Allowing the internet to provide different services for different applications is a more efficient use of existing resources and will result in higher quality of experience for end users. Unfortunately telephone/video/internet service to the home is often a monopoly or near monopoly and service providers have a proven history of taking advantage of this fact with inferior service and high prices. So as a society we cannot trust a for-profit monopoly-granted organization to not take advantage of service differentiation to confer unfair advantages to incumbent or internal services. This is why network neutrality is important.
However, there is another solution. It is now technologically possible to create an automated marketplace that allows applications running at the end user or in the web-application to purchase an end-to-end pathway with specific quality guarantees. It would look like this when connected to cable networks (mobile, etc networks are very similar):
This marketplace needs to be available to any customer and be the only way to purchase service. This creates a "level playing field" that fosters innovation. Through this marketplace an internet startup has access to the same bandwidth as an incumbent or internal web service provider. Services sold in the market can be tracked to ensure that it does not affect existing "baseline" contracts with customers.
The Bitcoin network is the only payment processor that can service this network due to its security model, pseudo-anonymous transactions, continuous micro-payment capabilities (payment channels), and irreversible transfers. With Bitcoin "payment channels" customers can continually pay fractions of a penny (pay-as-you-go) which ensures that the the payment matches the service provided. To protect the service provider, irreversible transfers are needed to eliminate chargebacks, fraud, and the overhead of collecting and storing the identity and payment information required with traditional trust-based payment networks. Pseudo-anonymous transactions ensure the "level playing field" -- the market cannot offer a particular company a better deal if it does not know who is purchasing the service.
In short, it is not feasible to use traditional payment processors for this marketplace because of high fraud rates for digital goods, communication of identifying information (which could be used to offer cheaper service to favored customers), and inability to cost-efficiently handle continuous micro-payments.
Introduction: If you could trust your ISP, you would not want Network Neutrality
To understand this, you need to understand that there are multiple metrics used to measure network performance. And services really do have different requirements.
This is called QOS or Quality of Service, and the 3 most common metrics are bandwidth, latency, and jitter. Bandwidth is the one that you know -- its how many bytes you'll receive per second, on average. Latency is if you send a message, how fast will you get a response? Jitter is how much the time between packet arrival varies.
So if you are uploading or downloading all your photos from DropBox, all you care about is bandwidth. If no bytes are transmitted for a few seconds, you don't care. All you care about is when the interminable upload will be over!
If you are playing a twitch video game you care about latency -- you need to dodge that incoming RPG so you need the game to react to your keystroke as quickly as possible! Its good to minimize jitter, but remember the game world is simulated on your system so it will not freeze. However if you have ever seen other characters suddenly "pop" somewhere else, that is caused by a large packet gap (high jitter).
If you are watching a movie through a set-top box, you mostly care about jitter. The set-top box does not have much memory; it can only hold a few seconds of the movie before playing it on the screen. So you need a steady, unchanging stream of data or the movie will freeze and jerk. Bandwidth is the second most important -- a higher bandwidth means clearer, HD video. Latency is completely unimportant (within reason). It does not matter if it takes the data packets .5ms or 1000ms to get to you -- the only difference is that the movie begins 1 second later.
From a consumer perspective, it does not make sense to pay for a connection that can simultaneously handle HD movies, massive uploads, and "twitch" video games 24 hours a day 7 days a week when you only use these services a few hours a day.
There is no technical barrierToday it is technically possible to create custom QOS data flows into your home. This is why your ISP does not need to fiddle with your cable box when you upgrade service and why when you don't pay your bill, nobody needs to drive by to shut off your service. In the mid 2000s, I helped specify the cable network protocol that enables this (its called PCMM or Packet Cable MultiMedia) and worked at one of the first companies enabling PCMM services. Today, similar protocols exist for mobile networks, and OpenFlow is an effort to create a unified protocol that will allow the creation of QOS flows across the entire network. At the same time NFV (Network Function Virtualization) is an effort to move the source of the data closer to the consumer -- this ability could be part of the same marketplace.
But here is the problemNetwork Service Providers* (NSP) have a monopoly on the data into your home. Given the opportunity, they will behave no differently than any other for-profit company and abuse that monopoly to provide inferior service at high prices.
For example, when Fiber-to-the-Home entered my neighborhood, my current cable data provider offered to double my bandwidth for free.
And I have personal experience with how painful it is to deploy the simplest services into NSP networks. In the mid 2000's I worked at a small cable-industry startup company. We were demoing a program that sat in your system tray (where all the little icons are on the right) that looked like a speedometer. But rather then just telling you the network speed, you could grab the needle and drag it higher to get more bandwidth to your home. Pretty awesome right! Surely there would be a market for this... but have you ever actually seen it?
The two key reasons for network neutrality are:
1. Permission-less innovation: The network service provider should not be placed in a position where it can offer or withhold bandwidth from a service, or negotiate differentiated pricing based on the service type or provider. If it is in this position it can influence or outright control what services run over its network. In fact, by taking an active role in "allowing" a particular type of data on its network, it may find itself legally required (or scared by litigation) into acting as a "policeman" of this data. Additionally, it may offer better pricing to incumbent or in-house services which will have a terrible effect on the technological innovation that has driven our economy for the last 15 years. Netflix would not exist because it is stealing cable TV revenue...
The market described above solves this problem...
2. Breaking currently negotiated contracts: If I am paying for 10mb/s, I paid for 10mb/s TRAVERSING the entire ISP network. The contract did not say "10mb/s only if nobody else is paying more at that moment", or "we'll send you 10mb/s if packets magically appear on our network, but we are limiting what Netflix can send to us so in reality you'll only get 1mb/s."
I believe that point 2 is not an issue long term. Do "coach" airline seats cost more because first class reduce the total number of coach seats? Does "bleacher" seating at the ball game cost more because of box seats? In my experience the opposite is true; companies are able to offer reduced "basic" prices and expanded capacity due to their high margin offerings. As network capacity increases to fill high-margin QOS demand, ISPs will be able to meet their baseline promises and have extra bandwidth left over.
The real problem today is that the lack of a marketplace for QOS on-demand has caused ISPs to "oversubscribe" their networks -- that is they have collectively promised much more bandwidth to all their customers than they actually can provide. So this ISP contractual "promise" is actually more of a maximum, when customers actually want a promised minimum. The existence of a QOS market aligns what the customer wants to buy (guaranteed minimum performance for a certain time) with what the ISP is selling.
* In this blog post I'm going to use the term "service" to mean any company that provides a web site or other internet accessible service (like video streaming, instant chat, etc). And I'll use "network provider" instead of ISP (internet service provider) because my observations apply to every networking company in the route from the service provider to the customer, not just the ISP that the customer has signed up for.