Where I live, the phone company is the only provider of high speed internet service. It is only a 3Mbps connection, but they are very reliable. My line probably receives an uptime comparable to 99.5%, or a few hours off per month. They have also been very fair, I have never gotten a call for using too much transfer in one month, and while I don’t max the line often, I do download very large files occasionally. Like many people I also use Hulu and YouTube, I rent movies and buy TV shows on iTunes, and I download operating system updates which can be substantial even for one computer. I may be ahead of the curve, but not by much. Going forward my use of bandwidth heavy services on the internet is only going to increase, and the use of these services will spread to include a large percentage of internet subscribers.

As I said, my ISP has never limited me in any way or complained, in part because the connection is technically slow for 2009, but also despite my above average use of my connection. I am able to make use of new services as they become available, and do so frequently. I may be very lucky compared to users of internet service provided by other telecommunications and cable companies.
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Time Warner cable is now proposing to cap the amount of data subscribers can transfer per month, at levels that are low even for an average user. Their plan is to start with 5GB per month for $30, with packages going all the way up to 100GB for $150 per month. Going over that cap will earn you a $1/GB overage charge. They claim that they need to do this to cover the costs of heavy or abusive subscribers, but I would encourage you to hold off on that assumption for the moment. You might say, sure people should pay for what they actually use! I would agree completely. However, if that were really the issue at hand, there would be no real problem and this article would end here. To be truly pay-per-use, the rates must be fair and must be in some way comparable to the actual costs of the provider.

Time Warner’s proposed rates however, are not fair, nor are they even remotely comparable to what it costs them to provide a given amount of data transfer per month. In fact, their rates are not even comparable to those offered by other cable companies and DSL providers. For the same price Time Warner offers 40GB of transfer per month, Comcast offers 250GB, and other companies enforce no limit whatsoever. These companies are not usually in direct competition, so you cannot simply choose one over the other. Indeed in some areas there is no other choice even for alternate access methods such as DSL. If we are to claim that these companies would like to implement a pay-per-use system, or recover costs from heavy users, we must at least reconcile the MASSIVE difference in allocated transfer offered, and figure a fair rate for the service.

So what would be fair? For starters a fair rate per subscriber involves adding the true cost of providing the physical connection over the last mile, to the cost of IP connectivity upstream for a given amount of transfer per month. Some companies do not even place transfer limits on their service, and this is either an indication that there isn’t a problem being caused by heavy users, or that the costs of bandwidth are irrelevant compared to the cost of the network, or both. It costs Time Warner the same amount of money in a given area to provide a last mile connection to Jimmy the P2P user as it does to get grandmas email 3 times per week next door. These 2 hypothetical people both use the same lines and the same equipment to move their data from their homes to the Time Warner office, and using those lines more does not wear them out or otherwise impose on Time Warner an increased cost if the network is not congested. If the network IS congested, the answer is to limit bandwidth or upgrade the last mile, not measure and limit data transfer per month. The transfer costs for Jimmy’s traffic upstream are a little higher, but not by the amounts Time Warner is claiming. To make an example, if Jimmy stops using P2P and only gets his email 3 times a week, the costs of Time Warner to provide Jimmy’s service do not go down by much (though if he switches to a lower priced package, their profit drops off a cliff), and if grandma suddenly becomes a pirate, TWCs costs do not go up by much, certainly not by $1 per GB.

So what are the true costs of data transfer? It depends on where you want to connect from. For an example of a location that connectivity is cheap, lets take a look at the datacenter, a highly concentrated connection point. The datacenter in which this server is running offers us 600GB of transfer for $59 per month, or for $159 we can have 1600GB. For the same price that Time Warner wants for 100GB per month, our datacenter offers us 1.6 terabytes of data transfer. We expect to be charged more if we use more, and these rates are perfectly fair. So is there a huge difference between a datacenter offering 10Mbps connections with 600GB of transfer per month, and a cable company offering 16Mbps connections with 250GB per month? Not as large as would seem, the sole difference is that the eventual consumer of that connection is further away with the cable company, and maintaining that network costs money. However, a cable company is still a centralized location much like a datacenter, and they can afford to connect with multiple upstream providers in much the same way. In fact, some cable companies offer a datacenter for hosting to their customers. The transfer costs are not that much different for most cable companies, despite what they would like you to believe.

