If the traditional phone companies have their say you will be soon be paying twice for optimized broadband content.
You first pay for a high speed connection and then you’ll be forced to pay additional tiered fees the phone companies hope to charge your content providers like Movielink and Google and Vonage and Game Servers to deliver uninterrupted multimedia broadcast content to you. 

Uninterrupted” or “streaming” content is the key here. Unlike email and instant messages, high quality content demands a data stream be strong and open and continued 00 it doesn’t work well in spurts. Here’s how The Wall Street Journal reported the issue last week:

The phone companies envision a system whereby Internet companies would agree to pay a fee for their content to receive priority treatment as it moves across increasingly crowded networks. Those that don’t pay the fee would find their transactions with Internet users — for games, movies and software downloads, for example — moving across networks at the normal but comparatively slower pace. Consumers could benefit through faster access to content from companies that agree to pay the fees.

Shaving the streaming tiers with “priority coding” means only the wealthy content providers will be able to afford that price to deliver you content and they aren’t going to pay the extra fees for priority content queuing — you will — so you will not only be paying for the high speed broadband connection, you’ll also be paying for the speed in which your content provider provides high speed content to your connection so you are, in fact, paying twice for the same bandwidth: 

“They want to charge us for the bandwidth the customer has already paid for,” said Jeffrey Citron, chief executive of Vonage. Customers who already pay a premium for high-speed Internet access, he said, will end up paying even more if online services pass the new access charges to consumers. “The customer has to pay twice. That’s crazy.”

Here’s how this plan was able to be hatched against us:

The looming battle between phone companies and Internet content providers has parallels with the fight between local and long-distance phone companies of the 1990s, when upstarts sought free access to the regional phone companies’ networks. Until recently, phone companies were required to treat all data sent across their high-speed networks equally and without discrimination. 

But last year, a Supreme Court decision cemented the FCC’s authority to decide the rules for broadband Internet lines. The agency promptly deregulated Internet services, dropping rules that prevented the type of pricing plans now being proposed.

I understand the business model behind what amounts to double-billing — Verizon and BellSouth and other hardwire providers must pay to keep the infrastructure in working shape and when a tornado blows away a town it is Verizon and not AOL that must go in there are re-wire and re-connect everyone to everything. 

Verizon and BellSouth do not feel they should give up their bandwidth to Vonage and Movielink and the like for the same price they charge email and newsgroup providers. Companies like Vonage and Movielink claim the hardwire providers are creating duplicate content as a competitor to those they plan to charge extra for premium streaming and that gives them an unfair advantage in the marketplace because the hardwire companies will not charge themselves the extra streaming fees and will, by default, deliver their own content faster than anyone else’s for a cheaper price to the end user. 
The hardwire companies argue their cost to maintain the infrastructure for broadband delivery is ongoing and escalating in effort and any advantage they may have by providing both backbone and content is negated by maintenance factors. 
Smaller content companies with no hope of paying the higher price for guaranteed bandwidth beyond “best efforts” from the hardwire phone companies are facing the notion they will soon not be able to afford to stay in business and when there’s less competition, the big companies can charge whatever fees they wish for content and delivery. 
Business is business, but we, the people, must be protected by a new law against this double-billing for content because this is really the same “business model” some ISPs were floating a few years back to charge us, the end user, two cents per email message sent and delivered to and from our accounts. 
That plan backfired because we, the people, loudly and vociferously protested how unfair it was to charge us twice for the same service — and we must stand together again to claim the same indignation that an identical effort to double-bill us — this time for quality broadband content delivery — is once again afoot under a newly legal but more dangerous guise.

28 Comments

  1. I get it they want to charge us more for better content but I don’t see how that’s double billing.

  2. Well, Karvain, the double billing idea comes when you pay for a high bandwidth connection and then you also pay to have content delivered to you at a rate you already inherently expect in your purchased broadband connection.

  3. So just because I pay for a high-speed internet connection doesn’t mean I’ll be able to do anything with it?

  4. Right. If you didn’t expect streaming video and game playing to work as advertised — without any added on cost after you signed your broadband connection — you would have stayed with Dial-Up instead.
    Broadband, by its very nature, rightly assumes you can do multimedia without interruption. The hardwire phone companies are saying if you want to continue to stream your multimedia content you’ll have to pay for more it but they aren’t saying that to you they’re saying it to those who wish to stream the content to you do the double billing for the same service is better hidden.

