IP Convergence: Beyond VoIP, Beyond Cost Savings

Regular readers of this blog (if there are any) will know that I have been consistently against any effort to impose net neutrality regulations on network operators. What I fail to understand most about the proponents of net neutrality is why they are so willing to put their fate in the hands of politicians when they have been so good at controlling their own destiny up until now. Why hyper-competitive enterprises like Google, Amazon.com, eBay, and Yahoo!, who have established incredible on-line brands and successful business models without any help from Washington, all of the sudden feel compelled to place their destiny in the hands of politicians who for the most part are beholden to the largest campaign contributors and employers, is beyond me especially when you consider that these companies are novices in Washington. This is all the more perplexing when these companies can control their own destiny by establishing the proper business relationships with other Internet backbone providers (such as Global Crossing) that would prevent the Bell Companies from leveraging their control of "eyeballs" to the detriment of content providers. Go figure.

Now comes a report out of the Phoenix Center pointing out that efforts to commoditize broadband access networks will deter future entry into the broadband access market. A fairly obvious point, and I am not sure why a 22-page report is necessary to make it, but I have never been much of a fan of economists anyway. The one unfortunate aspect of the report is that it smacks of the Bell Company tactic to hold infrastructure investment hostage to regulatory reform. It was never true when the Bell Companies made the argument and it is no more true when the Phoenix Center says it. While it is true that the commoditization of broadband access could dampen the interest of investors, several other considerations have a much bigger impact on investor sentiment and to suggest otherwise is disingenuous. Key among these considerations is access to public rights of way, access to buildings, capital costs, and customer acquisition costs. This would help explain why Om Malik is unable to find much awareness among Silicon Valley VCs and start-ups about the issue of net neutrality.

But, recall the Stifel/Nicolaus report which discussed a "tug of war" between the network participants who comprise the Internet. There is a tug of war going on for the value in the Internet and one potential outcome is that the broadband access providers will be stuck holding the commoditized end of the rope. But don't bet that the folks in Washington are going to make that happen. Why would our elected officials support efforts to turn some of the nation's largest employers, with some of the most widely held stocks, who happen to be some of the largest campaign contributors, into commodity enterprises?

And why do otherwise rational (and successful) businessmen and businesswomen suddenly feel that Washington is essential to their success?