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Re: Two Tiered Internet

  • From: JC Dill
  • Date: Wed Dec 14 23:07:31 2005

Hannigan, Martin wrote:

	but do i get "the Internet"?  ... your claim is that
No, my claim is that "users" are not paying the full boat.
Internet end-users are paying a larger share of the costs of the system than broadcast radio or TV end-users are paying (which here in the US is 0%).

Broadcast radio and TV is supported by ads placed in the content stream, and by paid-for content. Internet sites are supported by advertising placed in the content and by paid-for content (personal websites on paid hosting) or subscriptions (end-users subscribing to content). Internet users are paying part of the cost for connecting to the network, similar to how cable TV users are paying for the costs of connecting them to a better video delivery system. But neither are paying for "content" except where cable users pay for premium ad-free channels, or when internet users pay for subscriptions to certain sites or services.

(In print media, end users pay primarily for the delivery of the print media and not for the content which is "paid" for by advertising. Print media subscription rates are plummeting as users switch to getting the content on the web for free, rather than paying for the dead-tree deliveries. Advertising rates and profits are falling as subscription numbers fall.)

When and where the Cable TV system has competition, we have seen new services and increased demand for ala carte pricing so that users can elect to pay ONLY for the services they want and need - something that terrifies the CableCos. OTOH there's MetroFi, currently developing an ad-supported system to offer free WiFi in the city of Sunnyvale:

<http://wifinetnews.com/archives/006109.html>

And Google's plan to offer a similar service in Mountain View (without the screen eating ad):

<http://googleblog.blogspot.com/2005/11/wi-fi-in-mountain-view.html>

I wouldn't be at all surprised to see someone offer similar services for cable or satellite TV which would put additional pressure on the "pay to subscribe" model and bring these services to users more in the broadcast TV and radio model (free to receive, supported by ads).

What it comes down to is that in the long run end-users don't usually choose to pay for media or content services *unless* the services are delivered ad-free AND have compelling content. (Such as HBO and Showtime for film, and more recently XM and Sirius for radio.) So far there are very few services on the internet that qualify so end-users don't expect to pay more than a nominal connection fee to gain access to "the internet" and for the most part they only subscribe to sites that offer unique, high quality, ad-free content.

The only way the TelCos are going to succeed in developing their two-tiered internet is to provide compelling content only in their "premium service". Given that past efforts to produce compelling content available on only one network (anyone remember "web portals"?) have been dismal failures or successes which then failed when there was competition that provided more content (prodigy and aol losing market share as users switch to the internet), I'm expecting similar results from this plan. This would ONLY work if they could get a large content provider to switch to the "top tier" service and not offer content from that provider on the "low tier". Yeah, that'll be the day!

This is a plan that benefits the TelCo at the expense of both the end-user and the content provider. I can't see any reason why either party will play along, or any way the TelCo can force or coerce them to play along. Any efforts to "urge" users or content providers to use the higher tier by degrading the service on the lower tier will just piss off their present lower-tier paying customers who will leave for the competition. This can ONLY work in a market that has NO effective competition or if there is illegal collusion with the competition so that customers have no effective choice.

IMHO TelCos need to stop thinking of what they provide as a "service" and start to think of it as a method. They provide the wires on which other services run. Rent access to those wires for a fixed fee, the SAME fee to all who want to use the wire (including their own service companies). Install newer and faster wires (fiber to the home) or non-wire systems (how about investing in wireless before MetroFi and friends take away the entire connectivity market???) and rent access on those improved access method (wired and wireless systems) for a higher fee. Dump the complicated and expensive metered billing systems and go with simple fixed rate billing which greatly reduces billing and support costs. Stay focused on what they do well (build level 1-2 networks) and stop trying to force their way into markets they don't understand and force customers to buy the services that run on these wires from the TelCo affiliated and owned companies that do a BAD job of providing the services the customer wants.

One can dream.

jc







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