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Vincent Cerf, Google’s Chief Internet Evangelist and co-developer of the TCP/IP protocol, endorsed Barack Obama in a YouTube video on the basis that Obama supports internet neutrality. The argument goes that bandwidth providers should not prioritize data from one content provider over another. Cerf argues that companies like his own Google got their start “without having to ask any ISP for permission” and that net neutrality is therefor vital to continued innovation.
Why would ISPs be so evil to provide priority bandwidth to their customers for, say, video content served by Hulu over Google’s YouTube in the first place? Internet neutrality is not the root issue. The economics surrounding the supply, demand, and the monetization of internet infrastructure are broken - and likely to get worse fast. What’s wrong here and how can it be fixed?
The Problem
Physical internet infrastructure was cheap following the dot.com bust in 2001, selling for pennies on the dollar. Many of the firms who formed the supply chain for internet bandwidth are still dealing with ramifications of that post-dot.com fire sale eight years later. Avanex is in the business of photonics, supplying components to companies like Cisco to build the powerful switches that route global internet traffic. Shortly after its 2000 IPO the AVNX share price shot to $178. It’s been drawing down that IPO windfall ever since, with its shares now trading at $1.21. It’s among the lucky ones - most of the other firms in this business in 2000 have long since folded or consolidated.
Building internet infrastructure is expensive. The proliferation of all-you-can-eat internet subscriptions needs to be understood in the context of this post dot.com fire sale. There simply was a lot of infrastructure out there - more than enough to satisfy demand - and it was all very cheap. There was no pressure on the monetization of that bandwidth other than customer acquisition and retention.
Those days of nerd utopia are now over. The online search for new brownie recipes consumer subsidizes the power user. Everyone was happy with this arrangement when there was enough cheap bandwidth to go around. Now there’s not. To make matters worse, with the advent of streaming video and BitTorrent, the appetite for bandwidth of the power user is insatiable. For ISPs, ramping up infrastructure to satisfy total demand is impossible on the back of an obsolete business model. They’d go broke.
Bad Solutions
On a macro scale, bandwidth is an incremental cost. Providing two units of bandwidth is more expensive than providing one unit. ISPs are running a buffet restaurant that used to be popular with the Yoga crowd and is now popular with Sumo wrestlers. Bandwidth demand is growing so fast that a profitable subscription model where your best consumers (low-impact users) subsidize your worst ones would price everyone out of the market. $300/mo. internet plans?
* Breaking Internet Neutrality. In the long run, this will indeed stifle innovation. ISPs may not care about that today: innovation like video sharing is driving up their costs. However, in the long run they depend on innovation to generate demand for bandwidth. This is a short-sighted strategy - though as we’ve seen that’s never stopped the ISPs before.
* Stealing the Content Provider’s Revenue. Companies like Phorm provide technology to ISPs that track overall consumer browsing behavior and serve targeted ads from the ISP side. The value of these ads - in theory - is much higher than the temporary contextual approach Google uses. ISPs love the idea, but geek backlash has been fierce. In the UK, regulators have thus far sided with the geeks.
* Punish the Problem Children. If 5% of users are consuming 95% of bandwidth, they are customers with negative net value. While a buffet restaurant can’t legally ban fat people, for now ISPs still can. Banning them, throttling their bandwidth, and hard-capping bandwidth have all been attempted. Fundamentally, punishing the customer who wants your product most is a bad idea. The internet power user should be the best possible customer for an ISP in a business model that actually works.
A Silly Idea
Your company sells a product with an incremental unit cost - a Big Mac, a car, or bandwidth. McDonalds and car companies have hit on a great idea: charging their customers for that product on a per-unit basis. So did early dial-up ISPs. Reverting to this state seems like the only rationale solution in the long term for ISPs. Spying on customers, dictating favored content, and punishing your best customers are not long-term means to success. Interestingly, killing all-you-can-eat internet service solves numerous other problems too:
* An incentive for internet companies to innovate in bandwidth efficiency. If YouTube can deliver videos to the consumer for $0.02 worth of bandwidth, they have an advantage over a site that does so for $0.03.
* Just like ISPs had an unrealistic understanding of the value of what they were selling - power users have an unrealistic understanding of the value of what they’re buying. Would IP piracy sustain its growth without all-you-can-eat plans?
* Realigning the long-term goals of internet demand-generation (content) and internet access from a fixed-pie model to one of mutual growth. A killer new internet product would make everyone down the supply chain of bandwidth happy: the Avanex’s, the AT&T’s, and the product owner.
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Good read. Many people are still under a rock about bitorrent and such, dont think this problem is as bad as they make it out. And I know its not about speeds but seriously comparing our boardband to lets just say Korea, its a whole another world.
