End of Net Neutrality Points to Another Bubble - I Want QoS Before I Fund It
Posted by Mike Bijon January 06, 2006
It’s not a stock price bubble now, but the inflated heads of network & telecom companies. Om Malik notes in “Slow Lingering Death of Net Neutrality?” that ISPs want in on the riches of all that data running across their networks. In a very carfully worded proposal the network providers are “offering” content providers better performance for a fee. From the Wall Street Journal’s front page article (found via Rob Hyndman’s “Still More on Network Neutrality”):
The phone companies envision a system whereby Internet companies would agree to pay a fee for their content to receive priority treatment as it moves across increasingly crowded networks. Those that don’t pay the fee would find their transactions with Internet users — for games, movies and software downloads, for example — moving across networks at the normal but comparatively slower pace. Consumers could benefit through faster access to content from companies that agree to pay the fees.
It’s absurd that the network carriers are making promises beyond what they have already failed to deliver on. Consumers already pay ISP subscription fees to get just 60-80% of the connection’s rated bandwidth, yet they still see sound-outs during VoIP calls. At the other end of the carriers’ networks, content providers do have quality of service (QoS) worries, but it isn’t the network carriers delivering solutions to help them. Despite all the service level agreements in the world - every major content provider is already connected to the internet via multiple carriers and uses content delivery network (CDN) providers, companies like Akamai, Digital Island, and Xcelera, to maintain their own QoS levels.
There isn’t a chance that trying to take a slice of the content delivery pie will be good business for the network and telecom carriers. It may bring in more revenue at first, but good business involves keeping your customers happy enough to want (and even demand) more product. The ISPs are having trouble doing that, but they get greedy as they watch Google and iTunes pull in cash by using their networks. If they want to be content providers, then the ISPs should get into the market and see just how competitive it is. Instead the carriers cut risk by adopting a “utility” business model with subscription services and ’stable and predictable future revenue’. Stable and predictable earnings are risk-free though and don’t deliver some upside to annual earnings for execs looking to get rich on stock options. Instead the carriers could start provisioning their networks to reduce the quality of their product - instead of making a better product the carriers will want to be “paid off” like mob intimidators.
Carriers and ISPs surely see good business as anything that juices the stock price, as evidenced by already poor service levels, but it’s likely to bite them in the tail soon enough. I have no doubts that big ISPs will use even worse service quality to drive both content providers and subscribers to pay more for “better service”. The proposal cited above may be carefully-worded but I imagine service quality will drop unless someone pays up. The door for new network providers is just opening wider and wider. Whether it’s Google turning on dark fiber, Intel building its own WiMax network, or a content provider starting direct delivery - the company that figures out “connection delivery” the same way that Google figured out “information delivery” stands to be a major competitor in a very short time.
Mike Bijon: I'm a development manager and technologist for a smart, small marketing strategy company, 
[…] Far better and less selfishly than I said it in End of Net Neutrality Points to Another Bubble - I Want QoS Before I Fund It, Jeff Chester reviews the effects of the telecom carriers commoditizing bandwidth usage and the effects on consumers in The End of the Internet?. […]