In this week’s PodSession, Om Malik and Niall Kennedy discuss the prospects for a two-tiered Internet, which Om sees as pretty likely and not necessarily a bad thing. The PodSession is well worth a read and/or a listen. From Om:
Don’t expect the phone companies or cable companies to degrade somebody’s service intentionally, because that is going to become a problem for them in Washington D.C. However, they can give priority to their own applications, or to their own partners…But the end result is pretty much the same.
You know one Internet, the way it is, but then the incumbent carriers, at least in the U.S. will create what is the managed layer on top of this Internet. This will be the premium networking layer. It will be used by, for example, online gaming companies. You know latency’s such a big issue, so if you’re Sony or Microsoft it makes sense. If you are Xbox Live, you will be asked to pay a few million dollars to make sure your service, or your packets, get priority over everything else. There’s nothing wrong with that, because this is a commercial service Microsoft is selling over somebody else’s pipe so Microsoft or Sony will have to pay for it. Similarly Apple will make sure that iTunes will get priority traffic handling. These are premium services, so the concept is if Apple is making money and Microsoft is making money and Sony is making money, why shouldn’t the carrier make money?
A related question is how independent service providers will be charged for “priority” delivery of high-bandwidth, latency-sensitive services. In today’s cable TV model, cable operators charge users for content and pay a portion of this fee to content providers, with ad avails (for ad-supported channels) typically split between the operator and content provider. Would this pipe-owner-controlled revenue-sharing model be applied to future deals for priority delivery of Internet video? Will pipe-owners receive a share of each piece of content’s market value, or will fees paid by content providers be based on the technical requirements of their video content (e.g., related to bit-rates, latency, priority, etc.)?
Om suggests that, while the big Internet players will be reasonably well positioned to thrive within this model, the hurdles for startups are likely to increase, especially if they plan to deliver bandwidth-hungry and latency-sensitive services that will probably require “premium” carriage to be competitive.
[A] lot of smart companies are actually preparing for this kind of a situation. Google is one of those companies. There is a specific reason why they are building up their own backbone and coming closer to the user is because if they have appealing relationship with, let’s say SBC or Comcast, they are actually in a better position to exchange their traffic. So similarly traffic coming out of SBC’s network or Comcast’s network gets priority onto Google’s infrastructure.
You know how it affects Silicon Valley? I think it throws cold water on innovation a little bit. I think the biggest companies at risk here are the start-ups. Yahoo!, Apple, Microsoft, Google, Sony, HP, they have enough money to pay the carriers. So they have the mass market, they have the mass volume to actually figure all this into their business plan. I think all these little start-ups, which are basically getting started, they haven’t taken into account this reality, that one day they will have to pay, they might have to pay a little toll-tax on what they do. I mean if you are an online, I don’t know, word processing software company, something like Writely or whatever, they can basically give priority to Microsoft Word over you, so those little, little things start to become a bit of a problem. Things like latency issues, because Microsoft Word is gonna perform better online than the other ones. So you’re inherently thinking, as consumers, “Let’s go with the one which is working better.” So those are the issues. Those are practical problems. People will have to deal with them…This needs to be factored into their gameplan. Just like how many people you need to hire, and how much venture capital you need to make, this is something people should be thinking about as start-ups.
Noting that “muni wireless is one hope we have,” Om says he “hope[s] it really takes off because it actually puts some sort of pressure on the carriers and when I say carriers I mean both cable and phone companies.” But he adds that “[t]he issue with muni wireless is bandwidth. How much bandwidth will they have?”
Mitch Shapiro at 10:45 PM|Comments(0)
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