Easily digestible tech news... http://www.techdirt.com/ en-us http://www.techdirt.com/images/td-88x31.gifhttp://www.techdirt.com/ Fri, 9 Oct 2009 14:17:00 PDT Mike Masnick http://www.techdirt.com/articles/20091008/1845266465.shtml http://www.techdirt.com/articles/20091008/1845266465.shtml violated the very net neutrality rules the search giant is pushing for by blocking calls on Google Voice to various free conference service lines. However, as we explained at the time, the issues are totally different. However, from AT&T's standpoint, they get to try to kill two birds with one stone. First, AT&T would love to kill the regulatory arbitrage situation that allows small rural telcos to charge incoming call providers ridiculous connection fees. So, complaining about Google Voice draws more attention to that issue. Separately, it gets net neutrality questions moved away from AT&T and onto Google, which AT&T generally dislikes.

Still, it's hard not to be even more cynical when a bunch of politicians suddenly pick up interest in this issue, and ask the FCC to investigate Google using language that appears quite similar to the letter AT&T sent to the FCC. As Broadband Reports notes in that last link, it sure looks like AT&T got a bunch of friendly politicians to suddenly express outrage over something most of them didn't understand -- and they just had to rewrite the letter AT&T had already used. It's as if these companies and politicians don't even care how blatant it is that the lobbyists actually set the agenda.

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]]> at-least-try-to-be-creative http://www.techdirt.com/comment_rss.php?sid=20091008/1845266465 Fri, 2 Oct 2009 09:40:00 PDT Mike Masnick http://www.techdirt.com/articles/20091001/1916386401.shtml http://www.techdirt.com/articles/20091001/1916386401.shtml blocking calls to certain numbers it didn't like -- specifically free conference numbers that were using a regulatory arbitrage loophole that required the networks of incoming calls to certain rural telcos to pay huge connection fees, creating incentives for those telcos to develop cheap or free services that brought in lots of calls. Then, a few weeks ago, it came out that Google was blocking similar calls via its Google Voice offering. I still believe that offering a telephone service that connects to POTS requires that you complete all non-fee-based (i.e., 900 number) calls, according to an FCC order in 2007 on this particular subject. Google and MagicJack disagree.

However, with more and more people switching to VoIP services, combined with more and more VoIP providers going down this route, it's becoming a big issue, quickly. Harold Feld notes that Speakeasy is the latest VoIP provider to go down this route, blocking similar calls. To Speakeasy's credit, however, unlike both MagicJack and Google, it at least clearly alerted customers to this change, and also publicly lists out the blocked numbers. It's amazing that Google and MagicJack did not do either of these things.

Still, as Feld notes, this is becoming a big deal. It's likely that more and more VoIP providers are going to quickly go down this same path, and the phone system will start to splinter. This is bad. For a phone system to work, you shouldn't have a situation where the service you use can arbitrarily refuse to complete certain phone calls. The real answer is to get rid of the arbitrage loopholes. The rural telcos are clearly abusing the rules. Yes, this could seriously curtail various free conference calling solutions, but that's better than the alternative.

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]]> this-is-going-to-get-messy http://www.techdirt.com/comment_rss.php?sid=20091001/1916386401 Fri, 25 Sep 2009 17:07:16 PDT Mike Masnick http://www.techdirt.com/articles/20090925/1607516327.shtml http://www.techdirt.com/articles/20090925/1607516327.shtml being hypocritical on net neutrality by not living up to the same principles when it comes to its Google Voice product. The issue is that, apparently, Google Voice is now blocking calls to free conference services like FreeConference.com. This is identical to the problem I discussed a few weeks ago when I noticed that the MagicJack VoIP service blocked calls to those same services. Oddly, at the time, I got around the MagicJack block... by using Google Voice. So if it's now blocking those calls, I haven't yet seen it, but there are numerous complaints. And, just like I said at the time with MagicJack, I think that the FCC has been pretty clear in the past that this is not legal. If you're offering a phone service of this nature, you need to connect it with the phone calls customers are making.

So, I have to admit that I find Google's response to be disingenuous. It basically tries to shrug off the problem by saying Google doesn't have to follow such rules on connecting phone calls because it's a "web-based" offering. First, making such a claim just makes Google look like it's ducking the issue. Second, Google has done a dreadful job letting Google Voice users know that such calls are totally blocked by its service.

