The battle to cover backhaul costs

10 Apr 2006

The debate in the US over net neutrality highlights a core broadband issue - the cost of broadband Internet capacity is rising, and someone must pay. Telcos have other options besides making companies like Google pay extra for QoS, but content providers may have little choice if they want to offer video

For all the talk about 'convergence' these days, there are still times when it's clear that the telecoms and IT camps don't always mesh well. One interesting example that's been escalating over the last few months in the US is the public relations war between telcos like AT&T and Verizon and Internet content companies like Google, Yahoo! and Vonage over Net neutrality and QoS fees.

The US debate is complex, not least because there are several issues under the hammer. One is the complaint from telcos that Internet companies are moving toward bandwidth-hungry content offerings like video, VoIP and online games, but still insist on paying the same flat Internet connectivity fees they've always paid regardless of how much bandwidth they're hogging. Telcos say this is unfair because it's jacking up the cost of capacity on their backbones, and they should be compensated in the form of 'QoS fees'.

The Net content players, on the other hand, insist that the content is already being paid for by end-users, and that the telcos want to double-bill for the same traffic. They also take the so-called 'net neutrality' line that telcos are in essence common carriers, and that QoS fees amount to discrimination of traffic - a move they say is even more suspect because the same telcos are also offering video and VoIP services, and could use such fees to hinder competition from the likes of Google and Vonage.

Tier1 Research senior analyst Daniel Berninger argued in a recent blog post that the fee telcos had in mind was not about QoS or even CoS but rather forcing suppliers to pay for the right of transit - the equivalent of 'airlines charging Time Warner for the right of readers to take Time magazine on an airplane'.

The debate has become controversial enough that Congress and the FCC are threatening to step in. The House Commerce Committee, which was already working on legislation to revamp broadband regulations, has been focusing on the Net neutrality debate, while in the Senate, Senator Ron Wyden (Democrat-Oregon) introduced his own bill regarding net neutrality last month. Both bills essentially propose that telcos be prohibited from blocking or hindering traffic from competing services. That would theoretically include tiered or preferential pricing, which in theory would mean no QoS fees.

For now, the issue is primarily confined to the US market, but its implications for the broadband sector could be far-reaching in the near future. Politics, posturing and ideology aside, the Net neutrality argument highlights a chief problem in the current overall broadband scheme. In the race to roll out broadband access and grab market share quickly, many service providers have used all-you-can-eat flat-price offers to lure customers. And it's worked like a treat. The problem is that as users start to chase content that's not only bandwidth-intensive but also sensitive to latency, QoS will become increasingly important to specific types of content. Either way, their backbone costs are going up as a result.

This is impacting global carriers as well as local access players, and it's not a sustainable situation for anyone, says Robin Russell, CEO of Australia Japan Cable.

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