Gads a voice of reason on the Net Neutrality question...

[David Farber <dave () farber net>]

Begin forwarded message:

From: Jason Weisberger <jweisberger () mac com>
Date: June 2, 2006 1:31:49 PM EDT
To: dave () farber net
Cc: ip () v2 listbox com
Subject: Re: [IP] more on Another Net Neutrality question...

Gentlemen,

This is no new idea, it has already been done in the past and the  
whole net neutrality thing seems to just be a neat way for Big  
Content and Big Telecom to fight and hand money to politicians. I  
speak from a background of having been a telecommunications and  
internet networking executive and having worked on some of the  
largest IP networks out there. I was VP of Network Engineering for  
Digital Island, a company that built and "overlay" network, like you  
are discussing and I did stints as VP of Product Management and VP of  
Commercial Strategy at Cable & Wireless in the US. I spent a lot of  
time trying to explain to a large number of people how to pull that  
company out of the toilet and largely being ignored. I've seen first  
hand what it is that drags down the telecom infrastructure players  
that are providing backbone and longhaul internet transport to  
Microsoft, Ebay, Google, Yahoo and many others.  I'm no fan of big  
telecom but I think they are getting a really unfair image cast over  
them in this net-neutrality show.

First: No one is talking about taking the core IP-based internet  
service away from Big Content sites and making them pay unfair rates.  
Right now Yahoo, Google, Ebay and others pay unfair rates now, but  
I'm pretty willing to bet its too late there and telecom will never  
get them paying anything close to cost.

Here is what happened: The big providers over built. Then there was a  
scramble to grab marketshare, regardless of cost. That led to MSFT,  
Y!, Amazone, Ebay and others getting artificially depressed prices  
for volume; at or below cost. Then the market started to dump and  
prices were dropping like a rock to try and bring in ANY revenue as  
dotcom groups imploded and all the marginal revenue they were  
generating in the marketshare race went away.  Big Content took this  
opportunity to really drive prices down on the telecoms.

At the time I left C&W we had  situation that looked something like  
this:

Total Capacity of the Backbone Network: 70Gbps
Tier One Tax: 35Gbps (we can talk about how the roots of the internet  
as a research and educations platform have created some bad habits if  
you like, but basically bilateral peering is a mistake because it  
isn't bilateral, its 2:1 or worse for the backbones who cater to  
content as opposed to the guys who cater to eyeballs)
Theoretical Salable Network Capacity: 35Gbps (in reality you can  
never sell 100% because you have to expand between 70 and 85% before  
you hit the ceiling.)
Cost to run this network (US Only) $8MM month
Average Price/Mbps = $150

150X35000 = $5.25MM

So, even running in a perfect world with 100% capacity sold, that pig  
was never gonna grow wings and fly. I've heard of prices well below  
$75/Mbps now.

Now - "Net Neutrality" is just saying that Big Content doesn't want  
to pay more than Big Telecom would charge itself to use the same  
network AND that Big Telecom can't develop new services and charge a  
fair price for them, they need the same artificially depressed rates  
they are getting now. So with all the management who got Big Telecom  
into these problems gone and new management in and trying to fix them  
- we're told that it'd be bad to fix them and let the telecoms find a  
way to run a healthy business.

I think Big Telecom is resigned that basic internet service, sort of  
the Tier One world we're used to is going to be a loss leader. Prices  
aren't likely to come back up because most of their volume is bought  
up by Big Content who won't let the prices increase much.  I clearly  
remember a Big Content manager telling a product manager that they  
didn't care if they killed one of our product lines at C&W, we had to  
reduce their price. Not very sensical..

Why shouldn't telecom develop a QoS overlay network to the bulk rate  
internet? Its akin to FedEx and the Post Office. If there are  
applications/services that need better QoS why would we not want to  
have them? If AT&T invested the capex into the network, Shouldn't it  
cost Yahoo more per unit to ship QoS than AT&T? How does AT&T recover  
their investment and make margin on the capacity Yahoo uses if they  
don't get to charge them more? Why shouldn't AT&T seen an advantage  
from investing the tons of cash it'll take to roll this out? So what  
the fiber is in the ground? Everything above that layer costs money  
too...

