Wednesday, February 01, 2006

Telecom company troubles...

I don't often editorialize, but I'm going to do so today.

A few months back, I read all about a certain disagreement between a couple of ISP's (Level 3 and Cogent) over internet traffic going from one network to another.

A few weeks ago, we started hearing noises about ISP's charging "content providers" (that's potentially anbody on the internet, by the way, not just Google) for traffic coming from their sites to the ISP's customers.

Today, I read a story about FTTP (Fiber-To-The-Premises). I had already been thinking about the first two items and how they are related, and after this new blip on my radar today, there seems to be a general undercurrent that's identifiable in all three cases.

Before I get to that, though, lets look at each story and what it says to the public.

Story 1 - Cogent VS. Level 3

Cogent: A medium-sized ISP that relies on peering with top-tier ISP's to get bandwidth to people who pay them money. Level-3: A top-tier ISP that owns a lot of fiber, and is struggling to stay financially sound.

The stated issue? Cogent is sending too much data over Level-3's network, and making it unprofitable for them to continue peering.

Story 2 - Verizon/Bellsouth VS. Internet content providers

Verizon/Bellsouth: ISPs who have a large customer base connected to the internet, and making daily use of those connections. Content Providers: Various companies (Google, Microsoft, Yahoo, NBC, AOL, etc, etc, etc...any website on the internet) that have sites on the internet that nodes on the internet can connect to and get information from.

The stated issue? Customers of the ISPs are getting large amounts of information from various content providers, and the ISPs think that the content providers should pay for some of that.

Story 3 - Telcos VS. everyone

Telcos (Verizon, SBC, Qwest, Bellsouth): Companies that provide telephone and/or internet service to locations in the US.

Everyone: Just what it says. Well, everyone that pays taxes.

The stated issue? In the early 1990's, telcos said that they would roll out fiber connections to individual residences and businesses, providing ubiquitous high-speed access in the USA, in exchange for latitude on pricing regulations, restrictions on competition, and dispensations. They haven't done it yet.

Okay, so now what?

The first two are easy enough to connect. ISPs want to charge both their customers and the customers of other ISPs for data that traverses their networks. Classic double-dipping.

The third story is a bit different, in that they are not asking publicly, but they are asking to double-dip, just the same.

I think that perhaps the ISPs and telcos (which are becoming more and more synonymous) are suffering from a mindset held over from the days of Ma Bell. A mindset in which they own everything, control everything, and get income from everything that happens involving their systems or equipment. But more than that, they are in a position that makes the prospect of directly charging their customers a price that pays for the services they need to offer a very unattractive one.

We start with Story three, which comes first (and last) chronologically. Promises made...they'll do great things...everyone loves the idea. Reality sets costs money to do...competition still exists...dispensations are not enough to offset the cost of rolling out the program and operating the network. A plan is formed...delay the roll-out...keep the idea alive and hope that the agreement is forgotten.

Forgetting the agreement, in 1991 terms, is a simple task compared to what it takes today. Use some influence on a few media outlets, have a little talk with a few key congressmen, and spin things into a second round of promises. Today, however, the realities of the network (the one that we have to use in lieu of the one promised) and the internet that it enables make that forgetfulness effectively impossible. SCO knows a lot about the collective memory of the internet, and I think that the telcos are already beginning to learn. That brings us to the logical next step and Story One.

Okay, we can't make people forget, so how do we rectify the situation? Find money to pay for it, obviously. Asking the customers for more money is the last avenue to explore, so what is most opposite the customer...what helps us and not our competition? Ask our competitors to pay us. Level-3, while not one of the baby bells, itself, provided a useful example to the bells as to what happens in that situation.

Customers are affected, and ask questions. Breach of contract, deliberate degradation of services, Terms-of-service, lawsuits...there's little upside to disrupting all or part of a service that your customers pay for and doing so deliberately. That pretty much removes option two, which is good for you and I, since it prevents a balkanization of the internet in the US. That takes us to the next step, and Story Two

We can't make people forget, and we can't charge our competitors, so maybe we can cut down on the amount of traffic we have to handle, or make money from "excessive" traffic. How do we do this? Charge website operators that have large amounts of traffic. Our customers are unaffected monetarily, and we can just say "look, that data crosses our network, so they should have to pay some of the cost". This, of course, is still playing itself out, but I think that they'll find (as in the Level-3/Cogent fiasco) that customers are not made happier by the deliberate degradation of services that they already pay for.

So now...

you're either thinking this is interesting or ridiculous. I hope you think it's interesting. More interesting yet is what happens next. If customers don't clamor loudly about slow websites from those content providers that don't pay, then we have a de-facto tiered internet, rather than the peer-to-peer network that was designed decades ago. I'll leave the ruminations on what that means for us all to others who are already talking about it.

If customers do make noise about it, then we've effectively backed the baby bells into a corner. The only places that they can adjust things are expenditures and income. They can fire people, sell assets, or do the unspeakable...they can raise rates.

Of course, there is one very last option. If none of those things is going to work...they're running lean, raising rates will lose them customers, and selling assets just helps the competition, they can grovel. They can go to congress with their hat in their hand and tell us all the story of how best intentions never materialized into fiber networks. They can explain to congress, Bruce Kushnick, the IRS, and the FTC, what happened, how sorry they are, and how much more they need from us in order to make good on their promise.

I don't know what will happen...I'm not a fortune-teller, but whatever happens, I'm sure that we're in for something interesting.

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