Via Broadband Reports, in “FT.com / Companies – AT&T chief warns on internet costs“:
â€œWe have to figure out who pays for this bigger and bigger IP network,â€ said Mr Whitacre, who was in New York ahead of AT&Tâ€™s annual presentation to investors and analysts on Tuesday. â€œWe have to show a return on our investments.â€
â€œI think the content providers should be paying for the use of the network â€“ obviously not the piece from the customer to the network, which has already been paid for by the customer in Internet access fees â€“ but for accessing the so-called Internet cloud.â€
â€œNow they might pass it on to their customers who are looking at a movie, for example. But that ought to be a cost of doing business for them. They shouldnâ€™t get on [the network] and expect a free ride.â€
There ain’t not such thing as a free ride and there never was.
First, this is the CEO of AT&T asking that other carriers demand payment for transiting data that originates through AT&T. Every other carrier should immediately send AT&T a bill, care of Mr. Whitacre CC’d to the shareholders.
Second, there is already no free ride. Every connection to the Internet costs someone something already. Even if one were to connect up to a public peering point, there’s a cost for equipment, but I’m willing to bet that Google does pay someone quite a bit for access already. So, who’s Google’s upstream provider? Is that upstream provider going to allow AT&T to surcharge its own customer without retaliation?
On the otherhand, is this a pre-emptive strike against Google before they light up all that dark fibre? If Google used newly lit fibre to bypass much of the existing backbone, much like Internap innovated to bypass public peering with cross-negotiated connections with the carriers directly, doesn’t Google actually become on par with an AT&T as a fellow backbone provider? I wonder if that’s the real fear expressed here. AT&T could become irrelevant.
This strategy is one that the other carriers should encourage AT&T to follow through on because it well put AT&T out of business.
Third, the Internet routes around damage. If AT&T pipes become expensive, then other carriers will see business increase. AT&T will not see the money that Witacre seems to think it will. The loss of network neutrality will slow adoption of services and lose AT&T customers in the long run.
On the other hand, if all the carriers adopt the same strategy, then broadband is dead. The two-way, interactive Internet is dead and becomes just another implementation of on-demand cable services. I wonder what would grow up to replace it?
Wouldn’t this be the same kind of refusal to service customers that motivated Tacoma to bypass TCI for cable service and implement a municiple network instead?
At the vary least, a loss of network neutrality would make it increasingly profitable by comparison for a service company like Google to light up that dark fibre and start selling DSL services. That was pretty much the direction that Earthlink seemed to be innovating.
AT&T could drop off the Internet as consumers and providers all route around those pipes.
Fourth, doesn’t AT&T have service agreements that this would contradict, over which they could be sued? If a customer buys a DSL connection with some broadband speed, and AT&T itself throttles the sites the customer desires to reach … isn’t that misleading, a hidden cost, or worse?
Fifth, I forget what my fifth point was, but … Oh, yeah, so this whole “so-called Internet Cloud” thing … by analogy that would be a toll to drive your car onto the freeway paid directly out of your pocket and a charge each time you drove off the freeway, passed on to you in the cost of the goods you purchased and services you consumed at your destination. There is no such thing, really, as an “Internet Cloud” … which is really a web of interconnected private TCP/IP networks, which is the definition if the capital “I” Internet. (And, yes, there can be more than one. This isn’t Highlander, folks.)
Sixth, if I were an investor in AT&T, I would think seriously about diversifying. This is the CEO of AT&T saying that they do not have a sustainable business model. This is old school phone company monopoly behaviour in a world that has moved on to other monopolies. I doubt “retro” was the company image AT&T wanted in the marketplace.
I wrote a strategy memo a long time ago, over a decade ago now, while I was working at a regional ISP. In this document I talk about ideas of continued success, and touch on network neutrality issues. In one paragraph, I talked about the two-tier Internet that might be around the corner, both then (last edited Aug 98) and, apparently now again:
One of the theories that I’d had a couple of years ago was that the Internet as we now know it was going to split into two networks under the pressure from commercialization. My theory stated that since the needs of the commercial use of the Internet are essentially one-way and not interactive, there would be developed technologies that would provide high-bandwidth to the consumer and an asymmetrical bandwidth back up the pipe. This would satisfy the extent of the commercial use of the Internet so that people could click on the “Buy Now!” button while not burdening the commercial providers with any of the abstracted technical needs of a more fully interactive network. Further, this split would leave the ISP and other symmetrically allocated services as a second-class citizen on slower networks, thus relegating the non-commercial Internet to a backwater of pokey interconnections they’d negotiated among themselves.
Out of nostalgia, I’ve attached that document to this posting: Continued Success? (rtf 24k). It’s interesting to read these things.