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Summary:

Months after he sparked off a debate over network neutrality, SBC/AT&T chairman and chief executive, Ed Whitacre, is again making threatening (and very confusing) noises. In a chat with the Financial Times he said: “I think the content providers should be paying for the use of […]

Months after he sparked off a debate over network neutrality, SBC/AT&T chairman and chief executive, Ed Whitacre, is again making threatening (and very confusing) noises. In a chat with the Financial Times he said:

“I think the content providers should be paying for the use of the network – obviously not the piece from the customer to the network, which has already been paid for by the customer in Internet access fees – but for accessing the so-called Internet cloud.”

This is a different tact from the first time around. He had originally complained that folks like Google and Yahoo were getting a free ride on their pipes, and should pay them. Well, consumers had paid for their DSL connections, many pointed out, a big brouhaha ensued. Techdirt weighs in on FT comments,

He’s actually suggesting that when we buy bandwidth, we’re just buying the bandwidth from the end-point to the backbone… and everything else is just free.

His latest comments however have me confused. So essentially what he is saying, no no not charge for the content that travels on the last mile, but charge on the long-haul and metro network. Given the pricing trends in that market, that’s not too much money. As a very smart man on a private mailing list points out, the Internet has pushed the cost to the edge, so how much money there is to be made by charging content providers for QoS?

I bet these issues (and comments) are going to become fodder for US Congress which is going to start taking a closer look at the Network Neutrality in coming months. The interesting part of the equation is that even businesses are feeling a little threatened by the RBOC posturing. James Blaszak, whose law firm, Levine, Blaszak, Block & Boothby, who works for large companies on telecom issues recently told eWeek:

“If I pay for the loop that gets me access to the network, why is it that someone who wants to send me something should also pay? What if they say, to get to your customers for you to sell your wares, we want a share of your revenues? Once you buy into the notion that the telephone companies should be able to charge entities other than those that are buying access to the Internet, I don’t know where you stop.”

  1. [...] And, from the other end of the spectrum, ATT raises the toll road question again per Om Malik. [...]

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  2. Whitacre is just being a grumpy nut if you ask me. The days of Ma Bell charging whatever it wanted because it was the only play in town are long over. Whitacre is really going to have to give up on this idea of trying to find the right weasel words to try and justify the creation of arbitrary fees for content providers.

    To put this into terms the guy would understand, basically he is saying that if I made a phone call from myself to a service like Moviephone that the Moviephone people need to pay N times + 1 transit fees, where N = the number of telco networks Moviephone wants to be able to serve customer phone calls through in addition to paying whomever they already get phone service through.

    As you can see from my example, if any Telco tried to propose this madness for voice calls you would hear people screaming bloody murder.

    This blatant grab for money needs to be stopped ASAP before the fools in Congress somehow get the idea in their head that Whitacre’s position is A-OK once those checks to the lobbists in DC cash in.

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  3. I keep thinking this is all about VOIP, no? I mean, text, even lots of it doesn’t suck bandwidth like voice. So why the steadfast avoidance of mentioning actual bandwidth hoggers? Surely nothing to do with a use of these pipes which strikes at the core of the AT&T’s business?

    They want to price VOIP out of business, well, all but their own.

    j

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  4. Voip is not much bandwith compared to video. I can see where there could be a change in supply and demand for bandwith as traffic patterns change with time, due to new media transfers.

    The pipes have to compensate and adjust their infastructure and billing accordingly, but as a manner of economics, not a matter of fact. i.e. let the market dictate the price based on competitive measures. Oh, I forgot, these are near monopolies.

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  5. Gotta read this one on Verizon’s appropriating 80% of their network for their own usage (TV). Where does this leave the public internet?

    http://yahoo.businessweek.com/technology/content/feb2006/tc20060202_061809.htm

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  6. Re: Rick’s comment on the BW article: Does anyone know exactly what the “documents filed with the FCC” are?

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  7. Bandwidth issues have nothing to do with VoIP. Voice is trending to zero or free, so who really cares about that. VoIP takes up very little space, so its not a bandwidth issue. The whole argument of pipes is coming. How can the pipe owners make money off of the future services that will be offered over their pipes.

    Broadband is the future, Verizon’s fiber to the home shows that, but the must ensure that the other services that are delivered can be monitized, because if all content trends to zero, then their investment is a waste.

    We have seen the advertising model cracking, 450 channels, too many choices, TiVo America, well, advertising paid for the content. Advertising stopped supporting content, and we end up with channels full of Law and Order and cheap reality shows.

    Something has to pay for the investment in pipes and content.

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  8. While Whitacre is not the most eloquent spokesperson, he has touched on an issue that the industry must grapple with. As more consumer adopt broadband and video applications become more prevalent, underlying network operators are going to have to invest in the capacity of the Internet and traffic management tools. This investment will need to be recovered or the Internet will resemble the rail system in the United States – slow, subject to frequent interruptions, and perpetually under-funded.

    But the solution is not for a dominant provider of consumer Internet access to unilaterally erect toll booths. The industry must work together to develop the next-generation peering and interconnection arrangements that will support universal broadband and high-bandwidth applications in a manner that is economical for all components of the Internet, not just a few.

    I suspect Whitacre’s comments are also partly a result of ignorance. After all, he is a Bell head, not a Net head. His original statement in November ignored the fact that consumers pay handsomely (relative to the rest of the world) for their access to the Internet and application and service providers (collectively referred to as content providers) pay as well for hosting and connectivity. His more recent remarks at least acknowledge that the consumer pays. I guess what he is complaining about now is that the charges levied on content providers are not as high as he would like them to be. What he fails to recognize is that the charges reflect competitive market conditions. So if Whitacre is unhappy about the pricing levels, what he is really saying is that he is unhappy about the level of competition for wholesale Internet connectivity. Coming from the once (and perhaps future) monopoly Bell system, this sentiment is understandable.

    The solution, however, lies not in Washington, but in the marketplace. Content providers can readily see where Whitacre is heading with this and have organized themselves in Washington. The better course would be to organize themselves in the marketplace for surely they will hang separately if they do not hang together and in any event are no match for the combined political and legal resources of the Bell companies. Whitacre has fired a shot across the bow of the content providers. The content provider’s greatest weapons are their product and their business savvy. They should use these to respond and work with other industry participants to establish the business relationships that will keep the Internet a rich, robust, and dynamic medium for everyone.

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  9. [...] EDIT: There is more on Memeorandum about this. Check Om Malik’s blog for more insight here. I love this quote from James Blaszak: [...]

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  10. One other thought on people paying at both ends. Don’t cell phone users pay on both ends, as their calls are charged when both making and receiving calls? This is nothing new.

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