IP Capsule E-newsletter, August 17, 2006

IPso Facto…

How about an honest debate on net neutrality?
Cable executives have been dismissing net neutrality as "a solution in search of a problem." Nobody, they say, is going to block any content.

It's a great line – direct, pithy, and dismissive without sounding overly contemptuous. It's also disingenuous.

The issue isn't blocking anyone outright. The problem is how to handle the situation when third parties start providing – and getting a lot of demand for – bandwidth-hogging applications. The problem doesn't exist yet.

It doesn't exist yet because the largest, most ambitious third parties (e.g., Google, AOL, eBay) are not going to provide those applications until they have some assurance that MSOs will provide QoS – for free – so their future bandwidth-sucking applications don't look like garbage and fail.

Why MSOs should have to provide free QoS for someone else's services is a question those third parties don't want to answer, and so they're being just as disingenuous with claims that MSOs and phone companies want to create a world where the rich will be able to afford access to the information superhighway while the rest of us poor plebes are relegated to some metaphorical dirt road.

And that's literally what they're claiming. What follows is a blast e-mail to geographically selected eBay users (presumably chosen by virtue of their residence in the district of some key Congressman or another) from eBay CEO Meg Whitman: If you want to skip ahead, the basic message is: MSOs are bad – complain to your Congressman.

Net Neutrality and the eBay Community: A Call to Action

Dear ____________

As you know, I almost never reach out to you personally with a request to get involved in a debate in the U.S. Congress. However, today I feel I must.

Right now, the telephone and cable companies in control of Internet access are trying to use their enormous political muscle to dramatically change the Internet. It might be hard to believe, but lawmakers in Washington are seriously debating whether consumers should be free to use the Internet as they want in the future.

Join me by clicking here – http://www.ebaymainstreet.com/netneutrality – to send a message to your representatives in Congress.

The phone and cable companies now control more than 95% of all Internet access. These large corporations are spending millions of dollars to promote legislation that would allow them to divide the Internet into a two-tiered system.

The top tier would be a "Pay-to-Play" high-speed toll-road restricted to only the largest companies that can afford to pay high fees for preferential access to the Net.

The bottom tier — the slow lane — would be what is left for everyone else. If the fast lane is the information "super-highway," the slow lane will operate more like a dirt road.

Today's Internet is an incredible open marketplace for goods, services, information and ideas. We can't give that up. A two-lane system will restrict innovation because start-ups and small companies — the companies that can't afford the high fees — will be unable to succeed, and we'll lose out on the jobs, creativity and inspiration that come with them.

The power belongs with Internet users, not the big phone and cable companies. Let's use that power to send as many messages as possible to our elected officials in Washington. Please join me by clicking here right now to send a message to your representatives in Congress before it is too late. You can make the difference.

Thank you for reading this note. I hope you'll make your voice heard today.

Sincerely,
Meg Whitman
President and CEO
eBay Inc.

P.S. If you have any questions about this issue, please contact us at government_relations@ebay.com.

I tried that e-mail address myself to ask a few questions, but after several days I still have not gotten a response.

What I did get was a copy of a response to Whitman from eBay member David L. Cohen. Seems Whitman kinda curdled Cohen's butter. Oh, hey, did I mention Cohen is an executive vice president over at Comcast? Hence the butter curdling. Again, for those who want to skip ahead, the gist is that Whitman's whistling out her elbow and would she care to debate the finer points of the issue?

Dear Meg:

As an eBay user, I was excited to get email from the CEO. As you might imagine, I also have some thoughts on the network neutrality issue.

Like many Internet companies, eBay has been an incredible success story, thanks in part to the competitive broadband networks that extend to homes around the country, networks in which our company and other cable companies have invested over $110 billion over the last decade, while phone and wireless companies have invested tens of billions more. One might argue that the broadband era itself has enabled more innovation on the Internet than any other technological development to date.

The next generation of broadband networks will require even more investment, which will create even greater opportunities for innovative business models on the Web. However, in my judgment, regulating networks in the name of "network neutrality" will throw a monkey-wrench into the works. It will discourage innovation in networks and in business arrangements in ways that will not benefit consumers and will in fact stymie opportunities for innovators.

