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22 August 2006 Blog Home : August 2006 : Permalink

Verizon DSL - Passing on costs and Net Neutrality

There are, I believe, some good reasons why, in theory, Net Neutrality should be opposed and a number of bad reasons to support it. The former include the idea that a company should have the freedom to do what it wants with its property and offer whatever service it feels like. The problem is that these theoretical good reasons for opposing mandated Net Neutrality tend to get undermined by the acts of the weasels who stand to benefit from NN - the inumbent operators.

A case in point is Verizon DSL, which Business Week/AP reports is planning to introduce a surcharge to its subscribers bills which "coincidentally" almost completely replaces a soon to be phased out FCC charge.

AUG. 21 5:51 P.M. ET Verizon Communications Inc. is imposing a new surcharge on high-speed Internet service just as customers were set to receive lower bills thanks to a decision last year to deregulate the service.

The surcharge will initially be $1.20 a month for customers with service up to 768 kilobits per second and $2.70 per month for customers with faster DSL service, according to the company.

The fee comes as a government fee on DSL customers for the Universal Service Fund is being phased out. For customers with service up to 768 kpbs, the fee was $1.25 a month, and for customers with service of up to 3 Mbps, the fee was $2.83 a month, according to Verizon. Customers will no longer pay such charges effective Aug. 14, New York-based Verizon said.

The Verizon spokesweasel claims that this is due to "new costs that we've developed over the past year as we've been developing and delivering this standalone DSL service." but the timing of this discovery of new costs seems awfully suspicious. It seems to me, as an independant unbiased and unaffected third party, that a couple of good names for this surcharge would be "chutzpah" or "monopolist". The latter because the reason why Verizon is able to get away with this surcharge is that it faces little or no competition for residential broadband.

Verizon is the same company that Jeff Chester reports is plugging an optimized game network:

“The service is optimized for the Verizon fiber-optic broadband network, and runs fastest when players have subscribed with Verizon

Which brings me back to Net Neutrality. If residential customers had access to a number of broadband suppliers then net neutrality would have no purpose because one could shop around for the combination of features/price/performance that met one's needs and wallet. So that people who liked gaming could sign up to Verizon and get good gaming performance while those of us who wanted to do something else could sign up elsewhere. Unfortunately the reality is that most residential consumers have a choce of at most two broadband operators: their incumbent telco and their incumbent cableco, and these operators tend to offer a remarkably similar price for service.

Public Knowledge takes a look at the current "competitive" broadband climate. The piece points to a new study by Kagan research that suggests the existing duopoly system has allowed incumbent providers to avoid significant price-reductions (other than introductory offers) and other adaptation you'd see in a truly competitive environment. "Though the battle for broadband access subscribers is intense, there’s no screaming price war between cable TV and telcos, and Kagan Research doesn’t expect one in the foreseeable future," the report proclaims. It notes the average price for cable modem service was $39.45 per month, and $35.38 for DSL.

In these circumstances Mike Godwin's Taxi metaphor is not inappropriate. Mike unfortunately specifically mentioned the highly regulated NYC taxi model and thus got dinged, but the fact remains that in most of the world, taxi prices are regulated and that people prefer that. Here on the Côte d'Azur, for example, the Nice taxi drivers have an appaling reputation for "accidentally" switching off the meter and ripping off the punter and the unlicensed London mincabs have also suffered from accusations of price gouging. The core reason why taxis are regulated is much the same as why the net is regulated: the consumer is unable to make an informed choice much of the time. In the Taxi case, where the majority of users are not locals, it would be extremely difficult if not impossible for a would-be taxi user to research which taxi he or she wants for a particular journey and thus all the claims that prices would automatically fall are less than convincing [note that not all taxi regulation is good. the NYC case is not good basically because there is an artificially limited supply of taxis]. In the net neutrality case the problem is more to do with the cost of laying cables, it doesn't make sense for a house to have multiple separate copper / fiber lines and only use one of them.

This, BTW is why I disagree with some of Richard Bennett's criticism of Jeff Chester's Nation article. Jeff approving cites the idea of Robert Cringely/Bob Frankston that consumers should be able to own their own last mile. Bennett seems to think that the proposal is that the government should own the last mile, it is possible that Chester thinks this is the case but Cringely certainly does not.

The obvious answer is for regular folks like you and me to own our own last mile Internet connection. This idea, which Frankston supports, is well presented by Bill St. Arnaud in a presentation you'll find among this week's links. (Bill is senior director of advanced networks with CANARIE, which is responsible for the coordination and implementation of Canada's next generation optical Internet initiative.) The idea is simple: run Fiber To The Home (FTTH) and pay for it as a community of customers -- a cooperative. The cost per fiber drop, according to Bill's estimate, is $1,000-$1,500 if 40 percent of homes participate. Using the higher $1,500 figure, the cost to finance the system over 10 years at today's prime rate would be $17.42 per month.

What we'd get for our $17.42 per month is a gigabit-capable circuit with no bits inside - just a really fast connection to some local point of presence where you could connect to ANY ISP wanting to operate in your city.

This is a classic case of a libertarian small government approach and it ought to make sense to "conservatives" who are also believers in small government. No one is forced to pay for a service they don't want - it is a communtiy effort driven by the members of the community that want it, but its cost goes down per user if more users sign up so there is an incentive for neighbourhoods to sign up en masse. And there is, in fact, no reason why fiber should be used everywhere. In neighbourhoods where there is sparse demand the few users could form a cooperative to deploy a WiMAX base station or some other technology.

If you wish to oppose Net Neutrality then you also need to oppose the current incumbent monopolists becuase, as I said last time I visited this subject, the incumbents are the best argument for it.

I despise l'Escroc and Vile Pin