I was making my usual rounds of anti-telco, pro-neutrality, red-meat-servin’ blogs the other day when I came across this proposal from TechDirt’s Mike Masnick:
[H]ere’s a simple suggestion for mobile operators: Be the first to be totally upfront about your plans and services, remove any high pressure sales techniques, stop making it difficult to compare plans, phones and service and dub yourself as the customer friendly mobile operator. Then see what happens. Of course, some mobile operators have taken steps in this direction over the years. They’re a lot more open about where various deadspots are than before and they’ve tried to be more open about specific features and plans — but the problem is that this “secretive” mentality exists up and down throughout the organization. If a company makes it clear policy from top to bottom that openness, clarity and customer satisfaction are keys, it would capture the interest of an awful lot of people.
The same criticism could be leveled against Comcast for their recent Bittorrent-throttling antics or their not-actually-unlimited plans. And Comcast would be just as likely to take the advice to be upfront and forthright as the mobile operators are, which is to say not at all. You can see the reason for this in the very first comment left on Mike’s post, which appears to have been authored by a defensive employee of the cellular industry:
If you don’t like wireless companies it is simple…this is not a commodity or necessity of life such as water or power, this is a instrument that you choose to purchase and pay for. If you don’t like it, don’t buy it.
I think that this demonstrates the problem with the cable companies, the mobile companies, the record companies and (before they decided they wanted to be Google without the technology or marketshare) AOL, too: they don’t understand or won’t admit the nature of what it is that they’re actually selling. It’s not what the commenter thinks.
As far as I can tell, there are only two ways to make money by selling data to consumers. First, you can sell the signal: a catchy song, a fascinating print article, an entertaining video — you make it and you charge for access. It’s a pretty straightforward way of earning a living. Second, you can sell the delivery: you can charge for transmuting and transporting the signal into a location and form that’s easy for consumers to use.
These both used to be noble and lucrative fields of endeavor. The world will always have an appetite for original creative works. For a while it looked like the same could be said of novel methods of data delivery: radio was great, television was better, the telephone turned out to be pretty handy, and recorded music attracted something of a following. It seemed like the world had a bottomless appetite for new, increasingly efficient and ever-more specialized methods of delivering signals to consumers via enormous, capital-intensive infrastructures.
But it didn’t! Digital technology arrived and the world, while hungrier for content than ever, found that it preferred a steady diet of packets. The arrival of cheap and incredibly flexible signal processors on our desktops and in our entertainment centers made the old, centralized and largely analog infrastructure increasingly unnecessary. The development of information theory let us identify and draw very close to the theoretical maximum efficiency for signal transmission.
These days any signal can be made into packets, and we’ve pretty much figured out the best ways to move those packets. All that’s left is to do the actual moving. That’s the business the aforementioned companies are in: they ship bits.
Unfortunately, as Nicholas Negroponte noted, “Shipping bits [is] a crummy business.” That’s because bits are a commodity.
It must be pretty awful to wake up one day and suddenly realize that you’re in a commodity business. As a software developer I’ve at least had a taste of it — it was unsettling to realize that an army of developers in Bangalore could churn out code better than I could, dollar for dollar. I had fooled myself into believing that what I was selling was so extraordinary and great that people would be begging — begging! — for me to deign to craft some SQL and PHP on their behalf. Such a rarified gift! Such a technical artiste!
When you realize that you’re selling a mere commodity your ability to profit (and extract rents) from your cleverness is severely limited. It won’t help to roll out an ad campaign or make the product mint-scented. You can’t differentiate your product from your competitors’. It’s all pretty much the same. The users can’t tell the difference. All you can do is sell as much of it as you can while spending as little money as possible.
It’s probably pretty hard to show off all of the fascinating things you learned in business school if all you’re selling is bits. Rather than face this fact, the signal-deliverers choose to delude themselves and their customers. They use their existing market position to sign exclusive deals with content providers, forcing consumers to stick with Sprint if they want to see NFL highlights on their phones, or AOL if they want to hear Ted Leo cover Since U Been Gone, or visit Hulu if they want to watch their favorite show. They fool themselves into thinking that it isn’t their lingering monopolistic power that keeps the money coming in, but rather their unique talent for both running a cable company AND reinventing Tivo, or managing the production of television series AND building a YouTube competitor. Somehow, they maintain, it just happens that the sole firm allowed to provide these services is also the one best positioned to provide them efficiently.
Data is now a utility, just like the gas and electric lines running into your house. The present situation is as if the gas company gave customers specialized ovens that could only heat up prepared meals bought from the utility — and refused to connect the gas line to any other kind of oven. It’s ludicrous. We don’t want their ovens or meals or online music portals or mobile video platforms. We just need them to get out of the way of the original signal, then shuttle the bits we ask for as cheaply as possible.
But if the bit-movers admitted this they’d also be admitting that they’re less necessary than before — that there’s going to be fewer of them, and that they’re going to be making less money. That’s not the sort of thing that a corporation is eager to recognize. Nor is there an advantage to being the first to recognize it: there’s still good money to be made squeezing the last dregs from this dying business model, and rocking the boat will only hasten everybody’s inevitable demise. Who knows, you might get lucky and make it to retirement before the whole thing collapses. Might as well give it a shot.
So I think Mike’s proposal isn’t very feasible. It’s not a question of a needing a company to step forward and begin treating its customers with honesty and respect; it’s a question of needing an industry to admit that it’s less relevant than it used to be and quietly retire to a life of unassuming, unexciting competence. And that wouldn’t be much fun at all.
“The present situation is as if the gas company gave customers specialized ovens that could only heat up prepared meals bought from the utility â and refused to connect the gas line to any other kind of oven.”
That might be the best analogy of the net-neutrality subject I’ve ever read.
Great analysis.
I only disagree on one point: “…and we’ve pretty much figured out the best ways to move those packets.”
I don’t think we’ll ever get to a point where we know the best way to move “packets”, if by packets, you mean information.
TCP/IP works, for now, because it’s open, ubiquitous, and built by nerds. Sorry, I don’t know why that last bit is important, but I do believe that it is.
Anyway, the companies are bound to fail. I mean, look at them: they’re companies. They need profits. They are alienating their support base. It’s bound to end badly.
I think we’re probably closer than you think on the question of moving data. We can calculate the entropy of the piece of compressed data, for instance, and see how close it is to its maximally compressed (this only applies to lossless compression, of course). Similarly, we can take the bandwidth of a given slice of spectrum in a given medium and know how much data we can ever pass through it.
Now I’ll admit that important work is still being done — just yesterday I read about an Australian researcher’s development of a way to improve DSL efficiency. But my central point is that packet-switched networks offer such great advantages that it’s inconceivable that we’d move back to specialized signal-delivery systems rather than building new systems atop our present, unified, packet-based architecture (one that can, of course, have its capacity expanded as necessary).