Tuesday, December 19, 2006
Fight to the death: Net Neutrality
Bring up the topic of Net Neutrality and it's not unlikely that an audience will roll their eyes and sigh. It's a complicated topic, in part because it's technical, in part because it's untrod legal turf. It's also because FUD is being applied in heavy measure by many parties with a vested interest in the outcome.
For those folks who don't know what FUD is, it's fear, uncertainty and doubt, now used as a term of art in the software and hardware industry. It is this FUD that makes it very difficult for us to get to the bottom of this situation readily. If consumers and internet users feel frustrated and begin carping at each other, the FUD has done its work.
This overview is written for folks who are not working in technology (including communications, internet, software, hardware industries), in order to get past the FUD. If there's something erroneous or omitted, please point it out constructively, collaboratively and as simply as possible in comments for the benefit of others who may want more information on this topic.
Net Neutrality is a death match
The telephone industry (telcos) is currently in its death throes, or at least it is trying very hard to defend an aging business model struggling with profitability and therefore no longer viable.
Changing business models is accelerating in technology companies; unlike many traditional brick-and-mortar firms, the products offered can change in days and hours rather than years or decades. A breakthrough on chip size and speed today can force computer manufacturers to change their entire product line-up overnight. The schism between proprietary software companies and free/open source software provides another example of businesses whose models are being challenged; a simple change in licensing, like Sun Microsystem's recent release of Java to open source, can fundamentally change that for which a software company charges. Are they now a software maker or a software service provider if they don't own the software technology? This is a fundamental and generational shift in technology and business.
Google is an example of a business that is riding this shift in technology to profitability and future opportunity. It uses open source software and capitalizes on users' desire to collaborate over a network, instead of using proprietary software in a closed network or with no network at all. This is why we see telcos on one side of the equation, and Google on the other: their business models manifest different generations in technology.
Telcos cling to their old business model with a death grip, hoping that increasing the charges for some of the data ported over their lines will somehow save them. It's rather like stepping back in time to the 1800's, watching a cartage company using horse team-drawn wagons demanding more money for some of its freight when the same freight could get to its destination faster over those new-fangled iron horse railways.
That's a very dead business model.
Telcos' oligopoly is dying
Telephone companies had an oligopolistic position after the break up of AT&T, for reasons that are both physical and historic. There used to be only one physical network attached to a home or business; because of the investment and security issues involved, our laws evolved to both protect citizens from abuse by a monopoly and at the same time continue to encourage the telephone company (telco) to improve (i.e., Bell Labs).
The AT&T monopoly was broken in order to encourage lower pricing through competition while punishing unfair marketing practices (in exchange for AT&T's entry into computer services), but the breakup resulted in an oligopoly – few suppliers for the same products that don't fully compete, primarily due to the limitations of local physical networks.
With the emergence of cellular phones, this oligopoly has been threatened; cellular service represents a second network that can reach households without the same sunk costs to hardwire to each location. The network is moderately portable, too, meaning that the physical lock-in that reinforced oligopolistic conditions are also threatened.
Hence the acquisition of cell phone companies by telcos; not only did telcos buy marketshare and offer increased shareholder value through economies of scale, but they could continue to salvage the physical lock-in. Notice how some cell phone networks haven't been available except in defined areas, and often in tandem with the local telco that bought them.
Cable: the third network
Until recently, cable television (CATV) was not a threat to telcos. It offered entirely different services, even though it, too, required a physical network installed to premises. With improvements to Voice-over-Internet-Protocol (VoIP) and network technologies, CATV has become a threat to telcos as well, offering not only video but voice communications services.
This poses an even bigger threat to the telcos, who still rely on voice transmission for their bread-and-butter. Why would anyone who could get cable select plain old telephone service (POTS) if CATV could offer both video and voice?
Hence the battle here in the state of Michigan, between CATV providers and telcos; they are duking it out for what is the telcos' lifeblood, the consumer who uses POTS and video. Telcos figure they can keep this consumer if they can offer the same services as CATV providers – but for telcos this is a matter of life-or-death, since so many of their traditional POTS customers have already migrated to cell phones.
