The smell of a bad net neutrality argument

NOTE:  There are follow-up posts available here and here.

Forget the obvious jokes about broadcast content being an open sewer:  Alan J. Roth over at the Congress Blog actually, literally thinks that Washington, D.C. sewage treatment has a lot to teach Netflix:

I have two jobs. One of them – the full-time job that pays the bills – involves directing government affairs for a trade association of internet service providers (ISPs) and telecom companies. The other – a volunteer position – is my service on the Board of Directors of the District of Columbia Water and Sewer Authority (WASA).

And what is this connection that Mr. Roth has seen betwixt his two modes of employ?

I read Netflix CEO Reed Hastings’ January 26th letter to his shareholders [link here] offering his views on who should bear the costs of transporting and delivering his company’s high- volume, bandwidth-hogging Internet video service to its customers. A light bulb went on in my head: There’s a lesson that Hastings and his customers could take from how the Washington area pays for sewage disposal.

At this point, I’m dubious but curious.  Roth goes on to explain that the District owns a major sewage treatment plant in Blue Plains that serves suburbs beyond D.C.:

The suburbs’ sewage gets to Blue Plains via the same kind of “regional front doors” that Hastings described in his shareholder letter. A series of interconnection points link the suburbs’ sewer lines with the “last mile” that WASA operates through DC on the way to final treatment.

So there’s the analogy:  Roth thinks that sewage line’s “last mile” can be compared with with broadband’s last mile.  What’s his point?

Unlike Netflix’s self-serving suggestion that it should pay only to transport its bits to a regional gateway, after which the costs of delivery to the end point would fall on others, [the regional sewer services in D.C.] approached the costs of last-mile delivery differently. Each wholesale customer – that is, each suburban authority sending sewage to DC – pays a pro-rata share of the capital costs for Blue Plains and related transmission facilities, based on an agreed-upon allocation of the plant’s capacity. Operating and maintenance costs are shared based on each suburban customer’s actual flow of sewage to the plant.

By contrast, the “Netflix model” proposes to spread the costs created by Netflix customers to other consumers who derive no benefit from Netflix’s video bits. If WASA operated this way, suburban retail ratepayers would be billed by their own wastewater authorities for the relatively smaller costs of transporting their sewage to the interconnection points at the DC line. After that, DC retail ratepayers would have to pay all the costs of not only transporting suburban sewage to its ultimate destination at Blue Plains, but also for all the costs of processing and treating the suburbs’ waste there.

If I understand Roth’s analogy correctly, he has completely misapplied it.  Consider:

1.  Netflix is the analogue to the Blue Plains treatment plan.  Netflix provides the value (clean water/streamed video) that the consumer ultimately wants.  Local ISP’s are, in contrast, merely the D.C. suburbs with in-home connections but without adequate sewage treatment facilities.

2.  Netflix has built (or rented) its own sewer/data lines right to the point where the suburb/ISP takes over.

3.  Why shouldn’t the ISP only be paid for “the relatively smaller costs of transporting their sewage to the interconnection points”?

Am I missing something here?  Or is this argument really as self-defeating as it seems?