There is a coming clash between the telecommunications firms and the internet giants, but it’s not just about the internet giants buying broadband underlying pipes and access technology. It’s about the way technology is delivered and how to build out business models that take into account the value of content and services when the cost of transporting bits is significantly lower than the cost of transporting atoms.
The underlying enabler of all this — broadband networks — provides an excellent case study in how this might play out. Today we are moving from all-you-can-eat broadband to usage-based pricing as service providers try to reign in the demands on their networks, deliver a return on their investments and also compensate for high prices they pay per subscriber for video content. The battle here is exemplified by the likes of Netflix fighting caps implemented by companies including Comcast.
But at the Fiber to the Home conference held Tuesday in Austin, I saw the battle lines beginning to shift thanks to faster networks and new capabilities. IP networks are about services, which means that a delivery model where services are delivered as different channels becomes a possibility.
Soon, software-defined networking will allow providers to build out those channels virtually on their networks and deliver them a la carte or as a bundle. What’s missing is the business model.
When you combine gigabit networks and software defined networks you get more services delivered via broadband and a network that can adapt to the demands of applications on the fly. Because of this — and the increasing importance of the services one can deliver over gigabit networks — Joe Kochan of U.S. Ignite, a group trying to develop gigabit applications, proposed a different type of pricing model: one where users buy access to set of capabilities for either an application or a genre of applications.
Kochan proposed a medical channel that, for example, might have the security features one needs for relaying medical data, along with a high-speed, low-latency connection required to teleconference with a doctor or nurse. An education channel might have the capacity for interactive video as well as the applications a child might need for their work. Because one could also offer digital rights management, maybe the textbooks could be accessed online via that channel.
Kochan took it a bit further suggesting that you might get both a medical broadband channel and the hardware needed for your particular medical circumstances, but stopped short of explaining who would provide this. I’m not sure that I’d want Time Warner Cable choosing what hardware I should use to track my heart rate, for example.
However, your insurance company might see value in such a service and try to subsidize your gigabit broadband should you use hardware that it has selected. This vision of some kind of a la carte service delivery currently runs anathema to what we have today on broadband networks, and honestly would drive people in the network neutrality circles and consumer interest groups a little crazy. Personally, I’m thinking about what this could mean for my own stance on network neutrality.
For example, if there’s some kind of entertainment channel, one could argue that it might support Netflix’s protocols but not those used by BitTorrent or some other entertainment provider that may have a new protocol or alternative delivery mechanism that could result in a richer user experience at the expense of the network. In this case, it depends on how these channels are provisioned and who is in charge of the provisioning.
But what isn’t in doubt is the current model, with everything running pell-mell over the public internet, doesn’t have to be the future in a software-defined and gigabit-capable world. Even today, I am trying to wrangle and prioritize traffic on my home network through a smarter router. But how many consumers are willing to take those steps, or even know what they need to do to ensure their video conference calls aren’t pre-empted by their 13-year-old’s gaming?
With more data and more critical data going over broadband networks, some kind of prioritization and security scheme might make sense. What we’re seeing with gigabit networks from Google and AT&T is the meeting of two diametrically opposed sentiments each preparing to offer new business models.
“We’re seeing the world of telecommunications meet the world of the internet and where those two meet is going to be a series of negotiations about where both will work together,” Kochan said.
These fights will play out in the quest for infrastructure, on Capital Hill and in business models. For example, last week when AT&t announced pricing for its gigabit service, it included an option with a $30 per month discount if users consented to let AT&T monitor their searches and traffic for use in delivering targeted ads.
So perhaps the giants of the internet will consent to this idea of delivering broadband functionality as specific types of channels that will have certain characteristics and apps if it means the end consumer will trust more of their lives, their data and their physical experience to a digital existence. And before that happens I suppose regulators and net neutrality advocates will have to figure out if their thinking needs to evolve and what kinds of protections should be put in place.