Private profit from public investment?

More on the net neutrality debate

Comment Even after living in America for seven years, I still get surprised by how polarised debate can be on some issues. I can well remember getting in a cab in Vegas and being taken on the freeway that runs along the back of the strip to my hotel. The cab driver launched into a tirade against the then president, and I felt that should I demur in any way I was likely to find myself turfed out on the freeway, possibly having ingested a little lead.

Right now there's a lot of shrieking going on in the US about net neutrality which, depending on your point of view, either means the end of freeloading by those who would perpetrate massive digital copyright theft, or the death of the first amendment of the Constitution.

My view is that it comes down to a very simple point. The incumbent operators have argued for a continuation of their monopoly profits from fixed line telephony on the basis of needing to invest in a new fibre infrastructure to deliver a universal (i.e. no matter where you live you can buy it) next generation digital service.

However, having been gifted the money to build out this infrastructure, they then want to be able to retain the right to privileged access to the bandwidth it enables, as opposed to simply earning money for looking after it (from access charges).

Surely there's a disconnect here. If you go to the markets with a sound business model and borrow money, you should be able to do what you like (within the law) with your asset, but if you use what is essentially a government tax through protected fixed line telephony charges, surely you should not.

One person has argued for the concept of "eminent domain", which we know here as compulsory purchase, but in effect, the network in question has already been paid for by the citizens of the United States in over 100 years of monopoly profits to the old AT&T and the RBOCs (and pretty much back again after all the mergers).

As QoS comes to the internet over the next few years, the question of traffic management is going to be an interesting one to watch. We've seen T-Mobile recently take the decision to ban VoIP and IM from its HSDPA network, the question of a carrier's ability to ban things it doesn't like, or do things that explicitly or implicitly sabotage applications will be a major factor in competitive markets.

Fortunately for us, in the UK we have a very healthy competitive environment. Vodafone has stated that it will not ban VoIP on its new 3G broadband HSDPA network, and in the fixed line space there are many telecom players taking advantage of Ofcom rulings to unbundle local "last mile" loops at BT exchanges to offer services directly to residential and business users from their own IP backbones. Hopefully we can avoid all the shrieking and let the market do its job. ®

David Perry is principal analyst at research firm Freeform Dynamics.