Wednesday, February 10, 2010

Google's High-Speed Networks Threaten AT&T's Future Plans

The United States has the worst broadband network, in terms of coverage, speed and customer pricing, of any advanced nation on the planet. We are well behind Japan, Korea, most of Europe and even much of the Middle East. This is not an accident. It is a direct result of lax government regulation that has allowed cable companies and telecoms to buy up competition and raise prices without regard to service. Part of the business strategy of these broadband oligarchies has been to deliberately limit the speed of their networks until their dominance of the market is secure. Their dream then is to charge per data bit (tiered pricing), in total disregard to the real economics of providing service and the well being of their customers. They will have then achieved an evil businessman's dream come true. They will be charging people for literally nothing, since the cost of providing 20 bits is really nothing more than 200.
If these companies had gotten a hold of the internet at its beginning, it never would have happened. They would have killed it in the cradle through their greed. In fact, the internet came about primarily because big corporations, who could have easily set up their own proprietary networks early on, couldn't provide services anyone was interested in paying for. Those corporations that tried, like AOL, failed. Cable companies have a unique opportunity, through their municipal monopolies, to provide high speed networks at a low cost with great content. They are losing the battle to a free internet filled with pictures of cats. They simply charge too much, and provide too little. Everything is moving rapidly to the internet, and they know their future will be simply providing access to it.

Meanwhile, telecoms like AT&T with national networks of cell phone towers, also have a unique opportunity through virtual monopolies to provide proprietary networks with services and content that could easily compete with what is offered free on the internet. But they can't. So the future of the cell phone tower business is also simply as a means of providing access to a free internet. But they want to charge as much as possible for it, and their business plan is to limit speed and access until they've figured out the highest possible profit margin.

Left on their own, cable companies, and big telecom would kill or hobble the internet of today as a teenager. But there are other big companies that simply have too much to lose by handing over the internet to clueless corporations that want to charge for air simply because they are good at lobbying government.

Thus Google has been forced to get into providing internet service:

I think this is the last thing Google wants to do, they would prefer a competitive marketplace they have nothing to do with. But because the United States is falling further and further behind in the basic technology of the internet, they have little choice. This is clearly a shot at over the bow at AT&T and the cable providers. A warning that they need to change course.

Otherwise Google will step in and change it for them.

I'm sure AT&T, Verizon and Comcast and the others will work frantically to try to stop Google's initiative. Working behind the scenes, they succeeded in killing various US cities efforts to provide low cost citywide coverage. All sorts of pressure will be brought to bear against Google to prevent them from entering this market. And it might work.

But ultimately, their efforts will fail. The United States cannot continue to exist as a major world power with a third world broadband. If Google doesn't step in, Apple will, or Microsoft or some other big company. If that doesn't happen, small cities will finally do it on their own. (As they probably should have to begin with.)

Because the technology for providing quick and virtually cost free broadband is getting cheaper every day. AT&T has huge advantages in being able to service customers, if they want to. They have a national network of towers, national business offices, servers, scientists, workers, etc. If they want to provide low cost access they can compete and beat anyone else.

But if they continue to act as if this is something difficult, or impossible, they will eventually be replaced by some geeks working in their garage. Everyday, the technology that would enable a small company to compete against these big conglomerates gets cheaper. It could start in one city, with a small company providing super high speed access for very little (as Google plans to do) and then another and another. It could happen with a company providing access to apartment buildings and small businesses. The threat is very real.

Google's shot at the bow should serve as a wake up call. Hopefully, big telecom will respond in the true American way, by competing and making it unnecessary for Google to move further into this market. But if they respond according to their tradition, which is to delay and confuse the issue by pressuring Google behind the scenes to retreat, they might dodge a bullet to their arm by moving into one that gets them in the head.

UPDATE: BoingBoing posts that Google also has made available a ISP speed tester so the average person can find out how their network speed stacks up.


  1. While I agree with the overall idea of your blog, I don't agree that the government is responsible for policing company practices. We as consumers should demand more of our service providers. By paying our bills every month we are agreeing with them that they are charging reasonable prices for their data and phone plans. It us to the consumer to stop the phone plan and switch to a better company. Until that point in time, phone companies will continue its exigent ways--dragging along America's "media-savvy and data-greedy citizenry".

    (saw your blog address in Business Week, so I thought I'd drop in.)

  2. Unfortunately, because AT&T has exclusive rights to the iPhone in the United States, we don't have the choice to switch carriers, like the citizens of other more enlightened countries. Sometimes government does need to step in when companies have uncompetitive practices. But thanks for commenting!

  3. What? I can't believe this one:The United States has the worst broadband network, in terms of coverage, speed and customer pricing, of any advanced nation on the planet. They should have the fastest speed for they are one of the richest nation worldwide.

  4. Check out just one recent example cited by the New York Times:

    $26 a month for unlimited ultrafast broadband in Hong Kong.