JOHO - July 7, 2007

This is also posted at its own url: www.hyperorg.com/misc/delamination.html

Once upon a time, when this nation's telecommunications infrastructure was owned by a monopolistic industry, all the phones were black, long distance was incredibly expensive, and if you had a great idea for an innovative service using the telephone system, you were free to write a letter to the telephone company and suggest they look into it. About once a decade, the telephone company would introduce something new — touch tone phones, 800 numbers, and, yes, the pink Princess Phone for the ladies.

So, we know what a monopolistic, centralized communications system is like. And we know what it took to open it up even a little. Issuing regulations to make it more open this way or that didn't work because the telephone company was structured in every dimension — from business model to technical infrastructure to how its billing systems worked — to fight openness, competitiveness, and distributed, local control.

The way the old phone system was is the way the current suppliers of Internet connectivity are. That's not too surprising since the old phone companies are Internet carriers.

And we also know what happened once we broke up the old monopoly. Long distance rates dropped. New businesses emerged. Competition spurred innovations in services and in the equipment we could attach. The Princess Phone was dethroned as the best the industry could do.

The problem is the same and so is the solution. We should do to the carriers of Internet signals what we did to the carriers of telephone signals. Bust 'em up so that the companies that connect us to the Internet don't also sell us services over the Internet. Providing connection and providing content and services can and should be profitable businesses. They just shouldn't be the same business...just as you wouldn't want your local school owned by The Acme Textbook Company, or your safety inspectors supplied by The Acme Burglar Alarm Company. It's just too hard to resist your own brand.

No, we have to bust up the carrier cartel. Structural separation. Divestiture. It's the only way to get the Internet that our economy and our democracy need.

Who could blame the incumbent carriers? They came into this with a business model that served them well for decades. And changing their business model isn't like changing their minds. Their business model is a vast technical infrastructure that cost of billions of dollars to build. It's an organizational structure that brings a comfortable living to tens of thousands of people ... and outrageous livings to a handful of senior executives. It's a political structure staffed by hundreds of lobbyists who have become bosom buddies with People of Influence. The business model is embodied in skyscrapers financed by its own profits.

So, who can blame the incumbents for extending their old business model into the new world of the Internet?

The model rests on bedrock premises:

Provide the connection, but make the real money selling services that use that connection. The telephone companies make money by selling premium services, cable companies make money by selling videos on demand, and cellphone companies are starting to make money by selling video downloads.

Lower the risk by routing around the market. It costs money to hook up houses with telephone or cable wires. So, lower the risk by getting government to grant you monopoly status.

Go where the money is. The households most willing and able to pay for services are the affluent ones. Hook them up first. In fact, why bother connecting the lower income houses? They only buy basic services and they actually look at their bills before paying them.

The business model works. In fact, it's sweet.

The problem is, this business model requires the carriers to work against the public interest.

Our economy prospers when the Internet is equally open to every good idea. The carriers would rather use their "natural" advantages to help their services compete against services offered by others.

Our democracy flourishes when all ideas can get an equal hearing. The carriers would rather double dip, charging you to connect to the Net, and charging the popular sites for conecting them to their users. The result: Big, rich sites will pay to work better than those offering ideas and services out of the mainstream. Big voices will pay to sound better than our voices.

Our culture is enriched when anyone can create a song, a movie, a book, or manifesto. The carriers would rather sell us the same old works of the professionals who have brought us blockbusters and top 40 albums. So, the carriers' business model requires them to provide more bandwidth for downloading than for uploading...because, to them, we are passive consumers, not creators and active participants. The carriers' business model calls on them to "monetize" every drop of culture they can find. They thus always favor the rights of the content creators — especially when they're big movie studios or record companies — over the right of citizens to use those works and to base new works on them. That's why AT&T is willing to trample over Fair Use, censoring material it - not the courts - considers to be in violation by copyright. [source]

Unfortunately for the carriers, the Internet connection they provide is a bad fit with their business model. The Internet is a set of agreements governing the networks that agree to hook into it. Those agreements — "protocols," in tech talk — say that networks will move all bits around equally, without discriminating against some because of their origin or content. That's how the Net has become the greatest domain of innovation in history, and the great hope of democracy.

The carriers' business model doesn't fit well on the Internet. That's why the carriers are working so hard to turn the Internet into something else that suits their business model better:

Into cable TV, to be exact.

Net neutrality is not enough. Lord knows we love Net Neutrality. But, the carriers are playing us like a violin.

Net Neutrality means that carriers don't get to decide which bits they'll favor over others. They can't decide to tell, say, Google that if it doesn't pony up some cash, its search results won't be delivered as snappily as, say, Yahoo's. They can't decide to take money from the major movie studios to shoulder aside everybody else's bits so that blockbusters are delivered jitter free but your home movies of last year's wedding look like they were shot with an 8mm movie camera circa 1966. They can't decide that they'll take money from one popular online multiplayer game to make the "experience" better than another's, freezing out the game-changing game being created by two teenagers in their basement.

In fact, allowing carriers to violate Net neutrality would encourage the carriers to slow down the expansion of bandwidth. If they're making money — there's that business model again — by selling higher speed lanes, why would they open up all the available lanes so that we can all go at the speed we want? Being allowed to violate Net Neutrality gives the carriers an economic incentive to keep the scarcity going. (It's an artificial scarcity, but that's for another screed.)

