Fears for tiers

Newspapers want search engines to pay them.

The World Association of Newspapers (WAN) last week called for collective action to prevent what they claim to be copyright infringement by search firms.

'The search engines are increasingly aiming their strategic efforts at traditional content originators and aggregators like newspaper publishers. The irony is that these search engines exist, largely, because of the traditional news and content aggregators and profit at their expense', said WAN president Gavin O'Reilly.

To this observer, that seems ungrateful to say the least. Huge swathes of traffic are driven to newspaper's online sites because of search engines. It's hard to see how that happens at the expense of the papers themselves.

I mention all this because the relationship between newspapers and portals is somewhat analogous to that of ISPs and content providers. In both cases you have new businesses doing well by variously competing with, riding on and supplementing the traditional businesses.

The difference is that unlike newspapers, telcos and ISPs are very aware of the threats to them. And unlike newspapers, carriers can legitimately claim their costs are rising as a result of content downloads.

Whether that's enough to warrant charging for downloads is another matter.

The most vocal US carrier is the newly-merged AT&T, where chairman and CEO Ed Whitacre has calling for additional payments by content providers for use of the network. Otherwise, he said, carriers and ISPs had no incentive to further invest.

However, Whitacre artfully suggested that extra payments should be for premium service, not for best effort Internet.

Most likely, this fee would be passed onto consumers. That might work - a lot of consumers might be willing to accept tiered rates to guarantee a successful movie download.

But don't underestimate the sensitivity of this argument. It goes to the nature of the telecom industry.

Telcos have traditionally delivered calls and data irrespective of who they are from or what information they contain. The very word 'carrier' underlines that traditional culture.

Whitacre was putting his stake in the ground ahead of US Congressional hearings on what is known as 'net neutrality'. So are US consumer groups, who are demanding that telcos continue to be non-discriminatory bit pipes. Some carriers themselves, like Verizon, are saying the same thing.

A number of Asian carrier execs already feel Whitacre's pain, only more acutely. KT, for example, has scaled up its consumer broadband service from 10, 20 to 50 Mbps, all at virtually the same price.

 

Yet the backhaul cost also increases as consumers take advantage of the fire-hose into their homes, but KT has no way of recovering that extra cost.

Japanese and Hong Kong operators, which likewise offer all-you-can-eat pipes to the home, are in the same boat. One Hong Kong broadband exec declined to comment publicly but admitted it's a major talking point in the company.

This is not just about content downloads, but everything else. If ISPs can differentiate charges for content, why not for VoIP, IM and every other application.

Which is why telcos should have to make the case for tiered charging based on real costs and a genuine threat of an investment drought. Otherwise they will look like newspaper publishers, lost in cyberspace.

Robert Clark is a Hong Kong-based technology journalist and analyst [email protected]

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