Everything Old (in Telecom) is New Again

With Cyber Monday turning in good numbers, it’s ironic that we’re also seeing more stress cracks in the business model of the Internet in its broadest sense.  The popular hope that somehow things will just get better and cheaper forever is colliding with hard economic reality within the ecosystem of the Internet as players work against each other to grab profits when paths to profitability are far from clear overall.

Today, Comcast and Level 3 revealed a fundamental problem with transport with the former demanding that Level 3 pay for transport of Netflix video that Level 3 is being paid to cache and deliver as a CDN.  Level 3, of course, is crying foul under net neutrality, but Comcast was the guy whose appeal of the FCC’s rules resulted in the Court of Appeals declaring the FCC had no right to enforce such principles.  While many will see this as yet another example of Comcast being the bad boy of ISPs, it’s really a sign that ISPs are fed up with people creating business models that depend on Internet access and transport and not paying for either one.

Another development is that Australia’s NBN, having moved to effective passage, is now embroiled in yet more controversy.  The problem is that NBN proposes to require that ISPs connect to them at a series of on-ramps, which puts NBN in the ISP backhaul business rather than the access business.  Many see that as an example of “mission creep”, of ambition to make NBN what’s effectively a new national carrier through a thousand baby steps.  NBN, who has refused to submit its whole business plan for an audit, is insisting it needs clarity on its point-of-interconnect (POI) mission, and Australia’s regulator is implying they’d reject the NBN proposal.

Here in the US, the FCC has been postponing its regular December meeting, some say to prepare for the politically explosive decision to discuss the net neutrality topic in general and the FCC’s “third way” regulatory solution to the current impasse in particular.  The challenge the FCC faces is significant; the public believes it can just order stuff and it will happen and yet the Comcast appeal proves that’s not the case.  The proposal the FCC has had from the first was to declare that broadband access (not the Internet) is a telecommunications service and thus regulated under Title II and in theory subject to all the wholesaling requirements of the Act.  However, the FCC then proposes to forbear from applying those wholesale rules, which it can (in theory) justify under Section 706.  There, “regulatory forbearance” is one specific remedy the Act offers the FCC to promote broadband.

There’s only one thing that’s clear at this point, and that’s the fact that we can’t go on the way we are.  Market forces worldwide are speaking the language of profit, and that speech won’t be ignored.

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