Ed Felton, a Professor of Computer Science and Public Affairs at Princeton University, raises some interesting questions in response to Ed Whitacre’s comments quoted here and here by Business Week, and discussed in earlier IPD posts here and here.
[Whitacre] shows amazing disrespect for his home broadband customers, who are paying $40 or so every month to use SBC’s pipes. If I were an SBC broadband customer, I’d be dying to ask Mr. Whitacre exactly what my monthly payment is buying, if it isn’t buying access to Google, Yahoo, Vonage, and any other $%&^* Internet service I want to use. Didn’t SBC’s advertising say I was buying access to the Internet?
Second, if somebody is going to pay somebody in this situation, it’s not clear who should be doing the paying. There is some set of customers who want to use SBC broadband service to access Google. Why should Google pay SBC for this? Why shouldn’t SBC pay Google instead?
Sure, SBC would like its customers to have free access to Google, Yahoo, and Vonage. But as Mr. Whitacre would put it, the Internet can’t be free in that sense, because Google, Yahoo, and Vonage have made an investment and for SBC or anybody to expect to use those services for free is nuts!
My point is not that SBC should necessarily pay, but that there is no rule of nature saying that one layer of the protocol stack should pay another layer. If SBC gets paid by Google, it’s because SBC faces less competition and hence has more market power. As Susan Crawford observes, Mr. Whitacre speaks with “the voice of someone who doesn’t think he has any competitors.”Posted by Mitch Shapiro at 5:52 PM | Print | Comments (1)
As expected, the FCC today gave its approval to the mergers of SBC-AT&T and Verizon-MCI. While the FCC found that the mergers can limit competition in some circumstances where only one provider might be left, it concluded that the consent decrees the telcos entered into with the Department of Justice on October 27, requiring some spin-offs of certain properties, are sufficient to protect consumers.
The Commission did, however, require certain enforceable but voluntary (huh?) conditions on the new companies. Among these are agreements by the companies
*not to raise rates for certain services,
*not to provide special access services to themselves that are not available to similarly situated customers,
*to maintain for three years settlement-free peering arrangements with at least as many providers of Internet backbone services as they did in combination on the merger closing dates, and
*to provide “naked” DSL (DSL service on a standalone basis with no requirement that phone service also be purchased) service within their regions within twelve months.
State reviews are pending for SBC in Arizona, California and Ohio.
Posted by Cynthia Brumfield at 3:21 PM | Print | Comments (0)As Cynthia notes, comments by SBC CEO Ed Whitacre quoted in Business Week have triggered strong reactions from within the ranks of net-neutrality advocates, with some describing as extortion Whitacre’s assertion that “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?…for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!”
While a techdirt post takes this tack, it also notes that “the only reason this is possible now is because there’s less competition in the broadband space, not more. If there were real competition, SBC would never even dare to suggest that they might cut off a Google, Yahoo or Vonage.”
Susan Crawford suggests that the fight for network neutrality may be a losing one and that a better strategy is to push for policies that promote facilities-based competition and give end users more choices in terms of broadband access networks.
To talk in response about the glories of the end-to-end principle and the importance of facilitating end-user choice sounds weak. All we’re saying is that we like the norms of our network better then the norms of their network. They have invested $1.1 billion over the last few years in lobbying designed to support their network.
I don’t think the fight over “network neutrality” is one we’re going to win. We need to find higher ground. I think the real fight should be over rights of way and platform competition. There’s a clear lack of competition in the last mile — that’s where choice has to exist, and it doesn’t now…If the FCC is getting in the way of cross-platform competition, we need to fix that. In a sense, we need to look down — at the relationship between the provider and the customer — rather than up at the relationship between the provider and the bits it agrees to carry or block.
Competition in the market for pipes has to be the issue to focus on, not the neutrality of those pipes once they have been installed. We’ll always lose when our argument sounds like asking a regulator to shape the business model of particular companies.Posted by Mitch Shapiro at 12:49 PM | Print | Comments (0)
Business Week has a pretty candid interview with SBC CEO Ed Whitacre this week, and one comment made by the telco chieftain is already fanning the net neutrality flames. When asked about whether he’s concerned over Google and Yahoo’s efforts to diversify into VoIP and video, Whitacre flat out says that he expects both entities to pay SBC for access, or else.
