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Telco Chief Explains That We Really Only Pay For Half Of Our Internet Connection

from the break-it-down dept

AT&T's CEO Ed Whitacre was the one who kicked off all the US telcos publicly talking about ending network neutrality when he complained that it was "nuts" that Google, Yahoo and Vonage got to use his network for "free." Of course, he was ignoring the fees they already paid in bandwidth, along with the fees consumers pay for bandwidth (which they're only paying because they get access to various web sites and services). So, now, he's trying to better explain how, despite the fact everyone has already paid, these service providers are really getting a free ride. He does so by trying to split up how internet access is really sold:
"I think the content providers should be paying for the use of the network - obviously not the piece for the customer to the network, which has already been paid for by the customer in internet access fees, but for accessing the so-called internet cloud."
He's actually suggesting that when we buy bandwidth, we're just buying the bandwidth from the end-point to the backbone... and everything else is just free. He's conveniently forgetting (again) that without the content and services provided at all the other endpoints, the value of connecting from the end to the middle is pretty much gone. No one is paying to connect from the end to the middle. They're paying to connect all the ends to each other. That's the value of network effects, and it's what makes it worthwhile to buy internet access. So, he's being both misleading and wrong when he says: "But that ought to be a cost of doing business for them. They shouldn't get on [the network] and expect a free ride." It's a very telco way of looking at things. These are companies that are used to providing centralized services with a government granted monopoly. To them, the only important thing is from the ends to the middle -- where traditionally the telco then provided all the services you needed. They'll conveniently ignore that the only value of connecting to the middle is if you have unencumbered connections to all the other ends as well. In the meantime, with all the big telcos so brazenly talking up how they're going to ditch network neutrality, how is it that FCC chair Kevin Martin can still claim with a straight face that there's no evidence that anyone is trying to break neutral network principles.
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  1. identicon
    Thomas, 31 Jan 2006 @ 9:43am

    FCC = For Corporate Control

    how is it that FCC chair Kevin Martin can still claim with a straight face that there's no evidence that anyone is trying to break neutral network principles.
    because Rupert Murdoch told him to?

    reply to this | link to this | view in thread ]

  2. identicon
    Mousky, 31 Jan 2006 @ 10:34am

    Free Ride?

    Perhaps Google, Yahoo, eBay and Microsoft should show their monthly internet bill to Mr. Whitacre and then ask him how that is not a "cost of doing business".

    reply to this | link to this | view in thread ]

  3. identicon
    Anonymous Patriot, 31 Jan 2006 @ 10:34am

    Maybe if you could keep up ...

    Hey fuck-tard,

    No one is getting a “free ride.” Google – and every other “content provider” ALREADY pay you for bandwidth.

    Now that that is cleared up, (again) perhaps you can pull your head out of your ass, and do something about the fact that the US has fallen to 16th in the world in the percentage of citizens with access to broadband. 16th. We are slower than Israel. LOOK MOM, we are #16!!!!!

    You are rich enough already, now start being fucking productive, for a change.

    reply to this | link to this | view in thread ]

  4. identicon
    saleh, 31 Jan 2006 @ 10:41am

    I agree completely

    I agree with Ed. Since the network providers give away service for free to content providers, and they don't have to worry about bandwidth costs, it only makes sense that AT&T wants to recover that money somehow. </sarcasm>

    reply to this | link to this | view in thread ]

  5. identicon
    Chuck, 31 Jan 2006 @ 10:45am

    Kevin Martin

    Pretty much off-subject, so apologies in advance...

    Is it just me, or does Kevin Martin look as if he's about 20 years old?

    reply to this | link to this | view in thread ]

  6. identicon
    Scott, 31 Jan 2006 @ 11:02am

    Re: Free Ride?