  5. For DSL the situation is particularly infuriating. Except in a few cases where Verizon has deployed so-called ‘naked’ DSL (that is a broadband line that doesnt also require a working phone line), consumers are already forced to pay for a phone-line that they may not use. This can be partially justified by the upkeep and repair you mentioned, though these are generally covered by taxes leavied by governments on telecommunications lines. However, for consumers that rely heavily on their cell-phones, this traditional model of every home having a land-line doesnt make sense. Charging again for content over the broadband connection would simply add insult to injury.
    Next generation DSL and Wireless broadband (WiMax) technologies promise to provide broadband speeds on par with LAN connections (50-100Mbps). TelCo’s will need to upgrade their backend networks to support the increased bandwidth at the consumer end. Verizon itself is currently emplolying its fiber to the home FIOS service in some areas. With the FIOS service, the amount consumers pay is based on the bandwidth they need. This seems like a fair model. If consumers feel that they are going to need more bandwidth because they are going to heavily utilize streaming content services, they should be allowed to pay for it upfront with their broadband line rather than being hit with passed-on charges from the services that that subscribe to.
    Because of a heavily regulated telecommunications industry in the US, the technology and deployment of broadband in the US is well behind that of Japan and Korea. Some of this can be attributed to higher consumer demand in those countries, however as we repeatedly see technlogy creates demand with new possibilities for usage and content. The TelCo’s argument that current networks would become (do they have data on this based on forcasted usage of streaming content?) congested by the new services would be considerably deflated if current networks were upgraded with available technology. I have seen statistics that suggest that most broadband connections are highly underutilized. TelCo’s have betted on this and have effectively oversold their available bandwidth (the networks cannot typically support everyone’s broadband lines at their advertised speed simultaneously). They are now trying to make up for their own short-sightedness and unwillingness to increase capacity by forcing consumers to pay for their mistake.

  6. Sneaky and raw! They’re able to do this now because of that relaxing of the rules, then.

  7. Jonathan!
    Yes! It’s interesting, BTW, you call it “naked” DSL — here on the East Coast we call it “dry” DSL where you don’t have to have a phone line to get DSL service. I love regional differences!
    😀
    Your points are all well-argued and I agree FiOS is going to be really exciting, but Verizon should decide who will pay for the best tier of streaming — us or them — and then charge one of us for it once and then bluntly bill it without trying to double-dip us.
    There is already a clamping down on end user use of broadband connections to limit daily use. An “all you can eat” broadband connection is only that if you don’t eat everything all day and all night long. Some cable companies are even floating the idea of metered broadband connections were end users will be treated like ISPs get charged for content by the kilobyte.
    Sprint and Verizon already do metering on their EVDO and other high speed cellular connections. Sprint charges 2 cents a kilobyte for content and that can add up to thousands of dollars really fast.
    There was a time in America when telephone connectivity was so vital to our national interest it was regulated and kept on a neutral and universal price level so everyone had access to a fair price for communication.
    I argue access to the internet needs the same sort of protection, not less, as we move forward as a nation where access to information becomes the moments of our day.

  8. Karvain —
    Yes, that’s it. Without a law mandating neutral and fair behavior on the side of the backbone and hardwire providers it’s open season where price and pocketbooks rule depth of our continued virtual involvement with each other.

  9. Information is power. Access to power is economic. The poor get poorer… and dumber.

  11. As we are seeing, current regulations were not crafted in the best interest of consumers and do not secure fair access or fair pricing. Demand has kept prices reasonable, but there is little stopping these companies from gouging consumers down the road. I agree that internet connectivity should be considered as vital for the national interest as the telephone once was. It is unfortunate that economic disparity in our society translates to information disparity, which only tends to widen the economic disparity as the econnomy becomes increasingly linked to information technlogies.

  12. Once we are all moved away from our cheap, but reliable, copper wire connections for voice and data, Jonathan — and a FiOS installation will move you from copper to a glass line — and we are all using broadband for web and voice and entertainment we will be right in the big business’ pockets as we are beholden to their whimsy in pricing, speed provisioning and infrastructure upgrades. We will be unable to turn the clock back to gain competition or a competitive advantage as consumers in the marketplace.

  13. I agreee, though the TelCo’s claims are a bit strange as much of the backbone is not directly owned by the them. Why arent the backbone providers trying to get a piece of the pie? Consumers stand and the end of a long line of bandwidth re-selling, making change within the industry difficult without regulatory intervention.

  14. Well, I consider the TelCo’s part of the backbone in situ since they own, operate and control the “last mile” of access from both ends of the pipe for the end user.
    I have Verizon DSL and I am completely in their clutches because their service is incredibly reliable and smooth and generally effortless to mindless to maintain and I tried cable internet once and found it to be unreliable and slow.

