Tuesday, January 30, 2007

Net-neutrality

WARNING: This is a very long and very involved blog.

DISCLAIMER: The ideas expressed here-in are a speculation of the possibilities and in no way, shape or form constitute either my official opinion or the official positions or locus standi of any entities I am currently or have been or will be associated with. I am not affiliated with any persons or entities mentioned here-in. Any resonance is purely co-incidental. I am, to the best of my knowledge, expressly not vested in financial instruments or involved in monetary transactions including but not limited to, stocks or bonds or derivatives thereof, related to any entities mentioned here-in. I am not a member of any consumer advocacy group or the like and neither an agent (paid or otherwise) of any lobbying or industry group or the like. I explicitly reserve the right to recant, retract, modify, update, or otherwise change any section of the following, including but not limited to, arguments, references, inferences, speculations and conclusions for any reasons whatsoever be they new data, corrections, opinions, clarifications, omissions, amplifications or otherwise. I also specifically disclaim any assertions to the following being a well-researched thesis. The words below are not my official opinion.

If you are reading this, Wow! Hang-on, it gets worse :)

Chances are that you constitute the growing demographic that is increasingly on-line. Given that, the chances are very high that you have come across the words “Net-neutrality” thrown around in the news for the past few months. If you are a technophile you probably understand the issue and have pondered about it some. If not, don’t worry, I will provide you with a Bill O’Rielly version of it shortly. In other words, that means something that is based on samplings of news, opinions and, most egregiously, feelings. Having disqualified the prose that is about to follow, I would also like to specifically disclaim any assertions to the following being a well-researched thesis. The words below are my thoughts and feelings not my official opinion. I’ll let you decide; we are, after all (at least on paper) still living in a free society.

Net-neutrality is the name given to the battle-cry of a group of Internet-based companies and intellectuals clamoring for the government to legislate the manner in which Internet traffic is handled by the Internet service providers (ISPs). The companies in question are chiefly Google and Microsoft (gee, talk about strange bedfellows!) among others. More importantly, the intellectuals include Tim Wu , Craig Newmark the founder of Craigslist.com and some democrats thrown in for good measure. Oh and lest I forget Sir Tim Berners Lee , and Vint Cerf you know, the guys WHO INVENTED THE INTERNET (as opposed to Al Gore . N.B. also read “Cerf and Kahn response”).

So what are these behemoths “cribbing” about? (For those of you who are unfamiliar with this use of the word “cribbing”, a sidebar on Mumbai Hinglish slang: “crib” v: to cry or complain, esp. like a baby, you know the thing that usually occupies a crib. Common usage includes “quit cribbing, yaar”; “kya crib maar raha hai”; “she just kept on cribbing till I agreed to watch that chick flick with her”).

They are talking about a recent move by the internet service providers, in particular telecom providers (Verizon, AT&T) and cable-companies (Comcast)., to impose a “selective delivery” of data on the broadband internet connections. “Woah, slow down buddy. Them big words fly dang fast!”

What that means is these companies want to charge companies like Microsoft, Yahoo, Google and other online content providers an extra fee to ensure that their data reaches the consumer (you, me, everyone and their sisters) in a timely fashion (or at all).

“So What?”


Well, that means that nice new youtube video of the urban ninja or stupid people ghost riding the whip might not be as easily viewable as it is today. Well unless Google paid the ISPs a toll that is.



“So what’s wrong with that? It’s not like they are charging you, me, everyone and their sisters. They’re only charging the big companies, right?”
Well, in capitalism and consumerism, the cost is directly passed on to you, me, everyone and their sisters (as it should be). So we would end up paying. Not just that, we would pay the ISPs twice: once directly via the monthly fees to have Internet service, and then indirectly through the online site we access. Hmmn.

Now, there are at least two sides to every story. Why are the ISPs motivated to do this? Well, they say that such pricing helps them collect funds to facilitate new infrastructure such as “fiber-to-home’ providing us consumers with improved service. Also according to Mr. McCurry,

[quote]

“The Internet needs investment. That investment will be spread across the market and the big companies that provide content will help pay the cost and work that cost into their business models. Or the consumer will get stuck with the entire bill. And my mom who uses the Internet to email and read news will have to subsidize the guy down the street who wants to stream HDTV movies 10 times a day”.
[/quote]

Wow. What an argument. Surely we must protect the consumer.