It has never been clear exactly what proponents mean by the term "network neutrality." For the most part, its advocates seem to argue for one-size-fits-all regulations that would require all Internet content be treated exactly alike. Your letter and other materials claim apocalyptically that if such sweeping new federal regulations are not enacted, the sky will fall and the Internet as we know it will end. But this is exactly the kind of rhetoric that we heard from many of the same players during the "forced-access" and advanced instant messaging debates of some years past.

The record today shows that yesterday's clenched fist, would-be regulators were wrong, that regulation was unnecessary, and that companies like eBay, Microsoft, and Google all continued to profit handsomely — because they brought great value to the marketplace — without the paternalistic, heavy hand of federal regulation.

Of course, it is entirely natural and understandable that eBay would support the type of regulation of the Internet outlined in your letter. After all, getting the government to regulate the Internet would give eBay and other large e-commerce companies guaranteed access to the maximum bandwidth we deliver into a customer's home — for free. But, as the saying goes, there is no free lunch.

Many have argued that a "free-ride" for Internet content providers would come at the expense of every Internet user who would have to bear all the costs for network upgrades, and that it would merely preserve the dominance of a few – like eBay — and deny other innovators the chance to work with broadband network providers to bring new competition to your business. But most importantly, the likely consequence of transforming broadband providers into "dumb pipes" – which is essentially what you are asking for — will be to hamstring the forward march of technologies and services that will benefit consumers.

In tomorrow's world, a broadband provider might want to help bring health care into underserved rural areas with, for instance, real-time consultative video for complicated medical procedures. But your plan would outlaw that advance unless the same network capacity is given to companies like eBay to support your commercial endeavors. Similarly, your plan would allow you to effectively veto the creation of a child-friendly content zone that packages parent-approved bandwidth-intensive games with educational tools and learning communities. Your plan might even preclude tomorrow's broadband pioneers from partnering with content providers to raise capital to build new competitive wireline and wireless networks.

Further, it is unfair and misleading to argue, as you do, that this debate is about "whether consumers should be free to use the Internet as they want." By that logic, I should be able to use Google's Internet payments service — or anyone else's — when I bid for items on eBay, which just happens to be the most dominant auction site on the Web. But you won't let me. Does that mean the government should regulate you as a result? I can point to countless examples of ways in which the Internet of eBay and Google and Microsoft is not "neutral," but I would argue — as with networks — that some "non-neutrality" can in fact promote innovation and competition.

Comcast and other cable providers have said repeatedly that we do and will provide our customers with an Internet service on which their access to all lawful Internet content is neither blocked nor degraded, no matter the source. To take a contrary position would be commercial suicide — our broadband service already faces stiff competition from DSL, and the number of wireless, satellite, fiber-to-the-home, and broadband over power lines providers increases every day. In fact, the intensely competitive broadband marketplace – and the ready contestability of that market – provide the ultimate protection to the consumer.

The essential point is this: the broadband marketplace is in its infancy. No one can predict every business model or set of commercial arrangements as we move into the future. And we should not be trying to, a priori, predict or hamstring the natural course and evolution of the marketplace. We all need the freedom to experiment with business models that let us deliver what consumers want. We can get there if Congress focuses on liberating tomorrow's networks rather than regulating today's networks.

We have also said that the kind of regulation you propose is laden with risks — for your company, for Internet start-up companies, and for network providers. Because of the risks of adopting your regulated vision of the Internet, and the absence of any current problems that require intervention, many independent leading voices — including the editorial boards of the Wall Street Journal, the Washington Post, and USA Today – have argued against network neutrality regulation, as have leading technology innovators such as Cisco's John Chambers and the "grandfather of the Internet," Professor David Farber.

Since you were kind enough to share your views about the importance of fairness and neutrality on the Internet not just with me but presumably with millions of eBay users, I respectfully make this proposal. Why don't we work together to find an appropriate forum or method to provide truly neutral information on "network neutrality" to all of your customers. Instead of just providing a one-sided, decidedly non-neutral perspective on this complicated issue, let's give your customers a more balanced — more "neutral" — set of facts, in a dispassionate format, so they can make up their own minds. I have great confidence that, given all the facts, consumers will not support regulating the Internet. If you would like to discuss my offer, I am at your disposal.

