TELECOM Digest OnLine - Sorted: Re: The Coming Tug of War Over the Internet -- Wash Post

Re: The Coming Tug of War Over the Internet -- Wash Post

William Warren (
Tue, 24 Jan 2006 06:05:47 -0500 wrote:

> In article <>, Marcus Didius Falco
> <> wrote:


>> Whether or not you agree with Whitacre, you can understand his frustration.

>> Companies like Google and Yahoo pay some fees to connect to their
>> servers to the Internet, but AT&T will collect little if any
>> additional revenue when Yahoo starts offering new features that take
>> up lots of bandwidth on the Internet. When Yahoo's millions of
>> customers download huge blocks of video or play complex video games,
>> AT&T ends up carrying that increased digital traffic without
>> additional financial compensation.

> That's a bunch of bull crap. Google, Yahoo, et. al. pay for bandwidth.
> The fees they pay for network connectivity are based on bandwidth
> allocation. Now ATT is whining because Google, etc. are actually using
> the bandwidth that they're paying for.

The old line telecom providers have always relied on a tiered-service
pricing model: relatively cheap basic services, such as local POTS
"lifeline" service, subsidized by higher-priced and higher-profit
premium offerings. Although the amounts of the subsidies vary, the basic
premise has always been that business users pay more because they get
more utility from phones and because the network is designed to meet
business service levels, and that premium residential offerings, such as
call waiting, are also priced at high-profit margins.

The reason SBC-AT&T and the other "Baby Bells" are whining is because
the Internet has drawn the premium services out from under the Bell
umbrella, and left the RBOC's with only a basic service -- the pipes --
to make their profits. Shannon's rule applies in both a technical and
an economic sense here: bandwidth is the enemy of switching, and
bandwidth-intensive industries like Google/Yahoo/MSN et al are now
girding for battle with the old-line switching organizations that see
their chokehold on business communications slipping away.

In short, the RBOC's are trying to convince the Congress that they
should enjoy a share of the profit made on the Internet because they
are involved with providing the basic service that makes it possible:
it's an old argument, but the RBOCs are old companies and they think
that old scams work best. Since the Internet, by its very nature,
concentrates power at the endpoints, the former monopolists are
floating trial balloons to see if the public will stand for them
finding a new way to gouge the consumer.

William Warren
(Filter noise from my address for direct replies)

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