Broadband for the rest of us?

In its ongoing struggles to offer broadband Internet access, cable company Comcast recently had its hand slapped by the FCC for selectively shutting down access to certain Web services. Now, Comcast has decided in lieu of shutting down legitimate file sharing programs, it will simply limit users' Web access. If a Comcast customer creates more than 250 GB of traffic in a month, the company may terminate their service agreement.

While this is a throwback to the days when folks were charged by the kilobyte for access (remember MCI Mail and CompuServe?), it underscores some deeper problems at Comcast (and perhaps augurs similar problems at other cable Internet providers). Investors and Internet users (okay, all of us) should wonder: The profit margins are ostensibly quite healthy in the online access business, so why would a company go to such extremes—flaunt FCC rules, infuriate customers, hack clients' computers—to restrict Internet access?

Two reasons:

1. It has serious infrastructure problems, very serious infrastructure problems. Clearly Comcast cannot adequately handle the data load of its current subscribers, which means possible failures or tremendous capital expense in the future to keep up. So investors should be leery.

2. Its premium services, such as video on demand, are struggling. So Comcast wants to restrict movie studios and companies like Tivo from competing with Comcast's own video-on-demand business. The best way to do this is by limiting Internet access and thus preventing people from using those competing services in the future.

The first issue should certainly cause investors to worry. It indicates that the company has not anticipated the demand for Internet services and since it cannot keep up with that demand, the future looks bleak indeed for Comcast. It will either have to extensively upgrade the nodes on its network (the hubs in each neighborhood) or-–worse—add more lines. The latter is so expensive a proposition as to be prohibitive.

The second problem is ineluctable. As more video services become available, it's only a matter of months before more and more customers bump up against the 250 GB limit. Comcast tries to make 250 GB sound like a lot of data; the equivalent of 125 standard definition movies (at 2 GB a movie), the company says. However, people are watching movies in high definition now (what year is it, anyway). Those movies are more in the range of 25 to 33 GB each. Order 10 movies online from the growing number of legit movie sites, and you'll exceed Comcast's limit and your connection could be terminated, according to Comcast.

This way leads Comcast directly into antitrust lawsuits and extensive court battles. That means corporate distraction and declining profits.

Furthermore, while some may claim that 250 GB of data traffic a month is plenty for anyone, they would be wrong.

Increasingly popular Internet services promise to only raise the demand for data. Consider online backup and storage (just backing up a typical PC online would exceed Comcasts limits), and look at applications like Microsoft's Photosynth, and video calling services. These are data intensive, mainstream services. Photo and video sharing on sites like Youtube are commonplace. And online software purchases (want the next version of Photoshop?) can easily account for gigabytes of downloads. And never mind adding a few family members on the home Wi-Fi network who are addicted to World of Warcraft and iTunes. It won't take the average suburban family long to crash the 250 GB limit.

Now will Comcast actually call those families when they exceed the limits? That remains to be seen. However, it does indicate how deep the company's problems run.

On the upside, investors might look more closely at the likes of Sprint. Comcast's problems could be a boon to Sprint and its forthcoming WiMax wireless broadband service. All Sprint has to do is drop WiMax cell towers wherever Comcast has service, and voila, thousands of new subscribers.

For Technology News and Views Visit J-Q.com.

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Net Neutrality

While Comcast began backtracking (well, sort of) on its policy of shutting down certain Internet traffic, those north of the 49th parallel look like they're about to become second-class Netizens. The culprit? Bell Canada. And to think that all these years they were worried about the ugly Americans controlling the media.

First off: Comcast and BitTorrent (one of only dozens of technologies that legitimately use peer-to-peer software on the Web) have announced that they are talking about how Comcast handles spikes in traffic on its network. To date, Comcast has shut down or tricked peer-to-peer software to interrupt downloads, but it now promises that in future it will adopt a protocol agnostic network management technique to keep data flowing on its overwhelmed lines. (You can read the release for yourself here.)

