“In the Beginning” Meets the “LEC Apocalypse” - A Riff on Doc’s Snowball
July 25th, 2006 by Gordon Cook
Been talking with Doc Searles a bit, and am still feeling my way around in this new world. I like Doc’s “snowball” No, it’s “In the Beginning.”
But I have my own slightly different take.
Doc says: More than three years back, David Weinberger and I wrote World of Ends.
I agree.
Then Doc says: Wrong. The Net, as Bob Frankston puts it
Here, in response to Doc, I suggest we are getting on Dangerous ground: Bob’s infrastructure can be built - sort of - kind of. in some fashion. or another. Slap in some fiber… stick CDWM on the end….season with gig e and a dash of UCLP version 2.0 and you have something really nice, but what you have isn’t and never will be the internet. its a private network.
Doc continues: The problem is, the Net is really nothing more than the shortest data path between two devices. You want fast and free Internet for the same reason you want a fast and free connection between your computer and your keyboard and your screen. Think of the Net as a giant three dimensional zero. Everything across it is zero distance from everything else. The cost of using it isn’t zero, but once it’s built, that’s what it rounds to, once it’s built out. (As I explained here a few days ago.)
Cook’s Edge chimes in: I am in general agreement with Doc but feel that this framing misses something VERY important. I understand end-to-end and the stupid network just fine. But four months of working with Tom Vest (two 15,000 word interviews published and a third 15,000 word intereview to be published in about a week- there may also be a fourth and final one in 6 or 8 weeks) has heavily influenced my thinking. Tom’s been explaining his disertation research which he calls the Wealth of Networks. One of the key connections he is making that got my attention is what encourages internet growth and how we may understand the economic influence of Internet growth.
Doc’s “snowball” that we need just infrastructure and that there is “zero” in the middle between the ends, is OK as far as it goes. But it is missing a gritical element that Vest supplies.
Tom Vest understands end-to-end just fine, but he also fully grasps what he calls the tussle in the middle. In many critical ways although the distance across the net from one end to another should be blazzingly fast, the middle is not empty and the current owners of the end LEC and MSO have a territorial imperative on which their survival depends. They must defend their monopoly on the end points in order to enforce scarcity and keep their rents high by making sure that the bandwidth reaching the ends is rationed.
My addition to Doc’s “snowball” is that it is mandatory to understand the Bell’s position and strategy and that youi can do that only be understanding their their territorial imperative. Tom Vest says with great clarity in the interview I will publish on or about July 31.
[I want to make two points:] “There need be no congestion or bandwidth problem in the core of the Internet. The other point is that if you have a physical right of way that reaches into a region and you can use it however you wish, you can deliver an entire country’s worth of bandwidth over a single optical fiber pair. This is why the tussle these days really hinges on territorial control. In order to protect your business, if you are a dominant provider in a territory, you need to make sure that nobody else can get into that territory, even a little bit. You need to keep them all at the region’s edge and you cannot afford to take the risk of letting them get in. Why? Because the per-unit cost of conveying large volumes of traffic over optical fiber is asymptotically approaching zero. This does not mean that there is not a huge up front investment for each incremental upgrade. It does mean that the cost of an upgrade is vastly lower than the cost of starting over by assembling new rights-of-way and constructing new transmission facilities.”
“As the cost of bandwidth over distance over existing fiber comes down, the value of control over the right of way goes up. The result is that people who own right of way want more ownership and control over that to keep alternative, potentially competing network paths down (under their own control) or completely out. This commercial strategy hearkens all the way back to Adam Smith’s argument about mercantilism. Mercantilism is the idea that you make your money outside your territory. All you do is export. You try to be sure that you never have to import anything, and you absolutely block any market entry by “outsidersâ€. Your goal is to maximize your profits in other territorial markets, while protecting your own turf from foreign incursion.”
Cook’s Edge: What Tom is saying is critical to understanding Qwest and other LEC behavior. It is also critical to understanding why the LECs will stand at the end of every drive way to be sure we cannot break down their territorial control. If we succeed, for them it’s game over. They cannot afford to give us any opening. Right now we, are not succeeding. The FCC has sold us down the river. The Congress is selling us down the river. The state PUCs are beginning to give the LECs what they want, and so are the courts.
We may be master of our driveways, but soon we can’t cross from the driveway to the street without paying the LEC its charges. Doc is learning how narrow the window of opportunity for bypass is cracked open. Most of the rest of us likely have little idea.
The lesson so far in North America is that a telco simply cannot compete on an open access basis. They must either maintain their strangle hold over the local loop or die. I am happy for them to DIE. I think the next five to ten years will see a global struggle to kill them off.