Maybe Cisco and Lucent should have to sell all this kit below cost,  
so AT&T can build it to sell it below cost. Then Big Content can show  
awesome profitbability numbers while Telecoms  AND hardware file CH11  
again and again.

Claims that Big Telecom is holding innovation back by wanting to  
create an overlay and charge appropriately for it are nuts.  New  
software applications will in part be based off newly available  
infrastructure. When QoS is widely available a whole raft of  
applications taking advantage of it will arise. Impacting Big  
Content's margins a bit isn't going to slow down technology  
innovation. Its not like they are really innovating any more, any  
how. They buy people who innovate.

I do not understand how this net neutrality thing has even come so  
into the spotlight. What happened to letting the markets set the price?



On Jun 1, 2006, at 12:03 PM, David Farber wrote:

> Begin forwarded message:
>
> From: Gerry Faulhaber <gerry-faulhaber () mchsi com>
> Date: June 1, 2006 2:00:47 PM EDT
> To: dave () farber net
> Subject: Re: [IP] Another Net Neutrality question...
>
> [for IP, if you wish]
>
> Good job spotting this trend, Hiawatha.  We have seen the future  
> and it is private networks?
>
> Remember that old maxim that the Internet sees censorship as a  
> network outage and routes around it?  Well, how about a new maxim:  
> network operators will see legal constraints on the traditional  
> Internet as a flaw and they will build around it?
>
> Let's call it the Othernet.  And will somebody please tell me how  
> we got here?
>
> Professor Gerald R. Faulhaber
> Business and Public Policy Dept.
> Wharton School, University of Pennsylvania
> Philadelphia, PA 19104
> Professor of Law
> University of Pennsylvania Law School
>
> ----- Original Message ----- From: "David Farber" <dave () farber net>
> To: <ip () v2 listbox com>
> Sent: Thursday, June 01, 2006 11:38 AM
> Subject: [IP] Another Net Neutrality question...
>
>
> > Begin forwarded message:
> >
> > From: h_bray () globe com
> > Date: June 1, 2006 11:15:37 AM EDT
> > To: dave () farber net
> > Subject: Another Net Neutrality question...
> >
> > ...this one asked in my role as tech reporter.  I'm doing a story  
> > on the
> > matter.  It'll be straight down the middle, no sides taken.  But   
> > there's an
> > aspecr of this issue that I haven't seen addressed, and I'm hoping  
> > the
> > hypersmart people on the list can tidy it up for me.
> >
> > We keep talking about a two-tiered Internet.  I may have helped   
> > establish
> > that meme with a story I did on this issue a couple months ago.   
> > But is
> > that really what's happening?  Can't one just as easily argue that  
> > the
> > "premium" broadband tier isn't really the Internet at all?
> >
> > Imagine that Verizon, without using the "I" word, had decided to  
> > build a
> > new high-speed private data network to millions of homes.  They'd  
> > use this
> > network to carry TV signals, as well as a variety of computer data
> > services.  The network would use TCP/IP technology, but would run  
> > entirely
> > over Verizon's prvately owned hardware.
> >
> > If Verizon had done such a thing, would anyone argue that the  
> > company  was
> > obligated to share this network with others, without charging them  
> > usage
> > fees?  Wouldn't we shrug and say that since Verizon spent the  
> > billions
> > needed to build the network, they could do with it as they pleased?
> >
> > But this is pretty much what's happening now, isn't it?  This  
> > second  tier
> > of Internet service is really more like a private network.  It's  
> > not so
> > much a bifurcation of the Internet, but a complete departure from it.
> > Looked at that way, why shouldn't the broadband providers charge  
> > use  fees
> > to other data services?
> >
> >
> >
> >
> > Hiawatha Bray
> > Technology Reporter
> > Boston Globe
> > 135 Morrissey Blvd.
> > P.O. Box 55819
> > Boston, MA 02205-5819 USA
> > 617-929-3119 voice
> > 617-929-3183 fax
> > 617-233-9419 cell
> > bray () globe com
> > watha () monitortan com
> > Recent writings: www.boston.com/business/technology/bray
> >
> >
> >
> > -------------------------------------
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>
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