A fair amount has been made about the comments of SBC CEO Ed Whitacre in this recent BusinessWeek interview. Rightfully so. Here are Whitacres most troubling comments below:
How concerned are you about Internet upstarts like Google, MSN, Vonage, and others?
How do you think they’re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?
Granted, its not very clear what it is exactly that Mr. Whitacre is suggesting here, but the comments do seem to suggest an abandonment of the notion of network neutrality by incumbent broadband service providers. This is very troublesome. The business model that justified the capital investment in broadband by local exchange carriers and cable MSOs was based on the subscription fees for broadband service by consumers. What Whitacre seems to be hinting at here is that not only will I need to pay for my broadband pipe into my house and then pay a premium for any applications or services that my broadband provider deems as trying to freeload on the broadband pipe. Considering the implications of this statement fly in the face of some FCC decisions and policy statements from the past year, not to mention the conditions under which the acquisition of AT&T by SBC was approved just this very week, I think these comments are worthy of some clarification.
Mr Whitacre will be well reminded that the local loop and cable pipe will see competition from power companies and Wi-Max service providers. Likewise efforts to squash municipal Wi-Fi builds have not been quite the success SBC and Verizon might wish they were. Who knows what alternatives to the local loop well see next. Ownership of the long-haul is sufficiently competitive that if the likes of SBC or Verizon take an unacceptable approach to network neutrality there are the Level(3)s and others in the world to supplant the incumbents for the long-haul element. Abandon network neutrality and eventually the market will find a way to bypass your precious pipes.
