Telcos Still Pretending Google Gets "Free Ride"

from the repeating-something-relentlessly-does-not-make-it-true dept

Back in 2005, former AT&T CEO Ed Whitacre (now the head of GM) boldly proclaimed that Google was getting a "free ride" on his company’s "pipes," and that they should be charged an additional toll (you know, just because). As we’ve discussed several times now, Whitacre’s argument made absolutely no sense, given that Google not only pays plenty for bandwidth (as do AT&T’s customers), but the company owns billions in international and oceanic fiber runs, data centers and network infrastructure. Despite making no sense, this idea that Google was some kind of free ride parasite quickly became the cornerstone of the telco argument against network neutrality. In response,Techdirt has suggested that telco spokespeople should pay for Google’s bandwidth bill for a month if it’s so low — with no takers.

Of course, lost under the circus of the network neutrality debate was Whitacre’s real goal: to get content providers to subsidize AT&T’s network upgrades, something many myopic investors don’t want to pay for. Whitacre was also afraid; he understood Google poses an evolutionary threat, the likes of which traditional phone companies like AT&T had never seen before. Incumbent phone companies had grown comfortable sucking down regulatory favors, subsidies and tax cuts while operating in non-competitive markets. Suddenly, increasingly-ubiquitous broadband allowed companies like Google to enter "their" telecom space, gobbling up ad dollars and offering disruptive products like Google Voice — which threaten sacred cash cows like SMS and voice minutes.

Instead of competing with Google by out-innovating them, Whitacre’s first reaction was to impose an anti-competitive toll system like some kind of bridge troll — which should tell you plenty about pampered phone company thinking. Whitacre’s fuzzy logic was given a new coat of paint in pseudo-scientific studies paid for by phone carriers, and has since floated overseas. In the UK, incumbent phone companies have taken a page from Whitacre, insisting that the BBC should pay them extra money — just because people were using the BBC iPlayer. Now Google’s non-existent free ride has popped up in Europe this week, with Telefonica, France Telecom and Deutsche Telekom all jointly insisting that Google should be paying them a special toll for carrying Google traffic:

Cesar Alierta, chairman of Telefonica, said Google should share some of its online advertising revenue with the telecoms groups, so as to compensate the network operators for carrying the technology company’s bandwidth-hungry content over their infrastructure. "These guys [Google] are using the networks and they don’t pay anybody," he said.

Yes, Google doesn’t pay anything — except for the billions they pay for bandwidth and extensive infrastructure. Were Google a telecommunications carrier, they’d be the world’s third biggest according to Arbor Networks. It’s absolutely stunning that such a ridiculous argument remains in circulation (and that many press outlets don’t debunk the concept as painful nonsense). If electric companies went to AT&T or Telefonica to inform them that they wanted a cut of revenues on top of payment for electricity "just because" — they’d be laughed out the building. Yet somehow we’re supposed to take phone companies seriously, when in reality they’re simply repeating total nonsense in the hopes that repetition will magically make it true.

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Companies: at&t, google

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Comments on “Telcos Still Pretending Google Gets "Free Ride"”

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46 Comments
Derek Kerton (profile) says:

Re: I am always amazed

Yeah, you’re right. It’s not just Google: if the “logic” applies there, then it could be applied to a tiny blog with a few ads on it.

“You’re making money off our pipes, we should get a cut.”

Not like they’re already double dipping: charge consumers to get to Google, and the also charge Google for its Internet traffic. Should we be paying three times for the same connection?

Michial Thompson (user link) says:

Google should probably get more free rides

Actually I would think that more and more of the LARGE ISPs would want to give Google more of a free ride by placing Google servers behind their bandwith pipes and closer to the customers.

A SMART ISP would put Google Servers near customers and so that the customer accessed the servers on their own internal bandwidth rather than on the backbones where it costs them money.

Customers are going to access Google no matter what, and companies like Akamia (sp??) are already in the business of content replication and making a killing off of it. So why wouldn’t local ISP’s also use it to manage costs.

