In the last few months, it has become a fashion trend among telecoms and media to ask for Google's money. We may have a bit of pity on the journalists who risk their lives to bring us thoroughly researched first hand news, only to find the product of their work squandered for free on the Internet while they are asked to feed their families with shrinking salaries.
The pity turns to doubt when the state threatens to take over funding of the independent press (just quoting the land of liberty and the revolution
here).
Doubt turns into amusement when I read that Deutsche Telekom's René Obermann (
German or
English) has followed César Alierta of Telefónica (
Spanish or
English) in identifying Google as telecoms' next source of revenue.
First, how do they want to motivate Google in paying extra for traffic generated as an answer to requests issued by Deutsche Telekom's subscribers? Block access to Google's services for Telekom's subscribers? Chances are that customers would exchange Telekom's high quality network for Vodafone's full content network. If Telekom does that in November, Vodafone and all the other Telekom competitors will have a merry Christmas.
Second, it is true without a doubt that data transport prices will increase once commercial reasoning sets in. I would not have any problem with a charge of one dollar per gigabyte above 5 GB monthly consumption on my DSL line. And nothing against throttling transmission speed at 100 MB a day or 1 GB a month on my mobile connection. Note that these are network and application neutral rules. A byte delivered is a byte delivered – I don't want my bytes policed and charged extra whenever my access operator thinks he will go unpunished for doing so.
And note, too, that QoS (quality of service) is a value added service. I am willing to pay a cent per minute extra for quality of service when this avoids the 5 second conversation gaps I experience in Skype calls, or the video freeze that happens just before my favorite soccer team marks a goal. But what I am paying for are bounds on delay and jitter for bytes delivered, not for an access operator infrastructure that wants to understand the application I am buying quality of service for.
So far, the money-making new services we are left with is refined transport that should earn established telecoms and ISPs a few bucks more than present flat rates. Still, this is not the story that drives the pension funds into buying telecom stock.
Telecoms have that story, and they are not even aware of it.
Let's revisit some of telecoms' differentiators:
- Unmatched market penetration: About half the world's population, more than 3 billion people are hooked up to the global telecom network.
- Fully interconnected network: With a few exceptions, you can dial each of the 3+ billion users directly. You do not have to own 5 different SIM cards to reach different parts of the user space like in the social networks world.
- Hardware independence: The network works between an incredible mix of hard and software. Remember, not all customers are apples nor will they ever be.
- Lowest transaction costs. Telecoms can charge you 1-10 cent items (voice calls, SMS, etc.) and make a profit on that. Banks, credit card companies, and online payment systems are far from that price point.
- Global account settlement. Ever tried to use a credit card in Iran? Or a PayPal account in North Corea? But you can place phone calls to these countries – that is you buy call termination services in Iran, without registering personally with any local termination service. The Iranian or North Corean operators don't even have to know you. As a simple AT&T, Bell, or Telmex customer your operator guarantees to pay the termination fee in Iran or North Corea.
- And the ultimate secret: Automatic network identification: Whenever your telephone or Internet capable device is active, your access operator knows you – your session is connected to your contract or network identification number and this in turn to your contract data. So your access operator could charge you for payable internet content, if you have told them you want this – without going through authentication and checkout pages. When you're talking about a 5 cent item, this is crucial. Would you want to place a phone call, if you would have to go through a lengthy authentication procedure every time you start to dial?
You see me getting at my example. Just one innovative use of the assets telecoms sit on would be to charge low price Internet content, not just calls and SMS. And they could deliver to 10 times more customers, make available 1000 times more content, and be fully hardware independent. This means more traffic (and more tiny transaction fees) than voice and SMS combined. Along with boosting their own balance sheet, telecoms could save the media industry as a side effect.
And that is just one additional high growth market telecoms could open up on their own activity. Others will find more business opportunities looking at the huge telecom assets listed above.
Conclusion for Telecom Execs
If you prefer tax to innovation, there is a better and safer workplace for you.
If you prefer innovation to tax, there are better ideas than an app store.
Conclusion for Politicians
Politicians, net neutrality is not just a technical term.
You can enforce it and motivate one of your largest industries to innovate and thrive. They have the assets and the competent workforce to do so, they are just missing the willpower.
Or you can tax Google and throw the money at your languishing telecom industry. But do it tenderly, don't wake them up.
