Tuesday, 5 May 2009

Phone Companies vs Broadband

Traditional Telcos, "phone companies", are exactly the wrong people to own and operate consumer Broadband networks, and their close relative, Cable TV.

There is an inherent conflict:
  • Telco Engineering is very different to Computer Data Network Engineering. You cannot be good at both or build networks that are good at both.
    The network & equipment designs and tradeoffs are antithetical and antagonistic.
  • Telcos make money from phone services, which are relatively low bit-rate. It is against their commercial interests to sell high-quality, high-speed data networks at affordable prices.
    To expect them to cannibalise their most profitable line of business is asking for incompetent & irresponsible management, which puts them in jeopardy from corporate regulators and malpractice suits from shareholders.
There has always been a fundamental conflict of interest in any Telco rolling out Internet broadband services: cost-per-bit charging either makes telephony effectively free or streaming TV monumentally expensive.

In Australia after Telco deregulation, the initial duopoly (Telstra & Optus) were allowed to roll-out both Broadband and Cable TV. The early 1990's Cable TV debacle with 80+% duplication showed both the inherent commercial conflict and that both Telcos were aware of it and would act, aggressively, to maintain their commercial interest.

The current parlous state of play with National broadband service underlines the argument.
The design of the new NBN by Telcos is similarly flawed. They need to make it expensive and complex to protect their phone networks for as long as possible.

That our legislators and regulators have failed to understand this inherent conflict, to see the massive market distortions/failures is an amazing oversight. There are either blind to it or accepting of it and in the thrall of the large Telcos. Is it ignorance, incompetence, arrogance, apathy or something worse?

The solution is clear and demonstrably effective:
  • Issue separate licences for telephony and data networking, with the same cross-ownership restrictions/regulations already applied to the Media.
    Papers, radio and TV need to compete with one another.
    Regulations prohibit a single marketplace being dominated by a sole player.
Explaining why Australian consumers aren't served by a protective communications regime is becoming increasingly hard...

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