Forget Net Neutrality: Just Take The Networks Away From The Telcos

from the root-for-no-one dept

Slowly, but surely, people are starting to figure out what's really going on with the network neutrality debate. While some of us have been trying to point out that the network neutrality debate is only clouding the real issue concerning competition in the broadband space, too many people have been focused on which side of the ridiculous debate you're on. However, both the telcos and the internet companies have been feeding the public exaggerated propaganda that continues to obscure the real issue. Hopefully the tide is turning. Last week, Tom Evslin wrote up a great summary of the situation, pointing out why both sides were lying and how competition was the issue. Now, Andy Kessler has matched him with a fun opinion piece for the Weekly Standard explaining why you should root for no one in the net neutrality debates. He points out that the telcos have to push against net neutrality, because otherwise their business model collapses -- an argument he made a few years ago when it came to line sharing (the lack of which has obliterated what little competition there was in the broadband space). Kessler goes on to knock down the telco supporters' favorite argument about how they'll never invest in new fiber without a guarantee of a profitable business model:
"Forget the argument that telcos need to be guaranteed a return on investment or they won't upgrade our bandwidth. No one guarantees Intel a return before they spend billions in R&D on their next Pentium chip to beat their competitors at AMD. No one guarantees Cisco a return on their investment before they deploy their next router to beat Juniper. In real, competitive markets, the market provides access to capital.
So, what's the solution? Kessler comes up with a modest proposal of sorts, that is amusing to read, but which will never play in Silicon Valley with its libertarian focus on "property rights." He suggests yanking language out of the Supreme Court Kelo "eminent domain" case -- and using that to argue for taking over broadband networks from the telcos (a situation for which there is some evidence that better broadband can be delivered). His point, satirically enough, is that if the threats are made loudly enough, it could freak out the telcos just enough to generate some real competition in new networks. Instead, though, we're left with arguing about silly side arguments backed up by musicians who have no clue what they're talking about. Suddenly, arguing for eminent domain over telco networks doesn't seem quite so silly...
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  1. identicon
    Fox McCloud, 26 Jun 2006 @ 10:32am

    Telcos are screwing themselves a bit, aren't they?

    Out of nothing but curiosity...

    Back when I used Charter Cable, they had some sort of big deal going with MSN Search. Basically, they made a hybrid homepage that would let me check my charter email (which I never used) through the MSN/Hotmail interface, and put a nice Charter logo in the upper right corner of the MSN Page.

    Now, not being any more business-savy than I am, I'm going to act like an idiot and assume that charter probably either paid 10 million bucks for that privlage, or gave MSN "free extra bandwidth" or such.

    Now let's assume the telcos (charter included) have thair way and can tax any site using a lot of bandwidth. Since MSN Search is the third biggest site on the net (after Google and Yahoo) then clearly that'd be a ton of money, even for the lightest amount of bandwidth usage or the smallest charge. Under the deal like charter had with MSN, then they'd be taxing MSN for the privlage of using MSN as charter customer's start page.

    So in a way, doesn't this kill any chance or hope of search engines making deals with the telcos, even when those deals would typically help both the telcos and the search engines? Even more so, doesn't that in turn prevent search engines from asking OEMs to make them their default engine/page like the big deal Google just made with Dell? Why would any site want to be a start page in this case?

    If we assume that 60% of the people who buy a new dell with the google start page use it, but 40% don't, and dell sells 2 million PCs with that google sart page, then that means Google would have to pay telcos for 800,000 start page hits which would be completely wasted, at the very least (assuming people open the browser at least once to change the page.) Worse still, for the remaining 1,200,000 people who keep using google, many of them might open a browser just to go to an address, like we'll say techdirt. Even then, when users don't actually use google and instead go directly to a URL, it would cost google the taxes for that hit.

    And that's just search engines. That doesn't count other services on the net, like news pages (i.e. Techdirt, Slashdot, etc) or major download sites (Sourceforge, etc) or even, as mentioned, YouTube and VoIP services. I suppose I'm asking if maybe this would spell an end for pre-installed software? Wouldn't this mean that most companies would never agree to come preinstalled on new machines, and companies couldn't afford leads that don't generate a sale? If someone (like me, for example) wanted to read about 40 pages of the skype site before downloading and using it, and then only buy one set of airtime at once, or even make free internet-only calls, then wouldn't skype have no hope of turning a profit from that? Doesn't this spell an end to most advertising?

    If so, what would happen to tne entire internet ad industry? I'm assuming it wouldn't just dry up, so what's the alternative? Does that mean that every site on the net starts charging users to use it, since advertising is no longer profitable for the ad companies? Or does it mean that you're required to fill out big, long, detailed "surveys" when you get a new PC so they can target ads to you without wasting money? Wouldn't that in effect be forced spyware?

    That's my question, I suppose. Even if you believe every argument the telcos have, in some way or form, doesn't it eventually either make the internet undesirable to most users, and cut out 50%+ of their customers, or even worse, doesn't it spell a complete end to free internet? If sites must pay out the rump for the use of other lines, then how does a site afford that?

    The only viable alternative I can see to this is a complete and total internet monopoly. If NN was to suddenly be abolished and all the telcos did as I've described, and consumers get pissed, so they're risking losing them, then what happens? Isn't it logical that a single telco (we'll say Charter for arguments sake) could come up with a "all bandwidth that only uses charter lines is untaxed" gimmick, and in doing so, make most sites and users use only charter lines? If they do that, and then other telcos don't catch up quick enough, that means their competition - cox, comcast, direcway, DSL and the like - would seemingly dry up. Once that happens, and Charter has a total monopoly on the market, then they could raise prices. They could raise them as far as $400 or more a month, until internet services costs as much or more than power and water. Sre, eventually people would revolt and quit paying it, but if customers payed even $200 a month for a 256kb/second line since there would be no alternative, can you immagine the money generated in a single month from a total global internet monopoly?

    It's just a thought, but perhaps by getting rid of NN the telcos will actually kill the internet altogether, and in doing that, they could easily screw themselves with their own really big stick.

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