According to Jim Cicconi, “Vice president of legislative affairs” at AT&T, the whole Internet will be completely full by 2010. If you believe Jim, 20 typical households in 2010 will generate more traffic than the entire Internet today.
Sorry to have to break this to you, Jim, but you are either a complete ignoramus or you assume everyone you are talking to is. There is no credible evidence that anything this VP is saying has any truth to it whatsoever. Doing some simple math should make this incredibly clear: the aggregate bandwidth of the main U.S internet backbone is measured in terabits per second. There is no conceivable way that 20 U.S. households could consume even a noticeable fraction of that bandwidth. Even countries like Japan where “low bitrate” home connectivity means 20 Mbps have no problems managing the capacity of their Internet backbone. And there is absolutely no likelihood that anything approaching 20 Mbps to the home will become “standard” in the U.S. within the next decade, let alone the next three years.
So, why would this supposed senior executive, whose title implies to me that his primary skill is lobbying government officials to do AT&T’s bidding, say such incredibly inaccurate things? Simple- money.
AT&T and the other major communications network providers have built backbone networks that are pretty robust: home users aren’t going to impact that. No, the real problem is at the edge of the network. The mythical “last mile”, from the service provider’s backbone to the local concentrator and finally to your home. For the past two decades, network service providers have been massively over-committing the bandwidth at the edge of their network to home users: that is, they are selling the same bandwidth promise over and over and over again. The 4 Mbps you pay for, as an example, might share a common 10 Mbps link with 100 other people in your neighborhood who are also paying for 4 Mbps. This works out okay when no one is actually using what they paid for. But if more than two or three of those 100 people start using the network bandwidth they think they deserve, then the service providers have a problem.
Let me repeat my example for clarity: 100 people are paying for 4 Mbps of bandwidth. To increase profits, the service providers are pushing all 100 of those people through a single 10 Mbps link. That 10 Mbps link is overcommitted by approximately 40 times: if it were properly sized, it would be 400 Mbps to accommodate all of the capacity that the service provider had actually sold. Note that the websites and other Internet services home users connect to are *also* paying for connectivity to the Internet. Google, Apple, and Youtube spend millions of dollars a month of bandwidth each- but they get the bandwidth that they pay for, and that is written into their contracts. Not so for the home users.
To correct the massive overcommitment problem at the “last mile” to home users would cost tens of billions of dollars. The Telcos could afford the necessary upgrades, but that would cut into their profit margins for many quarters. For years they have been selling a pig in a poke: raking in profits based on the fact that they are selling something they can not conceivably deliver on the infrastructure they have deployed. Now more and more people are actually starting to use some significant portion (I.E.: more than 10%) of the bandwidth they have already paid for. And this causes a problem for the service provider’s business model.
Naturally, the service providers would like to make more profit, not less. So what they want to do is “shape” or throttle traffic, and charge both end users (I.E.: you) and service providers (I.E.: Google, Microsoft, Apple) extra to make sure you actually get the bandwidth you are already paying for. It is much, much cheaper to lobby the government to make sure they have the ability to get paid at least three times for every bit that gets pushed through their networks than it would be to actually upgrade the network appropriately.
What is at risk here isn’t the Internet. What is really at risk is the defective business model deployed by the major service providers themselves. They can’t see a way to keep on selling bandwidth the way they have (I.E.: massively overcommitting bandwidth to the home) without reducing their profits, so they are looking for legislative support to grant them a new way to charge extra for what people have already paid for.
When you hear about Network Neutrality, and you read about the big service providers like AT&T being against the concept… this is what it is all about. AT&T and their friends want the ability to charge you again for the bandwidth you have already paid for, all because they sold you a lie to begin with and can’t figure out now how to deliver what they promised without cutting into their profit margin. And since their initial lobbying efforts against Network Neutrality weren’t very well received, they are now starting to preach that the Internet is facing imminent collapse unless they are granted what they want.
Whenever I read about these tactics on the part of the big network providers, I can’t help but imagine a big, greasy mafia guy threatening some poor family in their home… “dats a nice movie you iz downloadin’ dere. Would be a shame if sumthin were to happin to dat movie, ya know what I mean? Bits could get lost, mabbe the connection drop: things like dat, they just happen, ya know? I cud look out fer dat, ya know, keep yer bandwidth safe. Fer a fee…”
I don’t know what the hell they teach people in business management schools but they sure don’t think like normal people… it’s like they are programmed with the Sierra club’s “limits to growth” report hardwired in.
Microsoft, telco’s, the record industry, traditional airlines … they are all concerned to the effective exclusion of all else on controlling “market share”, never growing the market or building new ones.
And yet, low cost airlines, the home computer industry when it started, cell phones when they started, Internet service … all these when they had their great success and growth was when they didn’t worry much about market share, and instead developed and provided new services to new customers.
