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Subject: [IP] a good discussion more on worth reading the economic arguments djf The High-Speed Money Line]]

  • From: David Farber <dave@farber.net>
  • To: ip@v2.listbox.com
  • Date: Mon, 06 Mar 2006 12:40:55 -0500 (EST)

---------------------------- Original Message ----------------------------
Subject: RE: [IP] more on worth reading the economic arguments djf The
High-Speed Money Line]
From:    &quot;Bob Frankston&quot; <Bob2-19-0501@bobf.frankston.com>
Date:    Mon, March 6, 2006 11:44 am
To:      dave@farber.net
         ip@v2.listbox.com
--------------------------------------------------------------------------

As I keep pointing out -- there is indeed a viable alternative of a real
marketplace not a fake one. Today's system is a fake because it depends on
capturing the value of the application - communications - in the transport
and that is no longer possible because with the Internet the value is
created OUTSIDE the network.

One example of the collateral damage caused by today's approach is the
utter lack of simple wireless connectivity. Another is that we have
redundant capital intensive bit paths whose only purpose is to contain bits
within billing paths.

In practice the Telcos are about nothing at all other than creating
billable events. Isn't it strange that as the costs of connectivity were
going down your phone bill was increasing - at least until VoIP forced the
issue.

We have an alternative model in the road systems - the roads themselves are
funded as infrastructure because the value from having the road system as a
whole, not the roads in isolation. You don't put a use meter on each
driveway.

Tolls, fuel taxes, fees on trucks etc are ways of generating money but they
are indirect. Local builders add capacity; communities add capacity and
large entities create interstate roads (and the Interstate DEFENSE Highway
System).

They don't create artificial scarcity just to increase toll revenues - at
least not so blatantly. The analogy isn't perfect as roads have limited
capacity and create other problems - connectivity scales far better.

I refer to today's carrier networks as trollways
(http://www.frankston.com/?name=Trollways) because the model is inverted -
the purpose of the road is to pass as many trollbooths as possible. We keep
the backbone unlit to assure artificial scarcity. Worse, by trying to force
us within their service model we lose the opportunity to create new value
and can only choose among the services that fill their coffers - it's hard
to come up with a more effective way to minimize the value of the networks.


We charge for local broadband as if all the calls were going out across the
country and thus assuring artificially limited local capacity (though
gigabits are one-way TV). The model has all the wrong incentives. What's
worse is that it's all artificial and totally unnecessary. It's a classic
case of a prison of our own devise - a creation of the Regulatorium and
what I referred to as 1930's state socialism. We are still paying the price
for the Great Depression.

A model in which the infrastructure is paid for as infrastructure -
privately, locally, nationally and internationally can create a true
marketplace in which the incentives are aligned.

Instead of having the strange phenomenon of carriers spending billions and
then arguing that they deserve to be paid we'd have them bidding on
contracts to install and/or maintain connectivity to a marketplace that is
buying capacity and making it available so value can be created without
having to be captured within the network and thus taken out of the economy.

With no need to trap the bits within billing paths we are free to let the
capacity leak out so as to provide complete wireless coverage without
having to channel all the traffic into the straightjacket of 3G services
(http://www.frankston.com/?name=AssuringScarcity).

We also would avoid the scare stories like the NYT A1 &quot;Hey Neighbor, Stop
Piggybacking on My Wireless&quot;. It would be as if you were yelling at someone
for stealing your porch light by reading a street sign. The community
wouldn't have to limit an individual's connection speed to assure scarcity
of valuable bits.

I keep trying to figure out how to explain this to a wide audience -
writing a response to this list is far easier because I can assume at least
some level of common understanding. Trying to explain that phone companies
no longer exist is hard but if you think about it the legacy landline
services are akin to continuing to rent out those old black phones after
divestiture (but worse sine the PSTN users are hostages not just rent
payers). Today's Telcos are trying to become anything but a Telco - they
want to become CableCos, CellCos or something else. Yet those other
entities still only make sense in the framing of the Regulatorium. The step
they cannot take is to become contractors for implementing commodity
connectivity - that's the kind of transition that a true marketplace
handles smoothly by birthing new entities while retiring those that are no
longer viable.