However (and this is important), the actual issue here is not net neutrality. The real issue is ridiculous regulatory setups in certain rural areas, that force unnaturally high connection fees on telcos to rural telcos, creating a massive arbitrage opportunity that the Free Conference call offerings making good (and profitable) use of in offering their services. Basically, every inbound call to these telcos requires massive per minute fees from the connecting service provider to the rural telco. It's so expensive that as long as the rural telco can offer a service (such as conference calls) at a cheaper rate, they make money on every inbound call -- but it's all due to outdated regulations that "protect" those telcos. Google mentions this in its response, but it should be the headline, not buried in the details: the issue with net neutrality is the telcos trying to double charge for the use of their network. The issue with these calls is a dumb regulatory setup that forces telephone service providers to pay insanely high rates to a small group of small telcos for any inbound calls.

So, yes, I agree that it's bad that Google (and MagicJack) blocks these calls -- and I believe it may in fact go against some previous statements by the FCC concerning phone services. But... it's not a net neutrality issue where they're doing so to squeeze extra money out of customers by holding part of the access for ransom. Instead, it's the result of bad and outdated local state regulations concerning connection fees that really need to be overturned.

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]]> distracting,-but-important http://www.techdirt.com/comment_rss.php?sid=20090925/1607516327 Thu, 16 Jul 2009 16:43:00 PDT Mike Masnick http://www.techdirt.com/articles/20090716/1601375572.shtml http://www.techdirt.com/articles/20090716/1601375572.shtml really happen. However, it appears that GGF has started working with Wayne Ross, who ran Grokster and Mashboxx, in an attempt to get him to negotiate with the labels. In an interview, he more or less reveals GGF's plans for The Pirate Bay.

Basically, you'll have to pay to leech, but the more resources you "contribute" to the system, the less you'll have to pay, and if you contribute enough resources/bandwidth, then you might actually make some money. Then, on top of that, they believe that some content providers/ISPs will pay for offloading their bandwidth. That explains some of the earlier statements made by GGF. In theory, the idea is that it makes everyone happy. Those who pay for bandwidth on hosting content can pay a lot less. Users who contribute bandwidth end up getting free content (or potentially even making some money). And, of course, the content owners get paid.

Except... that idyllic picture starts to break down when you start to run through the details. The second the paywall goes up, an awful lot of users will abandon The Pirate Bay for friendlier non-barrier-happy sites. That takes away pretty much the entire advantage of The Pirate Bay to make this work. Even the appeal of potentially making money probably won't attract enough users. Second problem? There's no way the economics works out nicely on this one. We've already seen the sort of ridiculous rates that the RIAA wants to charge for individual streams/downloads of music. Put those numbers into this model and start doing the math... and start laughing. There's no way that much money comes into the system. None.

Finally, it leaves out an important party who clearly will not like this setup at all -- even if all the rest of it works: consumer ISPs. The real "ingenious" part of the plan appears to be that some content hosters/service providers are effectively pushing bandwidth costs away from themselves, and dumping them on retail ISPs, who offer flat-rate connections. So the real "costs" are hidden in the typical flat-rate plans of ISPs.

It's effectively a sneaky arbitrage play, whereby The Pirate Bay tries to aggregate all the unused flat-rate ISP bandwidth, and wholesale it to others, paying copyright holders in cash, and downloaders in free/cheap content. But the ISPs whose bandwidth is getting used don't get paid, meaning they're more likely to push back even more against unlimited connection plans. I just can't see how this works.

Oh, right, in the meantime, it's not clear the recording industry has any interest in playing along. They're already demanding that cash from the sale go to them, rather than the founders. Of course, that's a bit misguided, since the founders no longer own The Pirate Bay, having handed the ownership over to others in 2006. So they won't be getting any of the money from the sale. The recording industry basically says it doesn't believe that to be true, and will use the sale as evidence that the founders should pay up. Thus, it's difficult to see them rushing out to embrace this already questionable arbitrage play.

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]]> this-looks-like-a-mess http://www.techdirt.com/comment_rss.php?sid=20090716/1601375572 Mon, 15 Sep 2008 09:09:00 PDT Mike Masnick http://www.techdirt.com/articles/20080914/1943402262.shtml http://www.techdirt.com/articles/20080914/1943402262.shtml antitrust violation, we're going to see more and more articles like the one in the New York Times this weekend that tries to highlight the story of a company "harmed" by Google's market power. In this case, it's the story of a guy who runs a directory site that was based entirely on Google arbitrage. He bought ads on Google's search engine to drive people to his directory page, and then littered the page with AdSense to collect revenue from people clicking through. The NY Times presents this as being somewhat harmful, but I have to side with Jeff Jarvis who doesn't see what Google did wrong.

