Tag Archives: Telecom

The FCC’s Latest Net Neutrality Proposal: Pros, Cons, and Question Marks

By Corynne McSherry – The FCC’s statements have stressed three bright-line rules.

These are all good ideas.

If net neutrality means anything, it means no unfair discrimination based on application or service, and these rules seem aimed at just that.

But there’s at least one worrisome bit: the repeated reference to “lawful content.”

Does the FCC intend to suggest that throttling unlawful content is OK?

How are ISPs to determine what is and is not lawful without snooping on their users? Can an ISP block access to the Pirate Bay without fear of violating open internet rules?

Another good idea is requiring providers to be more transparent. We can’t hold broadband providers accountable if we don’t know what they’re up to. more> http://tinyurl.com/mowh7rl

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Financialization in telecom

The normal role for finance in the economy is to facilitate trade and production efficiently. Through these transactions profits are generated. However, due to dysfunctional factors, it can become more profitable to use financial methods to generate profits without trade or production. This abnormal role of finance in the economy is termed financialization.

Financialization is “an economic, social and moral disaster: net disinvestment, loss of shareholder value, crippled capacity to innovate, destruction of jobs, exploitation of workers, runaway executive compensation, windfall gains for activist insiders, rapidly increasing inequality and sustained economic stagnation.” [2]

Financialization in the telecom industry has become a destructive force. “AT&T and Verizon say 10Mbps is too fast for “broadband,” 4Mbps is enough” is the best indicator yet of the depth of financialization in telecom. Providing better services will severely limit telcos financial engineering activities. It’s ironic coming from the heirs to the legend built on the promise of providing “best possible service.”

It seems telcos no longer consider it their business to provide services their customers need, illustrated by these reports:

Now, contrast it with how other industries are operating, for example, utilities, auto, or computing. Here are some highlights:

Loss of direction by dominant communication providers has negative cascading effects on the industry. It has decimated a once thriving telecom technology supply chain. Nortel is no more [2, 3]. Alcatel-Lucent “has not earned any money 2006-2013” [2, 3]. Motorola has shrunk dramatically [2, 3].

With all these things going on, one would think that there would be an earnest effort to find out what is wrong. Instead, the preoccupation in the media and industry is with “net neutrality” confusion, which the FCC Chairman summed up: “the idea of net neutrality has been discussed for a decade with no lasting results.”

Internet Fast and Slow Lanes

By George Mattathil – How the retail connections operate is what is critical for most regular users of the Internet, except for those who may be operating remote servers in co-location centers. The retail connection is the regular Internet access, or broadband access.

Now the economics regarding retail and whole connections. The cost involved in the retail connection is on a per subscriber basis. But the cost of wholesale connections is distributed over all the potential users of the wholesale connection. So wholesale connection is very cost effective, while the retail connections are very cost sensitive. more>

Maybe AT&T should fully divest from the communication industry

AT&T, by vigorously pursuing innovation, developed a patent to help manage the people who are not using the networks properly. The invention is currently a patent application to better manage “bandwidth abuse” [2, 3].

This is interesting at many levels. First, you would expect inventions are to help improve the use of networks, and not limit its use. Or, maybe, AT&T has very good ideas as to what are the “good uses” of networks, and what are the “bad uses.” And their self-appointed role is to make sure everyone’s “good behavior” regarding networks.

However, for the Internet as the emerging media for communications, the real controlling issue is First Amendment Rights [2, 3, 4, 5]. If the United States is to adhere its founding principles, then it is clearly outside the purview of commercial interests of AT&T.

This also creates interesting dilemma. For example, if Verizon or Comcast were also interested in correcting their misbehaving users, will they be infringing on AT&T’s patent? (assuming the patent gets granted) And they would be required to pay royalty to AT&T?

AT&T in its current incarnation is clearly motivated by financial profits, as explained by CEO, Randall Stephenson. It is worth pointing out that AT&T became the legend and most admired company in its glory days not by pursuing profits, but high ideals. Theodore Vail, who architected its growth, developed a “strategy to achieve a single communication system offering the best possible service,” subordinating the maximization of profit. And there was a vigorous campaign about “One policy, one system, and universal service,” to help implement a unified, coherent national network policy. The result was, at its peak, AT&T employed more than 1 million people, admired by all, and affectionately called Ma Bell.

Now, AT&T’s network assets are not helpful for maximizing financial profits to match the “financial games” by the innovators in the financial industry. For example, to create and dominate a whole new market like the CDS (credit-default swap). Or, the clever trades by Blackstone.

There is a clear solution for the conundrum AT&T finds itself in. AT&T should fully divest from the communication industry, and concentrate wholeheartedly in financial operations. Then, they would be able to beat JP Morgan, Goldman Sachs et al. at their own game.

Net neutrality: issues and solution

As expected, FCC’s Net Neutrality rules have been struck down by the court. The reason is FCC’s position is self-contradictory.

2002 FCC rule classified broadband/Internet as an information service, and outside the purview of FCC regulations. But 2010 FCC Net Neutrality ruling, placed conditions on the Internet service providers. Verizon’s challenge brought out this contradiction, and the court invalidated FCC’s 2010 Net Neutrality rules.

What is the way forward? The solution is not restoring Net Neutrality, as some have suggested.

Net Neutrality is a legal construct imposed on how networks are to be designed. Legal principles have no place in the design of networks, or for that matter, in the design of any technology products. But legal rules may be applied in the manner in which the technology systems are operated, or used.

Designing network systems involve making tradeoffs for efficient resource allocation, functionality and preventing deadlocks. This inherently involves treating different sets of bits differently. Hence, prudent engineering practices cannot be reconciled with the legal principles embodied in the Net Neutrality.

However, imposing telephone-centric common carrier regulations are also not appropriate for future networks, if it is to evolve to its full potential. The reason is that the phone-centric regulations were a compromise: In exchange for a government sanctioned monopoly [2, 3], AT&T agreed to be regulated as a utility. Network industry is no longer a monopoly, but has many entrenched competitors. And one of the critical issues is limiting market power abuses.

One issue, probably the most important, absent from the extensive discussions is the technology constraints involved. One critical factor for the current impasse is the lingering aftereffect of the dot-com bubble. The dot-com bubble created and reinforced the idea that all future networks are to be IP (Internet Protocol) based – “All-IP.” However, there is no technology rationale for this conclusion.

There are four primary data types: voice, data, video, and connected devices. Each has its own unique characteristics and requirements. Developments in digital technology enable transmission of all these data types over packets (internet.) That does not mean that the optimum network for these data needs is internet.

The situation is similar to transportation. It is feasible to build flying cars that also operate in water. But nobody argues that flying cars should be the universal transportation solution.  We have car, bus, train, boat, ship, plane, spacecraft, etc.  Each of these are designed for different transportation needs and requirements.

If we design networks in a similar manner — design different networks optimized for different services targeted for different data types — the issues related to the Net Neutrality will get simplified, allowing simpler resolution. However, such an approach will provide only limited, if any, opportunities for political drama.