  15. Verizon owns the copper in the East correct? In the SF Bay Area, all the DSL is technically provided by SBC, though it is re-distributed via ISPs. Yes, I have never been satisfied with cable either. I am still unclear at what level the bottleneck will occur. Until the TelCo’s can demonstrate that the bandwidth burden will be placed on them and not the backbone providers, I dont see how they have a case. City owned and operated WiMax could potentially change the playing field in that consumers would no longer be tied to that ‘last-mile’ of copper or glass, beholden to the whims of their local TelCo.

  16. Yes, Verizon currently owns the copper in my area but in the last 10 years it was first Bell Atlantic then NYNEX and now Verizon — the buying and re-grouping and conglomerama is mind-blowing.
    I now see SBC is becoming “at&t” again but with small lettering and Cingular is going to become “at&t” too, soon.
    Cable internet is always a bad idea because up to 100 people in your neighbor hood are on your “wire” so not only is your data not necessarily private your internet experience depends on how active your neighbors are at the same time. At night my cable connection would slow to a crawl.
    With DSL I have a dedicated line and all the bandwidth I pull is mind and mine alone. That’s a much better ongoing bang for my internet buck.
    I agree municipalities need to step up and offer broadband service as part of their infrastructure upgrades and charge us all a fee for access and let us once again to live free from want and the terror of being owned by the major TelCos.
    The TelCo’s case for cutting up the bandwidth priority queuing centers on the fact that since they are the ones who choose where, who and how to connect to the backbone they are able to meter that usage coming and going for each person they connect and they can drive business to or away from certain backbone providers. That’s a lot of power for a few copperlines to have in their collective hands.

  17. Yes, its rather bizarre that the baby Bell’s and their spinnoffs are now coalescing back to the same company that they emerged from. I suppose they have changed the name to avoid comparisons to the governement supported AT&T telecom monopoly of yore. I
    came across this timely discussion of telecom deregulation, video franchising and municipal broadband.
    Yes, DSL is superior to cable for the reasons you mentioned. Also, I really detest cable companies so I try avoid their services whenever possible! I have come across reports of local telco office overbooking their DSLAMs (the DSL switching equipment that connects the local-loop to the backbone connectivity), which results in similar slowing for DSL customers, though I think this is fairly limited.

  18. Thanks for the excellent information, Jonathan!
    I haven’t heard about the DSL issues you mention but I am certain they are there. I have been rather fortunate in my fine and robust DSL experience.

  19. I worked for a few years in Africa and the Caribbean on internet access issues for poorer countries – our company policy was to get access to the poorer areas where we could. This project (the Leland Project) was sponsored by the US Agency for International Development, focusing on access for sustainable development. Anyone with a slow internet connection can still access a wealth of information quickly. Karvain makes an interesting point on that.
    Broadband multimedia content is a whole different story. Basically, all ISPs business models rely on buying a lot of bandwidth and selling it several times. I do not expect in any of your contracts you will have a clause saying you have guaranteed bandwidth; the bandwidth you buy is purely a theoretical maximum rate, and the ISP will make a “best effort” to provide you with that. 98% of consumers use very little of their bandwidth except in “bursts” which are easy to balance and fairly provide to everyone. Only a small fraction of clients are downloading at high speed at any given time.
    Watching a high quality TV show over the net is very greedy in terms of bandwidth. You’re no longer requiring a burst that can slow down and speed back up. You need a steady bitstream at high speed. Think of busy streaming sites that constantly send you back to “buffering” mode. Large multimedia consumers soon become part of the 2% that consumes way more than the average consumer – who is himself paying the same amount as you. Is that fair? Is your water use a flat rate business model (in some places it is) or is your water use metered? It’s an issue with striking parallels.
    ISPs buy high bandwidth at very high cost to ensure guaranteed QoS (Quality of Service). Multimedia content requires high QoS. So either, you pick an ISP that has content on their own servers (which only requires QoS down your line, and not over someone else’s TCP/IP link) or you could pay ISP rates for your bandwidth. The fact that you don’t have to do that means you’re already getting a pretty good bang for your buck, all things considered.
    The ISP business model is not at fault in my opinion. If you have excellent QoS today and are not being penalised financially, that is because ultimately there are still a lot of people – at least at the moment – prepared to subsidise your use by paying the same flat rate as you for much less use of bandwidth.
    Call it what you like, but it’s not double billing. You’ve always (somewhere along the line) had to pay for guaranteed QoS. The difference in the dialup era was that modems were just so slow that they were easy to balance out. Nowadays, the pressure is on. Marketing has pushed the limits, but the small print has never said you had guaranteed bitrates.
    -Fruey

  20. freuy —
    It is double billing in America because of the way broadband has been promoted and sold to its citizens. Cable companies are particularly voracious in claiming a guaranteed 6 MB “always on” connection for streaming video and other multimedia content. I understand they oversell their bandwidth but the whole thing will come tumbling down when more and more people believe the PR hype only to find their connection crawls unless they pay extra fees to get “true” multimedia streaming from the internet into their homes that they thought they had already purchased today.