So, yes, yes, yes, let's have Net Neutrality. It's crucial, vital, essential.

But...

As good and true Internet supporters are urging Congress to make Net Neutrality the law of the land — and we wish them success — the carriers are busily building Net discrimination into their infrastructures. They are developing and testing a new network architecture, called the Internet Multimedia Subsystem (IMS), that enables them to track data packets across the network, so they can treat packets differently and bill accordingly.

The carriers view Net Neutrality not as a mere restriction or inconvenient regulation. It is a direct challenge to their business model, that is, to their existence. That's why in 2006 the carriers spent $1.4 million per week lobbying against it [source]. They will do to Net Neutrality what they have done to previous attempts to get them to behave:

The Telecom Act of 1996 required the carriers to make elements ("Unbundled Network Elements") of their networks available to other companies at prices that would allow these new companies to offer services and earn revenues from them. The carriers tied these new companies down with law suits. In 2003, the FCC eliminated the rules for broadband companies. Net effect of the legislation: None.
The carriers routinely agree to build out their networks to the poorer parts of the town. Then they don't.
The carriers took $200 billion [source] of tax payer money to create a fiber optic network that reached to every house. How's your fiber optic connection today?

The carriers will tip their hats at Net Neutrality if they are forced to. They will then ignore it. For the carriers, business models trump regulation, law and reason.

We have history so we can learn from it.

Delaminate the bastards. The only way to get Net Neutrality with teeth is by changing the business models of the businesses providing us with access. Peel apart the layers like a piece of rotting plywood.

The first layer will be for companies that want to provide access to the Internet. We'll pay them to let us attach a computer, cell phone or any other device — even a Princess Phone, once we get it all VoIPed up — to the Internet and begin to send and receive bits. As many bits as we want. All bits treated equally. The companies can compete over price, bandwidth, uptime, and other properties of the network.

The upper layer will be for companies that want to provide content and services using the Internet.

The health of these two layers is reciprocal: Customers will use more bits because there are more services and content available to them in the next layer. There be more services and content because the market now has lots of bandwidth, enough to handle new types of applications.

This is exactly the business architecture our economy, democracy and culture are thirsting for. We want to have companies competing to sell us more, better, faster access to the connected world. We want the services and the content — the things we can do, the ideas we can discuss — to grow like a crazy, bottom-up Renaissance.

This is the business architecture we'd have come up with if we had implemented the Internet from scratch. It mirrors the Internet's own architecture. It is the only one that removes the temptations to turn the Internet into cable TV.

But is it practical? Damn straight. It's so practical that we'll all be rich. And not just in money.

There's lots of money to be made selling commodity bits. The profit curve isn't as steep, but it's still a profit curve. And if the carriers don't want to do it, then, fine. There are lots of other companies that do. They used to be called "ISP's"? Remember? That was before the FCC, Congress and the courts decided that we didn't really need them. Well, guess what? We do. We need to follow through on Congress' intention in the 1996 Telecom Act and force the carriers to open up their infrastructure to ISPs, who will pay the carriers wholesale rates so the ISPs can provide retail service.

Of course, the carriers aren't going to do this voluntarily. It's going to take law, federal policy, and an enraged, um, engaged citizenry to make it happen. But we have learned from history that for the law to be effective, it's going to have to restructure the industry itself. Otherwise, their current business models will reassert themselves, and the Net will become pay TV.

Congress initially isn't going to be happy about this. They've been convinced by the carriers that we need them to have a reliable Internet. In fact, we know that decentralized systems are more robust than centralized ones. So, you — yes, you — are going to have to convince your local Congressperson that our economy, democracy and culture are too important to leave in the hands of companies that have demonstrated their willingness to lie to continue in their position of power. The Internet belongs to us as surely as the airwaves do.

Can we please have our Internet back now?

After the bit-robbing barons are out, what will the world look like?

The carriers currently run their connections to the Internet "backbone" provided by a handful of companies that are in fact already in the commodity bit business. The carriers will be able to continue tying into the backbone to sell us bits, but they'll have competition. Good. In this country we like the free market.

Local ISPs will spring back into existence, competing for our business. Some will offer outrageous connections speeds ... perhaps even approaching speeds common in South Korea, Iceland and Estonia [source]. Others will promise many nines of up time. Others will guarantee that all our browsing and downloads can be 100% anonymous. Who knows what others will offer. We can't wait to find out.

Of course, these ISPs are likely going to use cables already laid by the incumbent carriers (heavily subsidized by taxpayers, by the way). For this the carriers deserve to be compensated at reasonable rates. That's the way it was until the Supreme Court decided that it was unfair to the poor carriers.

Companies trying to sell us professional content — think Hollywood — will still be able to, of course. They'll have the same access to the Internet as the rest of us. So, if a movie studio does a deal with a cable company to offer us a package deal that gives us ten of their movies for free every month as well as low-cost telephony, they certainly can. They just won't be able to torque the Internet so that it works better for their services than for their competitors. Welcome to capitalism, boys!

To save the Internet we have to reshape the industry that connects us to it. For our economy. For our democracy. For our culture.

For our Internet.

David Weinberger
July 4, 2007

Thanks to David Isenberg, whose essay Making Network Neutrality Sustainable this is based on. The errors and infelicities in this piece are of course my own handiwork.

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Delamination Now!: How to keep the Internet from going the way of the Princess Phone

This is also posted at its own url: www.hyperorg.com/misc/delamination.html

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