Are consumers going to start having to spend a lot more to surf the Web?
Phone and cable companies have stoked those fears recently by floating plans that would have Amazon, Yahoo and other Web sites paying new fees to ensure that their content will be delivered to customers faster.
This possibility has raised the prospect that consumers may end up having to pay twice for access to the Internet — once to the phone or cable company that sells them a dial-up or broadband line, and again to Internet companies that pass along new charges for fast access to content from their sites.
Late last year, the Bells proposed to share the burden of upgrading their networks — particularly as big video files, which take up a lot of bandwidth on the networks, become more common — with the companies sending out that data. The plan quickly drew fire from consumer groups, technology companies and lawmakers eager to preserve open access to the Internet and fearful that the Bell companies have too much power.
Those worries were highlighted yesterday when AT&T announced plans to buy BellSouth for $67 billion, a merger that would create a telecommunications giant with $130 billion in sales and 70 million local phone customers in 22 states.
If a plan like the one the Bells are proposing were to come into effect, consumer prices might not increase immediately, consumer advocates, industry analysts and telecommunications executives say. But one way or another, consumers are likely to shell out more in the future for Web content.
The reason, they say, is simple. As Internet traffic booms and competition intensifies, the phone and cable companies are spending billions of dollars to expand their networks — and they want someone to help them foot the bill.
"The networks of today have to be upgraded," said Carl Russo, the chief executive of Calix, a company that sells Internet television equipment. "You can push this bag around all you want, but at the end of the day, we will pay for it."
The most obvious tactic would be to raise consumers' subscription rates. But Mr. Russo and others say that is unpalatable to the Bells, which portray themselves as the low-cost broadband providers, and even harder for cable companies, which already charge subscribers premium prices for their faster connections.
The government is unlikely to fork over any money to help the cable and phone companies expand their networks. Lawmakers would be pilloried if they used taxpayer dollars to subsidize the highly profitable telecommunications companies directly. So phone and cable companies are turning to a new source: Web content providers. For the most part, the Internet sites now get a free ride because network operators have to transport equally all data that travels on their networks. Some content providers do buy extra servers so that consumers can zip around their sites more quickly, but they absorb that cost themselves.
The idea of the service providers is to create a system where Web sites can, for a fee, bump their data into a kind of fast lane, where it will not be mixed in with everyone else's. A mom-and-pop online retailer might consider this unnecessary, but a company selling, say, videos online could see it as crucial.
"If other players want to take advantage of our network and need something to make their applications available to consumers, we will work with them as partners," said Thomas J. Tauke, executive vice president of public affairs, policy and communications at Verizon. "We anticipate that they will develop applications that need more bandwidth" in the future.
Companies like Amazon.com, eBay and Google fear that if they do not buy faster access, they could end up in a slow lane.
The Bells contend that the fast lanes they are proposing will not slow down other traffic because their networks are big enough to accommodate everyone.
"No one service takes away from the other because of the huge pipes," Mr. Tauke said of his company's network.
Some critics are skeptical and say the Bells' plans to sell television routed over their networks will leave less space for other content. Regardless, if two tiers of delivery speed were offered, content providers would feel compelled to get the faster service if only to keep up with their rivals who had the service. That could become costly.
"There's no limit to what they could charge for this high-speed lane and they could make the slow-speed lane as slow as they want," said Rich Tehrani, president of Technology Marketing Corporation, a media company that promotes Internet phone service. "There's no way to know today what the prices might be, but it could be anything, and that's the fear."
Mr. Tehrani and others fear that companies that compete with the network providers — for instance, the Internet phone provider Vonage — may not get the chance to sign up for faster access, even if they want it.
But the phone and cable industries have powerful allies in Congress who are already proposing legislation that would let them introduce this tiered service. If the telecommunications companies get their way, the most obvious candidates to pay for the premium service are companies that offer videos, music and other data-heavy products. Consumer advocates worry that if Apple, which runs the iTunes site, starts paying network operators for faster access, it may try to offset the cost by raising the price of a downloadable TV show, now $1.99, by a dime or two.
