Why The ITU's Plans To Divert Money To Lazy Telcos Will Slow Internet Buildout, Not Increase It

from the damn-history dept

We’ve noted that among the proposals being pushed this week at the ITU’s World Conference on International Telecommunications (WCIT) are a few that are solely designed to divert money from innovative internet companies to stodgy old telcos who haven’t adapted. The ITU has defended such proposals as being about sharing revenue more fairly, which tends to be a warning sign for most folks that failed organizations are about to take money from successful ones. Indeed, a number of proposals have suggested a form of “sending party pays” infrastructure for peering, claiming that such a system was successful (via the ITU) for telco buildout, and so they could do the same thing for the internet. Of course, this leaves aside the vast differences in how the networks work and where they came from — and how a “sending party pays” internet system would almost certainly lead to a balkanized and fragmented internet.

But, it’s even worse. A new study by Eli Dourado looking at how well “sending party pays” actually worked in the telco system found that it tended to hinder growth, rather than accelerate it:

The possible extension of the telephone system’s “sender-pays” rule to the Internet is a contentious international political issue under consideration at the World Conference on International Telecommunication (WCIT). This paper examines whether higher international telephone rates support or impede telecom sector growth in the receiving country. It uses data on international telephone rates from the US from 1992-2010 to explain growth in foreign telecom sectors during the same period. I find that higher international calling rates are correlated with slower growth in the telecom sector, which suggests that countries are not primarily using higher charges to finance additional expansion. These findings cast doubt on proposals that would extend sender-pays to the Internet sector.

In other words, the key argument the ITU likes to make for this diversion of funds… isn’t actually supported by the facts. Instead, it’s what we expected: about helping big telcos (often either state-owned, or formerly stated owned with still close connections) get a bunch of money for nothing… which they then won’t invest in expanding the network (why should they?). And, oh yes, the implementation of such a system might just also make it easier to limit internet access and/or spy on nearly everything people do (how else do you charge if you’re not monitoring activity?).

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Comments on “Why The ITU's Plans To Divert Money To Lazy Telcos Will Slow Internet Buildout, Not Increase It”

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Anonymous Coward says:

Re: Re:

How do you realistically compete on infrastructure? It really is not ideal to have 20 different power cables serving the same users.
Most of the incentives to expand infrastructure I know of assures a time-limited “monopoly” and thus is a big problem for the users having to pay “non-commodity” prices in that period. Even worse, the price of trying to compete is bad. The winner of the time-limited monopoly will have a big stack to chase away future competition before it can pay back its cost of settling into the market. Therefore infrastructure should be owned by the state or a company with absolutely no horse among the user-companies to be even remotely fair. I still haven’t heard of that system actually being used so far and I doubt I will ever hear about it.

Mesonoxian Eve (profile) says:

Re: Maybe it will push Google to expand

I would have agreed to this statement just a couple of years ago.

But now, no way. Google’s been doing things of late which makes me very, very uncomfortable.

The biggest action was the “all in one” rollout of Google+, which now ties everything I do online to a single account. While I still retain control of who can see what I post, the terror of a massive breach as happened last year forced my hand to remove all my personal documents from their free storage.

I stored tax returns, contacts, and other information online, and I was confident a breech in one area wouldn’t affect another, but now that’s shot to hell.

If Google wants to go into the ISP world, I’ll tread lightly. Because the last thing I’d ever want to see is “Don’t Be Evil” turn into “We’re rolling your personal life, web history, Google+, and everything you do online into our ISP service, and oops… the world now knows you’re into Dark Helmet.”

A little levity thrown in for fun, but “Dark Helmet” can be replaced with anything.


Anonymous Coward says:

Re: Re: Maybe it will push Google to expand

Encrypt the data and you are gold, then you have not to worry about what others do.

This is exactly what VPN did, people wanted to communicate privately/securely over and insecure channel and so they created a virtual tunnel.

Your virtual tunnel starts with your own data which you can control, if you have a facebook account you can post everything encrypted so only the people you trust and have the keys will ever be able to see it, the same goes for online spreadsheets, txt files, emails and any other kind of data, those can be all encrypted.

Right now only programmers have the tools to make those things easy because only them have the incentive to create tools for automagically recovering keys and decrypting data.

For example an script that reads Facebook’s pages and recover encrypted data can be done in Javascript, the same goes for any online service all those things can and should be encrypted by the user not the service provider, as much as I would blame somebody else my data is ultimately my responsibility and if I don’t do the minimum to secure it why should other ever care?

steve says:

"Sender pays" is a different concept in phoneland vs. in internet

In the case of phone calls, “sender pays” seems fair because the caller has the choice to initiate the call or not, while the callee has to answer in case it is important or someone he/she needs to hear from, but may not have solicited it.

In the case of internet, what ITU is calling “sender pays” means the server answering the client’s request. This is almost the opposite situation: the client initiates the connection, and under the ITU plan his ISP would get paid!