  21. Don’t let the big iLEC’s fool you. What they want to do is not double billing it’s Quadruple. I work with a company that builds the backbone core for these companies.
    Here’s how the internet billing play’s out.
    1. The customers pay for they’re broadband.
    2. The Internet service providers pay for their broadband access into the internet. Big one’s like Yahoo and Google have multiple Backbone links with multiple vendors. ie. Google could have Multiple OC-3’s with ATT (Now SBC) and MCI (Now Verizon) and Sprint and others for reliability capacity.. etc. etc.. THEY DON’T RIDE THE NET FOR FREE. THEY PAY FOR EXPENSIVE LINKS.. which are worth ten’s of thousands if not 100k’s a month.
    …… With me so far.
    3. The IP Backbone is made of interconnections between the carriers. And they have certain fees that they charge each other depending on the bandwidth requirements etc. etc..
    So if we the customers pay (1) and the content providers pay (1 1) and the interconnections are payed (1 1 1) that’s already a triple pay system. If we have to pay again for the streams it’ll be in the end 4 tiers of payment that Verizon and the Bell’s will get.
    The Verizon issue is that they want to get payed for everysingle stream that goes through their network because they’ve not negotiated good terms or they didn’t price their services to match their real network expense. And again .. in the end they want to bill the end user for it. They want to be able to bill John Doe’s ISP in California for access in New York even though he already payed for access into California for a certain bandwidth. So on an so forth..
    One Important thing to remember it that SBC and Verizon with their purchases of ATT and MCI respectively now own a significant amount of the CORE BACKBONE. Verizon realizes that the prices that MCI was charging customers was not cost effective so now they want a new rule to make up for that. And who’s fault is it that MCI and ATT where selling cheap internet access??? Well of course.. the greedy BELL’s Verizon, SBC, BellSouth..
    In the end it’s always the end customer that get’s the bill one way or the other..
    Great Blog DAVID.. thanks for giving us a space to speak out.. Hope you don’t decide to bill us 😉

  22. Excellent, Ivan! Thank you for the insightful perspective from the inside!
    Oh, and the kind comments on this blog are always appreciated and I am thrilled to offer space for the truth to sing and I’m happy to pay quadruple for it all!
    😀

  24. That’s an excellent article, Jonathan, thanks! Here are a couple of quotes from the piece for those who haven’t registered on the NYTimes site but might want to after reading this:
    Slow broadband seems to be our cursed lot. Until we get an upgrade – or rather an upgrade to an upgrade – the only Americans who will enjoy truly fast and inexpensive service will be those who leave the country. In California, Comcast cable broadband provides top download speeds of 6 megabits a second for a little more than $50 a month. That falls well short, however, of Verizon’s 15-megabit fiber-based service offered on the East Coast at about the same price. But what about the 100-megabit service in Japan for $25 month? And better, much better: Stockholm’s one-gigabit service – that is, 1,000 megabits, or more than 1,300 times faster than Verizon’s entry-level DSL service – for less than 100 euros, or $120, a month.
    And then this:
    Vinton G. Cerf has as good a claim as anyone to being the “father” of the Internet – he was the co-author in the 1970’s of key protocols that define it. He worked for many years at MCI and joined Google last year. After hearing a description of Verizon’s contemplated offering of a premium delivery service for video, he was skeptical that Verizon and other broadband carriers, would adhere to promises to keep their networks open. Mr. Cerf said that back in the 1990’s, when the Web arrived, consumers could choose from among hundreds of dial-up service providers, without geographical constraints. But “as broadband developed,” he added, “the set of choices telescoped to zero, one or two,” and the lack of choice means that “we now have a serious issue on our hands.”

  25. Another comment I’d like to make is that most of the services that are or will be offered are being tailored to web usage. Meaning that there are such technologies as Multicasting for Video streaming which optimizes video over the web in addition to VoIP being optimized for WAN technologies so these constant bandwith applications that VZ and ATT is so worried about are optimized to use the network as is. Not to mention all the dark fiber that is still out there.
    I would be more worried about the content providers not haveing enough capacity into the web then I would be about the networks running into issues where they actually have to implement QOS and policying functionality in order to maintain performance.

  26. Wow! Your comment is packed with great information, Ivan!
    It will be a fascinating next five years in the winnowing out of true broadband web content.

  28. The gravy train is staring, Jonathan, and we’re the ones who will pay for the trip!
    It’s too bad this is happening just as broadband is really starting to take off.

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