    Yeah really, I thought they paid for bandwidth too. I have been really confused about how all of this works for sometime now apparantly.

    reply to this | link to this | view in thread ]

  7. identicon
    Pissed telco tech, 31 Jan 2006 @ 11:30am

    I hate LECs

    Ok, so lets see here. How about some "easily" understandable analogies. Lets say I buy a car from said dealer. I go to the mall to buy some panties for my head. Dealer gets their feelings hurt and says,"Hey Mall! No fair! We sold all your customers cars and now you're getting customers "delivered" to your door curtesy of us and you aren't paying a damn cent!" Of course this doesn't make any sense as apposed to all the logic employed by the fuckin Bells. Whats next, mandatory collect calls to anyone NOT "in" with my cell provider? "Listen baby, you gotta stop calling me at work, my boss is getting pissed and they docked half of my last check just to cover the bill my cell phone company sent him last week". Honestly, I could swear that there was a word for this, I just can't remember, it was like the opposite of fair trade....oh wait, monopoly I think was it. I have to put up with all these companies on a daily basis. They are so hung up on this whole end point, last mile thing. They don't even do that well. If they mannage to not fuck up initial testing, you know like, finding the issue to begin with, and I mean a LAYER 1 issue, then they actually get a "tech" out and within 24 hours (ie, what is known as a "commit" time, for those LECs reading this who might not know what the word commit means). Its all bullshit and it will remain that way until it eventually self destructs, "they built it, they broke it" Fuck em all, I hate em, I say, microfiche, pigeons, tin cans and string motherfuckers! At least, then it won't suck the life out of all existance.

    reply to this | link to this | view in thread ]

  8. identicon
    S, 31 Jan 2006 @ 11:35am

    No Subject Given

    Hey, let's all connect to the middle and then drop off the face of the internet into a black whole! Everyone raise your hand if that sounds like fun and you wanna pay to do it!

    I seem to recall visiting a site or two where bandwidth allocation was being exceeded and *poof* no more page. Funny how that would happen since they were getting a free ride and all.

    reply to this | link to this | view in thread ]

  9. identicon
    Mike, 31 Jan 2006 @ 11:37am

    Content Provider

    As a "Content Provider" we ALREADY pay for access to the Internet. Last time I checked, I still get a monthly fee for bandwidth from my Data Center. Last time I checked, they still pay for their data lines from the likes of AT&T, Cogent, and all the others. So as far as I know, EVERYONE is paying to access this "network". Both endpoints. Now, as far as paying for the middle... That comes from both endpoints paying. God I hate Telco's. I can't wait until everything is VoIP and wireless.

    reply to this | link to this | view in thread ]

  10. identicon
    Anonymous Coward, 31 Jan 2006 @ 11:51am

    taxi cabs

    i liked this anology some guy put forth, he was saying thats taxi company was going to start charging places that they dropped people off at

    i mean after all the taxi cab companies are providing a free service to those places, they are delivering people right to their door, and the places arent even paying!! 'its nuts' that these places should have people delivered to them without having to pay!!

    its our cabs!!

    reply to this | link to this | view in thread ]

  11. identicon
    Andrew Strasser, 31 Jan 2006 @ 12:07pm


    It's that simple it will drive us to destruction.

    reply to this | link to this | view in thread ]

  12. identicon
    haggie, 31 Jan 2006 @ 12:13pm

    No Subject Given

    The "middle" analogy doesn't even hold up.

    I pay to get from my house to the "middle" and Google pays to take me from the "middle" to Google.com. When my search results are generated, Google pays to send them to the "middle" and I pay to get those results from the "middle" to my computer.

    Who hasn't been paid and where is the free ride?

    reply to this | link to this | view in thread ]

  13. identicon
    Scott, 31 Jan 2006 @ 12:14pm

    Re: Content Provider

    Yeah, funny that huh? I didn't even this black hole of a middle that no one paid for existed. I thought part of my bill was to be sure I could get from endpoint to endpoint not endpoint to middle, then you came out to the middle to meet me, how do you know to do that? Strange I really am going to have to reread how internet traffic works.

    reply to this | link to this | view in thread ]

  14. identicon
    Ben, 31 Jan 2006 @ 12:20pm

    Bribes are the FCC's best friend.

    how is it that FCC chair Kevin Martin can still claim with a straight face that there's no evidence that anyone is trying to break neutral network principles.
    ummm...he is being paid off by the telcos?

    reply to this | link to this | view in thread ]

  15. identicon
    Jeff, 31 Jan 2006 @ 12:25pm

    Re: I hate LECs

    Mark my words...and you are seeing it on techdirt first...I will put the LEC's completely out of business within the next ten years. They are a dying breed...plain and simple.

    reply to this | link to this | view in thread ]

  16. identicon
    Fat Pat, 31 Jan 2006 @ 12:32pm

    Re: Maybe if you could keep up ...

