The Battle over Net Neutrality
December 31st, 2005 Posted in ILEC News, Analysis, Main Page, Telecom Regulation, Web-based Services
I'm a bit late wading into the increasingly-contentious “net neutrality” bugaboo but if you've got some reading time over this last holiday weekend, you may want to check out a feature I wrote in today's National Post about what's going on. I've tried to boil down why some of the large U.S. telecom carriers such as SBC and BellSouth are so adamant about charging downstream tollgates and/or packet prioritization fees. A basic argument is their local phone businesses are shrinking due to VoIP and cable telephony so they need to find new sources of revenue at a time when the marketing of broadband access is becoming increasingly sophisticated with a variety of plans offering different speeds and packet quotas. I believe another reality is telecom executives such as SBC's Ed Whitacre (picture, above left) and BellSouth's William Smith are waging a high-profile lobbying campaign to influence the U.S. government's overhaul of the 1996 Telecommunications Act. By asking for the stars and the moon, they hope to get something more realistic from the folks in Washington. In Canada, Telus Corp. concedes it is looking at options such as downstream tollgates but in typical Canadian fashion, it doesn't want to act alone. Frankly, I do not believe the concept of tollgates and packet prioritization fees will happen because they will fundamentally change how the Internet works and the industry's economics. As it now stands, consumers are paying carriers - and cablecos - to access the Web while online service and content providers are paying fees to have their data centres and servers connected to the network. The carriers may be crying poor but broadband access is a very good business for them. The real issue is they want a bigger piece of the action but they must come up with more creative ways to do it than downstream fees.Update: Here's a recent BusinessWeek story on net neutrality.
December 31st, 2005 at 1:21 pm
Doesn't this sound like the newsprint and ink suppliers demanding “Tolls” from newspaper publishers for the stories being printed on their paper with their ink? When will the telcos be led by true business executives who realize that content is not their game any more than music content is part of the game for consumer electronics vendors? Fifteen to tweny years ago Novell got out of the hardware business and 3Com got out of the software business for a reason. While not the greatest of success stories it has at least allowed them to survive in a very dynamic business environment. Change is sometimes gut wrenching but deal with it!
As both an engineer and a former technology business executive with lots of strategy experience, maybe I am naive but from my viewpoint this net neutrality allows the telcos to focus their business on profitably supplying high quality access while the while the content suppliers can focus on providing content that appeals to an appropriate target audience. Maybe if they looked deeper at their balance sheets they will find that the financial dynamics associated with providing access vs supplying content is an oil and water combination. (I once did a business case study on a housing contractor in Calgary getting into the oil business — just about killed them due to the very different financial resource requirements.)
Welcome, Ed and William, to free enterprise! It really means figure out your real business or die. This scenario does point out that the only place for regulation is “last mile provision” in order to ensure fair pricing and access for consumers.
Let me know when NP starts paying toll charges to the newsprint and ink suppliers.
January 3rd, 2006 at 5:29 pm
Seems to me this is pretty creative way to receive new revenue. Demand a piece of the action that runs “through” them. They are a pipe. They know something is happening but they don't know what it is. Demand a cut.
Call it protection.
January 4th, 2006 at 11:44 am
The discussion on network neutrality goes a bit deeper (see this, for example).
I am intrigued with the report from Korea (in the BW article) … what has been notably absent from the discussion on network neutrality has been effects from user demand. SBC-cum-AT&T may change their policies quickly when nobody buys. Pricing policies have made a huge difference in the past … just look at the impact of AT&T Wireless's pioneering “one rate”, and the impact of pricing policies on dialup services in the 1990s.