Saturday, January 07, 2006

Subsidizing and charging for broadband internet access

There's a short article on MarketWatch entitled "Future of open Internet in question? Commentary: Network operators' demand for fees risky" which briefly discusses some of the pros and cons of efforts by the big telecom carriers to somehow gain compensation for high-bandwidth Internet usage, such VoIP and downloading of audio and video content.

I'm no fan of "The Phone Company", but I'm also not an advocate of the ideology that bandwidth is infinite and that access should be essentially free. In other words, I'm not in favor of any communications policy which is not firmly based on sound economic and business fundamentals.

To some extent, the telecoms and the ISPs have gotten themselves into a bind by undercharging for internet access. This first came to a head with AOL's unlimited access and went rapidly down hill when DSL and cable access came to market with a similar lack of limitation or economic cost assessment.

The telecoms also got themselves indirectly into a bind by not fully fathoming the performance and capacity distinctions between a fully switched network and an IP/packet style of network. Now they are beginning to realize the monumental blunder they made.

The proponents of a so-called "open" (free) internet to a large extent are advocating a free lunch program. At heart, they disapprove of private businesses acting as tollkeepers for the internet and would much rather have a publicly-funded internet, or at least have any private-sector participation be heavily regulated so that there is no private control of any aspect of the internet. I call it wishful thinking.

Just to be clear, I don't approve of the telecom carriers controlling or limiting access or pricing based on the specific content, but I do approve of charging for high-volume bandwidth, whether it is for QoS such as for VoIP or high-volumes such as downloading high-definition audio/video content.

I certainly don't want to see smaller Internet sites discriminated against in favor of larger sites, but failure to discriminate based on very high bandwidth usage makes no economic sense.

Either somebody pays directly or pays indirectly through some subsidy, the true economics need to be reflected somewhere on the balance sheet. Maybe the carriers are reaping a windfall since their networks are in place, but they should be charged extra to accumulate a war-chest to fund the next generation of network deployment. That's what we should be focusing on.

And the next generation of network needs to be more reliable, robust, and redundant, sufficient to withstand even significant terrorist attacks. Who's going to fund that?

Show me a clear accounting of the full economics of network access. Please. And be sure to document all of the assumptions, clearly.

-- Jack Krupansky


At 7:36 AM EST , Anonymous Anonymous said...

hi jack, we love your article so much that we blogged about it at

Kudos on the insight !

At 5:33 PM EST , Blogger Y.C. said...

Google is siding with us, the consumers:

The company's message to the BIG PHONE COMPANIES is very clear: WE WON'T PAY!

"Google is not discussing sharing of the costs of broadband networks with any carrier. We believe consumers are already paying to support broadband access to the Internet through subscription fees and, as a result, consumers should have the freedom to use this connection without limitations."

Read: Google: We Won't Pay Broadband Cyberextortion


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