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On November 16 2008 16:46 Disregard wrote:
Good read. I know its not about speeds but seriously comparing our boardband to lets just say Korea, its a whole another world.
Korea has the foresight to see their net infrastructure as a national investment. A lot of it was driven through public-private mixed enterprise. In the US on the other hand - ISPs take city councils to court when they try to do something like implement free wife across the city.
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The problem is the whole infrastructure in a market that get out of date in more or less 2 years so after while you can expect such shit to happen. I mean how to you keep up with a consumption that goes exponentially while revenues do not.
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Physician
United States4146 Posts
- you know, your still thinking as if the broadband technology has reached a cap.. or that infrastructure will be purely land-based.. in landline-based broadband the expensive part is setting up the lines, yeah we agree.. but the internet might just the way of cellphones or other airwaves communications systems, like wimax or why not even stratelites etc...or even stay land-based and use something that already exists in abundance: powerlines (were the potential is freaking huge)... or bit of all, even something new..
- the increase in demand of broadband internet might have caught up with the offer, but technology still moves on.. and this free-for-all-buffet mentality does does tend to push technology in the direction we want it to go, more is better not just purely improving efficiency of distribution..
- though I agree with ur post in its entirety, you remain a realist, I am optimist who believes with all his heart that science will deliver us from all evil and technology, will give us nirvana broadband, for all humanity to feast upon.. Theo u have BECOME A SUIT finally.. I say to YOU this: death to all who even make the suggestion of charge-by-the-byte or any variation of its unholy mantra.
- and just so you have a perspective to how far from you I stand: for me there is a new human right: free unlimited broadband access for everyone is a new inalienable human right. : )-
jesting aside, good post, as usual ~
edit: i forgot to vote , done
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Excellent use of colored type there sir. I feel so... emphasized.
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wait... i thought ISP's already capped our bandwidth??
i noe that some of my friends have gotten calls from their ISP, when they download too much stuff or create bunch of servers, warning them to not do it again or they will terminate their service...
pluss i think pay and u use or click in this case is the best possible solution they can come up w/
kind of like phone minuets...cept it would be Gb's transferred... maybe they can have roll over too ^^
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thedeadhaji
39489 Posts
I was actually under a per GB charge system while at uni in the UK, and honestly it only added up to a massive cost if I went on a huuuuuge torrent spree in the excess of 50-100gb.
I think for the right connection speed, I'd consider doing the math and seeing if it works for my needs.
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On November 18 2008 14:34 thedeadhaji wrote:
I was actually under a per GB charge system while at uni in the UK, and honestly it only added up to a massive cost if I went on a huuuuuge torrent spree in the excess of 50-100gb.
So you ended up paying a massive cost every month, right?
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Physician
United States4146 Posts
the power of the pony express ~ chu chu chu!
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United States17042 Posts
Two parts to the OP: one is: is there a problem?
I'm not sure that there is a problem with the way that the internet infrastructure is currently bought and paid for in America. I think that the ISP's are making money- it doesn't seem like they are losing money, or else it wouldn't make sense for them to continue offering the service. If they're making money, then they should be able to keep adding capacity to meet demand, especially if there's competition in a market (or else we have a monopoly condition, in which case lots of normal assumptions about efficiency don't apply). Moreover, some of the ISP's have stepped up and said that they don't need to implement traffic shaping, and that adding more capacity is enough . example.
This accusation that the internet is going to run out of bandwidth is quite common: it was supposed to run out in 1996 at the very least. Also, Accusations that P2P use are going to crash the internet seem unlikely
We can look at solutions, but the only problem I see is lack of competition in the broadband space (at least in america).
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i can't download over 250 gb a month or i get charged extra i think
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Physician
United States4146 Posts
exactly, many times because new technology are never considered in these arguments.. I still remember when optical cables across oceans were just pipe dreams (pun intended), today they are a reality..
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I lol every time at Americans outraged over caps on their internet usage. Try coming to NZ and dealing with monthly 10 GB caps. : |
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I know people who have been threatened with increased bills if they went another month with such high bandwidth usage. Charging per byte should never happen, but I understand cutting people off if they are using a ridiculous amount of bandwidth.
When I lived on campus I had a cap that was fairly low, but I would only ever go over if I was downloading a lot of files. It was just a daily usage cap, and if you went over it they just restricted your use, but didnt cut it off. It would go back to normal once you went under the cap for the last 24 hour period. It was only ever an issue a few times.
edit: 10gb caps per month?? I was on a 5gb per day cap. wtf do you do with 10gb a month?
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EPT