Change may not be easy but is necessary and, in this case, liberating. It
may be hard to imagine a real marketplace but it will soon be hard to
remember why and how we tolerated the Regulatorium.



-----Original Message-----
From: David Farber [mailto:dave@farber.net]
Sent: Monday, March 06, 2006 10:31
To: ip@v2.listbox.com
Subject: [IP] more on worth reading the economic arguments djf The
High-Speed Money Line]







-------- Original Message --------

Subject:    RE: [IP] worth reading the economic arguments djf The

High-Speed Money Line

Date:       Mon, 06 Mar 2006 09:50:40 -0500

From:       Patrick Ross <Pross@pff.org>

To:   dave@farber.net, ip@v2.listbox.com







Interesting article. As to the economic arguments, however, I'm baffled

by this one:



&quot;There's no limit to what they could charge for this high-speed lane and

they could make the slow-speed lane as slow as they want,&quot; said Rich

Tehrani, president of Technology Marketing Corporation, a media company

that promotes Internet phone service. &quot;There's no way to know today what

the prices might be, but it could be anything, and that's the fear.&quot;



No limit? The market doesn't apply here? Then if I'm AT&T I'm charging

$1 billion for every 0.001% of my pipe Google uses, and applying the

same scale to Yahoo!, Amazon, et al. Man, analysts have warned against

buying Bell stocks because they have high fixed costs, a dwindling core

customer base and are spending billions to enter new competitive

businesses, but with &quot;no limit to what they could charge&quot; they're

sitting pretty now!



Patrick Ross

Senior Fellow and VP-Communications & External Affairs

The Progress & Freedom Foundation

1444 Eye Street NW, Suite 500

Washington, DC  20005

202.969.2945 direct

www.pff.org

ipcentral.info





-----Original Message-----

From: David Farber [mailto:dave@farber.net]

Sent: Monday, March 06, 2006 9:25 AM

To: ip@v2.listbox.com

Subject: [IP] worth reading the economic arguments djf The High-Speed

Money Line







Begin forwarded message:



From: Monty Solomon <monty@roscom.com>

Date: March 6, 2006 1:05:01 AM EST

To: undisclosed-recipient:;

Subject: The High-Speed Money Line





The High-Speed Money Line



By KEN BELSON

The New York Times

March 6, 2006



Are consumers going to start having to spend a lot more to surf the Web?



Phone and cable companies have stoked those fears recently by

floating plans that would have Amazon, Yahoo and other Web sites

paying new fees to ensure that their content will be delivered to

customers faster.



This possibility has raised the prospect that consumers may end up

having to pay twice for access to the Internet - once to the phone or

cable company that sells them a dial-up or broadband line, and again

to Internet companies that pass along new charges for fast access to

content from their sites.



Late last year, the Bells proposed to share the burden of upgrading

their networks - particularly as big video files, which take up a lot

of bandwidth on the networks, become more common - with the companies

sending out that data. The plan quickly drew fire from consumer

groups, technology companies and lawmakers eager to preserve open

access to the Internet and fearful that the Bell companies have too

much power.



Those worries were highlighted yesterday when AT&T announced plans to

buy BellSouth for $67 billion, a merger that would create a

telecommunications giant with $130 billion in sales and 70 million

local phone customers in 22 states.



If a plan like the one the Bells are proposing were to come into

effect, consumer prices might not increase immediately, consumer

advocates, industry analysts and telecommunications executives say.

But one way or another, consumers are likely to shell out more in the

future for Web content.



The reason, they say, is simple. As Internet traffic booms and

competition intensifies, the phone and cable companies are spending

billions of dollars to expand their networks - and they want someone

to help them foot the bill.



...



http://www.nytimes.com/2006/03/06/technology/06broadband.html?

ex=1299301200&en=8d3878a2b1fef9be&ei=5088







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As I keep pointing out -- there is indeed a viable alternative of a real marketplace not a fake one. Today&#8217;s system is a fake because it depends on capturing the value of the application &#8211; communications &#8211; in the transport and that is no longer possible because with the Internet the value is created OUTSIDE the network.

One example of the collateral damage caused by today&#8217;s approach is the utter lack of simple wireless connectivity. Another is that we have redundant capital intensive bit paths whose only purpose is to contain bits within billing paths.