Without their transformation, killing them is the only choice. The ones in the US i don’t believe are capable of transformation.
A member of my mail list wrote: Long Distance service has an
originating carrier, a backhaul carrier and the termination carrier… But
we don’t get billed by 2 carriers (or three) but one.
Fred Goldstein replied: The current system for long distance billing is an out-and-out
disaster. Have you been following the state-by-state wars against
dial-up Internet and especially Virtual NXX? Familiar with the
Global NAPs disasters in MA and VT? Level 3’s state-by-state battles
with Qwest? That’s an artifact of the LD billing system, which is
being applied to ISPs in some states now, as in “ye olde modem taxe”,
only now it’s sometimes for real.
LD billing got to be this way because the LD and local industries
were split in 1984. The local carriers got to impose “access
charges” on both ends of the call, which the LD carrier paid. Since
access charges were hidden, the LECs could impose high monopoly
rents, with only industry insiders seeing it. LD rates reflected
this, of course, but people probably thought tha the LD carriers were
keeping a much larger percentage of their billings than they actually
did keep. Indirect billing invites abuse.
Cook’s Edge: I agree with Fred. But I would also point out that this loops right back to Tom Vest’s analysis quoted above of territorial control. Each modality (phone and cable tv) has an monopoly over its access to its customers. And the FCC, Congress and PUCs appear to be indifferent to the telco abuse of its newly granted monopoly. (cable always had a monopoly in the US - but not in Canada.)
The principal to remember here is that given almost unlimited bandwidth from fiber, the telco business model REQUIRES that bandwidth be rationed. In my opinion this is establishing a conflict that can only be satisfactorily solved by open access community owned fiber networks. Here fiber becomes the fifth utility and service providers can connect and offer wholesale or retail services to the community over SHARED fiber infrastructure.
[…] The second theme is about caching versus long-tail. A lot of the arguments about net neutrality tend to focus on “Someone must pay for all the upgrades we must do, in order to let all of you download all these videos that are going to clog up the tubes and make sure Senator Stevens never receives his internet“, while the real arguments may be about something else altogether: See Doc’s recent post on the subject, and Gordon’s follow-up. […]
Hey JP - serendipity at works again: I am doing the lay out of a seconf big interview with Tom Vest. I was just formating the following. Read and Savoir:
Vest: \”AT&Tv2 is on the timeline because that’s what we have, a reborn near-national scale territorial facilities owner, with monopoly control over the only access segment that connects millions of households to the Internet. This territorial facilities owner does not want to support wholesale services anymore, and it complains a lot in public about the grave dangers of network congestion.\”
\”The fact that these warnings come at a point on the multiplexing trend line where it’s possible to deliver a continuous 1Mbps stream 24×7 to every household in America over just a couple of optical fibers (out of 250+ on most every important point-to-point segment), is purely coincidental – or is it? In any case, if this contrast between fear mongering about congestion and the reality of near-infinite supply causes any cognitive dissonance with your readers, then I can only sympathize.\”
Cook\’s Edge: Between 1990 and 1992 I spent 18 months with the USA Congress Office of Technology Assessment. The purpose of OTA was to prevent congress from making STUPID technology mistakes.
No more the republicans in 1994 got rid of OTA. Its hard for me not to be very very cynical. I am talking a bit with Dirk van der Woude in Amsterdam. He tells me: Some ten or so Embassies of the Netherlands have a technological innovation officer.
Forsooth! Those wiley nederlanders. Apparently one thing these diplomats do is publish a mail list on their observations of technology goings on around them. Clever, eh. George Bush would never do that - he has other ways to spend taxpayer money. :-/
The short form of all this is that Verizon and ATT aree lying when they complain about their clogged pipes. The only question as Tom Evslin wrote on, I think July 5th, in his blog post about their views on being entitled to access charges. Access charges on all traffic is what they want their business model depends on them.
Now their pipes are clogged at the last mile because they have built them to be clogged. They could not afford to build them unconstricted. Why? Because they are then commoditized and can no longer meter and charge for every transaction. Some access pipes may be clogged sometimes. If so it is by design.
With the decline of wireline deliverable voice bits Whittacre is searching for access charges - he wants to get his pennies from all those google bits and you tube bits.
As Qwest rakes Level 3 across the PUC coals - Qwest is grabbing its equivalent of access charges.
Only if you are as stupid as George Bush would you give the phone company a monopoly over its last mile when its business model was underattack from more efficient IP networks and not expect the phone company to go on a rampage. Its late - I better stop.