Pervasive WiFi – the death knell
The silver bullet that could kill telcos' business model is pervasive wireless access. Indeed, the telcos have already worked very hard behind the scenes to kill off technologies that could offer such service. Unlike today's spotty wireless network availability, a pervasive wireless network could offer all consumers internet access, video on demand, as well as voice communications, from virtually anywhere, and is not limited to individual access points defined by highly local equipment on an owner's premise. This technology threatens not only telcos, but CATV providers as well, since CATV business model is built around physically limited networks and contracts currently defined by existing legislation; CATV no longer has to worry about telcos busting into the video business, but the highly disruptive wireless network.
While we see telcos and CATV duking it out for each other's marketshare, they are working cooperatively in the halls of Congress to thwart this fourth invisible network. Northpoint's “Broadwave” brand technology exemplifies pervasive WiFi technology that was killed in the cradle; it sought approval in Congress, but its efforts were suffocated after telco and CATV lobbyists went after it a couple of years ago. Had it survived, Northpoint would have licensed all the unused north-facing bandwidth; the technology used bandwidth for WiFi transmission not currently used by south-facing satellite dish technology. Any location that could receive satellite transmission could technically have transmitted wireless in the opposite direction – and both CATV and telcos would have been forced to drop their prices even further or buy up this technology, since the estimated price for combined video-voice-internet service was $20 per month per consumer. They saved their shareholders a lot of money by simply buying lobbyists and access in Congress.
Another telco-threatening technology sought listing offshore in Europe, avoiding potentially deadly U.S. competition for capitalization. Based on 900 Mhz frequency like cordless phones of last decade, XG Technology of Sarasota, Florida offers the ability to provide wireless networks within a two-mile range in a frequency that does not require licensing approval. Technically, any location that can support a 900 Mhz phone could become a wireless internet service provider. It seems a shame that American technology must go abroad to obtain financing in order to go head to head with an American oligopoly.
Telcos' other monster-sized nightmare
Google's proposed community wireless project in San Francisco is being monitored closely by telcos and CATV; it represents the kind of scenario that telcos and CATV dread, yet another player in the marketplace that is not confined by physical limitations of network or regulated to cradle-death by FCC and Congress. Although only one of six proposals submitted to San Francisco, the joint offering by Google and Earthlink relies upon advertising sales for funding, as well as fees for services above baseline broadband access. This is a potentially profitable income stream that telcos and CATV entities cannot realize due to limitations in their models. Google's recently announced discussions with Orange in Europe provides a hint of what's ahead for wired-and-wireless communities like San Francisco; imagine using a cell phone to look for the closest Thai restaurant, in a city with thousands of Thai restaurants, and having the cell phone automatically point to the closest restaurant, the most recommended restaurant, and the one that paid for higher indexing all in a matter of seconds, after choosing nothing more than Google Local, then entering “thai food” in a query.
Why would anyone bother using a POTS telephone instead of a competitively priced cell phone if this additional service was available for free, or even the Yellow Pages?
Why would a Thai restaurant pay as much as they have for a traditional Yellow Page, if they got more business from Google Local via cell phone rather than traditional telephone service?
One can see that this new model is highly disruptive; it will affect not only telcos providing POTS. Would telcos try to obstruct or capitalize on this disruption, by charging additional fees for packet transport of graphics, or video data instead of voice?
Obviously, there are technologies in the pipeline that are going to continue to threaten telcos and CATV along with other peripheral businesses. Affected businesses are going to fight tooth and nail to maintain status quo, until a tipping point at which the fight is more expensive than the benefit of changing their models. How do citizens ensure that telcos and CATV get to that tipping point?
In Michigan, one method would be to develop a comprehensive, statewide strategy for rolling out community-based wireless broadband, perhaps using San Francisco as a model upon which to develop. Telcos and CATV are either going to have to be part of the solution or gradually phased out to a level reducing them to a default service provider of last resort.
