Listen BellSouth: "The road to failure is paved with pride, but the road to success is lined with
humility."
The application layer and the network layer don't live next door to each other on the
traditional network model, and apparently application vendors and network carriers don't feel the love in real life,
either. BellSouth has decided that charging a premium for third-party data crossing its network is good business. I
couldn't disagree more, and here are several points I want to make:
1. After all the MSOs and telcos are
engaged in premium fees leverages against third parties, some scrappy network carrier will realize that he can beat
them all by simply practicing neutrality. The mere act of being neutral will heap so much business upon that
scrappy competitor that the Bells and Comcasts of the world will see their access customers leaving in droves.
2. Charging a premium "by the bit" to third-parties is just the long distance billing story read
a different way. The market found a way around long distance, and it will find away around premium access.
3. You can't charge a premium for a commodity. Bandwidth is a commodity, and this doesn't change. The market dictates
the price of the commodity, not one particular player in the market.
4. Specialized services from pure-play
vendors tend to be more successful that applications from diversified service producers. Cases in point: MSN vs. Google
in the search business. Yahoo Auctions vs. eBay in the online auction business. IBM vs. Dell in the
desktop PC business. And we all know what an incredible creative powerhouse these giant conglomerate telcos
and MSOs can be, right? OK, not at all.
5. It takes specialty--specialness--to build
value in the applications business. There's nothing special about bandwidth. Yet this is the telco's core revenue
outlook and should be their only source of revenue. If they want to earn more money, they do what
commodity providers do to earn more profit--produce their commodity at a lower cost.
