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Countering the tedious anti-Internet rhetoric

The truth is that for telcos and ISPs it's not that the Internet is unsustainable... just the opposite. The problem is that it's totally sustainable just as it is. Hence the anger, half-truths, and tortuous logic deployed in the quest to "have Google pay", "fight back against the OTTs", "find a sustainable way forward", etc.

In a paper he was commissioned to write for Google, 'There’s no economic imperative to reconsider an open Internet,' Benoit outlines the recent background - ETNO's failed pitch to the ITU to introduce international IP traffic compensation and then Free's effort to degrade Google services across its network and block ads.

It's when these events happen that the justifications bubble to the surface. Benoit demolishes then all (the full pdf can be downloaded here) and concludes that all the sound and fury about unsustainable business models just can't be sustained. The Internet's general terms and conditions are just fine as they are.

Just to pick a couple of points. A favourite trick is to examine an Internet phenomenon and then pretend that it can be challenged by switched network norms. So a fuss is made of traffic flows and so-called imbalances - not concepts that can be applied to the Internet since its members deal in connectivity not traffic. Furthermore, and for the same reason, direction doesn't really matter either. The paid-up members of a sending and a receiving network are deemed to be gaining roughly equal value from any data exchanged. The idea of an 'imbalance' is a non-starter.

And so to the 'free rider' argument. Google and the other OTTs DO pay their half of the journey (in either direction) and interconnect costs due to increased video consumption, for instance, (the anti-YouTube argument) are tiny - mere pennies per user.

Benoit shows that the narrow financial argument doesn't hold much water. So why the fury?

The financial spat is just a proxy for the real argument bubbling underneath. Which is that the Internet is steadily hollowing out the telco business model, mostly by replacing value-based pricing with incremental cost-based pricing. Telcos want a way to stem this tide.

And you can see their point: the telco game worked so well when network operators could value-price - without fear of competition - its SMS (for example) at 10 p per text. But as we know it turned out that Internet-based competitors could offer free messaging (in return for a bit of attention) since the incremental cost to the user, once the mobile broadband pipe is paid for, is very close to zero.

This dynamic is very threatening because telcos built their network investment case on trapping, not only all this value, but also the follow-on value from the richer services they could devise as the market moved forward.

So what must telcos do? I think they must acknowledge that Internet access is an important and growing part of their business because that's just the way the market has evolved. And they must continue to go 'over the top' and become Internet-based online service providers in their own rights which, despite the hype, many are already doing.

It's just that they'd much rather run their businesses and bag their profits the way they originally intended when they bid for those 3G licenses more than a decade ago. No wonder they hate Google.

Benoît Felten is the founder and Chief Reseach officer of Diffraction Analysis, a research firm specialised in next-generation broadband. He recently released a report entitled Building the Optimal NGA Service Portfolio.

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