In practice the Telcos are about nothing at all other than creating billable events. Isn&#8217;t it strange that as the costs of connectivity were going down your phone bill was increasing &#8211; at least until VoIP forced the issue.

We have an alternative model in the road systems &#8211; the roads themselves are funded as infrastructure because the value from having the road system as a whole, not the roads in isolation. You don&#8217;t put a use meter on each driveway.

Tolls, fuel taxes, fees on trucks etc are ways of generating money but they are indirect. Local builders add capacity; communities add capacity and large entities create interstate roads (and the Interstate DEFENSE Highway System).

They don&#8217;t create artificial scarcity just to increase toll revenues &#8211; at least not so blatantly. The analogy isn&#8217;t perfect as roads have limited capacity and create other problems &#8211; connectivity scales far better.

I refer to today&#8217;s carrier networks as trollways (http://www.frankston.com/?name=Trollways) because the model is inverted &#8211; the purpose of the road is to pass as many trollbooths as possible. We keep the backbone unlit to assure artificial scarcity. Worse, by trying to force us within their service model we lose the opportunity to create new value and can only choose among the services that fill their coffers &#8211; it&#8217;s hard to come up with a more effective way to minimize the value of the networks.

We charge for local broadband as if all the calls were going out across the country and thus assuring artificially limited local capacity (though gigabits are one-way TV). The model has all the wrong incentives. What&#8217;s worse is that it&#8217;s all artificial and totally unnecessary. It&#8217;s a classic case of a prison of our own devise &#8211; a creation of the Regulatorium and what I referred to as 1930&#8217;s state socialism. We are still paying the price for the Great Depression.

A model in which the infrastructure is paid for as infrastructure &#8211; privately, locally, nationally and internationally can create a true marketplace in which the incentives are aligned.

Instead of having the strange phenomenon of carriers spending billions and then arguing that they deserve to be paid we&#8217;d have them bidding on contracts to install and/or maintain connectivity to a marketplace that is buying capacity and making it available so value can be created without having to be captured within the network and thus taken out of the economy.

With no need to trap the bits within billing paths we are free to let the capacity leak out so as to provide complete wireless coverage without having to channel all the traffic into the straightjacket of 3G services (http://www.frankston.com/?name=AssuringScarcity).

We also would avoid the scare stories like the NYT A1 &#8220;Hey Neighbor, Stop Piggybacking on My Wireless&#8221;. It would be as if you were yelling at someone for stealing your porch light by reading a street sign. The community wouldn&#8217;t have to limit an individual&#8217;s connection speed to assure scarcity of valuable bits.

I keep trying to figure out how to explain this to a wide audience &#8211; writing a response to this list is far easier because I can assume at least some level of common understanding. Trying to explain that phone companies no longer exist is hard but if you think about it the legacy landline services are akin to continuing to rent out those old black phones after divestiture (but worse sine the PSTN users are hostages not just rent payers). Today&#8217;s Telcos are trying to become anything but a Telco &#8211; they want to become CableCos, CellCos or something else. Yet those other entities still only make sense in the framing of the Regulatorium. The step they cannot take is to become contractors for implementing commodity connectivity &#8211; that&#8217;s the kind of transition that a true marketplace handles smoothly by birthing new entities while retiring those that are no longer viable.

Change may not be easy but is necessary and, in this case, liberating. It may be hard to imagine a real marketplace but it will soon be hard to remember why and how we tolerated the Regulatorium.

&nbsp;

-----Original Message-----
From: David Farber [mailto:dave@farber.net]
Sent: Monday, March 06, 2006 10:31
To: ip@v2.listbox.com
Subject: [IP] more on worth reading the economic arguments djf The High-Speed Money Line]

&nbsp;

&nbsp;

&nbsp;

-------- Original Message --------

Subject: &nbsp;&nbsp; RE: [IP] worth reading the economic arguments djf The

High-Speed Money Line

Date: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mon, 06 Mar 2006 09:50:40 -0500

From: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Patrick Ross <Pross@pff.org>

To: &nbsp; dave@farber.net, ip@v2.listbox.com

&nbsp;

&nbsp;

