There have been a few stories lately about telcos [TimesSelect membership required for last link] trying to charge Apple, Google, Amazon, Ebay, and other Internet content providers for access to their new high-speed fiber networks to ensure that customers get high-speed access to the new services they’ll be rolling out.
This is, to put it bluntly, the single greatest threat to the Internet as we know it today, and it’s happening under the noses and without any interest from the bazillions of people it may affect in profound ways. Today you choose the web sites you visit by their merits–you like Google’s results better, or Yahoo’s portal interface better; more of your friends are on MySpace than Hi5. You can make these decisions on these merits because you don’t have to consider access to them: You can go anywhere you want on the web, and all the competitors, from a bandwidth point of view, are on a level playing field.
This is due to an organizing principle of the Internet called “network neutrality”. This means exactly what it says–the network (or inter-network, if you will) carries all traffic across it equally, without regard to source or destination or type of traffic. Bits of video footage from Google Video are treated the same as bits of mail traffic from Yahoo. On a technical level you could quibble about whether this is (or should be) 100% true 100% of the time, but in a broad, over-arching sense, it is.
If Verizon and Bellsouth and AT&T have their way, that era is going to come to an end. AT&T’s CEO, Ed Whitacre, has expressed shock and outrage that the likes of Google and Vonage expect to “use my pipes free”. This rather conveniently ignores the fact that all Internet content providers pay for the pipes that they connect to; hell, I pay $20 a month for this site right here (if you’re reading this at de|lusion).
Of course, Google doesn’t pay AT&T directly for carrying traffic to AT&T customers, but Google does pay its own service provider for those bits, and that service provider either pays AT&T for carrying those bits, and/or carries bits for AT&T in return–Not to mention the fact that AT&Ts customer’s pay AT&T a very significant amount of money every month to carry bits for them.
The telephone companies aren’t going to be silly enough to make the proposition as simple as “pay us or we won’t carry your traffic”. A small ISP, Madison River Communications, tried blocking Voice over IP (Internet telephony) traffic last year and was promptly fined US$15,000 by the FCC for violating the “common carrier” provisions of the Communications Act of 1934. These provisions basically state that phone companies cannot pick and choose who they’ll allow to talk to each other–they can’t refuse to connect your call to your friend in Japan just because they don’t like Nippon Telephone and Telegraph, and they can’t keep you from accessing Google’s web site just because Google didn’t pay them enough money.
What telcos are doing is much more insidious, because on its face it sounds perfectly reasonable. They say that all these new video and voice services can’t be handled by their current networks; they’re going to have to build all new fiber networks with much higher capacity to handle all these new services that the Googles and Yahoos of the world want to roll out. Somebody’s going to have to help pay for that, and the most appropriate payers are the content providers that are consuming the bandwidth. It’s just like riding a plane–you can ride business class, but for the best user experience, you need to pay more for first class.
Sounds perfectly reasonable, right? Well, it’s not. I’ve worked in the telecommunications industry, as well as been a consumer of broadband for years, and if there’s one thing I’ve learned, it’s that the baby Bells are always eager to violate you with their big fat pipes, and make you pay for it. “Oh, you’re not riding my pipes for free; you better pony up”, they say, and they don’t need to mention that not riding the pipes isn’t an option. Fuck those jackasses.
You wanna know what it’s really about? Two things:
Cable companies have been eating the telcos’ lunch, and now they offer phone service over cable. They do this on the same cable that they use to deliver cable television and movies on demand, too.
The phone companies have been taking a bath over this, in no small part because the stupid backward fucks had to be drug crying and screaming into the broadband age. I was buying 1mbps cable service for $60 from some bumfuck cable operator in College Station when the phone companies were still trying to charge a thousand bucks a month for a T1. They were so focused on making sure that the Telecommunications Act of 1996 didn’t actually open the phone lines to competition that they forgot not all competition occurs on the phone line.
They failed to notice or act when their thin-line phone business started moving to fat lines (cable) or no lines (cell). The cell business didn’t matter so much, because, after all, it’s still phone lines from the base stations back, and they owned most of the cell companies anyway.
The cable, though, that was another issue. When they couldn’t beat the cable guys on technical merits, they decided what they need to do is offer television, so they could have a turn at starving cable of their customer base.
The problem with this is that their network isn’t set up for it, so they need to build a whole new network to handle the video. It would almost be tempting to feel sorry for them, because cable gets to put their video traffic through before anything else goes, because, legally speaking, that’s what the network was built for to begin with.
The telcos can’t do that, because they have neither the network infrastructure (i.e., broadcast/broadband capability at the leaf level) to do it nor the the legal wiggle room to give their stuff priority (see the common carrier bit earlier).
So they try to solve it by creating “another” network, a premium one for video and high-bandwidth content. Never mind that this network starts in the same place and ends at the same place, and is owned by the same company. It’s a different network. It should be free of that old-school “regulation” that applied to that other network. That sort of regulation is so 20th-century anyway.
