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Neutral or Fast Lane for Telecoms?

Published: August 1, 2006

Currently, the Internet is free and open to anyone who wants to post content and/or access content. About the only limiting factor is the speed of connection to the Internet. Is that about to change?

As I traveled the highways and byways of our great nation on my summer vacation, I had plenty of time to contemplate one of the hot topics for both Internet blogs and the United States Senate – net neutrality. The bloggers are “hot and heavy” over protecting the “free speech” aspects of the Internet. They fear that big corporations will strangle the Internet with a walled garden approach to content.

The other side of the argument comes from Internet service providers (ISPs). Large corporations such as Verizon and Comcast see an environment where the ISPs are paying for the bandwidth innovation that drives the business models for content providers. You know the content providers…the big corporations with the great stock valuations and earnings (quite the opposite of the ISPs). However, these content providers are not paying for their access to the last mile of Internet access into the consumer’s home.

What is Net Neutrality?
For those unfamiliar with net neutrality, and apparently un-bombarded by Internet petitions, here is a quick refresher. Currently, the Internet is free and open to anyone who wants to post content and/or access content. About the only limiting factor is the speed of your connection to the Internet. This is referred to as a “dumb” pipe or connection. This connection is usually supplied to the average American by one of two sources – a phone company or a cable company.

As the Internet has grown, the business models of content providers have grown as well. It used to be that you posted information or aggregated content, and people came to view it along with the advertisements that were posted with it. However, as Steve Jobs is often wont to do, Apple changed the way that an industry does business with iTunes. Now, a successful business model depends on the speed, and sometimes quality, of a customer’s Internet connection to serve up content such as music, repeat television shows and, in the near future, movies and broadcast television.

The ISPs see an opportunity. If they invest in their infrastructure and create a virtual express lane on the Internet, they can “guarantee” (or as close as any entity associated with the Internet can guarantee something….) download speeds to certain content providers, thus providing a boost to those new business models. This type of pipe or connection is called a “smart” pipe. Who wouldn’t want to download a movie in less time? However, since there is no such thing as a free lunch, the ISPs would charge the content providers for access to this express lane.

The View from the Blogs
The bloggers, and content providers like Google, are upset at the prospects that one day ISPs like Verizon may start charging them for access to the virtual express lane. Even worse, these content providers fear that ISPs may block access completely to consumers unless a fee is paid. A good analogy would be the Kansas Turnpike.

If you want to get across Kansas, you can either pay the toll charged by the Kansas Turnpike or you can drive on less direct routes that take additional time and/or planning. For those who have traveled across the fine state of Kansas, you can understand the expediency of getting from Topeka to Kansas City, but may not understand why I-70, an interstate highway, has a toll on it. The bloggers view this type of toll on I-70 or the Internet as an affront to the open nature of their access to content consumers, which has always been free.

The ISP Perspective
The ISPs, like Verizon, see the situation as one of competitive advantage. An improved Internet connection with a virtual express lane allows guarantees to download speed and quality that will enable new content and services for Web sites. For the ISPs, the Chicago Skyway (is a good example.

If you want to get from Indiana to downtown Chicago, you can either pay the toll for the Chicago Skyway or you can use the Dan Ryan Expressway. For anyone who has been stuck in rush hour traffic (FYI – rush hour on the “Dan Ryan” is loosely defined as just about anytime from 6 a.m. until 8 p.m.) at the “corner” of I-94 and I-80, you know that the Skyway is a bargain at twice the price. The ISPs share this view and take the opinion that “time is money” to both to people wanting to access downtown Chicago or to a particularly large download from their music or video provider of choice.

A Suggestion
Since everyone else seems to have an opinion, I will give my suggestion for a net neutrality solution. First, the Internet is not and should not be a “walled garden.” Reasonable access should be permitted to all content. However, that does not mean that all content should be guaranteed at the top download speed or quality. This is similar to the concept of free speech as guaranteed by the Constitution, and not free beer as promoted by your local fraternity.

Next, in exchange for minimum download speed and quality, an ISP should be allowed to charge a fee to both consumers and to content providers to innovate and maintain their networks. Just as Don Corleone was asked to provide access to the judges of New York in the Godfather, the other Dons knew that they should pay for the services that Don Corleone had developed. These fees would be dependent on independent and transparent checks for speed and quality of service (QoS) of the ISP’s network.

Finally, ISPs should submit to local and national regulatory agencies, such as the state public utility commissions (PUCs) and the Federal Communications Commission (FCC), if they wished to provide “smart” pipe services. This ensures that consumers and content providers will have a reasonable opportunity to confirm minimum standards and prevent abuses by ISPs. This would be similar to the process that regional Bell operating companies (RBOCs) were subjected to regarding provision of local long distance services to the states that they served with local calls.

Wisdom of Solomon?
None of this is really revolutionary, nor is it going to make any one stakeholder in the net neutrality argument particularly happy. However, it does maintain the open nature of the Internet for U.S. consumers as defined by the FCC from September 2005. It also provides both a carrot in the form of expanded revenues from content providers and a stick, in the form of local government oversight, to ISPs hoping to provide “smart” pipes to consumers. Finally, it provides all the stakeholders a choice as to their “version” of the Internet. Content providers can decide to create competitive advantage either through access to “smart” pipes or tuning their content and/or applications to best use the “dumb” pipes. ISPs can decide if the potential additional revenue from content providers is worth the extra expense in network innovation and regulatory oversight. Consumers can decide which access plan provides the best value for their usage.

The Role of Business Intelligence
Now, what does this mean to the business intelligence organization of your average telecom service provider? Should a telecom service provider decide to provide “smart” pipe services as an ISP, the business intelligence organization will have and can best provide evidence on network and download performance via a well populated data warehouse if an independent group provides inaccurate information before a PUC. The business intelligence organization can also provide “third" party evidence on billing disagreements with content providers on “smart” pipe usage should they arise. Finally, the business intelligence organization will be well positioned with their existing marketing experience to identify consumers who would find the best value in a “smart” pipe solution.

Monthly Notes:

• Unofficial Book of the Month – Not exactly a book, but The Cathedral and the Bazaar by Eric Raymond is a great way to look at the concepts enabled by an open Internet.
  
  
• Interesting MBA Observation of the Month – Google and other content providers are backing a “free beer” approach to the Internet via net neutrality. However, when/if Google moves in the WiFi arena, will their outlook on net neutrality change when they are the ones paying for the networking equipment and/or the backbone development? Perhaps not based on the “do no evil” motto at Google, but it offers an interesting question for the now publicly traded Google.
  
  
• Highlighted Event of the Month – This month I am going repeat with TDWI’s summer event in San Diego, August 20-25. I highlighted TDWI’s Conference before because it offers great opportunities for education and networking. This time the same opportunities exist, but they now include this author’s debut as a presenter/instructor… Contact me for details.