Miscellaneous
by Mike Masnick
Fri, Mar 24th 2006 6:31pm
Over the last few months, we've seen the heads of the remaining telcos talk about how Google and other big internet companies should be paying them extra and how they were getting getting a free...
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Why Aren't The Telcos Paying Google For Making Their Network Valuable?
from the just-wondering dept
Over the last few months, we've seen the heads of the remaining telcos talk about how Google and other big internet companies should be paying them extra and how they were getting getting a free lunch. As plenty of people have pointed out (repeatedly), all of these companies pay their bandwidth bills, so if there are complaints, they should be directed there. More importantly, the telcos need to realize that people aren't just paying to connect to the middle of the network, but to connect the ends to each other. In other words, the internet connection is valuable because Google, Vonage and the others make it valuable for them. Breaking that up and getting rid of network neutrality hurts the value of the connection the telcos are trying to sell. This is why it makes sense for any of these companies to call the telcos' bluff and refuse to pay. Tom Evslin, who's an ex-telco exec himself, points out today that you can extend this argument much further. Since these sites and services make the telcos' network that much more valuable, shouldn't the telcos pay Google, Vonage, Apple and others for adding that value that makes customers want to buy an internet connection? In fact, as he points out, that's exactly how it works in the video business. Verizon just worked out a deal whereby they're paying CBS to be able to carry CBS on their new IPTV offering. It's hard to see how Verizon can argue that it makes sense for them to pay CBS, but that Google should pay them. In both cases, it's about adding content or services to the same network to make it valuable enough for consumers to sign up. Evslin points out (as we have in the past as well) that none of this is an issue if there's real competition. The fact that we're seeing these threats (even if the telcos are trying to backtrack a little) suggests that the telcos don't see themselves in a competitive market when it comes to internet connectivity.
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techbrat, Mar 24th, 2006 @ 6:57pm
hear hear
hear hear[ reply to this | link to this | view in thread ]
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mike, Mar 24th, 2006 @ 7:52pm
more bs
I think these telecompanies need to just find other types of markets to enter. Find new technologies to invest in.[ reply to this | link to this | view in thread ]
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Anonymous Coward, Mar 24th, 2006 @ 7:58pmPerhaps because Google is just one company out of millions that makes the internet valuable, whereas there are only a couple telco companies that make the internet valuable to American's by offering access to the internet. Do you really believe the Internet would be as popular as it is if we were all still using standard phone lines? Do you really believe that if Google wasn't around the Internet would suffer that much?
I personally think the telco's are just greedy for trying to charge the internet companies, but to say that they should pay Google is just plain stupidity.[ reply to this | link to this | view in thread ]
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Michael, Mar 24th, 2006 @ 8:06pmYeah... I'd have to say "well said."
I myself lean the opposite way on a couple minor points, but if I had to vote today, I'd side with the content providers.
For the most part, this all seems like a gentlemen's deal between infrastructure providers to agree not to upgrade networks unless people pay up. I believe this falls under "concerted action" in anti-trust law (or something similar... I'm rusty).
Yes, it costs Verizon money when Google releases a new high-bandwidth service, because they must upgrade infrastructure to provide for the new traffic without impacting existing traffic. Otherwise, their service slowly degrades.
The telco's see this as different for them because it is out of their control. Google caused the need for more bandwidth, as opposed to the telco's conciously deciding to better service to out-do their competitors. Because it was Google's fault, they want to charge Google. But think about this... how is this any different than Microsoft needing to invest in a new OS every few years? Why doesn't Microsoft try and charge Apple for requiring them to invest in upgrades to their product offering?
With respect to telcos, it's the unfortunate nature of their business that demand for bandwidth will increase. To maintain their competitiveness, they must upgrade, or their competitors will upgrade and out-perform them.
Or...
Or they shake hands with their competitors, and they all collectively agree not to upgrade unless bandwidth producers pay them first. I can see hints of both concerted action and outright extortion.
There are other issues to consider, and it's a huge mess, but there's some thoughts for you.[ reply to this | link to this | view in thread ]
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Michael, Mar 24th, 2006 @ 8:11pmShould have said "bandwidth consumers" in that last paragraph. "Content providers"...
Whatever. You get the point.[ reply to this | link to this | view in thread ]
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Bryan, Mar 24th, 2006 @ 8:18pmPerhaps google should give the big telco's a big "F*CK OFF!" and block anyone connecting from that particualar ISP? If it only worked as well as in my head it could cause millions of people to switch to a compeitor, just to stick with their favorite search engine.
[ reply to this | link to this | view in thread ]
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Michael, Mar 24th, 2006 @ 8:30pmBryan, that introduces a catch, though. One of the other issues in the debate is one of availability and it's effect on the current competitive market.