    Amen, brother.

    reply to this | link to this | view in thread ]

  17. identicon
    anony mouse, 31 Jan 2006 @ 1:26pm

    Re: I hate LECs

    Uh...how are YOU Jeff going to put the LECs out of business? Are you some sort of internet provider or something that is competing with them?

    reply to this | link to this | view in thread ]

  18. identicon
    barry goodknight, 31 Jan 2006 @ 10:07pm

    Re: Maybe if you could keep up ...

    I couldnt have said this better myself!

    reply to this | link to this | view in thread ]

  19. identicon
    Brian J. Bartlett, 1 Feb 2006 @ 1:48am


    Firms large and, in my case, small all pay for their bandwidth to the backbone and frequently to more than one provider. My remote servers are connected to two separate backbones and this economically illiterate id10t wants me to pay not only for the bandwidth and connection twice (to the two providers) but four times?

    If their business model is that deranged then either they need to go back to business school and take those courses in economics that they obviously slept through again or they need to correct their fee structure to recoup the costs they obviously have been undercharging for all these years. If the former, they might gain a bit of enlightenment although I seriously doubt that will happen. If the latter, then more than a few content providers will leave the net (of fire up their own dark-fibre, e.g. Google].

    Heck, I (almost) wish Google would fire up that fibre and spend their billions on the last mile problem. I'd hail my new Google overlords and willingly pay, and pay, just to get these blood-sucking leeches off our backs.

    reply to this | link to this | view in thread ]

  20. identicon
    Pissed off telco tech, 1 Feb 2006 @ 3:50am

    Re: Costs

    Yeah, I didn't know that google was looking to get their own dark-fibre network going, I would also willingly pay google instead but if they ever want to co-exist with the pre-existing internet, there will be a fee somewhere. Know I see whay China and Germany are wanting to start up their own networks. I just wish that there was some way to completely rid ourselves of this dependency on the LECs already established network, otherwise, there is nothing that anyone can do, really when you think about it, we are only a bit off from the government itself not having anything that they can do. I mean, the FCC and everyone else repeatedly grant all the bells more and more real estate in their own ass. Eventually the LECs will be like, "you know what, fuck you, you don't want to coopperate, fine... -yank-" and there you go. "Anyway who are you going to call, I mean, if you can't speak (with out a dial tone) Mr Anderson...."

    reply to this | link to this | view in thread ]

  21. identicon
    theCreator, 2 Feb 2006 @ 6:12am


    Man. Google/Yahoo and the other big Net companies should just cut off access to all AT&T/SBC users for one week and let's see how many of these users change providers.
    I suspect that the reason that Google is building their own fibre network is because they want to allow free access to the Internet to everyone via their own network?

    reply to this | link to this | view in thread ]

  22. identicon
    Ryan Walb, 9 Feb 2006 @ 10:20am

    Only halfway eh?

    So you'r telling me that you only charged Google to connect their servers to "the cloud" and you only charged Joe Shmoh to connect to "the cloud" but you forgot to charge anyone for "the cloud". Whoops!!! I guess you should have thought about that before you thought you were smart enough to sell Internet access. Where'd you get your business degree? A cracker jack box?

    reply to this | link to this | view in thread ]

  23. identicon
    Tom, 27 Mar 2006 @ 12:48pm

    Good joke.

    For the cloud theory to hold, I would have to buy only downlink bandwidth. It would make sense as I would pay for (my house to cloud) and google paying for (google to cloud)

    I remember the DSL/cable advertise for both uplink and downlink bamdwidth. I bet Google/yahoo paid for downlink/uplink bandwidth in Gigabits. So there is no cloud. I wonder if ATT would sue google over it. It would be real funny to watch such case.

    reply to this | link to this | view in thread ]

  24. identicon
    readme, 7 Jun 2006 @ 10:33am

    What is net neutrality all about?
    At its core, it's about consumer protection. Consumers should have unencumbered access to the Internet and not be subject to blocked content. AT&T vigorously supports net neutrality as defined by the FCC last August when it laid out its "New Principles to Preserve and Promote the Open and Interconnected Nature of Public Internet:"