With that in mind, Time Warner’s proposals would appear arbitrary and greedy, and at worst anti-competitive. In many areas they are the only provider of internet service, either because the cost of entry for another company is extremely high, and/or because the local government has granted one company a monopoly, which will be explained shortly. So under these circumstances, where one company has an extraordinary degree of control over a consumers internet access, and that company wishes to offer premium services such as Video on Demand, what happens when a company like Apple or Amazon wants to provide competitive high definition video on demand service over a customers internet connection? Those companies already pay for a content delivery network on their end (fair prices to be sure), and home users already pay for a connection to the cable company and pay for what should cover their transfer upstream, even if they use a lot of it (in fact it should pay for much more). However, using those services could easily burn through a transfer cap of even 250GB per month. You download a few high definition movies, or watch a few hours of streaming service per night for a month, and you are now well over your cap. The kicker is, if you had been watching Comcast HD video on demand, your use would not apply to the cap, because it isn’t technically an internet service and that video only needs to be transferred from the local cable network. In this situation, Comcast and other providers can use their monopoly position and their desire to be both a dumb pipe and a premium service to make it very expensive to use anything else but their own offerings, and consumers have little choice in the matter.

Let’s set aside transfer and bandwidth concerns for a moment and take a look at a much more serious problem, questionable filtering and blocking of specific services and applications, like Skype. Skype is a voice over internet service that in many ways replaces a traditional phone line. You get a phone number and are able to accept and make calls to the phone network and to other Skype users. However AT&T does not want users of their mobile internet service to be able to make Skype calls over their mobile network from devices like the iPhone. In this specific case, the application is actually limited to only work on Wi-Fi, and this limitation is enforced by Apple who runs the application store in which Skype is distributed.

So is AT&T worried about Skype using too much bandwidth? Depending on the codec in use, Skype uses between 29kbps and 50kbps for a call. At the lowest rate, a person could use 600 minutes of Skype voice calls per month and only use 250MB of transfer, or at the higher rate, 500MB. The cap on AT&T mobile data service is 5GB, so we aren’t anywhere close to that using Skype on a regular basis. The circumstances of a mobile network are a bit different than a land network, there is a more limited pool of resources available requiring some management and limitation. However, the truth is that AT&T is a wireless phone company right now, they make a substantial portion of their revenue charging for voice service that many users do not want, and which AT&T makes difficult to drop from your bill if you are able to remove it at all.

So when AT&T decides they don’t want Skype on their network, are they merely exercising control over their own private wireless network, or are they abusing their position both as an internet provider and as a user of public airwaves? They do pay for public airwaves in this case, but they also provide internet service. On the consumer side, you can’t simply choose another provider because most of these phones are locked to one carrier and have lengthy contracts that impede quick market corrections to such behavior. The situation is complicated and unclear at best.

A similar situation exists with traditional voice over internet providers such as Vonage, which is a service intended to be used over an existing internet connection such as Cable or DSL. VoIP is very sensitive to latency and dropped packets, if the VoIP traffic is delayed or if packets are dropped, call quality suffers substantially. But what happens when a company such as Comcast or Time Warner wishes to offer VoIP service as well? They both do offer VoIP service, and as the internet provider they are also in a position to exert a lot of control over the alternate Vonage service, so there is a conflict of interest and potential for the internet provider to harm the alternate service intentionally or accidentally. Vonage has little recourse, they are not an internet service provider, they can’t be expected to simply lay down their own last mile network nor should they have to, the internet exists to serve this very purpose. Customers can’t easily switch their internet provider either, but even if they did it would most likely be to a DSL provider, most of whom are also phone companies, who have an even greater incentive to make life difficult for Vonage as a company and for their users. Of course, ISPs aren’t going to admit to intentionally harming Vonage or other VoIP providers, and if call quality suffers it COULD be blamed on network problems or management practices.

Lets take a look at truly blatant interference on the part of an internet service provider.