&nbsp;

Interesting article. As to the economic arguments, however, I'm baffled

by this one:

&nbsp;

&quot;There's no limit to what they could charge for this high-speed lane and

they could make the slow-speed lane as slow as they want,&quot; said Rich

Tehrani, president of Technology Marketing Corporation, a media company

that promotes Internet phone service. &quot;There's no way to know today what

the prices might be, but it could be anything, and that's the fear.&quot;

&nbsp;

No limit? The market doesn't apply here? Then if I'm AT&T I'm charging

$1 billion for every 0.001% of my pipe Google uses, and applying the

same scale to Yahoo!, Amazon, et al. Man, analysts have warned against

buying Bell stocks because they have high fixed costs, a dwindling core

customer base and are spending billions to enter new competitive

businesses, but with &quot;no limit to what they could charge&quot; they're

sitting pretty now!

&nbsp;

Patrick Ross

Senior Fellow and VP-Communications & External Affairs

The Progress & Freedom Foundation

1444 Eye Street NW, Suite 500

Washington, DC&nbsp; 20005

202.969.2945 direct

www.pff.org

ipcentral.info

&nbsp;

&nbsp;

-----Original Message-----

From: David Farber [mailto:dave@farber.net]

Sent: Monday, March 06, 2006 9:25 AM

To: ip@v2.listbox.com

Subject: [IP] worth reading the economic arguments djf The High-Speed

Money Line

&nbsp;

&nbsp;

&nbsp;

Begin forwarded message:

&nbsp;

From: Monty Solomon <monty@roscom.com>

Date: March 6, 2006 1:05:01 AM EST

To: undisclosed-recipient:;

Subject: The High-Speed Money Line

&nbsp;

&nbsp;

The High-Speed Money Line

&nbsp;

By KEN BELSON

The New York Times

March 6, 2006

&nbsp;

Are consumers going to start having to spend a lot more to surf the Web?

&nbsp;

Phone and cable companies have stoked those fears recently by

floating plans that would have Amazon, Yahoo and other Web sites

paying new fees to ensure that their content will be delivered to

customers faster.

&nbsp;

This possibility has raised the prospect that consumers may end up

having to pay twice for access to the Internet - once to the phone or

cable company that sells them a dial-up or broadband line, and again

to Internet companies that pass along new charges for fast access to

content from their sites.

&nbsp;

Late last year, the Bells proposed to share the burden of upgrading

their networks - particularly as big video files, which take up a lot

of bandwidth on the networks, become more common - with the companies

sending out that data. The plan quickly drew fire from consumer

groups, technology companies and lawmakers eager to preserve open

access to the Internet and fearful that the Bell companies have too

much power.

&nbsp;

Those worries were highlighted yesterday when AT&T announced plans to

buy BellSouth for $67 billion, a merger that would create a

telecommunications giant with $130 billion in sales and 70 million

local phone customers in 22 states.

&nbsp;

If a plan like the one the Bells are proposing were to come into

effect, consumer prices might not increase immediately, consumer

advocates, industry analysts and telecommunications executives say.

But one way or another, consumers are likely to shell out more in the

future for Web content.

&nbsp;

The reason, they say, is simple. As Internet traffic booms and

competition intensifies, the phone and cable companies are spending

billions of dollars to expand their networks - and they want someone

to help them foot the bill.

&nbsp;

...

&nbsp;

http://www.nytimes.com/2006/03/06/technology/06broadband.html?

ex=1299301200&en=8d3878a2b1fef9be&ei=5088

&nbsp;

&nbsp;

&nbsp;

-------------------------------------

You are subscribed as pross@pff.org

To manage your subscription, go to

&nbsp; http://v2.listbox.com/member/?listname=ip

&nbsp;

Archives at:

http://www.interesting-people.org/archives/interesting-people/

&nbsp;

&nbsp;

-------------------------------------

You are subscribed as BobIP@Bobf.Frankston.com

To manage your subscription, go to

&nbsp; http://v2.listbox.com/member/?listname=ip

&nbsp;

Archives at: http://www.interesting-people.org/archives/interesting-people/


You are subscribed as interesting-people@lists.elistx.com To manage your subscription, go to http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/


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