The only thing the argument seems to be missing is that the real need to have fatter pipelines to home is because consumers want to reach broadband online content providers that have either unique content (e.g. YouTube or MySpace), or content that is available at very competitive prices (e.g. Vongo, abc, cbs, iTunes or that phone-call from your Valentine). If one were to jack up the online content prices, it will have the following possible outcomes depending on the elasticity of the online access market:

a) if the market is inelastic, meaning the demand will still be there irrespective of the price, kind of like the demand for breathable air or less dramatically gasoline, then the consumer will simply pay twice and the ISPs can provide them with the fat-pipes to home.

b) if the market is very elastic, then raising the prices will shrink the demand, reducing or even eliminating the need for the huge investment, effectively killing the budding online content industry and the much vaunted innovation

The telecom companies are saying it is case a) while the strange bedfellows claim b) as the prevailing market condition.

I was surprised to read the following opinions of very smart people. How could the Journal get it wrong ? Or a really smart lawyer skew it so bad?

It made me ponder the question a little more. Like any murder mystery, two things are important: modus operandi and motive.

First the most obvious one: motive. Capitalist economy, business wants money and profits. Simple. Done. Case closed.

Now lets look at the MO. The online content providers need to invest in
1. content generation and aggregation
2. content delivery
3. conditional access and consumer discrimination
4. revenue generation

For a site like CNN.com, content generation overlaps with the creative process for it’s traditional media outlets: print, and TV. They simply need to Web-ize their regular content. For a site like youtube, it depends entirely on its army of users.

CNN.com delivers its media perhaps through deals with companies like Akamai, so that their huge content can skip the slow core of the internet and “wormhole” to the “last mile”. Youtube probably does the same.

The content creators can charge users a fee to provide various levels and qualities of access. E.g. “5 bucks a month” for “unlimited songs” on Yahoo’s Launch.com internet radio, or CNN’s fees to enable online videos. Youtube is currently advertisement supported and as such free to the consumers. This conditional access and qualities of services are tied closely to their revenue streams.

Now for the ISPs: as things stand, they provide the “physical” (Physical, Data Link and Network layers for the 7-layered ISO minded geeks) infrastructure of the last mile to get the data packets to the user.

ISPs don’t do any (serious) content generation or aggregation. They currently also not do conditional access or discrimination in that they don’t prevent users from accessing any site or redirect accesses intended for one site to a different or competing site.

They do deliver content via their infrastructure and they generate revenue by charging a monthly fee (some call it an arm and a leg).

“So everyone is happy. Why the debate? Have we missed something?”

I think we have. Let us reopen the case file on motive. Who does this impact most and how?

The obvious answer is that it helps the online content aggregators and providers by providing them with an alternate and direct revenue stream from the consumer. Google benefits because it can search and display advertisements next to it (as can Yahoo and Microsoft). Apple and Microsoft (amongst many others like Adobe) benefit from the royalties for using the various content formats (mpeg-2, mpeg4/H.264/QuickTime, WMV etc.) and associated intellectual property (IP). Intel benefits when the user stores these on a local hard-drive and moves this around their “connected digital wireless home” using their Viiv products. No wonder they like this scenario.

What about the cable / telecommunication companies? Most of these companies are also “triple-pay” (“cable” TV/ internet and VOIP phone) providers. While the new developments increase internet subscriptions (which are typically managed and provided by Earthlink), the other two major business offerings are potentially supplanted by the online model. Ironically, all because these companies went ahead and laid out fibre-to-the-door. If you’re one of the “triple-play” providers, here’s what you’re thinking “Hey, where’d my lunch money go?”

So the prospect of losing a cornered market (ever noticed how there is only one “cable” company in your area? There is a federal law that forces telephone companies to play nice by sharing their lines but no such law exits for cable companies. In fact it has been brought up and shot down several times) causes the following knee-jerk reactions:

“Well I’ll be damned if I lay down the lines that cause me to go out of business” which gets translated to (to quote Mr. Mike McCurry)
[quote]
“Everything I have seen points to a bandwidth crunch coming in the years ahead. I am not a techie but one of BellSouth's chief architects [Henry Kafka] said recently that the average residential broadband user today consumes about two gigabytes of data per month. Watching TV over the Internet would consume 224 gigabytes per month. Regularly downloading movies would average nine gigs. We do believe that video over the Internet is in the near future, right?
Our point is that the entire Internet will slow down if we don't start making the needed enhancements.”
[/quote]

Wow, what spin. Bill O’Rielly, we need your “no spin zone” here. This is perhaps NOT true. The “bandwidth” is already there. Want proof? Look for the “on demand” movie section on your cable box. Those on-demand movies are digital files and are streamed down to your cable box in real-time. Does that reduce your e-mail speed? No. Why? It’s a big long answer and I will explain it shortly. But more importantly, what if everyone in your sub-division had on-demand and started watching a HD quality show at the same time. Would the cable-companies on-demand system croak due to lack of bandwidth? If the answer is yes, then it is a badly designed system. But in all probability it will function just fine. And so will your email. This is the same as the guy down the street downloading that huge movie while Mr. McCurry’s mom checks her e-mail.

