Thursday, February 24, 2011
Many ISPs are considering the move to usage-based tiered pricing models. This would result in data caps and overage charges or bandwidth throttling. These new models are simply a cash-grab which plummets us back to the stone age. Remember counting usage hours and AOL disks with x hours free where 10 < x < 1000 (hint, there are no more than 744 hours in a month)? Being in the streaming HD video business, Netflix is not at all happy about this.
Running an ISP is an expensive proposition for sure. Stringing wires, or fiber if you're lucky, across the US does not come cheap. Nor does tapping into the internet backbone. The beauty of data bits, unlike public utilities is that they are never "used up", and marginal costs of service are small. ISPs are trying to double dip. They want to charge the end user an additional fee per gigabyte when their marginal costs are already <$.01 per GB. They also want to charge Netflix to access their own customers over the last mile. The marginal cost of this is minimal. $7.44 is the maximum monthly marginal ISP cost for a household which streams HD netflix 24/7. And people watch a lot of TV, but not every hour of every day.
The problem is that the ISPs delay upgrading their infrastructure. When the current systems of cable lines and early generation DSL were built streaming HD video was a pipe dream. The current setup has served us well to a point, despite it being designed from the ground up for vastly different purposes (cable for analog television, and DSL lines running over POTS). When people simultaneously stream HD video content the network is brought to its knees. Rather than spend the money to fix this problem, the ISPs take the view that if they charge enough it will go away.
ISPs are just getting frustrated that their customers are vocal when the quality of service for data suffers via a slow connection. They can’t play the same data games as they do with cable TV video signals, such as shoving 500 "HD" channels through a tiny slice of bandwidth, resulting in horrible visual artifacts due to compression. It's ludicrous that a paid cable TV service has a lower picture quality than an over-the-air HD broadcast.
While we're on the topic of bandwidth issues, it's time to realize that there is a time and place for lossy compression, but there is no place in home or mobile consumer level networks for lossy transmission. Much like ISPs, cell phone companies built the networks to handle a particular load, voice. With an analog voice connection some lossy transmission is expected. With a mobile digital data connection it is unacceptable. Wireless mobile networks are more constrained than fiber to the home, but a phone call doesn't need to have the acoustic properties of a concert hall. That's where lossy compression comes in. Depending on content, information can be fudged. Lossy transmission in a digital phone call leads to a dropped or missed call. While this seems to be the norm at times, it is unacceptable. Bits are sacred and cannot be fudged. It's time to treat them with respect.
Just reinvest the profits in the infrastructure and let people use more bandwidth. It’s the only service that complains and reduces QoS when customer reliance and retention grows. Would a neighborhood barbershop throw a fit if they had a line around the block? No, they’d invest in capital and hire more barbers to service more customers and make more money. Everybody wins.
Why can’t the ISPs figure this out? They need to reinvest in their infrastructure. Instead of forcing their will on their customers and bending their usage habits, try being flexible and realize that this isn’t going away. Bandwidth usage has increased regularly since prehistoric times, except maybe for a period in the dark ages. Bits are bits, and we’re happy to pay for them, but we demand a fair price and QoS. I can’t wait until we have viable alternatives to drive competition.
So what's the solution? Run ISPs like a non-profit public utility. Austin Energy is one such utility. They have a clear monopoly on the electricity market, but their customer satisfaction ratings are through the roof. Employees at ISPs deserve to get paid, and as an organization they should make enough to cover their costs. The only public benefit to having for-profit ISPs is increased tax revenue. As a community owned service with completely transparent financials we can be assured that profits are reinvested in the infrastructure. Internet access is becoming more and more essential. Do most Americans regularly worry that we won't be able to take showers at the same time or keep our refrigerators cool enough? No. We should expect the same from our ISPs.