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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  1. identicon
    Anonymous Coward, 4 Dec 2012 @ 4:02pm

    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.

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