Legacy
incumbent telephone and cable companies are fighting a fiber future for
telecommunications infrastructure. People don’t need fast fiber connections,
they maintain.
Two
legacy telcos, AT&T and Verizon, have urged the U.S. Federal Communications
Commission to maintain its outdated definition of “broadband” at its current
asymmetric 4/1 Mbps. (Not that it matters much anyway since the telcos have
largely spurned federal subsidies to help them cover the cost of building out
their limited footprints to serve premises lacking even that pokey standard of
service.) Their stance reflects the incumbents’ decidedly retrospective philosophy,
driven by their highly CAPex risk averse business models that are
unlikely
to change even though demand for Internet connectivity has grown substantially
over the past decade. This retrograde
view of Internet demand and infrastructure planning is largely responsible for
the current dismal state of American Internet service where many homes and
neighborhoods are unserved and those that are pay too much for sub-par service.
Industry
expert
Michael Elling argues rather
than managing the economics of Internet infrastructure with an an
ex ante, value-based pricing that takes into account the potentially
enormous future demand for high bandwidth. The growth of bandwidth demand emulates
Moore’s Law for microprocessors, roughly doubling every 2-3 years. It will
continue to explode with applications such as 4k video streaming and two-way,
HD videoconferencing.
Moreover,
Elling astutely observes, contrary to the current market segmentation
strategies where providers cherry pick discrete neighborhoods in densely
populated metro areas, Elling sees the greatest demand growth for premise Internet
service coming from less densely populated areas where residents obtain relatively
higher value via its enabling remote work and e-commerce,
Elling also sees an ex
ante perspective that anticipates future demand rather than focusing on
past and present demand as mooting the current regulatory policy debate over
net neutrality. The net neutrality issue has come about because providers at
the core, transport and edge network layers don’t share a unified view of how prices
for their services should be set. While those at the core and the transport
layers might be inclined to work out a pricing scheme with the edge providers
based on ex ante demand at the edge,
it’s impossible to do so as long as the edge providers hang onto their ultra
risk averse, cost-based ex post demand
perspectives. If all the layers agreed to adopt an ex ante perspective, Elling believes, it would bring about a unified
pricing scheme based on balanced settlements and price signals that would provide
incentives for rapid investment and ubiquitous upgrades at all network layers.
Elling’s concept deserves serious consideration by Internet
providers at all network layers as well as public policymakers and regulators.
If the United States – the nation that invented the Internet – is to realize the
Internet’s full potential and benefit for all Americans, it must first make an attitude
adjustment. To an attitude that forsakes a retrospective orientation of
bandwidth poverty and embraces a forward thinking outlook based on bandwidth abundance
and prosperity.