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FCC chairman weighs-in on width versus length debate

It wasn’t so many years ago, remember, when AT&T (the old AT&T, the U. S. national telephone monopoly) owned the phone wire in your walls. You put the wire there, or your builder did, and you certainly paid for it, but once dial tone filled the lines those lines became the physical property of Ma Bell and you couldn’t legally touch them. Everyone longing for the bad old days should remember when you couldn’t touch your own phone lines under penalty of law. Today or tomorrow, we’re told, the FCC will vote under the guise of net neutrality to re-instill some of those old ways of doing business, at least for wireless networks.

Well it won’t work.

The short story of what’s happening at the FCC is that the agency is trying to grab power over the Internet and to make that happen is paying-off any number of constituencies. With everything eventually going onto the net as a data service, the FCC wants to avoid irrelevancy, so this is how they are doing it with the help of Google and Verizon. Net neutrality partisans appear willing to accept more oversight if it comes with guarantees against packet throttling. And phone companies are willing to accept broader restrictions if they can still throttle or introduce tiered charges on their only networks that matter anymore — wireless.

These new rules, then, establish three fundamental ideas: 1) the FCC has regulatory authority over the U. S. Internet; 2) Internet Service Providers (ISPs) can’t discriminate between data types like video, voice, or torrents on their wired networks, but; 3) wireless ISP’s can discriminate between data types and applications as long as they aren’t giving preferential treatment to their own competing products or services.

So T-Mobile, just as an example, can limit or create a surcharge for Hulu, but only if it isn’t offering a service of its own that is competitive with Hulu and for which it doesn’t make such a surcharge.

The theory behind this rule is that wireless networks are a more bandwidth-limited resource than wired networks.

While the new FCC rules allow tiered pricing and limited packet filtering for wireless networks, they do so with the loud (and I think fairly legitimate) argument that competition will work to mitigate any telco abuses. There are nearly always three or more wireless network providers in any area and those mobile providers that punish their customers will be punished in turn by the loss of those customers to more enlightened network operators.

But to my way of thinking it really doesn’t matter, because those who would put limits on the Internet really don’t understand how the Internet works.

Look for shortly to appear what I’m calling the Trojan App, a hybrid mobile application that doesn’t exist yet but certainly will within hours or days of the new rules going into effect. The Trojan App is a legitimate mobile application that performs multiple functions, at least one of which is to circumvent the new wireless rules.

Here’s what I mean. Maybe you saw the story a couple of days ago about technology being brought to market that would enable mobile phone companies to charge Facebook users by the page for access. Under the new rules a mobile carrier can do that, no problem. But because that mobile network offers its own voice service (they all do) under the new rules they can’t similarly restrict Skype or Google Voice or any of the dozens or hundreds of Voice-over-IP third-party services out there. So what’s to keep Skype or Google or Yahoo or iChat or MrVoIP from offering a mobile version of its service that includes a free gateway to Facebook?

Nothing.

These are perfectly legitimate applications that are protected from throttling by virtue of their competing with a core service of the ISP, yet in this instance they will have gained a secondary function of acting as a Virtual Private Network link to an otherwise-regulated service like Facebook.

It’s a digital loophole.

Some might argue this simply won’t happen but they’ll be wrong. That’s because there is a long and successful tradition of using functional VPNs to accomplish such ends on the Internet. That’s how I watch Top Gear. But even more importantly the major players will do it because they’ll be forced into it by the minor players.

I could set-up in the cloud overnight a VoIP or some other qualifying service like mail or chat or video streaming. If I add a Facebook gateway to my new service and Yahoo doesn’t to theirs, well Yahoo loses.

Okay, maybe Yahoo isn’t the best example, given their decided lack of common sense for the past decade or so, but you get my point. Skype would lose. Google would lose. Microsoft would lose. And you know they won’t stand for that.

The Internet — even the wireless Internet — is a living thing that will optimize itself around any obstruction.

Resistance is futile.

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Network neutrality came from the telephone business.  With electronic phone switching (analog, not digital) it was possible to give phone company customers who were willing to pay more priority access to trunk lines, avoiding the dreaded “all circuits are busy, please try your call again later.” Alas, some folks almost never got a circuit, so the FCC put a halt to that practice by mandating what it called “network neutrality” – first-come, first-served access to the voice network. When the commercial Internet came along, network neutrality was extended to digital data services, lately over the objection of telcos and big ISPs like Comcast, and the FCC is now about to expand those rules a bit more, which was in this week’s news. But to give network neutrality the proper context, we really should go back to that original analog voice example, because there are more details there worth telling.