Remember Bill Gate’s “no one will ever need more than 640k” comment? If you build it, someone will figure out a way to use it … and you can charge them for using it.
Sooner or later, if you turn your back on the new and just try to monopolize the old as a business you will have signed your death warrant. It may take 50 years like it did for the “recording industry” but sooner or later something new will come along and blow you out of the water.
Anyone remember what AT&T stands for? How much of their business is sending telegraphs anymore? Can you imagine that they would be around today if 100 years ago some MBA decided they should concentrate on market share of the telegraph market and ignore that Telephone thing?
Indeed, in some places the same tactics were tried to stifle the growth of phones… we all can see how well that worked.
I remember not all that long ago ( 35 years ) when none of my relatives in england actually had a phone … they couldn’t afford the license fees. Nor did they have cable TV till recently. They had TV’s they had to pay a fee to own and post office trucks drove down the streets with detector equipment looking for illegal sets. It was all rather quaint and backward. Cell phone growth and internet penetration in Canada has already stalled. If North American companies really want to be as quaint and backwards as the UK was in 30 years, and be swept away when the chinese, indian and european multinationals of the day swoop in to modernize us, as our companies did to the UK, just keep on ignoring innovation and focus on market share. Because as every MBA seems to know, the most important thing is total control of an obsolete and extinct market.
I’m not sure whether to agree or disagree with your point, Chris. On the one hand, you are absolutely right- the “protectionist” market share thinking is obvious in AT&T’s (and other telco/service providers) thinking.
On the other hand, I’ve ranted in the past about the “if it isn’t growing, it’s dead” thinking that exists throughout the market. Profit isn’t enough- profit has to be growing each year: 10% this year, 12% next, 15% the year after that. If it isn’t, you lay people off… not because your company is losing money, just because the rate at which your profit is growing has stalled. The corporate executives aren’t entirely to blame for this- the stock market, right down to ma and pa, all exist in a culture of greed that defies reason. I’m part of it, and it disgusts me: the only thing in nature that grows without bounds is cancer: and that is an apt and distressing analogy for most corporate management plans.
If I point out to one of these “greed is good” sorts that extending growth perpetually into the future is insanity, their response is: only if you assume we can’t create new markets. And there lies the root of my uncertainty regarding agreeing or disagreeing with you, Chris: if I agree with you, I’m saying that the people who use the “growth can be perpetual so long as we keep finding new things to sell the plebes” argument must be right. From there, it is a small step to losing my entire “it makes no sense to lay people off for missing profit *growth* targets” argument.
Mind you… if you asked AT&T and the other anti-net neutrality lobbyists, they’d say that what they are trying to do is exactly what you are saying they aren’t doing: creating a new service or product. The new service or product is “enhanced service specific data rate delivery guarantees”. For an extra fee, they’ll make sure your traffic gets to and from Google, iTunes, or Youtube on a “priority” basis, without being shunted onto low speed/high latency links. They can charge you service by service: one fee for iTunes, another for Youtube, and yet another for your favorite computer game. And at the same time, they can likewise be charging a fee to iTunes, Youtube, and your game provider. This is a service that didn’t exist before, and all they need to do in order to start selling it is be given the right to throttle all of your traffic to start with, so they can then parcel out the “improved” extra fee service for you.
It isn’t a market share thing at all: they are creating a brand new product, and all they need is the ability to break the existing product you are already paying for so they can charge you extra to make it work again. That way they won’t have to spend any of their money on actually building any new infrastructure- it is brilliant!
Clearly at some level the capacity for growth is finite, if for no other reason than we live in a finite universe. On a more practical level there are only so many people, who can only make and consume so much, and you can’t add something without removing something else.
Left to itself, this is a natural process of renewal… there are thousands of network architects today when there were none 100 years ago. On the other hand, there are a lot fewer steam train engineers. 😉
Most people do not, I think have a problem with this, they only want the bumps to be smoothed out so the transition is as smooth and painless as possible.
Such is the nature of real “growth” – natural, economic or personal, it is as much a matter of transformation as addition.
But of course the AT&T goon and his ilk are not speaking of real growth, or real transformation. They are much like the agri businesses, where they quite literally are killing your crop so they can sell you a new one and calling it a “new” market.
The truly ironic thing is that people would pay for a truly new product. As I mentioned with my cell phone and the cell companies unwillingness to let it be used as a modem: I would pay good money for that. Instead, the cell company keeps trying to force me to pay a great deal of money for things I have no interest in, and therefore do not buy. Instead the cell providers end up spending more and more trying to capture a smaller and smaller market because they won’t sell me something they have and that I want to buy.
It is almost a type of pathological hyper competitiveness, where a couple of bulls gore themselves to death fighting over a mate, and never actually breed. It is bad for the companies in the long run, though it might possibly be good for the individual executives and their egos in the short term.