Now why should Mr. McCurry’s mom pay the same $50/month for broadband access when all she does is read e-mail? Honestly, she shouldn’t, but it’s not like the cable-companies give her that option currently. They already are making her pay for bandwidth that she is never going to use. They can very well as of now, afford to drop her cost down to $19.99/month and keep charging the guy down the street $50/month. But then that would take away some of the lunch money. And no, we don’t want that now, do we? But, I digress.

I promised I would explain how the bandwidth is provided. So here it is (general overview and ideas. You may research this further on your own. Please feel free to point out any errors in this if you see them): Back in the good old days of analog cable (you may want to look up at your revolving ceiling fan for an artistic “flash-back” effect) each channel occupied a certain range (6Mhz) of electronic frequency signals (channel bandwidth). E.g. analog channel 2 on your cable corresponds to a frequency range of 55.25 MHz +/- 3MHz. Now for all the hundreds of cable channels that were available, there was a 6MHz slot reserved for each. That means that frequency range was being *wasted* even if no one was ever watching it. Also, to provide the exploding range of channels, the cable capacity was chosen to be able to carry a large swath of channels, say something like 600 channels total. Enter the brave new world of digital cable. Now each user must have a digital cable box (or a cable card) to get the goodies.

“So what does the digital transmission do? And why are you making such a big deal of it?”

Well because of the miracle of technology and digital compression, each channel can now occupy a bandwidth much smaller that 6MHz. Depending on the type of compression, one could fit two or more regular definition channels or at least one HD channel with a “regular” standard-definition (SD) channel. So if the cable (I shall henceforth use “cable” to mean “cable / telecom companies that provide TV services”) earlier used (say 300 * 6MHz) to provide 300 analog channels, they can do so in *at least half* that bandwidth. That leaves the other half to carry “value added” data such as your hi-speed internet service and on-demand channels / movies, with room to spare.

Also, the way the cable operators (as opposed to phone companies which tend to rely on IPTV) currently do on demand movies is by assigning a dedicated frequency band from the “spare” bandwidth to each customer! Which means if there are 200 apartments in your complex and everyone starts an on-demand movie at the same time they are reserving 200 channels (one for each) to carry that movie *only* for that consumer. That means the cable companies can carry 300 digital channels in the space of 150 original channels + 200 on demand movies in the space of 100 original channels. Assuming a total channel capacity of 600 channels on the physical cable wire, that means, an entire community or apartment complex is served their TV in just 250 channels worth of space, leaving about 350 channels worth of space for hi-speed internet *and* voice, with some room to spare.

NOTE: the way the on-demand movies are sent is still wasteful! Instead of stupidly reserving a digital channel for each on-demand download, a technique such as Code Division Multiple Access (CDMA) maybe used to stuff more than one stream on to the same digital channel.

Now for the people I just lost by mentioning CDMA, think of think of a 3D comic (yes, there was a time when these were marketed and actually popular). A single page carries two different images, one printed in red and the other in blue. Each eye sees only one image by using a special pair of glasses that have colored lenses. The red lens filters or shows only the image in red, while the blue shows images only in blue. The process of inking each separate image in a different color can be thought of as using a special code or encoding and the process of looking through red or blue filters is akin to “decoding”.

This works as long as colors or codes chosen are not similar or have common components, e.g. using red and pink inks (which qualifies as a shade or tone of red) with red and pink filters would cause confusion because both images would be seen (albeit to differing extents) by each eye. This confusion is technically referred to as “interference”. Now as long as you have a number of colors (and corresponding filters) that are not similar (also referred to as “orthogonal”) you can “pack” as many different images on to a page. (As an aside, these can’t be unlimited because when the different inked lines intersect, they “interfere” and form different colors that may be seen through either filter, and are hence limited by the area or “capacity” of the page. As the lines on the page increase, the usable area decreases increasing the probability of an intersection, a.k.a the “noise floor”).

