Just who do the telecom operators think they are?
The internet is made up of two layers: infrastructure that is mostly managed by companies known as operators, and the services transmitted through it. These days, it doesn’t matter what business you are in, part of your activities: information, your products, your services, customer relations, etc., will use the infrastructure provided by these operators.
The business of these companies, some of which have built their own infrastructure while others have mostly inherited facilities built with public money, is to charge customers for using their networks. Some of these customers want to receive data at certain speeds, while others are prepared to pay more for faster broadband. Given that not all customers use the networks at the same time, it’s easy to see that this is not a hard business to manage.
If only things were that simple, but the companies tasked with running this infrastructure want to maximize profits by moving into other activities along the value chain by offering other content or services. We should be wary of this trend, because from the perspective of fair competition, a network operator’s activities should be separate to its main operations.
But the operators also have one of the most powerful lobbies in the world and are able to keep this pretty much off the agenda. In practice, what happens is that the operators do what they like, while any newcomer faces problems derived from a conflict that anti-monopoly legislation would resolve in five minutes. Instead, there are operators who think it is perfectly normal to offer content to customers and then charge competitors if they want to offer the same type of content with a similar quality through the operators networks: my content travels well, thank you, but I’m going to degrade the performance of my competitor’s content unless I get paid an extra to ensure it arrives with enough quality to their customers. Doesn’t it sound like the old Mafia business of “paying for protection”? Just who do the telecom operators think they are to decide at which speed do the contents I want travel through the connection I pay them for? And to make things worse, these operators have, in Europe at least, now managed to get laws passed that consolidate this approach.
It’s amazingly easy for an operator to convince the EU authorities that it has problems managing its capacity and that it needs to impose certain limits. In reality of course, the operators have no congestion issues; this is just a ruse to charge customers more. Make no mistake, the operators are motivated by greed. If a business wants to offer a service that consumes a lot of data, as far as some operators are concerned, it makes no difference what technical solutions you offer, some operators are just going to insist that it pays more. This isn’t a peering agreement, it is abuse of a monopoly position, effectively holding users hostage.
In response, the big players have tried to pressure the operators to change their position: Apple issuing its own SIM cards, Microsoft following suit, Google’s Project Fi or Google Fiber are just tactics aimed at showing the operators that there are, or should be, limits to their power. Meanwhile, the operators continue to try to muscle in on a business they don’t really understand and that they should be prohibited from doing so by law. To make matters worse, it is possible that what remains of Yahoo! could end up in the hands of an operator.
The problems we face today are largely the result of the greed of operators that twist reality, arguing that bits are a commodity like oil, while others challenge the authority of consumer rights associations, and still others that think they are somehow the arbiters of which services should be given privileged treatment and which not. In short, abuse of infrastructure to try to make money from activities that by rights should be off limits.
If your business is infrastructure, then logic dictates that anything else you do should be ring-fenced. Managing infrastructure should be sufficiently profitable in itself, so that any other activity can be provided by a completely different organization. Companies can argue that “things aren’t that simple” or come up with imagined “preferential treatment” but these are all simply attempts to hide the truth: the operators have connived with governments and legislators to improve their profits at everybody else’s expense. We will soon start to see this in Europe.
In today’s world, the sad truth is that telecoms operators do not add value, they subtract from it. They are the problem, the brakes slowing things down, the awkward partner that is always demanding more, charging more, and taking advantage of a monopoly position. The operators refuse to accept that they should be just dumb pipes, when the reality is that the world would be a much better place if they were obliged by law to be precisely that. We have allowed these organizations to grow into monstrosities that will end up strangling innovation and competition because neither is in their interests. If an operator is unable to see any future for its business without abusing its position, then perhaps we need to start thinking about some other alternatives.
(En español, aquí)