But are there other options we haven't yet discussed? Or are the benefits of pervasive community-based wireless broadband access so compelling to education and economic development in this state that worrying about telcos and CATV isn't worth our time?
It's easy to wish away our physical corporeality (is that a redundancy?) - I'd like to wish away 10 lbs of mine - but we have to make our way through the world, and have infrastructure to support it. I find myself wondering, in my lighter-headed moments, why my laptop needs to be physically plugged into an outlet to get its battery charged. Like, why can't this be done wirelessly. Well, it could, but the carnage in terms of collateral damage would be significant, and could not be offset by incorporating it into the access rates.
Nice to see you back on the air. Happy Holidays to you and your family.
Actually, I don't have a problem with plugging in my laptop for power; I figure the alternative is fuel cells and we're really not there yet, just as we weren't there technologically during Ma Bell's monopolistic days with alternative networks.
So why can't we have internet over powerlines? It's technologically possible, and about as reliable (maybe more so) as the other networks are. Why hasn't this become more widespread, particularly since power is far more distributed than any other network? Would you feel better about having to be tethered if you could get extremely reliable broadband internet service at the same time?
We haven't installed pervasive wireless yet, so we really can't attest to the quality of the service. I'm sure that it can be better than what we get in our piecemeal patchwork; think about how much we rely on cellphones, an existing pervasive network. Granted, we have a sensitivity to dropped packets in cellphone service, but we don't have that same degree of sensitivity with internet usage -- I don't have a clue how many packets I'm dropping right now, for example. As long as I can type these letters one after another, I'm happy with my service, happier when it uploads. That's pretty tolerant.
We're also in the middle of a shift in our experience of the internet. If memory serves, the total installed base of cellphones is 5-to-4 over all PC's; this means that potentially more users experience the internet over phones than computers. In other words, these folks are already demanding pervasive wireless, they just aren't using traditional telephone networks or CATV to do so. Maybe that is part of the problem: the aggregate demand isn't focused enough on internet delivery alone to force the telcos and CATV providers to change.
In my neck of the woods, I'd be happy with the CATV company simply seeing itself as a telecommunications company and not merely a video provider. They only have 8am-5pm service and respond faster to video problems than internet problems. (Yet they are trying to sell me telephone service...gah.) This is a problem that more competition might fix.
I'm not wishing away the infrastructure; heck, infrastructure is my life. I'm simply saying there are more and better ways to get what we need, and we need to discuss them while being prepared for a serious fight from those parties heavily invested in the status quo.
Happy holidays to you and yours, Phil!
Internet over the power system is not a good idea. I'm a hardware engineer and I've spent a good deal of time dealing with EMI (ElectroMagnetic Interference) issues. The thought of sending the amount of RF over the power system that broadband internet access would entail is enough to curl my hair.
Most of the techniques we use to pass the FCC tests for EMI compliance involve spreading the noise out over the RF spectrum to avoid peaks that cause a failure at any one frequency in the regulated band. Over time as more and more broadband radiators are created we will reach a situation where quality of service will become poorer and poorer. The two catch phrases are spread spectrum and ultrawideband. These offer a short term fix at the cost of long term spectral pollution.
I've spent most of the last six years struggling with these issues in regard to networking entertainment media in commercial audio and home entertainment. Wireless distribution in the home has quality of service problems that are insurmountable beyond about 50 feet. For commercial audio there is no substitute for wire.
Your summary is very good from the point of view of the battle between switched circuit and packet based networks but there are these other dimensions we also have to deal with. I shudder to think that the regulatory enviornment for all this is set by people who have no comprehension of the technical issues involved.
I hope you have a wonderful Christmas.
Would love to hear your feedback after XG Technology is commercialized near-term; I suspect this is the fix to the 50-foot challenge.
And yes, I'm with you entirely on the non-technical regulatory folks trying to work their way through this mess; they are extremely prone to FUD and are likely to cave under with little effort at our expense.
Best to you and yours this holiday season, thanks for stopping by!