Sincerely,
David L. Cohen
Executive Vice President, Comcast Corporation

It appears to me that Cohen is making some assumptions about what, precisely, Whitman is proposing legislativelywise, and accusing her of saying a few things she's probably said elsewhere but not here in her e-mail, but until Whitman gets back to me I'll have to reserve judgment.

But what I really, really like is the idea of a real, substantive debate, one that avoids posturing, pithy one-liners, and misrepresentations of each other's positions, during which we find out exactly what companies like eBay want, what that would actually entail for cable operators and phone companies, and if there might be an amicable resolution, preferably one that prevents Sen. Ted Stevens from getting further involved.

CED will be happy to host, by the way. Cohen's willing – nay, eager. Anybody got Whitman's direct line?

—Brian Santo, IP Capsule Editor, and CED Magazine Senior Editor

MobiTV announces support for WiMAX
MobiTV announced its official support for the WiMAX standard, and perhaps it was only coincidence it happened on the same day that Sprint Nextel announced it is going to build a WiMAX network with a nationwide footprint.

MobiTV said it has been working with several wireless companies – which it declined to identify – through the last few quarters to provide support for the several versions of the 802.16 WiMAX standards, in partnership with several leaders in the wireless and technology industries.

MobiTV's support for WiMAX is not exclusive. The company said it expects to continue conducting research on a number of network standards as they emerge in order to meet the needs of its international partners.

Cell phone TV set for surge
Buoyed by adoption of broadcast-based platforms such as DVB-H, the number of people who watch TV via their cellular handsets will reach 446 million by the end of 2011, predicts IMS Research.

IMS, which expects to see mobile TV usage grow 50 percent year-on-year through 2010, notes that mobile TV subscription services will eventually be overtaken by digital broadcast services by that time.

But obtaining such a sizable following will require help on several fronts.

"If providers effectively supply compelling content, quality reception, and affordable, attractive phones, then every new mobile TV subscriber can become a mobile TV evangelist," said study co-author Stephen Froehlich. "However, to make their customers into product evangelists, mobile TV service providers and their partners must invest enough in infrastructure and technology to enable both wide population coverage and good indoor reception."

Fox going over the top to sell films, TV shows
Fox is ready to jump feet first into online video. The company's Fox Interactive Media (FIM) and Twentieth Century Fox units are preparing to provide feature films and television shows on a download-to-own basis across the FIM network.

The FIM network includes the personal Web page host MySpace.com, and the IGN Network, which will distribute content through its Direct 2 Drive site, where customers currently buy and download computer games.

Content made available will include feature films such as "X-Men The Last Stand" and "The Omen," and TV series such as "24" and "Prison Break." Purchased movies and television shows will be immediately transferable to Windows Media compatible portable devices, which Fox claims is an industry first.

Fox did not provide a target date for when Direct 2 Drive will start selling content. Fox expects to charge approximately $19.99 for new feature film releases and $1.99 per TV series episode.

Wisconsin telco to deploy ADC's FTTH technology
ADC said that Richland-Grant Telephone Cooperative, based in Blue River, Wis., will deploy ADC's OmniReach fiber-to-the-home (FTTH) solutions to provide IPTV and other services. RGTC will work with ADC to install OmniReach Multiport Service Terminals (MSTs) and fiber drop cables for rural delivery of Internet access, wide-area paging, voice mail, IPTV, local-area and wide-area networks.

Small Florida community sends FiOS over 3M mark
Verizon continues to roll out its FiOS TV service in dribs and drabs, most recently passing 4,000 households in north Sarasota County in Florida. Verizon says FiOS now passes 3 million homes. Verizon is continuing to build out its network in Sarasota and nearby Manatee counties

VoIP grows in second quarter; MSO VoIP coming on strong
Quarterly voice over IP subscriber growth slowed from 28% in the first quarter to 21% in the second quarter, but that's less an indication of slowing growth than it is a function of growing much bigger numbers, according to Primetrica.

VoIP service providers gained just about the same number of subscribers in the second quarter – 1.23 million, as they did in the previous quarter. The total number of VoIP customers was 6.9 million at the end of Q2.