But the charge-for-delivery model is already under attack in a slightly different forum. A collection of public interest groups are protesting a plan by America Online to charge high-volume senders of e-mail fees for guaranteed premium delivery of their messages. The groups fear that charities, small businesses and others that do not pay the fees will be at a disadvantage.
As an alternative, Apple or other content providers that sign up for premium delivery could set up tiered services of their own. They could, for example, create premium sites where customers would pay annual subscription fees to download songs and videos faster than at the company's free site.
The trouble is that only the most passionate iTunes fans might pay for a subscription, analysts say, so Apple could be forced to absorb the cost of paying network operators for access to their "fast lanes."
"Economics 101 says that if iTunes raises its rates, some consumers will switch to other music download sites, download fewer songs or even make more illegal downloads," said Bruce Leichtman, who runs the Leichtman Group, a market research group which follows the cable and phone industries. "The higher price would lower demand in some shape or form."
Another possibility, critics say, is that smaller Web sites would be crowded out. A big company like Apple, they argue, has the money to pay network providers for faster access and absorb the cost. But mom-and-pop online Web sites might not. If they were unable to compete with bigger, faster sites, the result could be less diversity of content on the Internet.
"Tollbooths and gatekeepers are the exact opposite of what the Internet is all about," said Michael J. Copps, a Democratic commissioner at the Federal Communications Commission. "Down that route consumers can count on paying more and getting less — less content, fewer services and reduced innovation."
The big network operators argue that they would never deliberately slow or block access to Web sites, because doing so would raise a furor in Washington. Besides, they say, angry consumers could switch Internet providers in protest.
That may be true in big cities like New York and Washington, where there is a variety of Internet service providers. But in many other cities, there are typically two and sometimes only one broadband provider — the cable or phone company.
In many cases, "there's nowhere else to go," said Paul Misener, the vice president of global public policy at Amazon. "The market power that these folks have is real, and it is not going to change any time soon."
http://www.nytimes.com/2006/03/06/technology/06broadband.html
Phone and cable companies have stoked those fears recently by floating plans that would have Amazon, Yahoo and other Web sites paying new fees to ensure that their content will be delivered to customers faster.
This possibility has raised the prospect that consumers may end up having to pay twice for access to the Internet — once to the phone or cable company that sells them a dial-up or broadband line, and again to Internet companies that pass along new charges for fast access to content from their sites.
Late last year, the Bells proposed to share the burden of upgrading their networks — particularly as big video files, which take up a lot of bandwidth on the networks, become more common — with the companies sending out that data. The plan quickly drew fire from consumer groups, technology companies and lawmakers eager to preserve open access to the Internet and fearful that the Bell companies have too much power.
Those worries were highlighted yesterday when AT&T announced plans to buy BellSouth for $67 billion, a merger that would create a telecommunications giant with $130 billion in sales and 70 million local phone customers in 22 states.
If a plan like the one the Bells are proposing were to come into effect, consumer prices might not increase immediately, consumer advocates, industry analysts and telecommunications executives say. But one way or another, consumers are likely to shell out more in the future for Web content.
The reason, they say, is simple. As Internet traffic booms and competition intensifies, the phone and cable companies are spending billions of dollars to expand their networks — and they want someone to help them foot the bill.
"The networks of today have to be upgraded," said Carl Russo, the chief executive of Calix, a company that sells Internet television equipment. "You can push this bag around all you want, but at the end of the day, we will pay for it."
The most obvious tactic would be to raise consumers' subscription rates. But Mr. Russo and others say that is unpalatable to the Bells, which portray themselves as the low-cost broadband providers, and even harder for cable companies, which already charge subscribers premium prices for their faster connections.
The government is unlikely to fork over any money to help the cable and phone companies expand their networks. Lawmakers would be pilloried if they used taxpayer dollars to subsidize the highly profitable telecommunications companies directly. So phone and cable companies are turning to a new source: Web content providers. For the most part, the Internet sites now get a free ride because network operators have to transport equally all data that travels on their networks. Some content providers do buy extra servers so that consumers can zip around their sites more quickly, but they absorb that cost themselves.
