Bader’s Bits

Highlighting the tectonic shifts underway in the U.S. telecomm industry, the Telecommunications Industry Association (TIA) announced that U.S. Wireless Subscriber Level Reaches 194.5 Million in 2005 and are expected to Grow to 270 Million by 2009. Geez, according to census.gov, there’s only 298.476,130 folks in the U.S. at the moment. Sounds like market saturation is approaching, no?

On the flip side, the number of access lines in use continues its five year decline, as the cool kids eschew them, and the cablecos and VoIP provide other alternatives. Market research firm eMarketer reports another TIA statistic not included in their press release, that landlines fell to 172 million lines. They predict consumer VoIP usage to increase to over 30 million users by 2010.

These trends will wreak havoc on the telcos business models. There is still real competition in the wireless space, while the landline business is more of an oligopoly with the cablecos. That’s why they’re fighting so hard for regulatory advantage. But the writing’s on the wall. That’s why net neutrality and a healthy relatively deregulated VoIP market are so crucial to moving the nation’s telecommunications services forward.

Qwest CEO Dick Notebaert joined his telco CEO colleagues by advocating for tiered Intenet service as a way for his customers to differentiate their service over Qwest’s network, according to a report on News.com.

“Would this give some content providers an advantage over others?” Mr. Notebaert asked the crowd rhetorically. “Well, yeah. We’re all trying to provide a little bit of differentiation for a competitive edge. That’s what business is about.”

Unfortunately, the comparison neglects the notion that Qwest is expected to become more of a content provider itself, and therefore may be preparing to provide that advantage to itself, as we’ve seen other telcos do with their ISP businesses.

Jeff Pulver, CEO of Pulver.com and producer of the VON show at which Mr. Notebaert spoke, commented: “I think it’s probably true that companies are coming to Qwest willing to pay for better treatment on their network [as Mr. Notebaert remarked],” he said. “But I think they’re doing it out of fear. It’s legalized extortion.”

The VON (Voice Over the Network) conference was the latest venue for for positioning and discussion about Net Neutrality. There’s still confusion over exactly what it means, but that didn’t stop folks from staking out a position. I’m disappointed that Cisco is siding with the telcos; perhaps that’s because they are significant Cisco customers, and Cisco is marketing new technology to them that will help them discriminate traffic.

Read ZDnet’s report from the show.

I must be getting old or something to have a senator for a hero. Why Sen. Wyden? He has proposed federally legislating Network Neutrality. Net Neutrality is of fundemental importance to protecting the Internet. It’s been a topic mostly discussed amongst the policy wonks and the industry. Now, it’s becoming a mainstream topic.

The Senator is leading the way in defining legislatively how Net Neutrality is defined. It’s principles, excerpted from the Senator’s press release are:

Not interfering with, blocking, degrading, altering, modifying or changing traffic on the Internet;

• Not being allowed to create a priority lane where content providers can buy quicker access to customers, while those who do not pay the fee are left in the slow lane;

• Allowing consumers to choose which devices they use to connect to the Internet while they are on the net;

• Ensuring that consumers have non-discriminatory access and service; and

• Having a transparent system in which consumers, Internet content, and applications companies have access to the rates, terms, and conditions for Internet service.

I applaud Senator Wyden’s initiative. He is one of the few Congressman willing to stand up to one of the best funded lobbying and political contribution machines in the nation.

His legislation will be part of the discussion for an update/rewrite of federal telecommunications policy. Those debates are in their early stages in Congress and it’s unclear if anything will come for vote in this session. The telcos are agitating for more deregulation. At least with Senator Wyden’s bill there is a counterbalance to their demands.

Show Senator Wyden you support. Send him an email!

After years of denying any reason for us to be concerned about Net Neutrality, SBC (one of the telcos) CEO Ed Whitacre let the cat out of the bag in a Business Week interview last fall. The significant exchange is:

How concerned are you about Internet upstarts like Google (GOOG ), MSN, Vonage, and others?
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?

The Internet can’t be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! (YHOO ) or Vonage or anybody to expect to use these pipes [for] free is nuts!

The misleading aspect of Whitacre’s statement regards “they” wanting to use his pipes for free. The fact is, there isn’t anyone using his, or anyone’s, pipes for free. We, as consumers on the Internet, pay for our pipes; so do “they” (the content providers) for the pipes they need in the data centers to serve up their content.

What Whitacre is really suggesting is discriminatory access. Unstated is his concern about competition for the services other than the pipe that he and the other telcos, want to provide: like voice and video. If he can justify additional charges, or more importantly control which content is allowed or preferred, he will ensure a huge competitive advantage for himself.

This is our worst fear coming true. Should this strategy succeed it will forever change the openness of the Internet. I don’t want my daughter telling her daughter about the “good old days” of the Internet.

Who’s in control of the Internet? Nobody really, and that’s why it has been such a fertile ground for innovation. You don’t need to ask permission, or buy a license, or sign a contract to launch a new website or application on the Internet. And when you do, you can reach virtually all of the hundreds of millions of users out there.

That fundemental premise of the ‘Net is now being questioned. The issue was first raised years ago, by folks seen as Chicken Littles (here’s a great backgrounder). However, national telecommunications policy is swinging back in favor of the incumbents, and that puts net neutrality at real risk.

Real risk of what? That the owners of the last mile connections to users (a small number of large cable and telephone companies), will assert themselves as gatekeepers between the content and the consumers. It is in their best interests to establish that control for their economic advantage, selecting winners and losers and discriminating in who can connect to whom. That is the antithesis of net neutrality, and would mark the end of the Internet innovation era, and the beginning of the slide towards the business/content model that exists in other mass media distribution like cable, satellite and network broadcasting, and may threaten emerging applications like voice over IP.

It’s also worth pointing out that this is the same issue as open access networks, ones that allow you a choice of ISP (unlike cable-provided Internet access where you have a choice of one). Choice and competition are good for all of us.

• More info: The Center for Digital Democracy