The “greed is good” crowd is alive and well and running a phone company near you. If Dr. Phil can help out cheating spouses, write a couple of self-help books, and get Oprah Winfrey to show up on The Late Show with David Letterman, he can surely help AT&T and Verizon’s management come to their senses.
This whole issue of the phone companies badgering Google and other content providers and threatening to end their “free ride” is not as complicated as it appears on the surface.
If you’re asking, “What’s going on?” then someone, somewhere is ready with an answer. Extortion.
Here’s the basic issue. Mafia overlords and goons from major telcos AT&T and Verizon are threatening to cutoff Google’s bandwidth.
Why? Verizon Senior VP and counsel John Thorne says Google, “…is enjoying a free lunch” because they use Verizon’s network.
So do I, but I haven’t heard anything from either AT&T or Verizon. Maybe I’m just snacking because I don’t use as much bandwidth.
The New AT&T is acting much like the old AT&T. Chairman Ed Whitacre says, “For a Google or a Yahoo or a Vonage or anybody to expect to use these pipes for free is nuts!”
The US ranks 13th in providing high speed connections to the home. Ahead of us are a number of countries in Europe, Japan and Korea. So, I’m not sympathetic to the telco executive’s cry for relief.Why are they talking that way? Doesn’t Google pay their bandwidth bills on time?
In the minds of many, such sabre rattling is nothing more than greed personified as extortion attempts. Attempts to squeeze big money from select content providers (Google, Yahoo, et al) with big bandwidth appetites.
In the age of deregulation, someone forgot to regulate what telco executives say to their customers.
At issue is bandwidth. Yours, mine, Googles, and every bit of bandwidth in between. Generally speaking, you and I pay a local phone company (DSL) or a cable TV company for bandwidth.
In exchange for that monthly fee, we get a connection to “the internet.” That connection may vary in speed but it lets us connect to everyone else who is connected to the internet, including Google and Yahoo.
Lest you think they’re actually getting a free ride, guess what? Google and Yahoo and everyone else connects to the internet the same way as you and me. Bandwidth.
Google and Yahoo buy bandwidth, lots of bandwidth, which connects their servers to “the internet.” I’m sure Google’s bandwidth bill is huge so it’s not like they’re getting it for free from AT&T or Verizon. Google pays for what bandwidth they use.
The issue of monetary concern for the telcos is all that bandwidth that runs between you and me and Google and Yahoo. The “internet cloud” as it’s often called, is made up of even more bandwidth which connects the major telcos, major cable companies, and major bandwidth providers (MCI is huge in providing bandwidth; now they’re a part of Verizon).
Generally speaking, all that extreme bandwidth between telcos and major bandwidth providers is connected using “peering arrangements” where very little or no money changes hands between the telcos or the bandwidth providers.
From the early days of the internet, that was dubbed a cost of doing business to keep the internet, well, connected. See where this is going?
It’s a cost, for which AT&T, Verizon and others who control such massive bandwidth, cannot directly associate with a revenue stream. The “peering arrangements” between them don’t bring much (if any) revenue.
That bandwidth shows up as an expense on the ledger and the phone company, logically, wants to be paid for transferring data (bandwidth) between you and me and Google and AT&T.
They can’t get more from you or me so they’re aiming for those deeper pockets.
It’s been this way for 10 years. Why all the noise now? Because deregulation of the telcos extended to freedom of speech and sabre rattling. The telcos want a bigger slice of what they see as Google’s cash cow.
It’s not much different than the record industry demanding that Apple pay them a fee (extortion) because the iPod holds their content. The cash in the cow and the rules of greed and extortion require someone to take a bite (excuse those analogies).
Think of it this way. Automobile manufacturers sell cars and trucks and have done so in much the same manner for nearly 100 years. So, we head down to the dealership, check out a new car, get ready to buy, but the dealer tacks on an additional $5,000 for an engine.
What? Don’t all cars come with engines? Why do I have to pay more? The answer, “Well, in the past, engines were free with each car. But we have stockholders who demand a return on investment in our company. No more free ride. You have to pay for the engine.”
Greed? Extortion? Or savvy business tactics? I report, you decide.
In a nutshell, that’s the issue. Google’s bandwidth requirements may or may not be putting a strain on AT&T or Verizon’s network, but clearly they’re required to add bandwith to handle the cross-traffic from Google and others which send data to me and you. They want someone to pay for that investment.
There’s other thorns in AT&T and Verizon’s side. Maybe Dr. Phil can help ease their pain. Vonage. The cable company’s Digital Phone. Skype. Internet phone service.
Ostensibly, internet phone services use the telco’s bandwidth and local exchange service, but the phone company doesn’t get as much money in the process, especially if a Vonage, Skype, or Digital Phone customer stops using their local land line telephone.
Again, the telco keeps the cost, but loses out in the revenue. So, they’re complaining. And threatening.
It’s not as if the telcos are losing money. AT&T, Verizon, and others are highly profitable businesses. Competition is fierce, which, according to some economists, should provide customers with more selection, higher quality, lower prices. It does not.
The US ranks 13th in providing high speed connections to the home. Ahead of us are a number of countries in Europe, Japan and Korea. So, I’m not sympathetic to the telco executive’s cry for relief.
What can be done? There’s only one solution. Dr. Phil. Telco execs need someone with a powerful voice to get in their face, tell them to stop blubbering, face reality, get a grip, and provide the service their customers are paying for.