Quite simply, we only have two choices where I live: cable or dial-up. I, for one, would gladly give up Google to maintain high-speed. It's just too important, and even Google has competitors that I'm willing to use.
At some point you'll have critical mass... maybe I wouldn't give up 5 major services... maybe it's 25... maybe it's 100... I don't know. At some point I'd prefer dial-up, but it might take a seriously large volume of content disappearing, and for every one that goes, some company who doesn't care about taking a stance will decide to fill the hole.
We need a real solution, not a bunch of children giving each other the finger in defiance. But then again, we're all just a bunch of brash, arrogant children...[ reply to this | link to this | view in thread ]
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Paul, Mar 24th, 2006 @ 9:36pm"6. Perhaps google should give the big telco's a big "F*CK OFF!" and block anyone connecting from that particualar ISP? If it only worked as well as in my head it could cause millions of people to switch to a compeitor, just to stick with their favorite search engine."
My current options where I'm at are Comcast Cable (8mbps) and SBC DSL (4mbps, too far from station to get 6)
Both are priced roughly the same, and if Google decided to block access to Comcast I would not sacraficemy faster speed just so that I can use google search and gmail.[ reply to this | link to this | view in thread ]
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Tom, Mar 25th, 2006 @ 2:30am
Re:
So essentially Google cannot compete with Comcast because Comcast has a monopoly on high-speed access in that area. I always wondered how this was legal? Am I missing something? Is this not a monopoly? Do you have some other good option? The only thing I can think of is that you could go with satellite internet, but, let's face it, satellite cannot compete with DSL.
Maybe I'm just thinking of this wrong...
Maybe there are competitors for Comcast. Maybe because the service you desire is access to the Internet. You can get Internet Access from different companies and you go with Comcast because they do it better.
But then I think some more...and it starts to seem like a monopoly again because the internet is so much different if you are on a high-speed connection. It shouldn't be classified as the same product that's offered by dial-up companies.
I think this is just too unclear because I'm trying to fit things into neat little catagories. Maybe we should define new catagories. Maybe we need to change the rules for ISP's and Cable TV providers because this isn't a free market in the current state.[ reply to this | link to this | view in thread ]
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Roomba Review, Mar 25th, 2006 @ 3:11am
Ridiculous
This article hits the nail on the head. The only reason any of the ISPs can dare make this argument is because they hold virtual monopolies on broadband.
Bottome line: If there were true competitive offerings in every region, they would never dare attempt to charge content providers for access.
The ISPs want their cake and they want to eat it too. If infrastructure upgrades were SO cost prohibitive, why do they fight tooth and nail to not allow local municipalities to offer free Wifi? The fact is that Google is more than willing to offer free Wifi everywhere, and if allowed to, they would. The phone companies and cable companies want to keep out competition, so that they can charge non competitive rates. Simple as that.
I say let them try to charge content providers! Google has bought up billions of dollars worth of dark fiber, and they are simply waiting for an excuse to light it up. If one of the local monopolies dares to try such a stupid move as they are insinuating, you can bet your bottom dollar that will be all that Google needs to push through legislation that will allow them to offer competing services, and then suddenly you'll see that it isn't really that hard for the local ISPs to price competitively after all.[ reply to this | link to this | view in thread ]
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Andy, Mar 25th, 2006 @ 4:03am
Who's screwing who here?
While no one seriously expects ISPs to pay Google (or other services) - that comment was presumably a simple reverse position to show how unreasonable the ISPs' suggestion is - I think it is worth pointing out that everybody using the 'Net is paying for the pleasure somewhere along the line.
Content providers and consumers alike have to pay (and they pay plenty) the ISPs. In fact, while my own phone and internet charges are, in my opinion, still too high, from what I understand (via conversations with US-based friends), the charges paid by US consumers are plain exorbitant.
With everyone and his/her granny now connected to the 'Net, surely the days of dial-up are all but over, and the days when we should see high-speed broadband access at cheap commodity prices should be upon us. Volume of subscriptions not cost per subscription is where the ISPs should look for their profits.
Also there is much talk of ISPs attempting to block VOIP traffic in order to protect their conventional (poor-tech) telephone services. When I have already paid for the right to use my connection, I'll be damned if I am prepared to be told how I can or cannot use that connection![ reply to this | link to this | view in thread ]
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VoVo, Mar 25th, 2006 @ 5:41amNot sure if the Veizon example works very well (though I wish it did). Presumably cable service providers pay CBS (or another content provider) and then charge their customers in proportion how much content (how many channels) they provide to the end user.
