15 January 2014

Major Kong Falls Over Switzerland

Net neutrality is dead!!! Long live Robo Cop!!! Or, what does the future hold now that net neutrality is gone?? The problem for quants is that, while data driven analysis makes perfect sense in the real world, i.e. the ones driven by forces of nature, the process gets squishy when the rules of the game change at the whim of humans. Most often, those rule changes are made by those who benefit from the change, and which change is often hidden from the public at large. And that group includes many of the quants.

When there is massive policy change such as this, the job of analysis is to consider how behavioural incentives have changed. What behaviours, previously forbidden, and which can turn a profit, are now legal? Who wins and who loses? The swan may not be black, but gray enough as to not matter.

Verizon, the entity which initiated the court action says:
"Verizon has been and remains committed to the open Internet, which provides consumers with competitive choices and unblocked access to lawful websites and content when, where and how they want," the company said in a statement. "This will not change in light of the court's decision."

By way of comparison, after the voting rights act ruling, those who made the ruling claimed that the law had worked, and nothing would change, because, well, the law had worked. Within 48 hours, those purely democratic Southern states which would never, ever return to past bad behaviour, set about undoing voting rights. You can look it up. Follow the incentive.

Anyone who actually believes that is a fool. The whole point of killing neutrality is to segment the market, and dump any segments which aren't "profitable enough".
In 2002, the agency said Internet service should not be subject to the same rules as highly regulated utilities, which are governed by regulations on matters like how much they can charge customers and what content they can agree to carry.

So, who was running the FCC in 2002?
Michael K. Powell, who was F.C.C. chairman in 2002 when the agency set up its Internet governance structure, said, "Today's historic court decision means that the F.C.C. has been granted jurisdiction over the Internet."

Then, who is Powell? Well, he's Colin's son; appointed by Clinton; and toadied for Bush. He now heads up the cable lobby.

Who, in the current world of Darwinist Capitalism, is the master of market segmentation? That would be Apple. Market segmentation means not only varying price to capture consumers' surplus (the notional version of the gambit) but also to remove market segments from supply. There has been in the common lexicon for some years the term 'digital divide', wherein the less wealthy have less of the digital domain. If the less wealthy don't have access to the innterTubes on a level playing field, this becomes yet another case of not wearing an Old School Tie (the Brits will get that; Yanks may be not so much). To the extent that current affairs reporting becomes beholden to innterTubes for dissemination, we can expect a few changes. First, the ever more concentrated control over the innterTubes will provide only 'good news'. And, second, the less wealthy will get 'good news' which portrays them as the cause of all that is bad with society. Fascism, as defined by Mussolini, is government by and for capitalists. As the information superhighway becomes the only path for information, and is controlled by a handful of capitalists, what's the incentive to not mold the information?

Remember: the 'free' parts of the innterTubes run on adverts (Wikipedia being an exception), and Apple has shown that segregating out the non-buyers from its sphere is more profitable. With the carriers now free to segregate their customers, why would they not? Why would they not make deals with Netflix, et al, to provide highspeed connections to wealthy neighborhoods/towns/cities, but not to South Buttfuck? Of course they will. There are sites already which catch my use of Adblock Plus, which is more to preserve bandwidth than to avoid ads (although I've never clicked on one and never will). Some won't let me in, others can be fooled. Market segmentation at work.

Of course, there is no such incentive. The incentive is to, Darwinist/Rand fashion, crush the weak under the boot heel. And, there is no punishment for being a bad actor.

The allure of innterTube ads is that they're more focused than print ads. But net neutrality limits the ability to segment aggressively. The time will come when sites will not only block those that don't view or click ads, but don't buy. Who better to enforce this segmentation than the carriers? Rather than each advert owner having to keep track, the carriers offer up a throttle: they'll keep track of those who buy and those who don't. Those who don't get blocked from some sites, and get reduced bandwidth in the bargain. In due time, the innterTubes will become like the Apple ecosystem: of, for, and by the top 20% of the wealth curve. That Old School Tie will be adorned with the Verizon Hyperspeed tie tack.

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