This was emailed to me a while ago and the author gave me permission to post it here.
In the last few months there have been many articles in the media about a move to a "tiered' internet. This has caused much confusion and early comments by Ed Whitacre have not helped much;
"How do you think they're going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes?" â€“ SBC: ain't no way VoIP uses mah pipes! (http://arstechnica.com/news.ars/post/20051031-5498.html)
Mr. Whitacre's comment above started this move to a tiered internet on the wrong foot. Many saw his comments as a way to add an extra charge on to the internet, sort of an extortion fee. A fee that you would have to pay in order to use SBC's data pipes. I feel that Mr. Whitacre's comments came from one who is thinking along the lines of a Telco and not an internet company.
Let me explain why I feel this way. One way a Telco can make money is by charging access fees to other Telcos when they use their switched network. If a Verizon customer calls an AT&T customer the Verizon has to pay AT&T a connection fee to connect the call to AT&T's network. This works both ways and is not much of a profit center unless there is a large disparity in connections between networks. I feel that Mr. Whitacre went with this "connection fee' paradigm and put it into an internet frame by thinking, "If one of our DSL customers connects to a web server that is on a different network then ours and sends 1MB of data to them but receives 5MBs of data in return then we are owed some sort of fee for the 4MB of data imbalance." Although this sounds good when thinking of the switched network it comes over all wrong when you look at the internet.
In regards to the internet, the owner of the website pays a web hosting company a set fee for X amount of bandwidth. This bandwidth is often expressed as "XGB of data transfers" as opposed to an unlimited pipe with a hard bandwidth (1.5MB T1) setting. Web hosting companies are always willing to say how big their pipe to the internet is, "We have dual T3's to the internet," but is never going to tell their customers that they will have a definite slice of that pipe. Their pipe is shared with all the servers they host.
In contrast to this is that of the DSL or cable modem supplier. The ISPs who sell these services tell their customers just what there max bandwidth is, "you get an unlimited 1.5MB pipe to the internet," and the customer is often sold on the idea that they can use their pipe as much as they want with no extra fees based on usage. There often are certain restrictions in the "terms of service' but 99% of internet users are unaffected by such things as they usually pertain to things such as hosting a server on a residential service.
Now comes the problem with Mr. Whitacre's earlier statementâ€¦
The internet user reads his words and thinks, "What??? I pay a monthly fee for my service, why is he talking about charging websites to use the network? The website already pays their hosting company for internet access and I'm paying my ISP for internet access! They are trying to extort money from the web companies for access to the network, something they (and I) already paid for!!!"
It is obvious to me that Mr. Whitacre's statement makes sense, but only as applied in the big picture of the internet, between top tier companies such as Verizon, AT&T, Level 3 and the other backbone companies. In fact, Cogent and AOL recently had a fight about internet access across their networks:
Back in January of 2003 there was a small fight between AOL and Cogent:
"We believe that AOL is looking to turn a cost center into a profit center and charge for connectivity feeling they have proprietary content," Schaffer said. "They want their customers to access their content for free and for customers of other ISPs to pay to get to their content, which includes sites like CNN.com." - War at the Core (http://www.isp-planet.com/business/2003/peering.html)
That fight is very similar to what Mr. Whitacre spoke of earlier this year. AOL made a business decision based on traffic patterns. They saw that cogent was sending three times as much traffic to AOL then AOL was sending back to them. They then decided that there was an imbalance here and turned what was a cost center into a profit center. The only difference her is that this was done mostly outside of the public arena.
Even more recently, Level 3 and Cogent had a fight that turned public when Level 3 shut down their peering links with Cogent:
"On Wednesday Level 3 broke off its peering agreement with Cogent over - you guessed it - money. Level 3, the larger company, wanted Cogent to raise its rates claiming Level 3 was doing most of the heavy lifting and Cogent was getting the better end of the deal." - ISP chicken fight leads to 'Net outages (http://www.networkworld.com/weblogs/layer8/010107.html)
More information can also be found at: http://www.boston.com/business/technology/articles/2005/10/07/dispute_threatens_to_snarl_internet/
Clearly those who are familiar with recent history in regards to the internet see Mr. Whitacre's comments as a prelude to another ISP fight but with bigger consequences. They look to his words and then look back at the Cogent vs. Level 3 dispute and see it happening all over againâ€¦
Now we have a new thing coming out of the mouths of the Telco executives; QOS or Quality of Service. Just as before, this is being misunderstood and presented in a poor manner.