Putting a rack of Google Servers in each major city would seem pretty cheap in comparison to the costs of the bandwidth consumed by users. And hell I’d even bet that google would be all over giving them the racks and servers because it also makes their service more efficient.

Free Capitalist (profile) says:

Re: Google should probably get more free rides

Customers are going to access Google no matter what, and companies like Akamia (sp??) are already in the business of content replication and making a killing off of it. So why wouldn’t local ISP’s also use it to manage costs.

Yes, “Akamai” (sic) does effectively profit from replicating popular content.

It’s just ridiculous for AT&T to be talking about charging more for popular content-providers’ bandwidth. For one, the modern AT&T had one of its most successful years ever in 2009 (its good to be king).

And of course there would be no significant ISP business for anyone were there no popular and useful services such as Google.

Myopic, greedy and entitled… sounds familiar.

Chronno S. Trigger (profile) says:

Re: Re: Google should probably get more free rides

“And of course there would be no significant ISP business for anyone were there no popular and useful services such as Google.”

That’s was I was thinking. Without content, ISPs would not be there. That’s the ISPs reason for being, it’s only reason for being: to serve sites like Google. AT&T should be paying Google.

Designerfx (profile) says:

google voice has sadly been countered

if you haven’t noticed, all carriers have switched from myfaves style plans to including “unlimited calling to any mobile phone”.

Well, the numbers for google voice are landline.

This was a direct strike at google, and the telcos didn’t even sit a second. Even tmobile switched their plans due to this one.

chris (profile) says:

Re: google voice has sadly been countered

if you haven’t noticed, all carriers have switched from myfaves style plans to including “unlimited calling to any mobile phone”.

Well, the numbers for google voice are landline.

that’s a good thing. that’s what competition is for.

now google will counter, and the telcos will counter, and in the end we the customer end up paying less than we did before google voice came along.

ScaredOfTheMan says:

Just makes me Angry

Every time I read these “(______________) should pay for using our Pipes” It just makes me angry, the outright entitlement expressed by these people is simply astounding. Its not like they don’t understand the interent, or peering, or bandwidth exchange…and yet they continue to make ridiculous statements like this.

Why can’t they simply be a provider of highly available, fast, internet and just be happy with that. Most of these guys are a monopoly or douopoly so what do they have to complain about?

Anonymous Coward says:

Re: Re:

…And, Godwin’d in 5.

But, I think Mike’s absolutely spot-on with his analogy (these kinds of ridicularities are best exposed with a good analogy): by the same logic, the telcos owe the electricity utilities — at least — a cut of the revenue.

Don’t try to set a legal precedent you don’t want to have applied to you.

Anonymous Coward says:

Re: Re: Re:3 Re:

I think he’s commenting on the fact that TAM now posts as AC, yet is too stupid to understand that everyone knows it’s him. When someone sees a post that is obviously his, he replies “HI MIKE”, as if Mike is the only person who could detect that it is TAM posting, even as AC.

So when you posted that there are other authors than Mike, he reversed the “Hi Mike” meme. Not so funny when you explain it fully.

John Duncan Yoyo (profile) says:

What would AT&T internet be worth without Google?

Lets ask the question that these telcos seem to forget- what would their internet offerings be worth without Google?

It certainly would be less than they are worth now. Heck the way I use the internet they would be worth next to nothing. Google is the index, my mail and lots of the content i consume. Without Google it would hardly be worth paying AT&T.

Anonymous Coward says:

Re: Re:

Whoops, hit submit too soon.

The big flaw in the telco’s reasoning is that Google isn’t pushing this stuff over their pipes, their customers are initiating the exchange. If their customers are using too many bits, then charge them more.

I don’t think it’s that unreasonable to have tiered plans based on speed or number of bits used. They shouldn’t discriminate on the type of traffic or its destination.

