Industry

Hydraulic Despotism

Dan Rosenbaum points to John Ellis's "The Internet Power Grab" in Fast Company. Mr. Ellis makes some very good points.

This trend, from free to fee, is emblematic of a more ominous development in the Internet arena. ... [M]ature companies in mature categories striking back at Silicon Valley technology and the pricing-power collapse that it implies. They are doing so in Washington, DC and in state capitols, where the technology crowd is weakest and most clueless.

....

[Silicon Valley] had no use for politics, no use for government, no use for the old rules. But it was more than that. They were openly disdainful of government regulation of any kind, and they didn't bother to hide their contempt.

So, instead of finding legislators who were willing to do nothing, they abstained from the system. DOJ v. Microsoft changed that for at least one company.

Just as their technology raised security concerns, it also threatened two established businesses in particular. The first was old-fashioned telephony -- the telephone business was the choke point of Internet technology. ... The problem was the so-called last mile: the wire into your home. Most homes were equipped with three wires: electric, telephone, and cable television. Most people connected to the Web over a standard phone line. Converting that line into a high-speed-access line was crucial to the success of all of the other Internet technologies that the Valley had to offer. [emphasis mine]

But there was a problem. Regional Bell Operating Companies made their money on local and long-distance telephony. The Valley was proclaiming that the days of such services being fee-based were numbered; in the future ( through Internet-Protocol telephony ), all voice calls would be free. And it was true. If every last mile was connected by fiber-optic wire or high-speed cable, every voice call could be free.

The RBOCs, of course, did not see such a future as beneficial to their financial health. So they went to work at the state and federal level to forestall the implementation of this technology until they could control it. RBOCs have state and federal political relationships that are the envy of every industry, with the possible exception of the electric utilities.

And instead of working with the companies that controlled the chokepoint, they said, "The Internet will be the Death of you." Is it any wonder that we have over-capacity in the backbone and puny 56K links at home?

3:19:49 PM # Google It!
categories: Industry