Come to think of it, isnt that what the telcos want to be. The model is just different from purely advertising paid (google, terrestrial channels) to user + advertiser paid channles (HBO type model).[ reply to this | link to this | view in thread ]
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Dave, Mar 25th, 2006 @ 7:52amI think the Verizon example works perfectly. I can forsee a future when most companies start delivering tv in IPTV form. The busineess model is no different than cable tv. Content providers sell to to access providers.
Obviously telcos have studied the ebay model and want to charge on both ends and rely on the fact that the is little or no competitiion.
I stick with Comcast through constant rate-hikes and service drop outs. And I am battling to get my non Comcast VoIP going.
But it is not a monopoly in the true sense. It is simply that the telcos don't want to duke it out. SBC is content to provide slow broadband at a value price and comcast gives a fast expensive service. IF SBC ever lays fiber Iwill eat my hat.[ reply to this | link to this | view in thread ]
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newmanae, Mar 25th, 2006 @ 8:11am
Techie niavete
For 20 years now we have comforted ourselves with the idea of an open unregulated internet, but the wild,wild west is dead, people.
These are all publicly traded companies with boards, shareholders and lobbiest. Given their track record in Washington, I'm betting on the telcos to get a model of the internet established much more along the lines of the cable industry than anything we've seen so far.[ reply to this | link to this | view in thread ]
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Daev, Mar 25th, 2006 @ 8:56am
Increased Bandwidth by Google Gives Us Better Conn
With respect to telcos, it's the unfortunate nature of their business that demand for bandwidth will increase. To maintain their competitiveness, they must upgrade, or their competitors will upgrade and out-perform them.
Agreed. We all should be THANKING Google for higher bandwidth usage! Google prevents our local Telco's from becoming too idle and stagnant. If Google didn't require more and more bandwidth, content providers would be perfectly satisfied to not upgrade our services past 5 Mbps. It is because of Google that these companies must keep on their toes and constantly be fighting to provide faster and faster services to the consumer.
Think about it people ... when 5 years from now you are streaming HD video through the internet, your puny 5 Mbps connection will not be enough! If Google doesn't force these companies to do it eventually, something tells me I wouldn't be suprised to do it itself given all the Dark Fiber it seems to be buying across the US.
[ reply to this | link to this | view in thread ]
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mark, Mar 25th, 2006 @ 9:09am
Need competition
The content and the networked pipe are both critically important to accomplishing the purpose of the end user. The end user will be willing to pay for both the pipe and the content if it is valuable.
To some degree, they have to work together. If I, the pipe-owner, invest big money to increase the bandwidth of my pipe, I have to be confident that the content is there so that the end user will want to pay for my bigger/faster pipe. If I, the content-distributor, invest big money to provide content that needs a big/fast pipe, I have to be confident that that pipe will be in place so that the end user will want to pay for my content.
If there is a single unregulated pipe-owner (or multiple pipe-owners colluding), he is the gatekeeper and can charge both the end user and the content-distributor for carriage. The system fails. If there is a single regulated pipe-owner (like the old AT&T monopoly), prices are regulated, but central planning will likely cause the system to not be as innovative or to grow in utility as quickly as a competitive system.
So we need multiple non-colluding pipe-owners. We do pay a cost in efficiency but it is usually worth it to gain innovation, leading to cost-reductions or greater utility.
Ditto with some variations on the content-distributor side as well.[ reply to this | link to this | view in thread ]
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mark, Mar 25th, 2006 @ 9:19am
Continued
The question is: are there enough end-users willing to pay some amount of money to support multiple pipe-owners investing big money in pipes?
Which leads to: is there enough utility (content) on the network to draw enough paying end-users? And are there others (content-owners, advertisers) trying to reach the end-users who are willing to pay to support the cost of investing in pipes?
Broadcast TV, cable TV, telephones, cell phones, and postal mail have all settled upon differing models. Do any of them fit the Internet?[ reply to this | link to this | view in thread ]
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chosen, Mar 25th, 2006 @ 10:35amMy personal point of view is that (although this article is mostly pointing Google as an example) Google and most of the others should tell the telcos no and move on with business as usual. What are these internet providers going to do if Google should step on their toes and say offer internet access themselves.
Cities across the US are looking for way to get city-wide Wi-Fi into the hands of their citizens, why shouldn't the telcos or service providers look into doing that instead of trying to bully the website providers?
Yes, the argument can go two ways. Google and the other internet sites make people want to get theinternet because they provide the information we need or are looking for. But if it wasn't for the service providers, we wouldn't be able to gain access to Google and some of the other sites.
But back to my ealier question, what will these service providers do if Google should decide to become one themselves?