Neither #2 nor #3 have come to pass, except in very limited ways. So, since #1 seems to be on the verge of happening, here’s what I wrote about it. There is a fair amount of link rot, but the points are still sharp — and depressing to contemplate:
Scenario I: The Carriers Win
Be afraid. Be very afraid. —Kevin Werbach.
Are you ready to see the Net privatized from the bottom to the top? Are you ready to see the Net’s free and open marketplace sucked into a pit of pipes built and fitted by the phone and cable companies and run according to rules lobbied by the carrier and content industries?
Do you believe a free and open market should be “Your choice of walled garden” or “Your choice of silo”? That’s what the big carrier and content companies believe. That’s why they’re getting ready to fence off the frontiers.
And we’re not stopping it.
With the purchase and re-animation of AT&T‘s remains, the collection of former Baby Bells called SBC will become the largest communications company in the US–the new Ma Bell. Verizon, comprised of the old GTE plus MCI and the Baby Bells SBC didn’t grab, is the new Pa Bell. That’s one side of the battlefield, called The Regulatory Environment. Across the battlefield from Ma and Pa Bell are the cable and entertainment giants: Comcast, Cox, TimeWarner and so on. Covering the battle are the business and tech media, which love a good fight.
The problem is that all of these battling companies–plus the regulators–hate the Net.
Maybe hate is too strong of a word. The thing is, they’re hostile to it, because they don’t get it. Worse, they only get it in one very literal way. See, to the carriers and their regulators, the Net isn’t a world, a frontier, a marketplace or a commons. To them, the Net is a collection of pipes. Their goal is to beat the other pipe-owners. To do that, they want to sell access and charge for traffic.
There’s nothing wrong with being in the bandwidth business, of course. But some of these big boys want to go farther with it. They don’t see themselves as a public utility selling a pure base-level service, such as water or electricity (which is what they are, by the way, in respect to the Net). They see themselves as a source of many additional value-adds, inside the pipes. They see opportunities to sell solutions to industries that rely on the Net–especially their natural partner, the content industry.
They see a problem with freeloaders. On the tall end of the power curve, those ‘loaders are AOL, Google, Microsoft, Yahoo and other large sources of the container cargo we call “content”. Out on the long tail, the freeloaders are you and me. The big ‘loaders have been getting a free ride for too long and are going to need to pay. The Information Highway isn’t the freaking interstate. It’s a system of private roads that needs to start charging tolls. As for the small ‘loaders, it hardly matters that they’re a boundless source of invention, innovation, vitality and new business. To the carriers, we’re all still just “consumers”. And we always will be.
“Piracy” is a bigger issue to the cargo sources than to the carriers. To the carriers, “fighting piracy” is a service offering as well as a lever on regulators to give carriers more control of the pipes. “You want us to help you fight piracy?”, the transport companies say to the content companies. “Okay, let’s deal.” And everybody else’s freedoms–to invent, to innovate, to do business, to take advantage of free markets and to make free culture–get dealt away.
The carriers have been lobbying Congress for control of the Net since Bush the Elder was in office. Once they get what they want, they’ll put up the toll booths, the truck scales, the customs checkpoints–all in a fresh new regulatory environment that formalizes the container cargo business we call packet transport. This new environment will be built to benefit the carriers and nobody else. The “consumers”? Oh ya, sure: they’ll benefit too, by having “access” to all the good things that carriers ship them from content providers. Is there anything else? No.
Crocodile grins began to grow on the faces of carriers as soon as it became clear that everything we call “media” eventually would flow through their pipes. All that stuff we used to call TV, radio, newspapers and magazines will just be “content” moving through the transport layer of the pipe system they own and control. Think it’s a cool thing that TV channels are going away? So do the carriers. The future à lá carte business of media will depend on one medium alone: the Net. And the Net is going to be theirs.
The Net’s genie, which granted all those e-commerce wishes over the past ten years, won’t just get shoved back in the bottle. No, that genie will be piped and priced by the packet. The owners of those pipes have a duty to their stockholders to make the most of the privileged position they’ve been waiting to claim ever since they got blind-sided, back in the 80s and 90s. (For an excellent history of how the European PTTs got snookered by the Net and the Web, see Paul F. Kunz’ Bringing the World Wide Web to America.) They have assets to leverage, dammit, and now they can.
Does it matter that countless markets flourish in the wide spaces opened by agreements and protocols that thrive at the grace of carriage? Or that those markets are threatened by new limits, protections and costs imposed at the pipe level?
No.
Thus, the Era of Net Facilitation will end. The choke points are in the pipes, the permission is coming from the lawmakers and regulators, and the choking will be done. No more free rides, folks. Time to pay. It’s called creating scarcity and charging for it. The Information Age may be here, but the Industrial Age is hardly over. In fact, there is no sign it will ever end.
