So how easy is it for someone with a political agenda to manufacture a crisis from normal economic trends? Judging by Monday’s Minneapolis Star-Tribune, the answer is: EXTREMELY.
An article entitled “A Net in Neutral” profiles the work of Andrew Odlyzko, net neutrality supporter and head of the University of Minnesota’s Digital Technology Center. Here’s Odlyzko’s basic claim: The Net isn’t growing as fast as it has been, the annual growth rate of Internet traffic has dropped to 50 percent and because of these trends, Congress should spur growth by passing net neutrality.
From a statistical perspective, this analysis wouldn’t stand up in a freshman year economics class. Look at the following hypothetical product growth and you’ll see why:
- Year Product users Growth Rate
Year 1 10 million
Year 2 15 million 50%
Year 3 21 million 40%
Year 4 27 million 28%
The fact is that MORE signed up in Year 3 than in Year 2 and that number stayed the same for Year 4. But if you look only at the growth rate, it (shock!) drops almost 50 percent from Year 2 to Year 4. Horrors!
This is what economists call the “Tyranny of the Small Base” and it’s an absurd way to base long-term usage projections.
It also shows why Mr. Odlyzko’s attempt to tie this to net neutrality is as weak as Paris Hilton’s DUI excuse. Of course the growth rate declines but the key measure – total amount of data being sent – continues to surge, which is the fact that’s driving the network’s expensive upgrades.
Two more points out of Econ 101 about new product adoption: First, it’s rarely lineal. Yes, you have surging growth initially but as the market gets increasingly saturated, like today’s broadband market, growth rates often come in spurts. Second, it’s doubtful that latecomers to the broadband web (in other words, the grandparents down the street) are going to use it as much as early adopters.
Finally, some of the other contentions in the article – we can’t tell whether they come from the reporter or Mr. Odlyzko – are especially ludicrous. For example, there’s this nugget:
“Traffic growth may be slowing for several reasons: The speed of computers isn’t increasing as fast as it once did….”
It’s unclear whether this is a reference to home PCs or servers, but in either case it’s an absurd rationale for changes in growth rates.
If this is the best that net neutrality proponents can muster to support net neutrality, they’re in worse shape than we thought. It also brings to mind the old saying, Give me the facts and I’ll see what I can do with them.
