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Updated: Net Neutrality: In Peril?

By - January 05, 2006

More noise from the telcos that they want a multi-tiered Internet. Watch this space. Paid Content reports from CES:

Verizon CEO is now on the band(width)wagon…in a Q&A at CES, Verizon CEO Ivan Seidenberg said that providers of bandwith-intensive Internet applications, including Google and Microsoft, should “share the cost” of operating broadband networks. He joins AT&T (then SBC) CEO Ed Whitacre, who last year put his foot in the mouth in a rather harsh interview with BW.

According to Seidenberg, Verizon and Google are already talking about how such compensation might be structured. While Seidenberg said Verizon “intuitively” believes that the Internet should be open to all applications, he also said that “we need to make sure there is the right economic model,” especially in regards to so-called “free” or advertising-supported applications, which generally do not offer any direct compensation to the network service provider.

Update: Good comments starting to flow below, and this Journal story focuses on the issue, though it’s paid walled. From it:

The phone companies envision a system whereby Internet companies would agree to pay a fee for their content to receive priority treatment as it moves across increasingly crowded networks. Those that don’t pay the fee would find their transactions with Internet users — for games, movies and software downloads, for example — moving across networks at the normal but comparatively slower pace. Consumers could benefit through faster access to content from companies that agree to pay the fees.

Er, EXCUSE ME? Am I not already PAYING these companies for HIGH SPEED ACCESS? That’s what the web services companies are saying:

“They want to charge us for the bandwidth the customer has already paid for,” said Jeffrey Citron, chief executive of Vonage. Customers who already pay a premium for high-speed Internet access, he said, will end up paying even more if online services pass the new access charges to consumers. “The customer has to pay twice. That’s crazy.”

Mr. Citron said he thinks that if the Bells tack on extra charges, cable companies that also provide broadband will soon follow.

Google, Yahoo, and others are in discussions with the telcos. I’d love to be a fly on THAT wall.

Update: I got a call from Google saying that the Journal story got it wrong – Google is NOT in talks with Verizon about a two tiered pricing scheme, and Verizon wants to clarify as well, though I await a call from them. This is a TOUCHY issue, and it will only get more interesting. We’ll tackle it at Web 2.0 this year for sure.

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11 thoughts on “Updated: Net Neutrality: In Peril?

  1. Scott Karp says:

    To support the notion of net neutrality, why not expand it to “distribution channel neutrality.” Searchblog reaches people who are interested in search, media, technology, etc. If I have something worthwhile to say to this audience, why should John Battelle be the only one allowed to speak to them in a high-profile way. Shouldn’t we deregulate Searchblog so that I (or anyone else) with something to say to this audience can write blog posts instead of just being relegated to comments?

    But I guess that would muck with the media economics of Searchblog, which John Battelle has invested a lot in building.

    I also “intuitively believe” in the principles of net neutrality — it just seems that arguments on both sides tend to oversimply a hugely complex issue.

  2. Hmmm. But in an important way, Searchblog *is* deregulated. You can right now, for no money, go start your own blog and write anything you want about search, media, technology. If it’s good, folks will read it.
    Searchblog is about my voice. If my voice starts to suck, folks can go read someone else’s voice. I’m not blocking folks from doing what I do. Can the same be said of the telcoms?

  3. John K says:

    Um, the $36 a month I pay for DSL or the $2k/month T1 line cost is not compensation to the network service provider??

    The lame whining of the telcos here is yet another reason why Google would be acquiring dark fiber and allowing users to connect directly to them.

  4. Mel says:

    As an internet subscriber, it seems that I pay for a certain amount of bandwidth already. That bandwidth allows me to access any online services I choose.

    If I access Google, Yahoo!, or MS via the bandwidth I’ve already purchased, why should my provider care?

    They already have caps on my monthly throughput, so where exactly are they losing money?

    Maybe it’s all marketing speak – like all of the “unlimited” VoIP packages that are sold as such, but really aren’t.

    They’re simply trying to double dip and get paid for the same traffic from two different people – me for the access and Google for *gasp* actually sending me data via that access.

  5. I agree with John that go start your own blog and write anything you want about search, media and technology. If it’s good, folks will read it.

  6. domain says:

    hi John,

    i think the DSL price is going worldwide down

    i pay in germany only ~ 40$ (50 Euro) for a telephone flat
    inside germany incl. a DSL Flat 6Mbit/s down and
    512kbit/s up

    the provider is versatel http://versatel.de

  7. One problem is that people are *not* paying for the bandwidth when they take out a DSL or cable subscription. They are paying for a *fraction* of the bandwidth, and the bandwidth provider assumes that most users won’t burden its network with the full thorughput they could theoretically impose if they up-and-downloaded at the full bandwidth 24 hours per day.