The carriers are going to lobby for the laws and regulations they need, and they’re going to do the deals they need to do. The new system will be theirs, not ours. The NEA principle–Nobody owns it, Everybody can use it, Anybody can improve it–so familiar to the Free Software and Open Source communities will prove to be a temporary ideal, a geek conceit. Code is not Law. Culture is not Free. From the Big Boys’ perspective, code and culture are stuff nobody cares about.
That’s us: Nobody.
The new carrier-based Net will work in the same asymmetrical few-to-many, top-down pyramidal way made familiar by TV, radio, newspapers, books, magazines and other Industrial Age media now being sucked into Information Age pipes. Movement still will go from producers to consumers, just like it always did. Meet the new boss, same as the old boss. Literally.
The deals that matter will be done between tops of pyramids. Hey, it’s easier to do business with the concentrated few than the dispersed many. The Long Tail can whip itself into a frenzy, but all the tech magazines and blogs in the world are no match for the tails and teeth of these old sharks. (Hey, Long Tailer, when’s the last time you treated your erected representatives to private movie screenings, drafted their legislation, ghosted their committee reports, made a blockbuster movie or rolled fiber across oceans?)
Google and Yahoo and Amazon and eBay and e-commerce and free software and open source and blogging and podcasting and all the rest of that idealistic junk have had their decade in the sun. Hell, throw in Apple and Microsoft, too. Who cares? Them? Doesn’t matter how big they are. They don’t matter. They’re late to the game.
We all know the content business got clobbered by this peer-to-peer crap. But the carriers took a bath by building out the Net’s piped infrastructure. They sank $billions by the dozen into fiber and copper and routers and trunks, waiting for the day when they’d be in a position to control the new beast fleshed on the skeleton that they built.
That Day Has Come.
It came earlier this month, when the November 7, 2005, issue of BusinessWeek hit the Web’s streets. In that issue are “Rewired and Ready for Combat” and “At SBC, It’s All About ‘Scale and Scope'”, which features an interview with Edward Whiteacre, CEO of SBC. Here’s the gist of it:
How concerned are you about Internet upstarts like Google (GOOG), MSN, Vonage, and others?
How do you think they’re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?
The Internet can’t be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! (YHOO) or Vonage or anybody to expect to use these pipes [for] free is nuts!
What’s your approach to regulation? Explain, for example, the difference between you and Verizon in how you are approaching regulatory approval for Telco TV [digital-TV service offered by telecoms].
The cable companies have an agreement with the cities: They pay a percentage of their revenue for a franchise right to broadcast TV. We have a franchise in every city we operate in based on providing telephone service.
Now, all of a sudden, without any additional payment, the cable companies are putting telephone communication down their pipes and we’re putting TV signals. If you want us to get a franchise agreement for TV, then let’s make the cable companies get a franchise for telephony.
If cable can put telephone down their existing franchise I should be able to put TV down my franchise. It’s kind of a “what’s fair is fair” deal. I think it’s just common sense.
What if the regulators don’t agree?
Then there won’t be any competition–there will be a cable-TV monopoly.
I know you’re a competitive person. Who are your biggest competitors?
Our big competition in the future is with the cable companies. Verizon’s going to be a player, and certainly I want to compete. And I want our shareowners to do better than anyone else.
If I were BusinessWeek, I’d ask:
What about the free and open marketplace that has grown on the Net itself? Do you have any interest in continuing to support that? Or in lobbying forms of deregulation that foster it? Or are you just in a holy war with the cable companies inside the same old regulatory environment you’ve known since forever?
I’d ask:
If you were to buy, say, Level 3, would you start to filter and restrict content at the transport level, to extract the profits you want, without regard for other market consequences? Would Cisco, builder of the great Firewall of China, help out?
I’d ask:
Which do you prefer: The regulatory environment where your business has adapted itself for more than a century, or a completely free and open marketplace like the rest of us enjoy sitting on top of your pipes?
Whiteacre’s answers, of course, would be less relevant than the obvious vector of his company’s intentions. For a summary of that, let’s return to Lauren Weinstein of People for Internet Responsibility:
Of course, the truth of the matter is that the telcos have been moving rapidly through massive consolidation–and a range of other tactics–to create an environment where “competition” will only be a pale reflection of what we were originally promised, with only a few gigantic players in control of all telecom resources and policies. Like the robot cop in Terminator 2 that reformed from blown-apart mercurial blobs of metal, the “golden age” of telecom competition is already giving way to empire.
Don’t blame BusinessWeek for not asking the important questions or for missing the Carriers vs. Net story. Biz pubs love to cover vendor sports. And there’s certainly a big story here.
Great distraction, vendor sports. While we’re busy watching phone and cable giants fight over a closed battlefield that ought to be open, we miss Net-hostile moves by other parties that result in other lost freedoms.