Google arbitrage sites are a problem for the end user. They're based on the simple concept of forcing people to go an extra click to siphon some money away. If I'm looking for a particular site on Google I don't first want to go to a directory -- I want to go directly to the site. That's true for many, many users -- and Google's efforts in punishing arbitrage sites isn't anticompetitive, it's about improving the user experience, which is something that should be praised, not sued. The only problem noticed in the scenario was that the guy chose a bad business model, where he was totally reliant on a single company for both all of his traffic and all of his revenue. He made the decision to base his entire business on a single supplier, and that supplier has every right to change the terms of its deals in an effort to make a better consumer experience. This isn't Google being anticompetitive -- it's Google serving its customers.

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]]> and-again-and-again-and-again http://www.techdirt.com/comment_rss.php?sid=20080914/1943402262 Wed, 18 Jun 2008 13:49:34 PDT Mike Masnick http://www.techdirt.com/articles/20080618/1321561448.shtml http://www.techdirt.com/articles/20080618/1321561448.shtml bribing users to use Microsoft's search. Basically, if you bought certain products via a Microsoft search, Microsoft would pay you cash back. And, of course, as soon as the cash got involved, it didn't take long for people to find loopholes. Various messages boards are highlighting how this works, but the end result is that people are buying $630 in cash for $715 (via Whitney McNamara), knowing that Microsoft will pay them "cash back" that more than makes up the difference -- in some cases up to $250. So, in that case, the seller of the "cash" ends up making $85, and the "buyer" makes $165. Microsoft, of course, is out the $250. Talk about arbitrage.

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]]> loopholes http://www.techdirt.com/comment_rss.php?sid=20080618/1321561448 Tue, 20 Nov 2007 07:33:00 PST Timothy Lee http://www.techdirt.com/articles/20071119/105802.shtml http://www.techdirt.com/articles/20071119/105802.shtml the demise of Yak4Ever, a startup company that exploited a regulatory loophole to allow them to offer free international calls. The bill was being paid by large telephone companies like AT&T and Verizon, which were forced to pay exorbitant rates to connect the calls under the FCC's byzantine long distance regulations. Apparently, the Baby Bells got fed up and simply stopped paying the bills, and the FCC hasn't ruled on the issue quickly enough to keep Yak4Ever in business. We wrote about a similar company, called FreeConference.com, back in January. That one offered free conference calling services, again subsidized by exorbitant interconnection charges. In that case, we criticized AT&T for blocking the calls instead of appealing the fees to the FCC. But regardless of the legal details, it's awfully hard to have much sympathy for either Yak4Ever or FreeConference. It seems pretty clear that they're not creating new wealth; they're just taking advantage of poorly-thought-out FCC regulations to make a buck at the expense of other phone companies. This is one of the reasons regulators should leave interconnection rates to market forces whenever possible. If long-distance interconnection rates were determined in competitive markets the way transit agreements are negotiated between Internet carriers, this sort of regulatory arbitrage wouldn't be a problem. It's only when the FCC is setting rates by fiat that these kinds of opportunities crop up.

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]]> regulatory-arbitrage http://www.techdirt.com/comment_rss.php?sid=20071119/105802 Fri, 5 Oct 2007 18:24:17 PDT Mike Masnick http://www.techdirt.com/articles/20071005/013707.shtml http://www.techdirt.com/articles/20071005/013707.shtml exploiting some legacy telco regulations, that were officially designed to help rural telcos get extra money to build out more rural service. Basically, the government allowed rural telcos to charge high termination fees to other telcos when calls from their lines terminated on one of the rural telco's lines. So, if you had AT&T and called your cousin in Iowa who had some small rural telco, AT&T would actually have to pay that telco some charge per minute, with the idea being that the telcos would use that money to invest in infrastructure. Of course, the infrastructure they invested in wasn't exactly building more lines to wire up others in the town, but in VoIP systems so they could reroute calls in to anywhere else, and then team up with various online sites to get as many calls as possible routed through those systems. Then they could just sit back and collect the millions of dollars rolling in from telcos. Broadband Reports points us to an article at the Wall Street Journal going into more details about how this happened -- and how the FCC is now scrambling a bit to see if there's a way they can stop it. In the meantime, the WSJ piece notes that while the telcos have been told by the FCC that they have to keep connecting these calls, they've simply stopped paying any of the termination fees as they await the results of the various lawsuits. Of course, all that's done for now is made the various free conference call services switch to other rural telcos in other states. Eventually, though, they'll run out of other states to go to (or the regulators will finally realize how their regulations are being exploited) and the little regulatory exploit will go away.

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]]> so-easy,-it's-almost-criminal... http://www.techdirt.com/comment_rss.php?sid=20071005/013707