Wednesday, April 19, 2006 Technology | The corporate toll on the Internet

Boing Boing provides a link to an excellent story, "The corporate toll on the Internet" which details the business plan that the Bell companies hope to impose on the internet. Our own "not so local" boys AT&T /BellSouth are leading proponents of the plan.

Boing Boing, with uncharacteristic bitterness says in its response to the article:
Maybe the answer is just more ISPs. More long-haul pipe (either physical or wireless), more rights-of-way cleared in cities, more of everything -- especially information about what a bunch of carrion-feeding, lying jackals AT&T are, and who else you can give your business to.
The article itself is easy to read; disturbingly so...that it clarifies matters so nicely may be part of what upset Cory Doctrow of Boing Boing. For instance, rather than simply repeating the lame claims of the incumbents that they would never do anything to upset their customers because the competition is so fierce, the author does what a normal person might do--look around and ask "What competition?" The answer, of course, is "Damned little."

But if you don't like your Internet provider, would you really be able to go elsewhere? Cerf, who is now Google's chief Internet "evangelist," pointed out in the Senate hearing that only 53 percent of Americans now have a choice between cable modem and DSL high-speed Internet service at home. According to the FCC, 28 percent of Americans have only one of these options for broadband Internet access, and 19 percent have no option at all.

And even for that 53 percent who are lucky enough to have two choices that duopoly is not all that much of an improvement:

He adds that "every economic theory we know suggests that when there's a duopoly" -- in this case between cable broadband and phone broadband -- "there will be tacit collusion in the market."

That's true, and few reporters have the depth of understanding to recognize it.

The author goes through the technical bits with the same clarifying verve.

If you'd like to understand this noise about network neutrality this article is an excellent primer.



Anonymous said...

The answer may be the example shown to us by South Korea, Japan and other forward looking nations. Counties like South Korea, actually disbanded the government owened telecom service to foster competition. The results were explosive. They are now the most "connected" country in the world. Governement builds out infrastructure like fiber, but stays out of the ISP, television and telephone business. It opens its infrastructure to all retail service providers. Small enclaves of government utilites will react to stop competition, when they become the competition.

John said...

While I like--and actually think ideal--the idea that the national government would do the same for the internet that it did for the interstate highway system infrastructure I do think there are problems with the way you phrase things here.

The models in Asia are not, by our standards, "privatization" models. The profit-taking companies are huge, closely integrated with the government and very much "directed" by government policy and massive, targeted investment to foster those policies. Think the old AT&T on steroids with an actual national broadband policy to fulfill.

Again, I think your suggestion makes sense as far as it goes. It would be easy and relatively cheap for Govt to provide a huge cheap, fast publicly-owned backbone with utterly open access (and this would in a stroke solve the net neutrality debate). Its not being discussed because only dreamers like you and I think the phone and cable lobbies would allow it.

But even with huge changes in the admin and congress that allowed the feds to displace the under-performing incumbents the cost-prohibitive part would be the local last mile. If public policy encouraged it and laws permitted I think most communities would shoulder this burden themselves and leave it open as you describe.

But the overall solution would still include muni investment.

For my money local muni investment can have only two logical outcomes:

1) in the standard model of competition it will spur price breaks and more/better services

2) if in fact your fears that it will in our special case stifle instead of stimulate competition are true that can only mean that wired telecom is a special case. I think that might be true. I'd not be surprised if fiber turned out to be what economists call a "natural monopoly" -- the classic sign of that is that only one provider survives. (This has basically been true in both phone and cable (and electricity) for most of their wireline history.) In that case--monopoly!--the public would be better off owning it. This is the classic rationale for public utilities of all kinds.

In both cases, taken as a whole, the entry of muni competition is a good thing. --especially if the muni is the first to field FTTH.