In other words, be dumb pipes. I think the first company to come along and really embrace that philosophy is going to make a killing. Be the best damned dumb pipe you can be and slash costs (especially advertising) and deliver huge value to your customers.

neil says:

Re: Re: Re:

This isn’t a problem for the telcos. all they have to do is block all access to google until google agrees to pay on a per packet basis.

most ISP also are our phone providers and remember they like to charge those long distance fees that’s how they think. google pays a small set of isps for the bandwidth it uses but although isp x gets some from google traffic goes to isp y to get to the customer and it is y that wants some money ie long distance charge.

Anonymous Coward says:

Re: Re: Re: Re:

I think you’re right. Phone companies (especially cellular phone companies) have this mindset of “you need to pay to get access to our customers”.

Honestly, I can’t blame them for trying to do this. They have very little to lose and a lot to gain. When a situation that comes along that’s all upside, why wouldn’t they pursue it?

Kirk (profile) says:

Re: Re: Re: HaHa

I agree that it’s not a problem for the telcos. If google blocks access to their subscribers they will quickly realize how little of a problem google is. In fact, similarly to Youtube/Warner, RIAA/College Radio, the telcos would immediately go crying to congress the minute google removed their reason for complaining. The telcos need to seriously grok on what business they’re in.

Hephaestus (profile) says:

hmmm ....

Why arent the telcos going after Microsoft, Yahoo, Amazon, e-bay, etc?

With what Google pulled in china I would be very cautious if I was running a telco.

from : google.com
to : google mail and applications user

Due to the charges being levied against us by you telcom provider we are with drawing google.com from your telcom provider as of xx/yy/zzzz. We will no longer be providing search, e-mail, apps, reader, …. (two pages later) ….finance, translate, and blogs. We will how ever be opening stores to sell the new google data pad, and cell phones all of these products work on our new 4g network. The cost will be less than you are being charged by your current provider and there will be no disconnect fees by EU law.

RobShaver (profile) says:

Didn't we pay for upgrading the Internet already?

I heard years ago somewhere that the FCC and the Telcos struck a bargain where the Telcos got to keep the new fees for phone features such as call waiting, caller ID, etc. In exchange the Telcos were supposed to use that revenue to upgrade Internet infrastructure.

Does anyone here know anything about that? I don’t remember any more details than that.

Anonymous Coward says:

Whitacre’s real goal: to get content providers to subsidize AT&T’s network upgrades, something many myopic investors don’t want to pay for.

This is one of the major problems for all US internet customers. The companies need to expand the infrastructure, but won’t based on the short term drop in profits. This is why so many rural customers of large phone companies are still stuck on dial-up. When I asked the local phone company rep (Century Link)directly why they wouldn’t upgrade to fiber like some rural co-ops have, the response was “because they have other sources for money”. Like the millions in profits aren’t a legitimate source for upgrades to their infrastructure.

Derek Kerton (profile) says:

YouTube

YouTube.

I mean, that’s really what this is about. I’m surprised it hasn’t come up in the comments yet. Most of you are talking about how Google search or mail or blogs is what you use, etc, but I don’t think that’s what this is about.

This is about the tremendous amount of capacity that is consumed by YouTube, and the impact it has on the carrier’s networks, and their capital expenditures.

Not that it changes any of your arguments. Most commenters here, and Karl’s article are spot on.

Really, what’s going on here is the telcos are pissed at YouTube for filling their pipes, making money for another company, beating them to offer compelling services, edging out their video offerings, and forcing infrastructure upgrades.

And the carriers really have only two solutions:
1) Suck up to regulators, charge Google for causing increased demand for the product the telcos sell, or
2) Charging customers more for using more of the product telcos sell.

Number 2 is going to be a very unpopular solution, as feedback here at Techdirt has illustrated in the past. And the eventual public backlash can mostly be blamed on the same ISPs who have ingrained the “unlimited” expectation into customers.

Why did they ever promise “unlimited” if it was never what they meant? Because they didn’t envision something like YouTube. Oops. If it wasn’t YouTube, it would be something else, guys. Maybe Netflix or Amazon.

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