For cell-phones, these “colors” and “filters” are mathematical functions that generally work the same way, but are more efficient. The same technique can be applied to cable systems to pack more than one on-demand download on to each channel, leaving even more available space on the cables!

What this means is that bandwidth is already there and there is perhaps *no* need to dig up roads and lay more cables, except for reaching houses that have never been reached before. Cable companies have thus far refrained from extending cables to rural areas for years anyways, irrespective of the current developments. So that exception isn’t relevant to the current argument and can be safely dismissed.

So all of this means that the first “knee jerk” reaction is entirely unfounded because there is *no* need to lay down any more cables as they already are plenty. This brings us to the next discussion:

“If they already have all they need to kill us, what can we do next to stop them? We must ensure we are compensated for the business we are about to lose”

“Can we charge them for using our lines?”

“Aha! Michael, you are a genius! You know how much I wanted you to stay away from this business. But remind me to give you a million dollar bonus this year. Provided we still have a cable TV business to give us that revenue.”

“Boss, you know we can make sure that the online shows suck.”

“What do you mean? They’ll be showing the same stuff we’ll be showing.”

“I mean I’ve watched Youtube videos of lonelygirl15. But then it really sucks when a 1000 other nitwits log on at the same time and slow down the server enough to make the video stop every now and then.”

“You mean cause a denial-of-service attack on the websites? Consigliore, can we do that?”

“No Don Corleone, we’ll get hosed by the feds, despite our lobbyist friends.”

“So what do you mean by that Michael?”

“I meant we could cause their video data to be slow enough to get stuck everytime, unless they pay you, Don Vito, a ‘protection’ fee.”

“Consigliore, can we do that?”

“Yes, Don Vito, we can charge the online websites a monthly fee to ensure that their data is delivered ‘expeditiously’ to the consumer. We can then also ‘promote’ the services of our friends and ventures.”

“Michael, you always were the smartest one. You know that, don’t you? Consigliore, the consumer groups are probably not going to like this. Get me Mike McCurry.”

Or something like that. The net result is that there is a decision by the ISPs to charge the online websites to ensure that their data is delivered. Of course, this conclusion is dressed for the masses to something like below:

[quote]

Look, the Internet is not a free public good. We all pay something to make it work right and that's the issue here. We pay federal taxes for interstate freeways but we charge 18-wheel semi-trailers higher taxes because they put a heavy burden on the road.
[/quote]

To which Mr. John Sumpter responds

[quote]
Mr. McCurry said "We pay federal taxes for interstate freeways but we charge 18-wheel semi-trailers higher taxes because they put a heavy burden on the road" and he's right. However, all 18-wheeled trucks get the same tax/charge for the same service. That's key to neutrality -- all similarly situated customers get the same charge for the same service.
The big network operators are trying to get rid of net neutrality because they want to favor affiliated content providers and discriminate against unaffiliated content providers. Different pricing for different capacity service is fine. Discriminating in favor of affiliates is wrong.
John Sumpter
Vice President - Regulatory
Pac-West Telecomm, Inc.
(a network operator/carrier that supports net neutrality)

[/quote]

hearing the “net-neutrality” battle cry, the cable gang comes up with a equally pithy “hands-off” slogan, layered with the notion that “regulation and government interference is bad.” I tend to usually agree with the latter, but I don’t seem to see how it is relevant in this situation.

The government does and must interfere to guarantee basic accesses such as freedom of speech and the right to be treated as equally by law.

Also Mr. McCurry’s conciliatory request for “Why not see how fierce competition in the broadband market works to produce the improved Internet we need before we decide to introduce a very heavy dose of regulation?” is on rocky footing because he presumes that there exists a “fierce competition in the broadband market” when none exists.

How many broadband internet providers do you have coming to your door? My apartment complex can’t have DSL and Comcast is the only choice. I am yet to come across a sub-division serviced by more than one cable company, be it Nashville, Raleigh, Detroit, Boulder, or Seattle.

So where do you stand on net-neutrality?

3 comments:

kage said...

here's a link that talks about this issue being one of the important ones that the main stream media (MSM) never covered!

kage said...

Save the Internet!

kage said...

more on Comcast's dirty tactics. I wonder why this can't be likened to tapping of phone-lines, something that can't be done without warrants or at least in post-Patriot act days without Federal direction.