These are our pipes, so pay up
The rumors started last fall. The CEO of SBC, Ed Whitacre, had an ingenious idea. His company is charging DSL customers to log onto the internet, and this much is great. However, these sites on the internet are making money from his customers finding them. They are profiting from his profiting! Oh no!
So, Mr. Whitacre did as any enthusiastic CEO would do. He went on a rant about web services freeloading on his precious pipes:
Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes? The Internet can’t be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!
The diatribe actually summarizes the position well. Websites are reaching customers through lines his company controls, and he ain’t getting nothing for it!
So to get what he deserves, he will charge Google and Yahoo and every other high profile site to become a part of the SBC internet. The whole controversy seemed to go away temporarily. Of course, late last year, SBC was busy being swallowed up AT&T. Now Whitacre is in charge of the AT&T empire, and he revisited his plans to control the internet late last month. In January, he stressed again that content providers would not receive a “free ride” on his network.
AT&T is now the largest provider of DSL, and they even distribute broadband in cooperation with other companies like Yahoo! However, AT&T is not the only telecom planning to do this anymore, and the reasons behind this seem less than honest.
This January, Verizon and Bell South spoke out as well. They want to pull revenue from both ends of the pipe too. Verizon sounded resolved to charge high profile sites, like AT&T wants to do. Bell South’s proposition is a little less drastic, offering higher bandwidth to websites that pay up.
Telecoms, scared of obscurity
The telecoms speak as though they have every right to skim profit from Google and Yahoo and any content provider. They want to improve profits by breaking one service into two services. Whitacre sees his DSL as a two-tier process. Customers pay to have a high speed connection established between their houses and the nearest telephone center. This is the first tier. The second tier is the connection between the telephone company and their upstream internet provider that they connect to. This second half is the portion that the telecoms seem to think that nobody is paying for.
In fact, they make it sound like their DSL customers don’t give them a cent for reaching websites. To the telecoms, the customers are paying only to connect to their servers. The internet is just a free add-on to this. But last I checked, AT&T’s servers didn’t have any content I wanted. Neither did Verizon’s or Bell South’s. When I pay my monthly DSL subscription fees, I personally think I am paying for the ability to reach whatever endpoint on the internet I want to see.
The DSL providers’ second-tier costs are what most businessmen would call operating expenses. Customers have already been paying for both “tiers” of DSL, which is how the internet service provider business has always operated. To turn around and charge web services for this invented service is deceptive and can have an ugly impact on the internet.
If telecoms charge content providers, that is effectively charging two people for doing one thing. I wish I could get two salaries for doing one job too. So what would drive Ed Whitacre and other telecom CEOs to resort to cheap tricks like designing a “two-tier” ISP structure?
It just looks like these giant telecoms are afraid of obscurity. VOIP services like Skype and Vonage simulate their telephone services at lower costs. Google and local services replace any need for phone company phone books or 411 directories. Being able to access these services on cable internet makes having a traditional phone completely unnecessary.
If telecoms can charge both customers and sites for bandwidth usage, they position themselves at the top of the food chain. Services like Skype and Google would likely try to increase revenue to pay the new expenses. For Skype and other VOIP services, this would drive the cost of calls up. Having a real phone line might even end up being cheaper than VOIP after the providers pay off DSL providers. Google would need to boost ad revenue or, perhaps, charge a small fee each month for Googling. The scramble for extra revenue would hit all customers and advertisers, not just ones on DSL. Somebody paying inflated Skype rates while on Comcast cable internet is effectively paying DSL companies by extension.
More troubling is the idea that this would set a precedent for ISPs. It wouldn’t stop at DSL providers, and would probably spread to big cable companies and the dial-up giants like AOL. If Whitacre can pull this off, all ISPs are open to charging web services for the “second tier” since they all have this operating expense. Google could have to pay fees to a list of companies that is too extensive to name. Customers, already paying high rates for internet, will certainly not be overjoyed when their ISP doesn’t get Google’s or Yahoo’s money and blocks their favorite search engine.
Pay the Fee and We’ll Unban Your IP
The very concept of charging companies for providing free content for a service is backwards. Since when do content providers have to pay the medium to be included?