Network neutrality in the voice era took from the telephone companies the opportunity to sell priority access to trunk lines, but it didn’t remove the need for big businesses to have such priority access. So AT&T invented a leased-line business where companies could buy whole circuits that operated 24/7 and were guaranteed access to the long distance network. By being a separate product with a separate tariff and sold in a completely different way, this leased line business, which had long been used by broadcasters but was now expanded to other business customers, was WAY bigger in revenue for AT&T (more than 10X) than simple priority access ever would have been, which is why AT&T suddenly stopped complaining.  Network neutrality made more money for the old AT&T than had it not existed. People forget that part.

Now Obama’s FCC is trying to fulfill what I’m sure was a campaign promise and codify network neutrality so future more conservative Administrations will have a harder time messing with it.  Republican interests, fulfilling promises of their own, are opposing the expansion of network neutrality saying it is an imposition of government on a free market that works just fine, thanks.  Oh, except for Wall Street, and the insurance companies, and the banks, and maybe six homeowners on your street and about four million others, but otherwise the free market is perfect.

Internet network neutrality became an issue because ISPs were found to be undermining it, blocking ports and packets and using other traffic shaping techniques not just to help certain kinds of traffic like VoIP, but specifically to hurt other kinds of traffic like Bit Torrent.

What’s the beef here, really? Are we running out of bandwidth?  Remember the FCC came about to administer public airwaves, which very much are limited, but wired networks aren’t, at least not in the same sense.

Cable systems these days often run their TV service at break-even and make nearly all of their profit on Internet, voice service, and video-on-demand. I know cable bills are always rising, but so too are the payments from cable systems to cable channels, which is why cable networks are booming and broadcast networks are wilting, because that cash flow to content creators doesn’t exist (in fact it is reversed) in the commercial broadcast model.

Cable Internet and phone services, in contrast, have no content cost. They leverage the existing cable infrastructure investment, and have as their main expense Internet backbone bandwidth that has been going down in price by 50 percent per year for more than a decade with no end in sight.

Right now the typical cable operator uses one analog channel (6 MHz – usually channel 80) for Internet service. That’s ONE PERCENT of the total bandwidth on an analog cable network.  Give up a shopping channel and Internet bandwidth could be instantly doubled.

There is no Internet bandwidth shortage.

DOCSIS 3.0 cable modem technology, which is rolling-out now, can bond together up to four analog channels (I can think of a few I’d gladly give up) and in turn offer up to 100 megabit-per-second Internet service.

Taking a look 5-10 years into the future makes the existence of these new network neutrality issues even less problematic.   The future of cable TV, for example lies clearly in switched digital cable service with recording capability, where the only active channels are those actually being used on a given subnet, freeing-up huge amounts of bandwidth for other uses.

Now start to think like a cable CEO circa 2019 or even 2015. You have the same short-term mentality of nearly all U.S. CEO’s, which means you care about this quarter, this fiscal year, and that date 2.5 years in the future when you’ll pull the ripcord on your golden parachute. Nothing else matters and nothing else impacts your business decisions. You suddenly realize that 90 percent of your profit is coming from 10 percent of your business – Internet and maybe voice. Nearly all the money you care about – profit – comes from providing a switched empty pipe to customers.  So what do you do? YOU SELL OR SPIN-OFF TO SHAREHOLDERS EVERYTHING EXCEPT THE EMPTY PIPE BUSINESS, THAT’S WHAT.

And the telcos will, too, because they’ll be in a similar position.

This is the inevitable future and it makes much of the current debate, well, silly.

Network operators will get out of the content business, which will be handled for the most part by Google/Hulu/whomever using shipping containers filled with servers docked at the local Network Operations Center – shipping containers for which the network (formerly cable and telco) operators will collect rent just like grocery chains now make their profit by renting out shelf space to Proctor & Gamble, not by selling things.

Where, in this new world of renting empty pipes, will the network operators come down when it comes to network neutrality? They’ll be all for it, having by then philosophically switched camps, because ONCE THEY STOP CARING WHAT BITS ARE IN THE PIPE, THAT PIPE STARTS TO MAKE MORE PROFIT.

So we’re getting all worked-up over something that is structurally destined to become a non-issue in the near future. Having said that, I remain a supporter of network neutrality simply because it’s the way I prefer my Internet to run.