Quarterly VoIP revenues jumped 173%, from $221 million in the second quarter of 2005 to $607 million in the second quarter of 2006.

Vonage leads the consumer VoIP market with nearly 1.8 million subscriber lines, a quarterly increase of 243,000, followed by Time Warner Cable, with just under 1.6 million after adding 234,000 new digital phone customers.

Cablevision Systems Corp. remained the third largest VoIP service provider, with 987,542 subscribers, up from 865,000 at the end of the first quarter. Comcast Cable was the big gainer though, adding 305,000 subscribers for a total of 721,000. At that growth rate, Comcast should take over third place in Q3, according to Primetrica.

Primetrica called companies like Vonage "enhanced service providers," which use the public Internet to deliver their services. Vonage is by far the dominant ESP, trailed by 8×8, SunRocket, Primus Telecommunications' Lingo service, and a host of smaller providers.

Primetrica said MSOs are eclipsing ESPs due to superior financial resources and the distinct advantage of established customer relationships. VoIP is still new for operators, and penetration rates are still very low, which means they have plenty of room to grow.

Primetrica observed that VoIP providers' gains are the telcos' losses. The five largest U.S. ILECs (AT&T, Verizon, BellSouth, Qwest, and Embarq) collectively lost nearly 2.6 million switched access lines during the second quarter, although they do not provide a breakdown of losses to VoIP versus losses to wireless.

Cable industry asks FCC for fair shake on VoIP regs

NCTA okay with USF contributions, but not with FCC calculations
The National Cable & Telecommunications (NCTA) sent the Federal Communications Commission (FCC) a letter last week saying it supports the Commission's decision to have interconnected VoIP providers contribute to the Universal Service Fund (USF), but objected to the methods the FCC proposes to calculate the contributions, calling them unfair.

Responding to the increase in the availability and popularity of VoIP service, the FCC is looking to revise rules for how telephony providers contribute to the USF, which offers funds for people and public institutions that are either underserved or cannot afford phone service.

"The Commission's revenue-based methodology is already outmoded and not suitable for a competitive marketplace in which interstate and intrastate calls are offered to customers at a single rate," the NCTA wrote in the letter. "If USF contributions are to be required of interconnected VoIP providers – as they should – the Commission should, as quickly as possible, replace that methodology with a number-based approach.

"Meanwhile, the interim safe harbor adopted for VoIP providers should immediately be revised to reflect the fact that cable VoIP service is more like bundled local and long distance wireline telephone service than like wireline toll service. In addition, the preapproval requirement for traffic studies should be eliminated."

If the FCC were to adopt its proposed methodology, cable operators could end up unfairly paying more into the USF than most other phone companies. MSOs, added cable's top lobbying group, would also be subject to conditions not imposed on other phone companies. In essence, the NCTA is arguing for equal treatment.

Time Warner Cable orders ARRIS CMTS
Time Warner Cable will be buying C4 and C3 CMTS products from ARRIS for the next two years. ARRIS noted TWC has already deployed the 1RU-size ARRIS C3 CMTS in several of its systems and recently placed its first C4 CMTS orders last week. The new two-year purchase agreement cements the relationship.

ARRIS has been one of TWC's major suppliers of VoIP embedded multimedia terminal adapters (E-MTA).

Time Warner Cable has over 5.4 million high-speed data subscribers and over 1.6 million digital phone customers.

"We are pleased to announce this purchase agreement with ARRIS," said Time Warner Cable's Chief Technology Officer Mike LaJoie. "We require all our vendors to meet very high standards for product performance, reliability and support. The ARRIS team proved its ability to meet these standards and we are pleased their CMTS products will be deployed in the Time Warner Cable network delivering advanced telecommunications services to our subscribers."

Court backs Baby Bells on fiber line sharing
A U.S. appeals court has affirmed the FCC's 2003 decision that AT&T and Verizon will not have to share their fiber lines with competitors.

The Court of Appeals for the District of Columbia Circuit rejected the arguments of EarthLink and other competitors of the ILECs that the FCC did not, and does not, have the authority to absolve ILECs from having to share their lines.

