Not too long ago a firestorm of controversy erupted over some broadband providers’ contention that the “free ride” on their networks was in their words “bull” or “nuts.” That touched off a whirlwind of debate about what, if any, legislative anti-discrimination action is appropriate and when.
It has led to opposing views of what the FCC’s “four principles” mean, as a frenzy of political jockeying for competitive advantage has gotten underway since their release in August.
Although the House recently declined to support network neutrality, the issue is still being bandied about in the Senate as a re-write of the Telecom Act is considered.
Internet companies continue to push Washington to mandate legislation that would force broadband providers to offer the same service levels to all people. Yet broadband providers are lobbying for government to stay out of it, so that QoS-based pricing for tiers of service levels can evolve naturally.
Each side is looking at “anti-discrimination” legislation in different ways. The question is whether change is necessary to drive innovation, or whether change would unnecessarily burden the companies providing infrastructure for that innovation.
“The Internet is not free even now; it’s already a commercial enterprise. You can’t fund a commercial enterprise without segmented pricing. You use more, you pay more,” says Duffy Mich, CEO of Aperio CI, which designs marketing systems around billing needs. “Billing will be based on content and QoS. There will be micropayments for viewing pages, and people will be willing to pay for things like streaming video and other high-bandwidth, QoS-based services.”
Many would consider government intervention counterproductive to innovation. “If the [Federal Aviation Administration] tells the largest airline that it has to start offering its competition’s customers seats on their flights at insignificant and incremental costs, the airline would ultimately lose incentive to invest in new technology and planes, as they’d feel they were giving it up for free. And the smaller airlines wouldn’t invest in new planes, because they’d be getting seats on the bigger airline’s planes,” explains Ron Cowles, research VP with Gartner. “Any government-imposed change to the ecosystem will cause some difficulty; any laws imposed on the public Internet will be influenced by the special interests of large Internet companies who want to gain competitive advantage. We have to be very careful at this critical point in time.”
Currently, one would be hard-pressed to find another market where businesses get away with not paying suppliers or don’t charge for providing superior quality of service to higher-paying customers. We all pay tolls to ride over road infrastructure, food companies pay for prime shelf space, manufacturers pay for shipping goods, and airlines pay other airlines for providing connecting flights for customers.
Supermarkets would never be allowed to charge consumers for three items, rather than the two they actually bring to the check-out, just because three is the “industry average.” And if a supermarket closed down because it was forced to give away food for free, people wouldn’t stop eating; rather, vendors on the street would pop up all over the place to sell food, and consumers would go to them.
So if the legislation ultimately allows the Googles, EarthLinks and Yahoos of the world to get away with not paying the “freight” to ship their goods, is it fair to allow those very same companies to sell advertising, promote certain goods or content, and block spam? Should they be allowed to stop broadband companies from doing the same?
The push for widespread broadband access through Wi-Fi and other new technologies means networks will become increasingly burdened at some point. After spending billions on fiber, is it fair to tell broadband providers they can be no more than bit pipes for competing VoIP traffic and growing IPTV traffic?
The fear of that is exacerbated by the recent success of IPTV and fiber-to-the-home projects that enable direct-to-consumer relationships. Phenomena like YouTube, Digg.com, Reddit.com, Newsvine.com and other video-sharing sites are scaring not only TV executives who are fearful that these are the Napsters of the TV world, but also broadband providers who carry IPTV traffic generated by these types of sites for free. These start-ups will eventually turn into commercial enterprises with millions of consumers that may gum up networks in the not-too-distant future.
Already the YouTube site gets 200 million page views a day, and Digg has as much traffic as the New York Times, according to Alexa.com, a traffic tracking site.
Despite the threat of bottlenecks on networks, some in Congress already are proposing bills that say broadband providers cannot provide content if they provide access. Does that increase consumer choice or reduce it?
But how would things evolve without government intervention?
Broadband companies would possibly capitalize on the real opportunity to profit from their experience with billing, customer care and packaging, because they could become the aggregators among all the pieces in the puzzle.
It’s inevitable that the high-bandwidth and QoS-reliant services whose first iterations are available under flat-rate plans, or for free, will have to give way to a pay-for-what-you-get model. Too often, innovative services are stifled by the lack of flexibility in systems to do the rating, pricing and customer care. As more and more parties become involved with the traffic flowing over broadband providers’ networks, the network providers have a clear opportunity to orchestrate how this pans out, especially if their systems are flexible enough to handle multiple services from multiple partners.
“Typically, systems today support the operational aspects of core services, but do nothing to support market flexibility that the net neutrality issue brings to the fore,” says Highdeal’s David McNierney, VP of market development.
Rather than support just internal marketing departments, broadband providers would morph into multi-service providers that will support the business development organizations of many content providers through a focus on product marketing management. “They will have to support the marketing departments of content partners to handle complex, tiered pricing and packaged services, as well as complex settlement,” says McNierney. That, he says, will require flexible billing and pricing technology that focuses on the four p’s of product, price, place and promotion.
The YouTubes of the world are trying to bypass reliance on the broadband providers by going directly to consumers for the time being. These direct-to-consumer companies are having to learn about pricing models by observing what happens to companies like Apple, who at first succeed with flat-rate, dollar-a-download pricing schemes, but then need more innovating packaging to continue to succeed. “Rather than be a threat, broadband providers have an opportunity to help emerging players to develop customer loyalty and long-term relationships,” says McNierney. “The simple models that first attract people will evolve to rewards for long-term customers that help them see value beyond what they are downloading. Just charging the customer is no longer enough.”
That sounds great in theory, but why is there this paranoia and fear of an Internet “retail model”? Why do advocates want to preempt something like a free evolution of the market? Do they have reason to lack faith in regulatory and lawmaking bodies that are supposed to act as checks and balances against abuses on the Internet?
The Answer Is “Yes” Internet “purists” have reason to think it is inevitable that competition will force large broadband providers to act as gatekeepers for content that threatens their own supply of voice, video and music.
Indeed, it’s easy to see how a cable company offering VoIP might exempt its own customers from high-bandwidth premiums to attract customers to its own product over its competitors.
The ISPs, DSL and broadband companies are being unrealistic if they think they can just say “trust us, we have the public good in mind.” If no checks and balances are put in place beforehand, it is conceivable that cable, DSL and broadband providers will prioritize, block or degrade traffic according to their interests—ostensibly controlling what customers can access on the Internet.
In his testimony before a Senate panel, Google senior executive Vinton Cerf said competition is not fierce enough in the U.S. market to prevent discrimination against competing services or content providers. A case in point is the FCC, which has been somewhat weak in requiring cable operators and other broadband providers to open lines to independent ISPs.
Also, consumers already pay for Internet service through monthly access fees. Would additional prioritization or quality of service fees be fair?
It depends on how net neutrality is defined and what the definition will allow or ban.
The debate rages on as Senate and House members draft bills to be part of any rewrite of the Telecom Act. Congress could do such a rewrite this year or next.
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