The End of Free Lunch?
In what could arguably be called a meeting of the Legion of Doom, the telcos (At&t(sbc), Verizon, BellSouth, and Qwest) met earlier this week to discuss the 10 year anniversary of the 1996 Telecommunications Act and what lessons they've learned from it.
They of course took the opportunity to once again attempt to further their agenda to levee an unmandated tax on the Internet. Along with 'access fees', the Bell companies are also lobbying state and federal governments to exempt them from franchise agreements, which every cable company has had to deal with for decades. Franchise agreements are used by local governments to insure public access to the cable television networks, i.e. local access channels. But franchise agreements are a story for another day.
"The network builders are spending a fortune constructing and maintaining the networks that Google intends to ride on with nothing but cheap servers," said Verizon Senior vice president John Thorne. "It is enjoying a free lunch that should, by any rational account, be the lunch of the facilities providers."
The first thing you need to understand to understand why I and countless others are upset with these 'access fees' is how the Internet works. In the Internet market you have four stake holders: end users, content providers, access providers, and backbone providers.
Backbone providers are those companies that built out huge fiber optic networks that span not only this country, but the globe. These providers consist of companies such as UUNet, the old At&t, Sprint, and many others. Obviously, no one company could afford to lay all the fiber necessary to connect all the places of the world so they made interconnection agreements with each other to pass network traffic unabated to destinations on each others' networks.
To connect end users/customers to the Internet access providers purchase connections to the Internet through backbone providers. In theory, access providers make money by charging a fair rate for service that would allow them a decent ROI for building their network to the end user.
"The only way we are going to attract the truly huge amounts of capital needed to build out these networks is to strike down governmental entry barriers and allow providers to realize profits," Thorne said yesterday.
On the other end, content providers also purchase connections to backbone providers. On these connections they offer their services such as VoIP, Instant Messaging, web searches, and countless other services. There are a few ways in which these companies achieve ROI. They can charge a service fee directly to the customer or they can use advertising to subsidize the costs of the service similar to local network television.
"Will another set of restrictions -- the continental minefield of franchise agreements and the free-ridership of Google and its brethren -- choke off investment in broadband deployment?" Thorne said.
In all three classes of business, content providers, access providers, backbone providers, it is up to them to price their service in a manner that insures them ROI. The Bell companies have enjoyed a monopoly on local phone service for over 100 years and now thanks to the open nature of the Internet, they have to compete for the first time against services like VoIP.
Since they are not used to competition they are dumping the only product they offer that has a legitimate alternative and that is their broadband Internet access service, the alternative being cable broadband. Because they are dumping their access service at far below a sustainable level and they are finally being forced to compete for local phone services, they are finding old habits hard to break and are looking to the government to allow them to charge a tariff on content providers for access to their customers.
Somewhere along the way Bell came under the false conclusion that they own the Internet and that they own all the customers. They don't quite understand that the only reason customers are paying for Internet access is to gain access to the largely free or low cost content being provided by the content providers Bell wishes to tax.
Bell's ultimate plan is to offer voice, Internet, television, and many other services. They want to insure they can protect their top ten global profits by blocking out competing services or by making it very difficult for these competitors to operate profitably.
"In the Internet world, both ends essentially pay for access to the Internet system, and so the providers of access get compensated by the users at each end," said Vinton G. Cerf, a vice president and "chief Internet evangelist" at Google, who helped develop the Internet's basic communications protocol. "My big concern is that suddenly [telco companies] want to step in the middle and create a toll road to limit customers' ability to get access to services of their choice even though they have paid for access to the network in the first place."
Have fun
j
|
0 people think they have something witty to say about this entry.