In the not so distant past, Comcast was found to be interfering with user traffic to stop Bittorrent connections by falsifying specific TCP flags (RST) in order to trick each end of a Bittorrent connection to believe the other side had disconnected. The effect was that Bittorrent as a protocol became much less useful. It just so happens that Bittorrent is used for both illegitimate piracy AND legitimate video services. It just so happens that Comcast offers competing video services and would really really like you to use those instead of alternate services on the internet for which they receive no further revenue, services that again, sometimes use Bittorrent. Comcast initially denied doing anything at all despite the mountain of evidence suggesting otherwise, giving the appearance that they had something to hide.

So was that:

1: A case of a private company managing their network or attempting to stop piracy?
2: A private company interfering with a competitors services?
3: Both?

Technically option 3 may be true. However, while Comcast and other telcos are private companies, they benefit greatly from things most private companies do not.

It simply isn’t possible for companies to provide services like cable television or phone service without using public resources, going through peoples back yards, under public highways and over city streets. Because of this, and because the costs are so high they have been granted the right to use public resources such as easements, utility poles and sidewalk boxes. In return they agree to be regulated. This is called a granted monopoly, meaning that they have been granted exclusive right to offer a specific service in an area, such as cable television, phone service, and now because these same companies have expanded to being ISPs, internet service. This is the incentive these companies have been offered to build out and maintain a complex last mile network, and it is one they continue to benefit from. There is usually no competitor to a cable company in one area, nor any competitor to the phone company. You live in a certain area, you get Comcast, or Verizon, or AT&T, or Time Warner.

This is beneficial to consumers in that they are guaranteed that a certain area will have phone service or cable television, and that the company will be watched closely to ensure they don’t abuse their position, because they are in fact a monopoly in that area for a given service. But as we can see here, these companies which are already regulated for providing cable and phone service, ARE abusing their position, taking advantage of the monopoly position they have been given, and turning around and pretending to be entirely private companies that can do whatever they wish with the lines they own when it comes to internet service. In some cases those lines were not built out with just private money either, public money has been used to fund the development of such communications networks while private companies profit from them.

So what am I proposing? It is very simple actually. If we want the internet to remain the useful, open medium that has allowed for all the things we currently benefit from, we have 2 choices.

1. My preference, and the only real option at this point – Encourage local municipalities to build out new fiber networks using tax dollars or other funding sources, then either maintain them with city employees, or contract out that maintenance to a private company, but have the public retain ownership. Then upstream internet service providers can offer internet service and indeed any services they wish to customers. The local government would be prohibited from censoring the network or entering into exclusive deals with private companies to provide services over it. Private companies would be free to offer services in any way they wish, and customers would be free not to use them. Cost of entry would be low enough so as to encourage outside companies to come in and provide upstream connections without having to worry about the last mile network. The problem it seems, is that incumbent telcos don’t like being replaced, and have sued municipalities that have attempted to build out such a network.

2. If we are to continue to allow private companies to manage and own last mile networks that internet users depend on, and given that ALL private internet service providers must use public resources to provide their service, they should be subject to regulation. They are already regulated for the other services they provide (over the same wires i might add), so regulating their internet service is essential and the lack of regulation is inexcusable:

• Since most companies are not content with just selling internet service, but take advantage of a granted monopoly status, they should not be permitted to rig service rates to favor their own content services. They do not have to be just “dumb pipes”, but if consumers choose to utilize them in this way, companies should not interfere. Reasonable rates must be charged to ensure companies get a fair deal to maintain the network.
• Because this network is so important, internet service providers cannot be allowed to abuse their position and dictate which applications or services may be used over the network. Either offer internet service, or don’t.

That’s basically it. If those terms are unacceptable, fine. Companies who don’t like them should cede control over the lines to the local government to implement option 1 above, or to a company who DOES wish to offer real internet access. The Internet is too important to allow private companies to have this level of unlimited control over it, and given that the majority of Americans access the internet through a company that is a monopoly in one area, the only solution is to ensure that the regulations they are already subject to for other services, are applied to Internet service as well.

If we continue to allow private companies to use public resources to provide last mile networks and upstream internet access, while asserting the right to completely control the network, they will abuse that control, plenty of examples show that they already are. The internet will no longer be the open medium that has made it what it is today, and instead will turn into a collusive toll road, where content owners and network operators conspire to dictate what consumers will have access to. This is absolutely unacceptable.