The EU is a focus of a lot of things these days, and we can now add net neutrality to the list. The EC hearings on the issue, launched late in June, produced the predictable results—people are alarmed at the risk of loss of innovation and privacy and competitiveness, but they have no practical contributions to make. What’s now happening is that a group of EU operators and equipment vendors are preparing their own report in response to the EU activity. This report will conclude that the interests of the public and the aggressive 100 Mbps broadband goals set by the EC, would best be met if the operators had the latitude to explore different business models to the best-efforts peering-agreement model of the Internet today.
I have to tell you that the issue of business model is to the Internet what entitlement reform is to budget processes. Yes, there is no question that the current peering model which doesn’t provide for settlement among ISPs or between ISPs and content sources is flawed. In fact, it’s probably broken. The challenge is that we’ve created a whole industry based on the broken model, and unraveling that model without scarring the players involved may not be as easy as just saying “Now’s the time”. My view is that we need to transition to a new business model in stages.
- Stage number one is to allow the operators to create premium services and sell them to either consumers or content providers, with the proviso that these services not degrade best-efforts Internet. These services should include not only enhanced handling but also higher-layer services.
- Stage number two is to establish settlement among ISPs for all such premium handling as a mandatory element in any peering agreement, but again as an independent element to best-efforts Internet.
- Stage three is to extend settlement agreements to include best-efforts traffic, starting with situations where that traffic is delivered through premium subscription services and moving to more general applications.
If we don’t offer network operators choices to help them recover the cost of enhanced Internet usage and performance, we won’t have either. That will not only destabilize the operators, it will hurt the network equipment space rather badly.
Cisco, premier provider of network equipment, is the subject of escalating rumors about job cuts, the latest being that the total could run to ten thousand jobs. What seems to be happening is that Cisco is considering a range of options, some of which include the sale of or spin-off of some of its businesses, notably the Scientific Atlanta property. The most radical cuts would seem to come from exercising one of these choices. However, it does seem likely that the company will actually cut over 4 thousand jobs.
There is no company in the industry that embodies what I believe to be the “intransigence of incumbency” than Cisco. Networking has undergone revolutionary changes, changes that Cisco products helped to bring about. Despite this, Cisco has gone forward with a marketing, strategic, and product approach that has presumed the most simplistic of all possible futures—the one that’s nothing more than a bigger form of the present. With arguably the best intellectual property portfolio in the industry, the stuff that carriers would kill to be able to deploy effectively, Cisco has failed to show those very carriers what effective deployment would involve. “Buy a router today because traffic demands are growing exponentially!” says the sales guy. Hey, I’m tired of hearing about exponential growth, and so are the buyers. Traffic doesn’t mandate investment, return on investment does.