''The consumer's paying for 20 megabits coming into their home," Davidson said. ''They should be able to use that 20 megabits to use whatever services they want." - Telecoms want their products to travel on a faster Internet (http://www.boston.com/business/technology/articles/2005/12/13/telecoms_want_their_products_to_travel_on_a_faster_internet/?page=2)
The above statement sounds good as a sound bite but, when properly dissected, reveals a PR problem. The consumer who pays for a 20MB service is still getting a 20MB service. ISPs never guarantee anything in regards to latency of packets delivered. It simply can not be done. How can you guarantee a 20MB service if the other end of the connection only has a 10MB pipe? Many people leave out the "up to" in the service contract when talking about bandwidth from ISPs. ISPs do not sell a constant 20MB pipe, they sell an "up to" 20MB pipe. By leaving out those first two words many a customer becomes mislead.
''When costs are being driven into an equation, they have to be recovered somewhere," said Bill Smith, chief technology officer of BellSouth. ''Why do fundamental business economics not apply to the Internet?" - Telecoms want their products to travel on a faster Internet (http://www.boston.com/business/technology/articles/2005/12/13/telecoms_want_their_products_to_travel_on_a_faster_internet/?page=2)
Bill Smith has it right, no one can argue that the costs of upgrading the network need to be recovered. The problem we have is that many people are being misled into thinking that the internet is a zero-sum game. They believe that if you increase the speed of some packets all other packets must be slowed down. They do not realize that with the increased usage of fiber optic cabling, cabling that can contain more then one wavelength of light, there is virtually no limit to the amount of bandwidth we can put down a pipe. If a section of the internet becomes too congested we can add routers and bandwidth very quickly.
A few years ago, we used the "pizza" analogy to illustrate just what sort of relationship existed between ILECs and CLECs. I feel it may be time for a new analogy. I propose the "shipping" analogy:
Much as there are many ISPs who provide access to the internet there are also many shipping companies that will move your package for a price. Both ISPs and Shipping companies are in the business of moving packages, ISPs move packages of data and shipping companies move packages of physical goods.
Shipping companies have infrastructure. They have offices, vans and planes. ISPs have infrastructure too. They have cables, optical lines, routers and switches.
Shipping companies offer different grades of service. You can get standard delivery which may take more then a week. Air delivery which may take only a few days. You can even pay a lot more and get guaranteed overnight delivery!
ISPs do not have this ability, not yet at leastâ€¦
Suppose a new company wants to ship packages to its customers. They look at the long list of shipping companies and shipping options. They decide that because their packages are not of a high priority they can get by with the standard shipping.
Another company comes along and wants to ship their product, but their product is time-sensitive. They need to use overnight delivery! So, they pay extra and get that service.
Now, what would happen if the government suddenly stepped in and said, "You can no longer charge differing rates for your shipping methods and you have to provide shipping on the same schedule for every customer." Would every shipment go overnight or would every shipment go standard? It all depends on pricing. If they were forced to only charge the standard rate but had to deliver using their fastest method they would stop overnight deliveries.
More then likely, the major shippers would break their company into smaller parts. They would have one subsidiary that only did standard delivery, one for air mail, and one for overnight deliveries.
Now, because an ISP is essentially a virtual shipping company, why should they not be allowed to offer expatiated shipping options? The USPS does it, they even offer insurance on your parcel. They still ship the regular mail at the same speed as before.
If my business model is based on sending time-sensitive content to my paid subscribers then I would want the option to pay for this service.
I think the biggest fear about QOS is that John Q Public believes that by boosting the priority on some packets others will be negatively impacted. They already know that some Canadian companies have purposefully throttled down VOIP packets (and offered a service upgrade to remove the throttling) and they believe that Telcos will do the same thing.
"Shaw's VoIP tax is an unfair attempt to drive up the price of competing VoIP services to protect its own high-priced service," said Joe Parent, vice president of marketing, Vonage Canada in a statement released this week. - Vonage Canada Asks CRTC to Investigate Shaw's VoIP Tax(http://news.tmcnet.com/news/2006/03/08/1440827.htm)