Losing net neutrality will harm the IT vendors and startups

Losing net neutrality will harm the IT vendors and startups

Summary: I recently wrote a post arguing that Google, Yahoo and all the other online giants have put up a half-hearted defense of Internet neutrality because they have a lot to gain from the absence of net neutrality. The ones that have the most to lose from the loss of net neutrality are not the web services companies but the infrastructure providers They won't speak up because they don't want to upset their "valued customers.

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TOPICS: Broadband
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I recently wrote a post arguing that Google, Yahoo and all the other online giants have put up a half-hearted defense of Internet neutrality because they have a lot to gain from the absence of net neutrality.

The ones that have the most to lose from the loss of net neutrality are not the web services companies but the infrastructure providers They won't speak up because they don't want to upset their "valued customers." such as Cisco Systems, Intel, Sun Microsystems, IBM, EMC, Dell and Hewlett-Packard. And it is puzzling why they are so quiet on this issue.

If the Telcos and cable TV companies are allowed control the choke point--the last mile connection into the digital home then that cuts out competition. Without competition you have far fewer infrastructure builders.

This means that to get to the next stage of high speed broadband is going to take a lot longer because the Telcos and cable TV companies operate a duopoly in most markets. They'll get around to upgrading their networks when they get around to it.

There is no competitive pushing and shoving to get them moving faster. And there is no competitive infrastructure building which is bad for the big IT vendors. Plus, it is a bad situation for thousands of Silicon Valley startups (and their VCs) that are banking on the availability of ubiquitous high speed broadband connections at low prices.

We've been here before: During Internet 1.0 a lot of startups were way too early in their expectation that millions would soon have (low speed) broadband connections and they went out of business.

Now, we have millions with low-speed broadband but it is the rate of adoption of higher speed broadband that will determine the fortunes of the next generations of Silicon Valley startups.

Yet the startups are too tied up with their ventures and blinkered from seeing what is going on in the political realm, where the Telcos have huge sway thanks to institutional connections that span generations. They are very good at lobbying against any legislation that mandates net neutrality.

The leading Silicon Valley companies such as CSCO, INTC, and HPQ, all have much better political connections than the newbies such as GOOG and YHOO. However, the executives at the big IT vendors are extremely shy in speaking out on this issue, when in private, some of them will agree with me that the actions of the telcos are harming their markets.

They won't speak up on network neutrality because they don't want to upset their "valued customers." But those valued customers are costing them the loss of a much larger market.

IMHO they should be taking care of their valued shareholders. They could sell far more infrastructure equipment if the Internet is open, neutral and there is unfettered access to the digital consumer.

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Please see:

Check out this Washington Post interview with Scott McNealy and how this former fearless iconoclast sidesteps the net neutrality issue.

Here is a summary of news coverage on net neutrality from News.com.

Here is Wikipedia on Net Neutrality as law.

Topic: Broadband

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4 comments
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  • Perhaps they're quiet...

    ...because they understand the folly of collectivism.
    Omch'Ar
    • Collectivism?

      Whatch you talkin' about?
      wmlundine
  • We MUST have true Net Neutrality

    We MUST have true net neutrality if the internet is to continue to flourish. If we don't, then the telcos and the cable companies will decide for us, instead of the end-users deciding for themselves, which services are "winners".

    The FCC and the Congress, over the last 30 years, has lost its way. It has forgotten that it works for us taxpayers, NOT for the telecommunications companies.

    The model I would use to keep the internet on track is the ICC model:

    1) Totally divorce content from transport. A transport provider could still provide content, but it must be done by a seperate subsidiary at "arms length", with NO discrimination permitted by the transport entity for the traffic of its affiliated content provider.

    2) All tranport should be on a first-come-first served best effort model, like what is done with the railroads. The railroads are required to tranport all legal traffic that is properly tendered to their system - transport on the internet should be the same. The only exception should be "perishable" traffic: traffic that, as a class needs special consideration. VoIP traffic is one example. But such special consideration must be "vendor-neutral". The railroads do the same thing with "perishable" cargo, like fresh fruit and similar items.

    I think this is the least we should expect from the telcos and the cable companies. The government (meaning "we the people") have given those companies special considerations such as the use of public rights-of-way, limited eminent domain to construct their facilities, special tax breaks and other special treatment to construct their networks. The are a public utility, whether they like that fact or not. The LEAST we should expect in return is non-discriminatory tranport of all traffic.

    What I propose is NOT collectivism - just simple fairness.
    bowenw9
  • Doesn't make sense?

    The telcos build the additional capacity to compete with cable, the other member of the duopoly. No matter who pays for it, the same amount of capacity is added. So the hardware companies you name have no interest in how the "net neutrality" contest comes out.

    Google, Yahoo, Microsoft, et al have great interest in this fight, because if "net neutrality" fails they have to pay for the resources they're using for profitable products. They get a free ride if the costs can be shifted to the public, including all those who never use their bandwidth intensive services.

    The issue of competition for the duopoly is secondary, also unlikely. On this issue, it's important that the telcos be paid for the extra capacity. Because if the telcos lose, the result is a cable monopoly. That would be a very problematic result.
    Anton Philidor