However, it still means that popular applications, such as digital phone service like Skype could be thwarted for Comcast customers. It also means that Comcast still wants to make the Internet its own and could shut out (or "manage") competitors looking to deliver video entertainment online or digital phone service competing with Comcast's offerings. Indeed, Comcast wants to introduce new standards to control Internet traffic--without going to the official Internet and Web standards bodies (well, it said it would submit its ideas to the Internet Engineering Task Force). Not exactly what people had in mind, we think. And you can imagine the uproar if another company, say, Microsoft had proposed such a thing. There'd be H E double L hockey sticks to pay. (By the way, there's already such an internationally accepted standard for addressing these "management" issues: IPv6.) Of course, what Comcast is really doing is desperately trying to avoid potential government legislation that would protect the Internet as it stands (see Net Neutrality).

Meanwhile, back in Canada (no, we haven't forgotten about you) several companies that sell high-speed Internet service to folks have learned the hard way that there's some fine print in their contracts with Bell Canada. It seems that Bell, which delivers the main Internet hookup to those companies, can reduce service whenever the mood strikes it. And the mood has struck.

Bell Canada has already begun slowing down certain traffic on Canadian Internet connections. In the process, subscribers to so-called high-speed services are experiencing serious slow downs (can you say, "dial-up") and even the venerated CBC got caught up in the controversy when its program,“Canada’s Next Great Prime Minister,” (notice how I'm restraining myself from making a joke about this) was made unavailable online due to Bell Canada's slow down. So much for those Canadian content rules.

The question is: Would Alanis Morissette call this ironic?

For more on the inequities of living in the Great White North, see an article from one of my former employers, The Globe and Mail. By the way, Bell Canada, polite as can be, is planning to slow down all Internet traffic it finds objectionable by April. Well, at least most of the snow should have melted by then and Canucks can play outside...

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Net Neutrality

The issue of who controls the Internet--whether it remains as it is with open access or can be controlled by private telecommunications companies--moved to the fore again this week when a San Francisco subscriber to Comcast launched a suit against the company. The suit alleges that the largest cable company in the U.S. misleads customers and uses unfair business practices by interfering with file sharing programs.

Naturally, lawyers for the plaintiff are looking to form a class action suit (now that's one way to recoup those inflated broadband access charges). So get in early and often by contacting the representing law firm.

Already, a collection of consumer and legal organizations have asked the FCC to prevent Comcast from interfering with legitimate file sharing. One proposal is that the FCC should fine Comcast $195,000 for every subscriber whose Internet access has been restricted.

For its part, Comcast says it does not block programs on the Internet---it just delays some traffic. Right.

To read more on this issue see "Comcast Hijacks the Internet" and "Verizon and AT&T: Web 2.0 Killers."

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Hello? Hello?

Net neutrality has yet to pierce the public consciousness (Jon Stewart notwithstanding), but that moment may soon be upon us.

The phrase "net neutrality" refers to the current state of the Web wherein every site has parity on the Internet. Anyone can start a Web site (say, Joe's Guide to Sesquipedalianistic People) and be assured that you and I can connect to it as easily as we connect to, say, The New York Times online. It is the way the Internet was designed, and it is what makes it a unique communications tool and an increasingly essential part of the global business and information infrastructure.

Now, several companies want to hijack the Web, change its structure, and use it to wring money out of every single site on the World Wide Web. The proposal is to strike down net neutrality so that companies like AT&T, Verizon, and Qwest could make it easier to access some web sites and more difficult to access others. So, in the future if you wanted people to be able to download video clips from your site, for example, you'd have to pay additional fees to one of the companies that own the phyisical telecommunications lines, otherwise those companies would make it extremely difficult for people to access your Web site.

The result: Good-bye comparison shopping online, good-bye entrepreneurs and innovation, good-bye voice over IP digital phone services like Skype, good-bye videos online, good-bye every Web 2.0 idea you've every heard of. The only sites that would survive would be the likes of Amazon and Google, which presumably could afford to pay the telecos for priority access. Oh, and you can kiss the idea of online advertising good-bye as well, since the only way to get sufficient traffic to support an ad-based model would be to give the telecos a cut. However, the margins for most sites are too small to make that feasible.