The idea of the service providers is to create a system where Web sites can, for a fee, bump their data into a kind of fast lane, where it will not be mixed in with everyone else's. A mom-and-pop online retailer might consider this unnecessary, but a company selling, say, videos online could see it as crucial.
"If other players want to take advantage of our network and need something to make their applications available to consumers, we will work with them as partners," said Thomas J. Tauke, executive vice president of public affairs, policy and communications at Verizon. "We anticipate that they will develop applications that need more bandwidth" in the future.
Companies like Amazon.com, eBay and Google fear that if they do not buy faster access, they could end up in a slow lane.
The Bells contend that the fast lanes they are proposing will not slow down other traffic because their networks are big enough to accommodate everyone.
"No one service takes away from the other because of the huge pipes," Mr. Tauke said of his company's network.
Some critics are skeptical and say the Bells' plans to sell television routed over their networks will leave less space for other content. Regardless, if two tiers of delivery speed were offered, content providers would feel compelled to get the faster service if only to keep up with their rivals who had the service. That could become costly.
"There's no limit to what they could charge for this high-speed lane and they could make the slow-speed lane as slow as they want," said Rich Tehrani, president of Technology Marketing Corporation, a media company that promotes Internet phone service. "There's no way to know today what the prices might be, but it could be anything, and that's the fear."
Mr. Tehrani and others fear that companies that compete with the network providers — for instance, the Internet phone provider Vonage — may not get the chance to sign up for faster access, even if they want it.
But the phone and cable industries have powerful allies in Congress who are already proposing legislation that would let them introduce this tiered service. If the telecommunications companies get their way, the most obvious candidates to pay for the premium service are companies that offer videos, music and other data-heavy products. Consumer advocates worry that if Apple, which runs the iTunes site, starts paying network operators for faster access, it may try to offset the cost by raising the price of a downloadable TV show, now $1.99, by a dime or two.
But the charge-for-delivery model is already under attack in a slightly different forum. A collection of public interest groups are protesting a plan by America Online to charge high-volume senders of e-mail fees for guaranteed premium delivery of their messages. The groups fear that charities, small businesses and others that do not pay the fees will be at a disadvantage.
As an alternative, Apple or other content providers that sign up for premium delivery could set up tiered services of their own. They could, for example, create premium sites where customers would pay annual subscription fees to download songs and videos faster than at the company's free site.
The trouble is that only the most passionate iTunes fans might pay for a subscription, analysts say, so Apple could be forced to absorb the cost of paying network operators for access to their "fast lanes."
"Economics 101 says that if iTunes raises its rates, some consumers will switch to other music download sites, download fewer songs or even make more illegal downloads," said Bruce Leichtman, who runs the Leichtman Group, a market research group which follows the cable and phone industries. "The higher price would lower demand in some shape or form."
Another possibility, critics say, is that smaller Web sites would be crowded out. A big company like Apple, they argue, has the money to pay network providers for faster access and absorb the cost. But mom-and-pop online Web sites might not. If they were unable to compete with bigger, faster sites, the result could be less diversity of content on the Internet.
"Tollbooths and gatekeepers are the exact opposite of what the Internet is all about," said Michael J. Copps, a Democratic commissioner at the Federal Communications Commission. "Down that route consumers can count on paying more and getting less — less content, fewer services and reduced innovation."
The big network operators argue that they would never deliberately slow or block access to Web sites, because doing so would raise a furor in Washington. Besides, they say, angry consumers could switch Internet providers in protest.
That may be true in big cities like New York and Washington, where there is a variety of Internet service providers. But in many other cities, there are typically two and sometimes only one broadband provider — the cable or phone company.
In many cases, "there's nowhere else to go," said Paul Misener, the vice president of global public policy at Amazon. "The market power that these folks have is real, and it is not going to change any time soon."
http://www.nytimes.com/2006/03/06/technology/06broadband.html