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! or Vonage or anybody to expect to use these pipes [for] free is nuts!
The teeth-gnashing has already begun, and Whitacre may end up issuing a big “clarification” before the brouhaha is over. Here’s Techdirt’s reaction to Whitacre:
In other words, he’s talking about going well beyond blocking some ports like BellSouth, to actually blocking out websites and services unless they first pay SBC a fee. It certainly has the feel of extortion: pay up or no one on our network will be able to reach your website. If you thought that mess Level 3 and Cogent was problematic, just wait until you can’t access Google from SBC, because Google fails to pay up SBC’s “connection” fees.
And here’s Kevin Werbach’s reaction:
Be afraid. Be very afraid.Posted by Cynthia Brumfield at 11:44 AM | Print | Comments (0)
Amid the debates over whether the iPod’s screen is big enough to attract a large customer base for videos, Apple announced today that it has racked up one million video downloads from iTunes in the first 20 days. “Selling one million videos in less than 20 days strongly suggests there is a market for legal video downloads,” Steve Jobs, Apple’s CEO said in a press release. “Our next challenge is to broaden our content offerings, so that customers can enjoy watching more videos on their computers and new iPods.”
While not a record for Apple — music downloads topped one million within four days after the launch of iTunes — the amount is significant given the relatively thin choices offered. In addition to 2,000 music videos, iTunes offers only a few selected top TV shows from ABC (Lost, Desperate Housewives, That’s So Raven) and some free news content from ABC affiliated TV stations.
If most of the downloads were paid content, at $1.99/pop the total revenue generated by Apple for video downloads since the launch of the video iPod is nearly $2 million. On an annual basis, that’s about $36.3 million. But, revenues are likely to mushroom as more content makes its way to iTunes and as more video-capable iPods penetrate the market.
Posted by Cynthia Brumfield at 11:16 AM | Print | Comments (0)
Business Week has a series of articles that examine the critical turning points for the phone business, timed to coincide with the DOJ’s clearance (with conditions) of the mergers of SBC-AT&T and Verizon-MCI. At the heart of this series is a piece that looks at the top two telco leaders, Verizon and SBC, and the competitive challenges they face from VoIP, among other forces.
Chief among the telcos’ top priorities is to enter the video business, with both Verizon and SBC devoting a lot of energy to revamping their networks to compete with cable. (See item posted today about the current state of telco-offered video services.)
More interesting is the fact that once the mergers close, SBC and Verizon will become competitors to each other, a new situation for the formerly cozy RBOCs.
The two giants will be pushed into tangling with each other more than ever before, too. They’ve already stepped up their rivalry in wireless. Next, with the acquisitions of AT&T and MCI, will come corporate services and Internet calling. Net technology is now developed enough that it will be easy for Whitacre and Seidenberg to compete for customers in each other’s territories. AT&T has already been pushing Internet calling, so once SBC closes its deal, it will be in direct competition with Verizon in all of its top markets, including New York, Philadelphia, Boston, and Los Angeles.Posted by Cynthia Brumfield at 9:25 AM | Print | Comments (0)
Although the fiber-based initiatives of the top telcos grab all the headlines, the bundled DBS offerings of SBC, Verizon and BellSouth topped the million subscriber mark at the end of Q3 05, according to my analysis published in today’s IP Media Monitor.
At the end of Q3 05, Verizon, SBC and BellSouth counted a collective 1.18 million video customers. BellSouth led the way with 460K video customers, with SBC not far behind with 419K video subscribers. Verizon counted 300K video subscribers by the end of the quarter. While only a fraction of the sixty-five million video customers served by the cable industry, and only a fraction still of the twenty-five or so million subscribers served by EchoStar and DirecTV, the million-level milestone is nonetheless impressive given that at the end of Q4 04 the total video subscribers encompassed by the telcos was half that figure.
Posted by Cynthia Brumfield at 9:17 AM | Print | Comments (0)
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