Bit caps, consolidation, and Clearwire
Bit caps, consolidation, and Clearwire
Bit caps, consolidation, and Clearwire

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    The news that Comcast, Time Warner, and AT&T are all considering capping use of their networks — so that “overuse” would trigger a charge — has prompted intense discussion of just why these network operators are moving in this direction. One camp suggests that these operators have to do something to manage congestion, and because any protocol-specific discrimination plan raises howls of protest from the Net Neutrality side of the fence adopting bit-usage discrimination schemes is inevitable. It's the least-bad approach, following this view.

    The Net Neutrality side, for its part, points out that (1) each of us will fall into the 5% of “over-users” at some point or another, (2) the operators want to make sure that they remain the chief sources of video content, rather than allowing internet access to video undermine their business plans, and (3) it seems odd to manage to scarcity rather than invest in improved access for everyone. It's as if the operators would prefer to keep internet access expectations at 2003 levels. And if you really wanted to manage congestion you'd charge differently for usage at different times. (Meanwhile, Korea.)

    People in countries with experience in volume limits (e.g., Australia) tell us that it's miserable having fixed caps and overage charges. In Japan, they began with expensive metered access and left it as soon as they could move towards an unbundled/separated regime — now costs are low (and flat) and speeds are very high.

    Bit caps are portrayed as similar to familiar cellphone models — getting a “bucket of minutes” for a fixed price. But the history of internet usage hasn't proceeded that way, and it should be hard to force users into these plans. Should be — but may not be, both because users here in the US don't expect to be able to access enormous amounts of video online at high speeds, and because users don't have a lot of choices for network provision. If most of the big ones move in the bit-cap direction there will be few opportunities for users to vote with their subscription fees and escape.

    Speaking of “most of the big ones,” the big ones may get bigger. Verizon's purchase of Alltel will mean that two companies — AT&T and Verizon — will “control 150 million of the 260 million wireless customers in the US.” (From Public Knowledge.) Verizon will have 80 million of those customers alone. All around the world, wireless providers are consolidating as they seek to “become national players in next-generation mobile networks.”

    So here we are: a retrograde move towards metered pricing, increased consolidation, and no necessary link between any of this activity and better internet access for everyone.

    The Sprint/Clearwire transaction seems like a possible work-around (thanks to those of you who sent me the filing from last week — I still can't link to it but I will when it's available). Their claim is that they'll create “a new nationwide advanced wireless broadband network that will increase competition across the country and vault the US into a leadership position in the broadband innovation and deployment.” They're planning to provide speeds that are five times as fast as current wireless speeds, as they roll out the “world's first nationwide WiMAX network.” (It's always good to appeal to our national pride.) They're planning to allow wholesale access — although perhaps only by the cable investors in the plan, Comcast and Time Warner. (There's a vague mention of other unaffiliated firms, but no assertion that just anyone will be allowed to re-sell their network.) Now, they're not giving up on “reasonable network management” or “no devices that harm our network.” But they're asserting that wireless access is the future, that it's the fastest-growing segment of the US telecom industry, and that a new competitor is needed.

    There are worries — will the $3.2 billion from the investors be enough to make a nationwide network possible? Will the technology actually work — penetrate walls, go through anything? What about backhaul problems? Backhaul may be the big unexplored issue here — without a line taking all of those WiMAX communications somewhere, they won't succeed, and those lines are controlled by incumbents who don't have any incentive to charge market prices. Because there isn't a market.

    So that's today's picture. Head-scratching about bit caps, intense consolidation, and the glimmer of a possibility that a “third pipe” might emerge. It all ties together, because without the cooperation of the incumbent network operators (the people who feel bold enough, market-powerful enough, to float metered pricing), the third pipe may not have a realistic chance of succeeding.

    Meanwhile, the rest of the world watches US wireless policy closely.

    Cross-posted from Susan Crawford blog.