Tuesday, December 20, 2005

A Return to “Walled Gardens”?

This week's Business Week draws attention to an issue that's been hot in the Internet community for the last month. Currently, companies like eBay, Google and Yahoo pay a lot of money to telecom companies for local loop connections to their networks, and from there to the Internet backbone. However, some of the major telephone and cable companies (led by AT&T's Edward Whitacre) want the content and service providers to pay for access to their residential and business Internet subscribers. Specifically, this is what’s being considered:

  • Using Quality of Service (QoS) to give content providers that agree to pay them more bandwidth and better response times than content providers that don’t pay, and blocking some websites and services altogether.

  • Limiting or barring competitive VoIP vendors from accessing their networks.

The result could be a return to the “walled garden” model pursued by AOL, CompuServe, Delphi, etc. in the years before the Internet. SBC, for example, could give priority to its partner Yahoo, and make competitive services like Google and MSN much slower and harder to reach. It could also decide to block all usage of file-sharing services because they use too much bandwidth.

None of this is new, at least to corporations that have limited employees’ access to certain websites and services for years. Companies regularly block access to porn and shopping sites, and they forbid the use of file-sharing software and services such as Skype. However, these controls are only imposed within these companies’ firewalls. Now, the major telecom companies want the ability to impose these same kinds of limitations on their subscribers.

The risks of this scenario might explain some moves by Google over the last year. At the beginning of 2005, rumors surfaced about a plan by Google to purchase large amounts of “dark fiber”. There was some speculation that Google was planning to become a “super-ISP”, but that talk quickly died down as the press moved on to other stories. Then, in late summer, Google pursued providing citywide WiFi service to San Francisco and Mountain View, CA, where Google is headquartered. The San Francisco franchise is still being debated, but Google won the contract in Mountain View.

Now, why would Google need nationwide dark fiber? It makes sense for the company to run its own private network in order to interconnect its server sites. But why does the company want to get into WiFi? I believe that Google’s dark fiber and WiFi initiatives are closely linked. In the event that the major telecom companies try to force Google to pay for access to their networks, Google can “light up” its own competitive ISP service in major metropolitan areas. After all, there’s no reason why Google can’t overbuild wireless data services in the same areas as the major telecom companies. With WiMAX service and mesh networking, Google could cover an entire city quickly, and at a comparatively low cost.

Of course, Google could use QoS to give priority to its own content and services, but there’s no reason why other content providers couldn’t launch their own ISP services. It’s even reasonable to assume that two or three major content providers could get together and finance a competitive ISP service, guaranteeing all of them equal access to subscribers.

The fight for open access to the Internet is just beginning. Stay tuned—you may see a lot more competitors soon.

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