Cable giant Comcast is at the center of a very important controversy for small businesses across the nation.
In the summer of 2007 it became clear the carrier was putting restrictions on how much information selected customers could transmit. BitTorrent, a peer-to-peer (P2P) application-sharing company, had been using lots of bandwidth, so Comcast throttled back some its transmissions.
This August the Federal Communications Commission ruled the practice illegal. In September the carrier said it would appeal the decision and would begin capping residential bandwidth in October.
Comcast’s rationale for limiting BitTorrent’s traffic was to make the Internet experience more pleasurable for other customers whose transmissions may have been on hold because bandwidth hogs were overloading the network.
The reality is that all Internet service providers (ISPs) are overbooked—they have sold more bandwidth than they can support.
‘All You Can Eat’
This overbooking has been an issue since the old Public Switched Telephone Network (PSTN) days. In that situation, individuals would receive a busy signal when the network was overloaded. Because the Internet has an antithetical design, ISPs don’t have a busy signal option. And, to date, most have done little or nothing to limit the volume of customer transmissions, basically offering a flat-rate, “all you can eat” approach.
However, the “all you can eat” model may no longer be viable—a change the government seems to be ignoring. ISPs could use the open salad bar model when users were mainly transmitting small textual data. But with video becoming more common, users increasingly transmit very large high-definition files.
In response, Comcast plans to cap customer usage at 250 GB of data each month. That translates to about 50 million e-mails, 62,500 songs, 125 standard-definition movies, or 25,000 high-resolution digital photos. That amount would seem to meet the needs of most customers, including small and midsize businesses. The only folks affected would be companies such as BitTorrent that have based their business on the “all you can eat” model, and hackers, who routinely spew out tons of unwanted solicitations and malware.
Per-Bit Pricing Models
For whatever reason, some people believe ISPs should not be able to put any restrictions on the volume of information any user transmits. That’s absurd. Per-bit and per-byte pricing models have long been used for data transmissions.
In trying to build and sustain their businesses, carriers constantly balance their attractiveness and viability versus unlimited usage pricing models. By government decree, they no longer have that option. In effect, FCC has decided to tell ISPs how to run their networks.
A related issue is Comcast’s reluctance to disclose its network management processes. The reason seems obvious. Carriers spend literally billions of dollars installing and fine-tuning their networks each year. If they can move traffic more efficiently from one location to the next than their competitors, it translates to a more profitable bottom line.
But advocates of government-mandated network neutrality maintain Comcast has an obligation to open its network operation to the world. Why not have Kentucky Fried Chicken publish its original recipe or Coca-Cola tell us how it makes soft drinks?
The network neutrality camp also claims throttling bandwidth is intended to hinder competitors of Comcast video services. It is hard to understand how one arrives at such a deduction—especially when there hasn’t been a speck of evidence to support such charges.
No Internet Monopoly
Net neutrality supporters pressure FCC with the claim cable companies are unfairly monopolizing the Internet access marketplace.
This conveniently ignores a couple of factors. First, there is no Internet access monopoly. A small or midsize business can get access from cable companies, telcos, or wireless suppliers. True, there are not 50 choices, as you might have when buying a new pair of pants, but there is a reason why so few companies compete in the Internet access arena—it’s not a great business.
Providing Internet access requires a lot of capital for the network and support infrastructure, and there’s not a lot of money to be made when customers pay about $20 a month for unlimited access.
While carriers have had difficulty, customers have profited. In fact, one could argue the market factors that have driven the Internet to date have been one of capitalism’s greatest success stories. It certainly seems to deliver more bang for the buck than just about any other type of product or service. Rather than reward the companies that have accomplished this, however, they are being punished.
The downside of this recent government meddling is that it has forced Comcast and other carriers to funnel corporate resources away from efforts that could help customers, such as improving their customer service or developing new services.
The U.S. government was very helpful in establishing the Internet, but now it is hindering, rather than helping, its development. The time has come for it to butt out and let the ISPs run their businesses.
Paul Korzeniowski ([email protected]) is a Sudbury, Massachusetts-based analyst of computer networking issues. An earlier version of this article appeared at Forbes.com in September. Reprinted with permission.