Look at television. Cable channels are given money for providing content to a cable company’s subscribers. The channels pay for the television programming. It would be ridiculous for the TV show Lost to have to pay ABC to appear, since it’s making ABC a load of money. Likewise, it would be silly to ask MTV to pay Comcast to show up in the TV directory. Actually, DSL providers should feel downright privileged to have so much completely free content that their subscribers are happy to pay for.
Verizon isn’t grateful for an internet full of free content either. Senior VP addressed lawmakers about his concern that Google was taking advantage of him: “The network builders are spending a fortune constructing and maintaining the networks that Google intends to ride on with nothing but cheap servers.”
The only things Google has invested in their operations are a few crumby servers? I don’t think they’d have gotten anywhere like that. In fact, let me elaborate.
Estimates place Google’s server count at roughly 1,000. I’m having difficulty imagining buying, powering, and maintaining any array of one thousand computers cheaply. Of course, Google can’t just power on their machines and magically be on the internet. They still have to pay an upstream provider for all their bandwidth so that they can connect to one of the internet backbones. Then Google has to pay salaries of some 5,700 employees keeping the business running and advancing. For Verizon to give the impression that Google is just a handful of money making machines in a closet is brainless.
Since Google is already paying for their bandwidth to an upstream provider, paying AT&T, Bell South, and Verizon for the bandwidth that DSL customers are using looks even more ridiculous. Not just that, it’s the bandwidth that DSL customers have already paid for!
With AT&T and Verizon playing “bad cop,” Bell South prepared to approach sites like Google as “good cop.” The company has no stated plans of blocking sites directly, but it wants companies like Google to pay additional fees for its DSL subscribers to access the site at full speed. Sites that don’t pay will load much slower.
Paying the fees to DSL providers would establish a standard and create a strong block for their competition. So the profit is dangling in front of Google. Do they chase it?
Google Says NO!
Google probably recognizes how much money they could make by teaming up with Bell South. But does it betray their “do no evil” motto?
To slow down rival services that don’t pay or can’t afford the fees is some really shady cyberexortion. Imagine holding VOIP conversations or downloading music at restricted speeds, while you know there’s a site that offers the same service at 5mbps. You’re going to go with the company paying the extortion money, even if they charge a little more. After all, what’s the point of broadband if it doesn’t move fast?
Needless to say, choking the bandwidth of all but the wealthiest sites makes it really hard for any upstart business. One of the reasons Google became so successful in the first place was the speed of its results. If the company had to pay a premium to deliver that speed, it may never have showed its power. People would have avoided the newborn Google. And if they had to pay AT&T or Verizon to be included on the network at all, matters would have been even worse.
At this point, the telecom schemes seem to be a deal with the devil. If Google pays a fee it can probably afford, its competitors will run slower on DSL (until they can pay up too). Big companies would be alright, but they’d have to opt-in to the service to be competitive. However, it creates a gigantic barrier for competition. For an upstart to create an engine or service that’s better than Google will be right next to impossible; it would cost too much to be remotely competitive. So large companies would pay to keep small companies down, and small companies can’t get the bandwidth to keep customers around. Worst of all, customers and information hunters are stuck with fewer choices than ever. The only clear winner is the telecom industry.
Thank Google though for holding true to their motto to not be evil. If they wanted to get rich at the cost of ethics, all they had to do was pay the fee. Instead, the search giant gave Bell South the bird, telling reporters that they will not be negotiating with the DSL provider.
Google doesn’t stop there. Not only did they say no, but they also plan to block all other sites from being a part of this. Vint Cerf, who is known as a founding father of the internet and Google’s Chief Internet Evangelist, is on a campaign. He is trying to get these telecom scams shut down.
On February 7th, Cerf spoke to Congress about the proposed “two-tier” internet billing schemes. Vint Cerf is working to get lawmakers to install barriers preventing Bell South, AT&T, and Verizon from carrying out any nefarious plans.
He’s not just protecting Google from added costs; he’s protecting all internet users from extra charges and being given fewer choices than ever. The internet is ideally about universal and equal access to information. Thank Google for trying to defend it.