If the concept is “one who initiates the data transfer” then it’s the caller in the phone case and the client in the internet case. If it’s “whoever transfers more data to the other” it’s about equal in the phone case (dedicated connections) and usually the “callee” in the internet case.

Anonymous Coward says:

Explain to me like I am five

Sorry if I am being dumb, but could someone explain to me the following?

1. If this “sender pays” stuff is per-packet (which is the only way that makes sense, since the Internet Protocol is packet-based), what prevents a protocol from wastefully sending same-sized packets in the opposite direction, netting a total result of almost zero? For instance, if you download a five-megabyte Youtube video, and Google makes your browser send five megabytes of junk data to Youtube, wouldn’t that result in a total payment of zero?

2. Why would charging for bytes sent result in more spying, since it could be implemented on top of the already existing per-interface byte and packet counters on the border routers? The way I understood the idea being proposed, every step of the way would pay based solely on the amount of traffic sent, independent of the destination of the traffic. So Youtube would pay its next hop based on how many bytes or packets it sent, that hop would pay the next one also based on how many bytes or packets it sent, and so on, until the traffic reaches the end user, which for some reason is not paid even tough he/she got traffic sent to him/her. Each step has a simple byte and packet counter, which already exists, and needs to log nothing more.

Josh in CharlotteNC (profile) says:

Re: Explain to me like I am five

what prevents a protocol from wastefully sending same-sized packets in the opposite direction, netting a total result of almost zero?

Strictly speaking, nothing… but the upload speed of most people’s home connections would prevent this from working the way you imagine. Also, for those on capped data plans, you’ve just doubled the traffic. And from an engineering perspective, there is obviously no sense and many problems with it.

Mesonoxian Eve (profile) says:

Re: Explain to me like I am five

To explain this, even at a 5 year old level, would be… daunting, but I’ll try.

Imagine you’re selling pies to the world, and in order to deliver those pies, you enlist the help of neighborhood kids with wagons.

In this proposal, you would be paying for the use of wagons to deliver the pie, regardless who owns the wagons.

It’s belief is, if you pay those wagon owners, they’ll rush out and put 10cc motors on them, making them more efficient, but the reality wouldn’t see a change in wagons at all because, to the wagon owners, it’s literally free money.

The privacy issue can be equated to wagon owners can lick the pie during transit, and no one would be the wiser except the pie licker.

The proposal is ridiculous on too many levels to address, because it fails to take into consideration the wagon owners of the next county, and you can bet one wagon owner isn’t going to want to pay the second wagon owner the shares of that free money.

Because in the world of the internet, there’s no such thing as “My PC > YouTube” connection. It’s more of “My PC > Wagon 1 > Wagon 2 > Wagon 3 > Wagon 4 > YouTube”.

And trust me when I say this, the payout YouTube will have to make won’t be to Wagon 4, it’ll be all 4 wagons.

ITU’s math courtesy of MPAA where 2+2=0.

Anonymous Coward says:

Re: Explain to me like I am five

Endless, nonsensical, boring regulations that will make it almost impossible for any small entity(company/person/group) to be part of it, the regulations alone may require the resources of accounts, lawyers and managers and whatever is charged from others will end up in the bill of users of course, which means there will be caps, minimum usage restrictions, high prices, etc, if you look close enough it start to get scary.

2. You can only charge/pay for what you know about it and so you will have a tremendous incentive to monitor how the bytes travel, also you will have that extra incentive to spy on everyone so you don’t get a bill for spoofed packets by zombie computers. If you was a service provider being charged millions would you not try to see if that bill was actually correct?

What could go wrong with that?
Service providers could start requiring special software that would monitor every exchange they make so they don’t get shafted by others on their bills.

That is only one scenario there are others though.

Old Dog learns New Tricks says:

ITU - the defacto communist.

“The ITU has defended such proposals as being about sharing revenue more fairly,”

Is this not the basic philosophy for communism? So organisations like RIAA, MPAA and their ilk, ITU and its ilk are all at their core communist in the Marxist/Leninist/Maoist tradition. They are not capitalist by their very action.

In other words, take from those that do and give to those that don’t want to do, in other words, you who work have to support me who is lazy because I don’t want to work, I just want to live the good life.

Andrew D. Todd (user link) says:

How to Bypass the ITU

The United States and Europe could denounce the International Telecommunications Union, and set up a new international organization under the Organization for Economic Co-operation and Development. The OECD is a rather more exclusive club than the UN, with only thirty-four members, only about three of which can be said to be in the verges of the Third World. A considerably larger number of countries participate in the OECD as Observers, rather than full members.


