The New Internet Tax, brought to you by AT&T(SBC), Verizon, & BellSouth
In case you are unaware, the current broadband situation in this country is an issue that is very near and dear to my heart. I work for a small local ISP (Internet Service Provider) in Kansas City, MO. We have been in business for over 11 years and are the largest and oldest locally owned and operated ISP in the area.
For the past several years the Bell companies (AT&T (formerly SBC), Verizon, & BellSouth) have been pushing heavily to enter the broadband market and garner a significant portion of that market space. To do this the Bell companies launched a strategy that was three fold.
First, they blackmailed state governments into removing various regulatory requirements imposed on the companies by refusing to invest in broadband infrastructure.
Second, they targeted the thousands of small ISPs by offering those ISPs access to resell their DSL service at wholesale rates. The agreements the Bells tricked many ISPs into signing (locally my company was not one of them or we would not be around today) in order to resell DSL required the ISPs pay Bell $40 per subscriber for access, a minimum of a $3000 per month ATM circuit with which to transfer customer traffic from Bells' network to that of the ISP so that the ISP would provide access to the Internet. This required ISPs to ramp up their bandwidth connections to the backbone at very hefty costs at the time. The Bells retailed DSL at $50 a month at this time, which forced ISPs to offer the same rates or lose customers to Bell. This left $10 a month to pay for the ATM lines to Bell and the increased backbone connections, not too mention staffing and equipment.
After a few short months the Bells struck by drastically reducing their retail rates for DSL effectively squeezing out all independent DSL competition and driving thousands of small and not-so small companies out of business.
Third, they lobbied the federal government and FCC to release them from reselling DSL by reclassifying it as an information service and release them from providing access to the copper infrastructure and future fiber infrastructure as required in the 1996 Telecommunications Act.
The Bells succeeded on all these fronts and with DSL prices from the Bells now as low as $14.95 a month, customers have and are switching to them in droves. They have made tremendous strides in customer acquisitions over the last 2 years and are quickly becoming the predominant provider of broadband, high-speed Internet service in America.
And now that they have begun to establish their monopoly power in the broadband sector, the CEOs of these Bell companies are now lobbying for content providers like Google, Ebay, Apple, Microsoft, and countless others to pay them "Access Fees" to their customers.
Bill Smith, chief technology officer at BellSouth said, "Higher usage for broadband services drives more costs that we have to recover."
"Our ability to consume bandwidth is growing far, far faster than the speed at which it is being added," he said. "The more bandwidth we consume, the more Internet traffic jams we have."
"It's the shipping business of the digital age," Smith said, arguing that consumers should welcome the pay-for-delivery concept.
BellSouth bears the cost of maintaining the network over which other companies, such as VOIP provider Vonage Holdings Corp., deliver services for profit, BellSouth spokesman Jeff Battcher said.
"I didn't see Vonage trucks down in New Orleans ... repairing phone lines" after Hurricane Katrina last year, Battcher said.
AT&T CEO Ed Whitacre suggests, "Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes?"
AT&T CFO Rick Lindner said, "The reality is that business models are changing and I think there are opportunities - to enter into commercial arrangements that are beneficial to both companies and beneficial to customers as well."
Verizon's CEO Ivan Seidenberg complained, "We have to make sure that they [application providers] don't sit on our network and chew up bandwidth." Whitacre believes companies like Google and Microsoft should "share the cost" of operating broadband networks.
The "Access Fees" being pushed by AT&T, BellSouth, and Verizon are nothing more than an attempt to divert the cost of offering broadband to the content providers so that they can continue to dump their DSL service on the market at well below fair market price.
While the government has instituted a self-imposed moratorium on Internet taxes, the Bell companies have been able to use their monopoly position to dump their broadband service on the market, drive out independent competition, and gain a significant foothold on the broadband market which they now plan to use to levee their own form of Internet tax.
It is key that people like Jeff Pulver and other key players in the technology industry begin calling these "access fees" what they are, an unmandated Internet tax. Both consumers and the federal government need to be made aware of what is really going on.
In addition, we must all continue to urge the large content providers like Google, Ebay, Apple, etc. to turn the tables on the Bell companies. The content providers should begin their own form of packet shaping and deprioritize packets from the Bell companies and reduce the speed at which they can access content to below the speed of dialup.
I don't recommend cutting the Bell companies off entirely from content providers, but definitely making the Bells' access subpar will force the hand of the federal government and the FCC to finally do something to protect the consumers they claim to serve.
Have fun,
j
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