Currently, there is no explicit legislation to prevent telecos from charging every Web site additional fees for access. Hence, the so-called net neutrality movement, which wants legislators to enact laws to prevent the telecos from fragmenting the Web and stifling innovation, restricting access to information, etc. (Incidentally, there is already technology out there to prioritize informational traffic on the Net--IPv6--but that is designed to address other Internet issues, such as how to accommodate, say, streaming video and the explosion of IP numbers.)

What's remarkable about the net neutrality issue is that some organizations, ignorant about how the Internet is structured, have come out against net neutrality. The latest to voice such a position is the technologically handicapped U.S. Department of Justice. On September 6, it filed a so-called ex parte paper with the FCC commenting on net neutrality. Essentially, that paper argued against preserving net neutrality for two reasons: 1) net neutrality laws would stifle innovation, and 2) allowing companies to create a multi-tiered service has worked in other businesses, like the U.S. Postal Service.

As to the first point, it is patently false. Net neutrality is the existing state of affairs and there's been plenty of innovation (no matter how much fun I poke at trendy marketing terms like Web 2.0). Maybe no one at the DOJ has used the Internet yet.

On the second point, it a false analogy. Aside from the questionable tactic of citing the U.S. Postal Service--which is barely hanging on by its fingernails and has failed to innovate since the days of the pony express--the Internet is really more analogous to the phone system. So following the DOJ's logic, eliminating net neutrality would be like allowing phone companies to not only charge for basic service, but also charge each and every one of us an extra fee to actually guarantee that our phones would ring every time someone called (rather than just ringing, well, some times).

So why should you care about net neutrality? Because if net neutrality were to end any business that uses the Web would be adversely affected and every person who uses the Web even just for e-mail could see the utility of the Internet severely curtailed.

To learn more about the issue, how it could affect you, and what you can do about it, I suggest visiting  Save the Internet. See also, "Fighting for Higher Phone Bills."

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Hello? Hello?

Lower phone bills? We're all for it. Well, almost all of us are for it. The folks at Verizon aren't too keen on it (neither are the folks at Qwest or AT&T for that matter). But the telecom world is changing, and lawsuits won't hold it back. Although they could result in much higher bills for you.

Struggling to come up with some way to stem the voice-over-the-Internet tide, Verizon has been suing Vonage for allegedly infringing on its patents, and Verizon won an initial judgement in March focusing on three extremely broad patents involving voice mail and how calls can be transferred over a public packet switched network (in other words, over the Internet to the plain old telephone lines). One point about the case, which is now under appeal until June, is that Verizon's patents appear to be too broad, potentially undermining the whole transition to voice over IP (VoIP) that is underway. 

Another point is that if Verizon prevails in the Vonage case, Verizon could initiate threats against other VoIP providers. It might mean that other firms would pay inflated licensing fees just to stave off litigation. And it would mean...you guessed it...higher phone bills for you and me. Witness the fact that Verizon's own VoIP service is substantially more expense than Vonage, even though Verizon owes many of the physical phone lines. (All Vonage owns are a lot of computer servers.)

As a side note, it's interesting to point out that the issue of "Net neutrality"--in other words leaving the basic Internet protocol technology and access to it the way it is--wasn't an issue until companies like AT&T and Qwest floated the idea that they might start charging Web sites for better access to the Internet. In other words, they would blockade the lines on which Internet traffic travels and thus wipe out small, online businesses while delivering a major blow to Google's business plans. (Not only would Google have to pay for access, but Google also has a VoIP play of its own called Google Talk.)

All of this is a way of trying to squeeze revenue out of what is a dying telecom business model. The days of charging for minutes or long distance calls is already over. The old teleco's just don't realize it yet.

For more on the changing telecom business, see my article on past mergers in U.S. News & World Report.

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