34 Comments

Summary:

On the front page of The Wall Street Journal, the clock started to tick on the “network neutrality.” Verizon Chief Executive Ivan Seidenberg told reporters: “We have to make sure they don’t sit on our network and chew up our capacity.” Anyone who forgot the comments […]

On the front page of The Wall Street Journal, the clock started to tick on the “network neutrality.”

Verizon Chief Executive Ivan Seidenberg told reporters: “We have to make sure they don’t sit on our network and chew up our capacity.”

Anyone who forgot the comments of AT&T’s Ed Whitacre and BellSouth’s CTO Bill Smith, this is just a reminder. The argument is that the phone companies are going to charge for better performance for say games, or movie downloads or software downloads. It is not a bad thought, though only in cases where latency is a big issue. The argument of better network performance, as many in the business would tell you, is a bit of chimera.


Even if you buy into the argument, as a consumer, what I would like to see is that if incumbents charge for the network access, then they pass on those savings to consumers. After all we are paying for the network – about $40 a month. But back to the WSJ story, in which I found this gem of a quote that sums up the antagonistic approach.

“During the hurricanes, Google didn’t pay to have the DSL restored,” said BellSouth spokesman Jeff Battcher. “We’re paying all that money.”

I don’t know if you charge people about $75 a month, or about $825 a year for DSL and phone service, it is your job to fix the line. Did Google come and take my money as monthly service fee? Even HMOs don’t make statements like these!

“We need a watchful eye to ensure that network providers do not become Internet gatekeepers, with the ability to dictate who can use the Internet and for what purposes,” said Commissioner Michael Copps of the Federal Communications Commission. He helped press to get the FCC enforcement power over issues of “net neutrality” as a condition of recent mergers in the telecom industry. “Net neutrality” is the idea that owners of phone and cable networks can’t dictate how a consumer uses the Internet or discriminate against any Internet content, regardless of the source.

We addressed all these issues in our podcast, Two Tier Internet. The full transcript is here.

…charge a premium from certain people who want better performance, that is fine. The minute they start imposing a toll tax, this quasi-toll tax for the access part of it, that is where things get a little complicated. That’s where, as a consumer, you have to stand up and scream, because why are you paying them fifty dollars when they define what you can see or what you can’t see? So we cross that bridge when we get to it. Right now everybody’s made threats, nobody’s followed through. So it’s something we have to watch very carefully.

You’re subscribed! If you like, you can update your settings

  1. Anyone who knows the history of the Bells know that this was inevitable. I bet Jeff Pulver is going bonkers right now.

  2. robhyndman.com » Blog Archive » Still More on Network Neutrality Friday, January 6, 2006

    [...] Om writes about the article today in a post titled “Slow Lingering Death of Net Neutrality?”, and links to a podcast that covers the issue. One of Om’s observations about the WSJ piece particularly caught my attention: Even if you buy into the argument, as a consumer, what I would like to see is that if incumbents charge for the network access, then they pass on those savings to consumers. After all we are paying for the network – about $40 a month. But back to the WSJ story, in which I found this gem of a quote that sums up the antagonistic approach. [...]

  3. Is this simply greed in it’s purest form? Are access providers envious of the advertising profits that the service providers reap. If so, why don’t they approach this in a true business-like manner and get off their duffs and create their own portals and content. If all they do is sell a phone and a pipe, then that’s what they should get paid for. Greedy …

    Some have teamed up with Yahoo, so how will that shake-out?

  4. BTW, this Verizon statement is reversing their public stance from a few months ago where they pledged not to interfere with service providers, else customers would depart. So have they since had lunch with their compadres at SBC and BS. Will cable join the front or does that matter?

  5. This is duopoly exploitation at its best and what I would consider it collusion (hopefully the government does too, but I doubt it since there isn’t a lobby for the consumer). These companies can’t come to grips with the fact that we (the consumer) want a fat pipe for data and thats all. Hey if they want to through in voice traffic for free, great. If they want to offer competitive services at competitive prices then that is a free market. Other than that let me do what I want with my data. I have already been told that I can’t choose my own SMTP provider. That is not net neutrality. I am paying $50 / month for a 3 MB connection cable connection. If I want to saturate that connection with video, or voice, VPN Data, or what ever, then I should be allowed.

  6. The eternal problem for networked industries is how to engage in rational price discrimination. When the network was a phone network, they did so at the service layer — customers paid more for long distance, vertical features, business lines, etc. But in the IP world, the network providers might not provide any services other than access. So they have to figure out how to price discriminate in access.

    So far all they have is bandwidth. Eventually, they’ll add bandwidth-on-demand and prioritization for latency-sensitive applications. Consumers will want their voice, video and gaming streams prioritized (especially in the last mile) over other applications. And since usage follows a power law (80/20 rule) they may also be driven toward usage tiers to properly associate network costs with the 20% of users driving 80% of capacity investment. Finally, they may also offer bandwidth allocation options for consumers who want more upstream capacity. And there will probably be other network capabilities developed.

    Once these capabilities are developed and in the market, wholesale deals will follow. Movielink is not the only content provider who will be interested in paying for network capabilities on behalf of its customers.

  7. As an internet subscriber, it seems that I pay for a certain amount of bandwidth already. That bandwidth allows me to access any online services I choose.

    If I access Google, Yahoo!, or MS via the bandwidth I’ve already purchased, why should my provider care?

    They already have caps on my monthly throughput, so where exactly are they losing money?

    Maybe it’s all marketing speak – like all of the “unlimited” VoIP packages that are sold as such, but really aren’t.

    They’re simply trying to double dip and get paid for the same traffic from two different people – me for the access and Google for gasp actually sending me data via that access.

  8. Om, I think you’re being too easy on the telecoms in the podcast. Drawing a line between obstructing competitors’ services (bad) and charging extra for premium service (good, or at least OK) is, to my mind, short-sighted.

    First, it will result in the non-premium ‘net being ghettoized – under-invested in capacity and services. Increasingly everything will become ‘for an extra fee’ – Canadian example is Shaw, which charges a surcharge to provide QoS on third-party VoIP.

    Second, the networks should be working hard to improve the carrying capacity and speed of delivery for all services – including those offered by the Vonages of the world. If their only business was the pipe, and they were competitive and not duopolistic, they would be doing this. But they’re not competitive, and they are competitors to the application providers (like the Vonages of the world), so they won’t do this as vigorously as they should – to do so would benefit their competitors. Instead, they’ll improve their own services and the services of those who will pay them.

    They wouldn’t be able to do this – or at least not as easily as they can now – if they did not have near monopolistic control of the pipe.

    My $.02.

  9. Excellent Stuff. In the past Om has commented on how the telecoms will want to take the open internet and convert it to the “walled garden” they love. The challenge for the telecoms is that Google spends all of its R&D on applications/services while the telecoms will have to spend on “the network” and “applications”. Most believe that they’re gonna lose on the applications front and resort to nasty tactics on the network front. Let’s face it, they are paying for the network and are going to watch as the application providers get the majority of the revenue and glory. It is gonna get much more ugly. Let the fun continue.

  10. The knife cuts both ways, just not as deep — what would the access providers think if content providers charged access providers for servicing their customers? Without content it’s just a big empty pipe.

Comments have been disabled for this post