    Consumers are entitled to access the lawful Internet content of their choice;
    Consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement;
    Consumers are entitled to connect their choice of legal devices that do not harm the network;
    Consumers are entitled to competition among network providers, application and service providers, and content providers.
    Sounds reasonable. Where's the disagreement?
    Some Internet content providers have hijacked the concept of net neutrality — away from consumers — and made it a rallying cry to protect their business interests.
    Here's the basic premise: We invest billions in our broadband network, which gives content providers — popular Web sites, VoIP providers and so forth — access into the homes of customers like you and me. That works fine, to a point. These content providers more and more are offering online services — especially video — that require more bandwidth. They want to ensure that these services get to consumers without any delay or latency, which happens sometimes with a typical Internet connection. They want us to give them premium bandwidth — not only more bandwidth, but some level of service guarantee — to deliver their services to Internet customers. Just as people are willing to pay more for next-day mail delivery instead of regular delivery, we think content providers should help pay for this premium delivery if that's what they want or expect. Put another way, our customers should not be expected to pay more for DSL because a content provider demands premium bandwidth treatment. Companies seeking increased bandwidth should bear the cost.

    Can you elaborate?
    As I said, we agree with the FCC and we side with consumers. A truly healthy Internet is one where all parties who use it share in the cost of ensuring the health of the networks. We invest billions to build and maintain networks. Content providers count on that investment to reach their customers. Prioritization of data over private networks is an essential part of managing traffic. We simply want to allow content providers the option of choosing different service levels when moving bits over our network. From that point, it's up to them whether they want the service we're offering.

    But no blocking or degrading?
    Absolutely not. Any broadband provider who blocked access to the Internet would be inviting its customers to find another provider. AT&T has made clear, as a matter of company policy, that we will not block or degrade anyone's content.

    Why do people sometimes equate net neutrality to highway construction?
    It's a good analogy. Double-load tractor trailers pay extra fees to travel our highways because they require more room and they cause more wear and tear on the roads. Companies that push bandwidth-consuming applications such as video are the equivalent of big rigs on the highway. If Internet content providers had their way with the highway system, two things would happen: Everyone would have sub-par roads and everyone would pay significantly higher gas taxes. There is a better way, which would continue to provide consumers what they have today as well as offer them more options.

    Everyone would pay more under the Internet content providers' plan?
    Yes. By denying companies a choice of selecting different levels of speed and security, net neutrality proponents are really advocating a "one-size-fits-all" Internet. That would add costs for all Internet users, regardless of usage. Higher-bandwidth applications, like gaming and video, require billions in investment for fatter pipes. Absent the ability to manage traffic and offer differentiated pricing, low-volume users would pay more for basic activities such as e-mailing and Web surfing just to subsidize gamers and others. Some Internet companies want all consumers to pay for the high-bandwidth services, regardless of whether or not they use them. Instead, we believe the cost of providing high-bandwidth, high-quality services should be paid for by those who actually use them.

    What are we proposing?
    It all boils down to this. We don't want to restrict anyone's use of the Internet. We just believe that high-volume, bandwidth-intensive content providers should be asked to contribute proportionally toward the huge costs they create-rather than demand premium network services with the costs being passed on to DSL customers who may never use or need their applications.

    And, more importantly, we think customers should continue to have control over their Internet experience, including their monthly bill, rather than have their services and costs dictated by the unreasonable demands of a few large content providers.

    reply to this | link to this | view in thread ]

  25. identicon
    michael rossiter, 30 Jun 2006 @ 6:11am


    If a company is providing a "high bandwidth service" that no-one uses..guess what??? NO BANDWIDTH IS USED!!!!!!!!

    Bandwidth is not some magical substance that gets stored in a warehouse...if a company provides a popular service they pay more by their bill increasing....if they generate an unpopular service then they go out of business using no bandwidth at all....

    Content providers DO contribute proportionally to their bandwidth they use by paying PER GIGABIT...the faster the connection, the more is sent per second hence the bigger the bandwidth bill.

    Is it just me or is "read me" a telco drone cut&pasting from some feeble comms companies official dogma...?

    reply to this | link to this | view in thread ]

  26. identicon
    Anonymous Coward, 7 Jan 2007 @ 4:53pm

    How does a dumbass like Ed Whitacre actually get to the position he is in. People like that dont do anything to better our quality of life unless there is something big in it for them. Greedy SOB leech.

    reply to this | link to this | view in thread ]

  27. identicon
    Anonymous Coward, 26 Aug 2007 @ 12:21pm

    The telcos are horrible monopolies that keep getting away with it even though everyone seems to agree they are monopolies. They need to be broken up for good and their CEO's should be put away in jail for life and forced to pay jail cell fees by the minute.

    reply to this | link to this | view in thread ]

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