Net Neutrality - The Other Side of the Story

AZCI.net has built and operates a wireless ISP service that currently covers the inhabitants of about 2,500 sq miles of extremely rural Pinal County, AZ. We provide service, almost exclusively to residential customers living largely on land in unincorporated portions of the County. More than 95% of the topography that we cover is not served by the LEC (Qwest) or cable providers (COX, Comcast).

About Our Network
Our network is exclusively wireless with more than 50 cell sites, each with one or more Access Points. We install a customer premise radio / antenna device on the customer’s building which points back to the nearest cell site. We use a “microcell” technology with cell sites on approximately 4 mile centers but able to reach out 8-9 miles.

We installed a DS3 (fiber based 45mbps) circuit in February 2009. At that time, our consolidated bandwidth demand was about 25mbps at the peak time of the day (between 5pm and 11Pm GMT-7). We watched that demand grow towards the upper capacity limit of a DS3 by fall of 2009 and then placed an upgrade order for an OC3 (Fiber based 155mbps circuit) which was installed in May, 2010.

Growth Out of Balance
Our peak bandwidth demand has grown from about 30mbps on average to over 110mbps peaking at 120mbps, in less than 12 months. That’s a 4-fold increase in bandwidth demand while our customer base has grown approximately 30% as has our revenue.

What is driving this growth is Netflix, Hulu and the rest of the movie/video/audio on demand content souces. Our network management tools allow us see where the traffic comes from. At the same time, we can see that our upload bandwidth demand has remained nearly constant (which speaks to affordable movie/video on demand replacing illegal File-Sharing of copyrighted Intellectual Property, which is a good thing for all).

What This Means to Consumers
So, in a nutshell, here is the issue that the ISPs are facing:

Carrier/ISP cost of bandwidth and internal network cost of delivering that bandwidth to our customers is growing at a rate which far outstrips our gains in revenue and our ability to generate the capital necessary to upgrade our delivery networks to provide the internal capacity necessary to carry the traffic increase. Given Murphy’s law, the more bandwidth we provide the more the consumers will consume…

Net neutrality advocates that ISPs charge customers a flat fee for access which is not based upon content, type the access or the rate at which they demand it (Rate of demand is not the same as Connection Speed). Net Neutrality puts the cost of delivering movie/video on demand on the back of the Carriers/ISPs and not on the companies who supply the content and receive all of the revenue for selling the content and not on the customers who consume a disproportionate amount of bandwidth compared to the rest of the ISP's customer base. In the end, the age old 80/20 rule applies...that is, 80 percent of the resources are being consumed by 20% of the customers.

Let's Not Stifle Innovation
We are certainly supportive of new technologies which enable customers to use the Internet in new and heretofore unforseen ways. But, it is not realistic for providers of content that disproportionately consumes the bandwidth of Internet and the network delivery resources of transnational carriers and ISPs to continue to be able to escape having to pay for the bandwidth demand that they create. An analogy would be Gasoline for your car at the same price regardless of how far you live from the production facility. We all know that higher the delivery cost, the higher the cost at the pump. The problem here is that the businesses who sell the content and the consumers who demand it have both escaped having to pay for its delivery!

The bottom line is that somebody has to pay for the Internet Resources being consumed. In a network made up of Providers, Carriers, ISPs and Customers, proportionate cost sharing must occur or the whole thing will topple. The Carrier/ISP financial model based upon an Interactive Internet with a fixed price paid by consumers is no longer a viable model because the interactive use of the Internet is now only a small portion of its total use. Compare the Internet to other consumable resources that we use constantly in our daily lives: Water, Electricity, Fuel, Food...The more we use the more it costs us.

This is not your father's Internet
The Internet is an evolving resource. When it first began as ARPA.net, it was a vehicle for interchanging text messages between users. Then, graphical computer operating systems from Apple and Microsoft arrived and the content explosion began. But, it was still interactive, meaning that most users spent most of their Internet time pointing, clicking and reading. All that has changed. The Internet is becoming a flowing data delivery system where the data streaming is constant. The Internet is replacing Satellite and Cable TV as the video content delivery system.

Net Neutrality is NOT about Controlling Access
The subject of Net Neutrality is becoming a heated debate. Those favoring Net Neutrality are "selling" Fear, Uncertainty and Doubt, better known as FUD, spreading a campaign that those against net neutrality are trying to censor the Internet or in someway prevent Internet users from gaining access to various types of content, or simply being greedy. If you think about it, why would Carriers/ISPs want to reduce or limit access which would throttle their business growth and revenue? Just the opposite is true because we all operate in a Free Enterprise Model. Revenue and profit growth are the cornerstones of American business.

The Evidence is right in front of our eyes!
Think about what happened to AT&T when the iPhone was delivered. The deluge of content consumed by the iPhone users sunk AT&T's network for all consumers, thereby causing consumers to scream "blue bloody hell" that AT&Ts network was terrible.

Verizon, with its introduction of the iPhone, is requiring customers to acknowledge that if they consume disproportionate amounts of bandwidth, Verizon may throttle them. That's because Verizon and the rest of the ISP community cannot not yet charge those consuming disproportionate amounts of Bandwidth more money based upon their consumption. Most people we talk to take the position, "If I want something, I'll pay for it, but, don't tell me I can't have it"..

The Constitution does not provide Internet Entitlement
Unfortunately, the Net Neutrality argument is being put forth by proponents as one where consumers are "entitled to unrestricted access and those opposed to Net Neutrality only want to control access, or censor access"..Nothing could be further from the truth. Carriers/ISPs are simply at war with providers who provide content that consumes the Carrier/ISPs network and do not want to pay their fair share.

What Happened to AT&T can happen to the Internet
Overcommitment of the Internet can and will happen unless something changes. The last IPv4 addresses were issued by ARIN on 2/4/11.

When you are contemplating change, start with this basic premise: Internet Access in a capitalistic society based upon free enterprise will flourish so long as the enterprises that provide the access can make money and invest some of that money in the continous expansion of their networks to meet the continuing demand of the customers.

One possible solution
The solution lies in a variable cost model for Internet usage that charges the consumer for the amount of bandwidth that the consumer consumes, the instantaneous demand that the consumer places on the ISP/Carrier and the type of traffic that the consumer is consuming..

This cost sharing model is not new. We all use it to pay for the electricity that powers our lives and the water that flows from our faucets and irrigates our crops etc.. Transferring this cost back onto the content providers is logistically difficult. So, ultimately, the consumers will be responsible to pay for what they consume. Now, since most of the high bandwidth consuming content is Movie/Video/Audio, the providers of this content (who are enjoying disproportionate profits because they have shifted their cost of delivering their content onto the Carriers/ISPs) are going to have to create an incentive for their customers to consume more and more of their content. Consider the current Netflix model. Pay a flat rate no matter how much you download. This model will have to change to one where each downloaded content includes a rebate to help their customer's ever increasing cost of consumption. This will have the effect of reducing the consumer's cost and shifting the delivery cost back to the Content Provider (where it belongs). The content provider can then set it's basic monthly cost high enough to cover delivery costs and the basic Free Enterprise Model will then be in effect allowing all parties, providers, carriers, ISPs, and consumers to flourish.

We invite your comments.

Sincerely,
GAF