In large parts of the Third World, the most practical method of long-distance telecommunications is a satellite phone. Low-Earth Orbit satellites (Polar Orbit) are launched in numbers sufficient to reflect the communications requirements of the wealthy countries of the Northern Hemisphere, but as a matter of physics, they cannot stay over the Northern Hemisphere, but must continue on to the Southern Hemisphere. The satellites are of course owned by the major developed countries. From the point of view of someone in Sub-Saharan Africa, the United States is about five hundred miles _up_. The price of service in any given area reflects the local market, averaged over a thousand miles or so. A satellite phone user can simply bypass the whole infrastructure of his national telephone company and his country’s ministry of communications. In particular, the Iridium Satellite network has become more or less an extension of the United States Government, which provides a quarter of its revenue. In governmental terms it would not be too expensive for the United States Government to become aggressive about expanding Iridium, in much the same spirit that it funded Radio Free Europe during the Cold War.


For that matter, if you look at a map of undersea cables, you will notice that those cable which reach out into the Third World, notably the Circum-Africa cable, have their junctions well out to sea, in ten thousand feet of water. They are prudently designed to be immune to misadventures happening on shore.

Allen (profile) says:

Countries that retained state sponsored monopolies could sustain higher prices that limited growth. Countries that introduced competition saw prices drop, elasticity kicked in and those markets grew. There’s a clear correlation, but sender pays isnt the cause, the cause is basic economics.

The problem with suggesting Sender Pays for internet settlement is the fantasy that packets are an analogue for minutes. There is no scalable way to measure interactions and no clear way to even agree which party in an individual interaction got the most value and thus should pay. There is nothing that works better than what the internet industry has come up with while the ITU were off doing other things.

Network and content providers have been arguing about this for near 20 years. The ITU actually already put out paper/recommendation that internet settlement should be on a sender pays basis in the late 90’s. The internet including practically all telcos basically ignored them.

Even if this does get voted through the internet will ignore them again. I doubt the US is going to give over legislative control over ICANN for a start.

Regimes that want ‘control’ already can do and already do whatever they want anyway.

The ITU is making a last desperate grasp for relevancy. Even arguing against it lends them more legitimacy than they have.

Androgynous Cowherd says:

Same old story again.

You’d think people would realize by now. Every supply-side policy to promote infrastructure build-out, job creation, or etc., every single one, has been a dismal failure (at doing what it was sold to the public as being for — while, of course, doing a good job of lining the pockets of the already-wealthy, purely coincidentally I am sure).

Companies build something or hire people and thereby increase capacity if they must do so to make more money. In other words, if they have to work for that money rather than just being handed it.

To make companies have to work for the money it cannot be given to the companies; it must be given, instead, to their customers. Which means to people, rather than to companies, if you want trickle-up effects all the way through the supply chain.

Which, in turn, means demand-side policies are the ones that work to produce economic growth.

All policies that are purportedly to produce growth, but which effect wealth transfers from the consumer or taxpayer to business, are thus inherently wrong. (Note: this includes copyrights and patents; a monopoly right is another form of wealth transfer to the supply side! How can it not be when it creates monopoly rents? Obviously, it also includes subsidies and bailouts.)

This leads to counterintuitive results, ones which especially will give libertarians conniptions. For instance, you increase growth much more by taxing the rich and giving out welfare, health care, and education to the poor — horror of horrors! — than with laissez-faire. This grows the demand side relative to laissez-faire, and because past a certain wealth level a person gets diminishing marginal returns per added dollar of wealth, the impact through reduced incentive to do whatever work rich people do is much less than the impact through increasing the purchasing power of the 99%.

Likewise, farm subsidies to keep food prices low are inferior to taxing the rich a bit more and using it to give free food (or just free money) to the poor. Demand for food is inelastic enough that the farms will still have all their business. But they’ll have to earn the money by doing a better job. Subsidies promote inefficiencies and distort the market, while moving some money from the top of the wealth pyramid back to the bottom to “fertilize the base of it” doesn’t. Nowhere are the distorting effects clearer than with the recent corn-ethanol subsidies.

The one area where government market distortion is desirable is in the area of pushing the costs for diffuse negative externalities back onto their causers. Taxing emissions would be the classic example. This corrects the market failure from diffuse negative externalities. Diffuse positive externalities, by contrast, are a feature, not a bug. We want those.

Wait, what? The government might like to ban addictive drugs, say, or at least ban being able to go to your local corner gun shop and buy a megaton nuke? Well, destructive products being misused (or, in some cases, used at all) is a type of negative externality.

As for public goods that the market would undersupply, half the time the feared undersupply is a myth (e.g., in the case of copyrightable goods) and the rest of the time the undersupply is either the result of excessive regulation (e.g. broadband (lack of) competition) or best addressed by the government supplying it itself (e.g. national defense).

Anonymous Coward says:

considering the Internet seems to have done pretty good up to now without a ‘sending party pays’ regime in operation, this is just another attempt to, not only get good companies to subsidize lazy, bad companies, but also to take further control of something that doesn’t need to be taken control of. it’s pure jealousy having found out that ITU members are becoming obsolete and are trying to simply justify their continued existence!

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