americans wonder why Europeans have to make a big issue out of international mobile roaming fees. Simultaneously, in seemingly totally different areas, such as pharmaceuticals, there are hot controversies about wildly varying prices for the same drugs from the same manufacturers in different countries. What is generally missing is a perspective that puts all these developments into a single coherent view. Yet such a perspective is not hard to present. History, going back centuries, is full of similar pricing controversies, in many cases amazingly similar to current ones. This long history, fortified by economic explanations for the existence of such controversies, guarantees that they will persist into the indefinite future, as no definitive solution exists. They will therefore provide generous meal tickets for generations of lobbyists, lawyers, and economists. The fundamental issue is the degree to which service or goods providers are allowed to discriminate among their customers. Basic economic theory tells us, and empirical evidence reaffirms, that more control allows providers to increase revenues and profits. Both theory and evidence also show that under some conditions, this is to the benefit of customers. The real question is about the appropriate balance, and this question has been debated, explicitly or implicitly, over centuries. The basic arguments have not varied much, the providers always pleading high costs or need to expand, customers resisting on the grounds of ruinous charges or unfairness. Probably the only novel element in recent times has been the argument, based on property rights, that providers should have complete freedom in pricing. This does seem to be new. Traditionally, law has imposed special non-discrimination and duty to serve obligations on those employed in certain industries. The understanding was that untrammeled control for providers in such industries, in particular transportation, inn-keeping, and communication, was similar to a lack not just of property rights but of law itself. It would expose society to arbitrary actions that repressed economic activity, either by making enterprises unprofitable, or introducing prohibitive degrees of uncertainty. Aside from basic non-discrimination principles of law, there were often statutory requirements that extended these principles and made them explicit. Yet many of these requirements compromised with the economic need to allow some forms of discrimination. Thus, for example, the 1833 charter of the London and Birmingham Railway in England envisaged a degree of structural separation, with the company providing only the rails, and other carriers being able to bring their own wagons and locomotives onto those rails to provide actual carriage service for customers. This charter (3 William IV, c.36) provided that the railway "shall not partially raise or lower the Rates or Tolls payable under this Act, but all such Rates and Tolls shall be so fixed as that the same shall be taken from all Persons alike, under the same or similar Circumstances." Yet the maximal tolls set by this Act (the railway could charge less, but not more) varied by a factor of three between goods such as cotton clothes and compost. Also, the extent to which providers could discriminate, or could engage in vertical integration, varied historically, depending on economic circumstances. Thus, for example, English canals were in most cases barred from being carriers. This prohibition was lifted in the 1840s, when canals were impacted negatively by railway competition. Moreover, even before this change, the tolls the canals collected depended on the cargo (as with railways such as the London and Birmingham one), and so were totally uncorrelated to costs, and thus required (as in the case of railways) the equivalent of the modern "deep packet inspection" to determine what was being carried. These examples illustrate the general historical trend for society to balance the competing incentives, depending on the circumstances of each case. In general, the greater the costs, the more power to discriminate is given to the providers, although that is often controlled by fairness rules. (For example, private colleges in the United States practice an extremely discriminatory policy, with affluent parents paying the full tuition, and those earning less benefiting from discounts, called scholarships. However, this policy is carried out through policies that those colleges assure the public are based on rules and "fair.") Hence precedent and economic logic suggest that neutrality rules should be based on detailed evidence of costs, something that is seldom seen today. The process of finding a compromise between the incentives to discriminate and to have equal treatment was seldom free of politics, and the outcomes most likely were seldom exactly optimal. This is nicely illustrated by the following citation from a report of a UK 1867 Royal Commission, writing about the Stockton and Darlington Railway, which opened in 1825, and was a key step in the development of this industry: It is worthy of remark that in order to check the use of this line for conveying coals for shipping, and to confine it to inland traffic, parties interested in rival ports contrived to insert a clause limiting the charge for the haulage of all coal to Stockton for shipping, to one halfpenny per ton per mile, whereas the rate of fourpence per ton per mile was allowed for all coals transported for land sale. It was supposed by all parties that it would be impossible to carry coals at such a low rate without loss; but this rate not only turned out profitable, but formed ultimately the vital element in the success of the railway. This quote illustrates not only the political interference in policy making that was and surely will continue to be ubiquitous, but also the difficulty in regulating rapidly developing technologies. Tolls that were "supposed by all parties" to be ruinous turned out to be profitable, as incremental changes in the newly developed steam railway lowered costs. Hence there is no reasonable hope of coming up with a fixed set of rules that will work in general. This means that regulations will have to be flexible. Yet they should not be arbitrary or too heavily affected by politics, in order not to inhibit economic activity, another difficult compromise. That regulation will be required by society there seems little doubt. Claims that there haven't been any serious problems concerning net neutrality in telecom and so there is no need to regulate are easy to dismiss. Not only have there been problems recently, but history shows that providers, if allowed, will discriminate, just as the economic incentives suggest. Very often they will do it even when there is competition, much less a monopoly. (There are many examples of competition leading to increased discrimination.) They will even do it when there is regulation, by looking for ways around the rules. Thus, for example, English canals that were barred from the business of serving as carriers, sometimes managed to exert extra control by gaining control of warehouses. In some cases regulation simply could not deal with the complexity of the industry at the desired level. The early English railways were obliged by their statutes to allow carriers to use the rails for movement of their own wagons. However, in practice those railways frustrated such requirements by not providing water for the carriers' locomotives or sidings for loading and unloading cargo. The result was that Parliament conceded to railways monopoly carriage rights. Regulation in the future is likely to be even more difficult. While the world is not moving at the proverbial "Internet time," many changes are taking place faster than before. In addition, some of the most interesting changes that could lead to a reshaping of our economy are taking place in software, in the architecture of the information systems, such as cloud computing and social networks. In the traditional physical world, of physical infrastructures, regulators had some tools at their disposal that are less applicable now. Service providers, even when they clothed themselves in the mantle of private property rights, frequently had to rely on the coercive power of the state to acquire land or rights of way, and the state could condition the grant of such rights on proper behavior. In the online world, that is not available. And it is very tricky, for example, to decide whether a change in a web search algorithm is driven by the need to control activities that pollute search results, or by the desire to enhance the prominence of a service controlled by that search engine. Thus we are bound to be involved in very messy proceedings, and the only safe prediction is that lobbyists, lawyers, and economists will do well. Endnote: The subject of this note is dealt with in more detail in two papers by the author that appeared in Review of Network Economics: 1. Network neutrality, search neutrality, and the never-ending conflict between efficiency and fairness in markets, http://www.bepress.com/rne/vol8/iss1/4/ 2. The evolution of price discrimination in transportation and its implications for the Internet, http://www.bepress.com/rne/vol3/iss3/4/

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