Take ICANN, for instance, where a new .com Registry Agreement allows Verisign to raise the rates for .com names by 7% annually, and to operate .com in perpetuity, and to “mak[e] commercial use of, or collect, traffic data regarding domain names or non-existent domain names”, and to reap other rewards for what few other than Verisign would agree is a good job. Bret Faucett summarizes the darkest shadow across the noir scenario we’ve already described:
The theme running through all of these is that ICANN and Verisign are treating the .COM registry as a private resource. It’s not. The root servers and TLD servers are public resources. We should treat them like that.
Bret has one of the most eloquent voices in the wilderness of clues the Big Boys would rather avoid. So does Susan Crawford, who was just, perhaps miraculously, named to the ICANN board.
For Bret, Susan and the rest of the restless natives of this new world, what matters most is Saving the Net–keeping it a free and open marketplace for everybody–while also making sure that carriers of all kinds can compete and succeed while providing much of the infrastructure on which that marketplace resides. That means we need to understand the Net as more than a bunch of pipes and business on the Net as more than transporting and selling “content”.
This isn’t a trivial issue. It’s a matter of life and death for the Net itself. How are we going to fight?
Read on.
Meanwhile the Net continues to cry out for a definition all can agree on. Toward that goal, I wrote this in The Intention Economy:
To simplify things a bit, look at the Net’s future as a battleground where any and only fight it out. On the side of any are the Net’s protocols. On the side of only are governments and businesses with interests in restricting and controlling access to the Net, and thwarting many purposes to which the Net might be put. This battle also happens inside our own heads, because we tend to view the Net both ways. Ironies abound.
For example, the Internet is often called a “network of networks,” yet the Net was designed to transcend the connections it employs, and is therefore not reducible to them. It is not comprised of wiring, and is not a “service,” even though it’s called one by ISPs.
So let’s look at the sides here. On the any side, “net-heads” (yes, they call themselves that) frame their understanding of the Net in terms of its protocols, and those protocols’ virtues. On the only side, “bell-heads” (yes, they call themselves that, too) frame their understanding of the Net in terms of wiring infrastructure and billing systems.
To net-heads, the Internet is a vast new virtual space with qualities such as neutrality and generativity. To maximize economic opportunity and vitality, those virtues need to be maximized—even if phone and cable TV businesses don’t wish to acknowledge or support those virtues.
To bell-heads, the Internet’s “network of networks” is a collection of mostly private properties, with which owners should be free to do what they please. So, if what pleases them is throttling certain kinds of data traffic to maximize QoS (Quality of Service), too bad. They are The Market, which will grow best if they act in their own economic self-interest. Hey, look at all the good they’ve done already. (Want dial-up again, anyone?) And look at the robust competition between cable and phone companies. Isn’t that producing enough economic benefits for everybody?
Since net-heads tend to make social arguments while bell-heads tend to make economic ones, net-heads get positioned on the left and bell-heads on the right. Between the two are boundless technical arguments that aren’t worth getting into here.
I’m a net-head, but one who wants both sides to recognize that the Net’s original design is encompassing and beneficial for economies and societies everywhere. That is, I believe the argument for the Net is the same as the one for gravity, sunlight, the periodic table and pine trees: that it is part of nature itself. What makes the Net different from all those other products of Nature is that humans made the Net for theselves.
The Net’s nature—its essential purpose—is to support everything that uses it, just as the essential purpose of a clock is to tell time. So, while the Net today relies on phone and cable connections, its support-everything purpose should not be subordinated to legacy phone and cable TV businesses. The Internet, in the neutral and generative form defined by its protocols, is a far larger and more interesting market environment than the one defined by the parochial and limited interests of phone and cable companies, both of which are desperately trying to hold on to their legacy businesses, and would be better served by embracing all the opportunities the Internet opens up, for everybody.
We’re going to evolve past those old businesses anyway. Phone and cable company engineers know that, and so do many of the business leaders in those companies, even as they fight to protect their legacy businesses at all costs.
As a pro-business guy, I sympathize with phone and cable companies, which are cursed by the need to maintain margins in existing business while building out infrastructures that obsolete those businesses (at least as we know them). These companies get little credit (especially from net-heads) for their genuine innovations, and for their ability to innovate more. We do need them, whether we like them or not…
So, then
The Net’s capacity to support limitless economic activity and growth will win in the long run because it will prove out in the very marketplaces it support. But there will be a great deal of resistance along the way, as the narrow interests of both Big Government and Big Business try to contain the Net’s potential within the scope of their own ambitions. Still the evolutionary direction of the Net is toward ambient connectivity. Whatever that looks and feels like, it won’t resemble either the phone system or cable TV. Rather it will look like everything, together.
That’s the long-term optimistic view. Meanwhile, there is much cause for pessimism in the short term.
In 