The cable companies want to move away from a business model based on the cost of moving bits, and toward one based on the value of the bits being moved. Oh, they’ll make some lame-ass analogy about how the internet is like a (forgive the term) information highway, and like any rapidly expanding transportation infrastructure, it needs tolls to pay for the construction of new roads. The part they don’t mention is that they want the toll to be based on the value of your cargo. They want a slice of whatever commerce passes over their lines.
They won’t admit that, of course. But, tacitly, they already have. Bellsouth Chief Technology Officer Bill Smith, surely a man with a great mental precision regarding the measurement of traffic, told MarketWatch recently that Apple could be charged a nickel or a dime per song. Notice that by proposing a charge per song (as opposed to per megabyte), he explicitly ties the charge to Apple’s revenue stream. And if he gets his way, you can bet that your iTunes are going to cost $1.05 – $1.09, because if you think Apple’s eating that cost, you are batshit out of your mind.
Making that shift is what really pulls the pants down around the consumer’s knees, because then, rather than paying a commodity fee for the transportation of bits (which, after all, all cost the same to transport), you’re paying to add another slice to the pie so that the telcos can…er…have their cake and eat it too. Or something like that. Anyway. Ass rape, I tell you.
So there you have my modest and restrained assessment of why the phone companies are doing what they’re doing. Below I hold forth on why it’s a Bad Idea™:
The public has always treated the Internet like a public utility, something that everyone has (in theory) equal access to, like roads or cable or, for that matter, the telephone system. This view of the role of the Internet has been solely responsible for its explosive growth in the last decade. Anyone can get on. Anyone can get their message out for little or no money. The best ideas triumph, and all that silly hogwash I believe in so much kinda sorta.
If the telcos get their way, then that won’t be true of the next generation of Internet services. What happens when Google Video signs an exclusive deal with Verizon? Any potential competitors to Google Video just lost half of their potential customer base, and is non-competitive.
The same thing goes for almost any startup; they won’t be able to compete against established players in the field, who already have a steady revenue stream to pay the telcos what amounts to protection money. As a matter of fact, this business model creates a whole new racket for erecting barriers to entry in any market that touches the online world, which is, um, pretty much any market, except maybe Sumatran mud clam futures.
It will lead to the Balkanization of the Internet! I know this is the oldest and most cliché drum-beater in any old inet fogey’s arsenal, but that’s mostly because we’ve been worrying about it so long, and so far it hasn’t happened because we constantly worry about it and do things to keep it from happening.
It seems fairly obvious to me that If you have to pay for high-speed access to a telco’s customers, then there are bound to occur a large number of situations where some content provider isn’t going to pay some telco for some reason, and there will be some parts of the web where almost everything will be slow (because the telco is trying to charge too much, or doesn’t have as many customers as other telcos, so can’t get the dollars from the content providers, and hence doesn’t have as much money for bandwidth). In the short term this leads to the creation of many seperate and unequal internets, and in the long term, perhaps worse, consolidation into one Internet, under Ma Bell once again. That woman is mean with a whip and a strap-on.
The economics of supply and demand–Bandwidth is not a particularly scarce resource. Under the current economic model, where we, as Internet customers, pay ISPs to move bits for us, the ISPs make more money by moving bits more efficiently.
Under the telco proposed model, a large chunk of their revenue stream comes not from bit-moving services, but instead from customer access services. The content providers are essentially paying the telcos for access to the telco customer base.
The problem with this is that the telcos no longer have any great financial incentive to move bits efficiently. Oh sure, in the short term you could maybe change to a different ISP, but you know the phone companies look joyfully forward to a day when that’s not an option, and work hard to bring that day about. Remember SBC? PacBell? MCI? GTE? Nextel? Yeah. Me either.
The main problem the proposed business model cures is paying for laying and lighting all the new fiber that needs to be in place to handle all the high-speed communication we’re going to want to do in the near future, and tying the cost of Internet Access for large content providers to the amount of bandwidth they use.
However, there is already a perfectly workable solution for this: ISPs should charge content providers by the gigabit transferred, and ISPs should carry traffic for other ISPs either based on a parity of bits sent and received, or by paying for any discrepancy. Come to think of it, that’s pretty much how it works today. I would say that having a market in bandwidth futures would be a good idea, except Enron already had that idea, so it can’t be good.
Horrible, horrible anal rape.
Okay, so that’s why it’s a bad idea. The good news is that there are a few bright spots on the horizon. The cable companies (who are evil, too, but not quite as evil as Ma Bell) are kicking the telcos collective ass, and with the death of the wireline phone, they’re becoming less and less relevant. Even as the RBOCs rebuild Bell Telephone, they’re actually losing monopoly power. They don’t control cable, they don’t control satellite, a lot of non-telcos, and non-RBOCs, are starting to lay and light their own fiber. And for the moment, at least, congress appears to largely be on “our” side, if by “our” side you mean on the side of huge multinational corporations whose stars are waxing rather than huge multinational companies whose stars are waning. Here’s to hoping Microsoft, Google, AOL, and Yahoo! have better lobbyists than, what is it now, Ma and Pa Bell?
[ed. note: I went back to see if there were any more places I could insert horrible ass rape references, but, well, it would have been just tacky.]