The decision is a clear victory for the ILECs, who have chafed at line-sharing regulations since they were first imposed by the 1996 Telecommunications Act.

Sprint Nextel to spend over $2.5B on mobile WiMAX network
Sprint Nextel.com plans to deploy the first fourth-generation (4G) nationwide broadband mobile network in the U.S. Sprint Nextel will base the new network on the mobile version of WiMAX, IEEE 802.16e-2005. Market trials are scheduled for the end of 2007, and a full scale rollout for 2008.

The move is a combination of opportunity and necessity. Sprint Nextel has a singularly thick portfolio of rights to 2.5 GHz spectrum that will allow it to cover 85 percent of the households in the top 100 U.S. markets.

The company's 3G network is in fact two networks, one each from its constituent elements. Motorola and Samsung have committed to create multimode devices that will support services on the 4G network Sprint Nextel will build as well as the 3G (CDMA and EV-DO) networks now in place. Sprint will maintain its 3G networks, first to provide all broadband service in areas outside the planned 4G coverage, but also to provide voice service.

WiMAX promoter Intel will deliver WiMAX solutions for Centrino Mobile Technology and next generation computing devices, and will help promote the technology.

Larry Swasey, senior analyst for Visant Strategies, said, "The choice of 802.16e by Sprint Nextel is a large one and it enables the carrier to become a showcase for the next generation of IP-based, high-speed mobile wireless in a voice saturated market in need of more data revenues. Data revenues have become the focus of most of the larger operators at this time and Sprint Nextel as usual has jumped in the water earlier rather than later."

He added, "This does not mean that a number of the other variants, such as the Qualcomm Flash-OFDM solution acquired when the company bought Flarion, and standards such as TD-SCDMA, UMTS-TDD, UMTS LTE, WiBro and others, will not do well during the next years as well. We still have a large audience worldwide of mobile and fixed operators that are looking at all of these technologies and many, if not most, have been deployed commercially in either a fixed or mobile setting by this point."

Sprint Nextel said it expects to invest $1 billion in 2007 and between $1.5 billion and $2 billion in 2008 on its 4G mobile broadband network.

RCN founder proposes new broadband company
RCN Corp. founder David McCourt plans to form a new public company, to be called Granahan McCourt Acquisition.

McCourt aims to raise $125 million, which he will use to buy control of companies that make or distribute communications services, according to a report in USA Today.

The board of directors of Granahan McCourt Acquisition includes some familiar names: former CIA director George Tenet, former ESPN chief Roger Werner and Starwood Hotels and Resorts founder Barry Sternlicht.

McCourt left RCN after that company emerged from Chapter 11 bankruptcy protection in 2005.

Shaw cranks up the velocity on top-tier data service
After first Cogeco (click here for story) and then Rogers Cable (click here for story) upped the transmission rates of their Internet service, now Shaw Communications is following suit with a speed increase to 10 Mbps. Shaw's High-Speed Xtreme-I customers will automatically receive the upgraded service at no extra cost.

And like its Canadian brethren, Shaw is putting a limit on data transfer, with a cap of 100 GB a month for its Xtreme-I tier.

With its top-tier service, Shaw is also offering up to 10 email addresses; a security package; two IP addresses; and 20 MB of personal Web space.

AudioCodes completes buy of Netrake
AudioCodes, a provider of voice over packet (VoP) technologies, strengthened its position in IMS technology by wrapping up its announced acquisition of Netrake Corp., a provider of session border controllers (SBC) and security gateway solutions.

SBCs enable connectivity, policies and security for real-time sessions such as VoIP and video when traversing IP to IP networks. Security gateways enable secure real-time sessions across Wi-Fi, broadband and wireless networks in fixed mobile convergence (FMC) deployments.

AudioCodes bought Netrake for $10 million cash. Netrake will be operated as a subsidiary.

Seen On The Net…

You remember that scene in "Who Framed Roger Rabbit?" when Eddie Valiant (Bob Hoskins) asks a sexy Jessica Rabbit what she sees in a doofus like Roger Rabbit, and she says: "He makes me laugh."

From a coaster found in a bar in Washington, D.C. (where FiOS is not yet available), submitted by a loyal reader.