    There are many fixes to this problem:

    a) Assume that data transmission costs will drop to the point where it doesn’t matter whether people use more capacity than originally planned.

    b) Change from flat subscription prices to pay-by-the-gigabyte. This is the way websites are being charged for hosting, so it may be reasonable that users should be charged the same way for downloading. If you download a lot of video files, you should pay more than somebody who only does lightweight web browsing, since you are imposing more of a burden on the infrastructure.

    c) Multi-tiered subscriptions, with different levels-of-service guarantees. If you have the cheap subscription, your big files may be delayed if somebody at a higher tier is downloading across the same infrastruture at the same time.

    Note that all three of these solutions preserve the openness of the Internet in that they treat all content providers the same. That’s what’s important.

    By the way, I don’t think that option (a) will be realistic any time soon. Yes, data transmission is getting cheaper every year, but the info people want to access is getting fatter as well. We will want full-length HDTV movies, and we will want them at 1080p, not a wimpy 720p or 1080i.

  8. TMS says:

    So a question in case anyone knows the answer to this:

    Is this an attempt to impose the cable TV model on the internet?

    My understanding is that for Cable TV, I pay a fee to the cable company, and the channels themselves pay a fee to the cable company in order to be one of the available offerings.

    Is that right? If so, is this is the mental model being used by the telcos? (Not saying it is a correct model, but it would sure make understanding the telco position easier).

  9. Scott Karp says:

    John, following your agrgument, the Bells/cables can say to the Internet companies, if your content is so great, then build your own distribution networks to deliver it. There’s nothing to stop me from starting my own blog (which I have), and I can now write whatever I want — and there’s nothing to stop the Internet companies from building their own broadband networks, which they can use to distribute any content or services they want. Of coure, my blog doesn’t have a large audience like Searchblog, so I have to go through the time and expense of building one — it would be much easier if I could just have unlimited access to your audience by posting my content through Searchblog. In (sort of) the same way, the Internet companies don’t want to have to build their own networks, so they want unlimited access to the ones that already exist.

    I’m torturing this analogy, so let me try one other approach in response to some of the other comments.

    I pay for electricity, so I should be able to use as much as I want for whatever I want, right? But there’s a reason why I can’t plug a large industrial machine into my wall socket — the infrastructure can’t handle it.

    So much for voltage neutrality.

    When I tried to attach my flame thrower to my natual gas line, no luck. So much for flammables neutrality.

    If I had a swimming pool, I’d probably want to fill it in 3 minutes, but my local water and sewage authority wouldn’t let that fly, so there goes aqua neutrality.

    If consumers want to use a network beyond it’s intended capacity, why should they expect that priviledge at no additional charge?

  10. John says:

    This is a perfectly timed discussion because it begs the question on what exactly is Google’s value ad in the video market? Ad supported? Device interconnectivity?

    What differentiates them from the Cable and IPTV operators exactly? What time is Larry on? I can’t wait to find out.

  11. Mel says:

    Scott – On the electricity analogy … My electric wasn’t sold to me on a “flat rate with caps plan”, so I can’t just “use all the electricity I want.

    My internet access on the other hand is a flat rate with caps – around 5 mbs speed, with a 40 Gig monthly cap. If I don’t exceed that, why oh why would they feel a need to charge any more.

    If this was just marketing lingo that my provider never intended to meet, then that borders on fraud.

    If they’re getting paid by the user for bandwidth that never exceeds the advertised speeds and caps, then they have no justification to wanting others to pay too. If those caps are being exceeded, it’s because their own system won’t throttle back after an advertised cap has been breached. Again, there is no justification for wanting to charge anyone but the user.

    The TeleCableComs see a big pool of money they missed that nobody except a few saw coming along. They’re ticked and are trying the easiest route at getting some of it – Threats, as opposed to actually trying to gain market share in some of these services.

    I’m working on a little side project that I hope one day has even a fraction of the market that GYM does, and I’m doing it on no budget at all. If I can do it, the telecoms can do it too.

    Hell, SBCATT is spending one billion dollars to rebrand from SBC to AT&T. Hey, here’s a though – take a half billion of that and make it available to the SBCATT’ers along with some ’20%’ time and see what they come up with.

    Won’t happen. SBC, Verizon and the others in that group simply do not have the thought process to do that. It’s not in their business playbook. Those that can think that way are kicking the telecoms collective asses in ad revenue.

    Where’s the Tylenol.

    (note: part of this was a reponse to Scott. The rest? Well, I got on a roll and couldn’t get off!)

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