Mobile Nature & Raw Economics :

Partitioning the Internet: Google and Verizon Hold Forth

Despite numerous rumors and repeated questions, Google and Verizon denied they were in any kind of discussions. When specificaly asked if they were engaged in conversations about the prioritization of Internet traffic, they continued to deny any such talks had taken place.

Today, Google and Verizon issued a joint statement that they have not only been talking for some time, but had negotiated an agreement between them, deciding the shape the Internet should take in the future.

Once seemingly bitter rivals on either side of the Net Neutrality debate the announcement caught the technology community completely off guard and baffled the mainstream press. The surprise could be excused: Google, a search and content company consuming massive quantities of bandwidth. Though a giant with billions in Internet advertising revenue, still an upstart to many. Google had made many pronouncements about the open Internet, maintained a persistent support of opensource and all the while sporting the incongruous corporate motto, “Do no evil.”

Verizon, at its roots, is an old line telecom. Assembled, over several decades, from a patchwork of mergers and acquisitions of former ‘Baby Bells’. Born in an era of monopoly landlines it has leveraged that dominance into one of, if not, the largest mobile wireless networks in the United States. Fiercely anti regulation, Verizon believes that its infrastructure investments, which are substantial, justify its position that they should be able to manage their network in any way they see fit.

It was a naive view that Google would not, as corporations tend to do, protect its own interests. They had no hesitation in allowing the technology community believe that they would defend it as if they were a gentle giant. A more justified shock comes from the seeming unlikely nature of this CoOpoly. Google, an operation with an insatiable appetite for bandwidth: search, Gmail, YouTube, to name but a few, with an obvious desire to move its content unimpaired. Verizon, both ISP and network and a growing interest in expending its own content services, with an unbridled sense that it must extract every cent it can from every packet crossing its infrastructure. The situation was designed to be a classic conflict of wills, dominance and vast sums of money.

In many ways the Google/Verizon CoOpoly should have come as a no surprise. The vacuum of leadership created by the indecisive and ponderously slow FCC and a US Congress, fragmented, self serving and utterly unaware of the strategic importance of the future of broadband Internet to the United States economy. Our political leaders live in an age of agriculture and manufacturing, while swimming in tens of millions in lobbying funds from the telecom industry.

What shocks your author’s and others sensibilities is the arrogance that two private companies could decide among themselves the future of a critical resource that essentially belongs to the public. Without the right-of-ways for their physical cables and the radio spectrum for wireless, there would be no network infrastructure and the Internet layer that rests upon it. These raw, unfinished resources belong to the public and are leased to the telecoms.

The Google/Verizon CoOpoly holds that the one cop on the beat, the FCC, who is charged with protecting this vital public resource should be limited in its scope. To avoid acting as an arbiter of policy and manager of regulation, to instead take a back bench approach, leaving the industry to decide. They do not want the FCC to classify ISPs as common carriers based on Title II of the Communications Act. After the its legal setback in the Comcast traffic shaping case, the FCC has considered reinstating this provision and expanding it to include ISPs.

Verizon-Google Legislative Framework Proposal, “The FCC would enforce the consumer protection and nondiscrimination requirements through case-by-case adjudication, but would have no rulemaking authority with respect to those provisions” In other words, no regulation or policy set in advance and any decision in any instance would not set precedence.

They continue, “Parties would be encouraged to use non-governmental dispute resolution processes established by independent, widely-recognized Internet community governance initiatives, and the FCC would be directed to give appropriate deference to decisions or advisory opinions of such groups.” It is not clear who these groups would be but the main gist of this statement is that the FCC would cede all in control in these matters despite the fact that thy are the sole federal agency chartered with this responsibility, to protect the public’s interests.

“The FCC could grant injunctive relief for violations of the consumer protection and non-discrimination provisions. The FCC could impose a forfeiture of up to $2,000,000 for knowing violations of the consumer-protection or non-discrimination provisions.” Google’s revenue for their last fiscal year was over $26 billion and Verizon’s revenue was over $108 billion, so a $2 million fine could be considered the price of doing business, hardly a deterrent.

From the Google Public Policy Blog, “…our proposal would allow broadband providers to offer additional, differentiated online services, in addition to the Internet access and video services (such as Verizon’s FIOS TV) offered today,” if you heard a thud, that was the other shoe dropping. This is Google/Verizon speak for a stratified and tiered Internet. If you need high bandwidth, an absence of traffic shaping and no download caps then you will pay separate and higher fees. The Internet will divide into classes of access, the Cadillac, the ghetto and something of ill definition in between.

There is no hiding this part of the quote, “…and video services (such as Verizon’s FIOS TV)…” if telecoms and cablecoms can achieve their dream business model of ‘Bundle, Package and Distribute’ then the gestation of a commodity priced broadband infrastructure will never come about. If an Internet comes about where a few massive players control both the content and its distribution, the economic benefits of an innovation explosion from this widely available raw material will never be realized.

A few sentences later they tick off the benefits of their vision, ”…might include health care monitoring, the smart grid, advanced educational services, or new entertainment and gaming options.” It is  mightily counter intuitive argument they make in this statement. By their logic: a few large players, with little or no competition, will generate a myriad of innovative services and products as opposed to having a widely available, high quality and affordable broadband populated with tens of thousands of competitive players.

Of the two great desires of telecoms: first, to tier and and create premium access we now come to the second, ”…we both recognize that wireless broadband is different from the traditional wireline world,in part because the mobile marketplace is more competitive and changing rapidly.” And here it comes, ”…under this proposal we would not now apply most of the wireline principles to wireless.” The idea that wireless is more competitive and nascent is almost laughable if were not so serious.

Wireline broadband could be considered less competitive because of its fixed physical nature and that there is, at best, maybe two broadband options in most localities, DSL or cable.  But to say that wireless broadband is more competitive is an exaggeration of major proportions. In any given area a mobile wireless customer may theoretically choose between, AT&T, Verizon, Sprint or T-Mobile but in reality the choices can be far more limited.

Wireless requires cell towers and to build and expand cell towers requires permits. The land and building tops available to these towers is limited and the permitting to build more or expend the current installations is slow. Ask anyone in San Francisco or New York how they feel about their AT&T service, or Sprint or T-Mobile customers in large swaths of the US. Competition is uneven at best. Compared to Europe prices in the US are high and features are limited. Bandwidth is far too often shaped, capped or throttled. To demand a pass on oversight in the wireless arena has no benefits to the public.

It is time that the political leadership offer realistic regulation and longterm plans for broadband in the United States that will insure a competitive environment and an opportunity for business both large and small. It is time for the public to understand what their rights are and demand them. The physical right-of-ways and radio spectrum belong to citizens and are leased to the telecoms for the good of all, their profit but also the public good. The broadband future is far to critical, both strategically and economically, to allow a few large companies to decide it for us all.

Originally published in the Swiss online newspaper, www.zitig.ch, reedited for WholeThinking.

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