[AusNOG] ISP pricing in the NBN world

[Rod Veith]

"Can you *seriously* see a place for voice carriers in 2062, after we've
brought up several generations of people who have *ONLY* known peer-to-peer
communication systems, and for whom hub-and-scope application architectures
are quaint inefficient historical foreign concepts?"

Yes. But they won't be the Telcos as we know them today. 

Very simple business rules apply and the type of technology is almost
irrelevant. The technical architectures are irrelevant to people. What
matters is that a business needs to spend money to provide these services.
When a business spends money, it will charge someone to get the money back
plus profit. Good luck building infrastructure at nil cost, or trying to
convince someone else to build it for you and not charge you for the
pleasure.

As for Skype, do you really expect free Skype to Skype calls to stay around
for ever? They are slowly increasing the range of services they offer and
introducing charging for services. Remember when listing on Ebay was free?
Remember when bank accounts were fee free? Free news on the net - for how
much longer? Google search is free - but only because businesses pay for
advertising. Everything we do in a modern society has a cost. The only thing
that changes from country to country is whether you pay directly or in
taxes.

Apple services free?? Umm, isn't that built into cross-subsidies and high
unit prices?

There are business around with deep pockets willing to spend marketing
dollars by subsidising entry costs. Once the number of customers reaches
their 'magic number', fees start to be charged. It is simply just another
standard business model, one that happens to suit a disruptive technology
like the internet.

Rod



-----Original Message-----
From: Mark Newton [mailto:newton at atdot.dotat.org] 
Sent: Monday, 16 April 2012 5:49 PM
To: Rod Veith
Cc: ausnog at lists.ausnog.net
Subject: Re: [AusNOG] ISP pricing in the NBN world

On Mon, Apr 16, 2012 at 05:21:25PM +1000, Rod Veith wrote:

 > As an ISP, I don't care if you send a resume or a photo of your kid. I do
> care about existing business models and how I can continue to make money.

But your customers don't care about that.  And they've been enabled with
technology that lets them bypass you if they don't like your price.

Aside from everything else, the Internet is a marvellously capable
gatekeeper destruction machine.  Doesn't matter what realm you're talking
about, the Internet takes the power previously enjoyed by gatekeepers,
devolves it to end users, and poses the question, "Now what...?"

That's how it got started in the first place (TCP/IP turned
circuit-switching telcos into commodity bitpipes, supplanting them so
completely that they had to turn themselves into packet- switching ISPs to
stay alive).  That's the copyright debate in a nutshell.  That's the
censorship debate.  That's interception and data retention (the Walsh Report
in the 1990's was all about the question, "What does law enforcement do when
the people they most want to intercept have strong crypto in easy-to-use
packaging?").  That's cloud.  That's Skype and iMessage.

It's all the same theme:  If you behave like a gatekeeper, the base
technology of the internet provides your customers with the means to bypass
you.  There is no exclusivity or lock-in associated with layered services.

Yet layered services seems to be where all the service providers want to be,
now that they've worked out that bit-transport is a commodity game with tiny
margins.

Look at the new markets service providers want to move into: 
Voice and TV, market domains which significant quantities of end users have
already decided to replace with Skype and Bittorrent.

In the medium to long term, I'd expect those "new markets" to get
commoditized every bit as much as bit delivery has been.  You won't make
money by providing voice telephony to people connected to your internet
service, or pay-TV to people connected to your internet service.  If you
want to make any money at all out of those things, you'll need to be
offering them to people who =aren't= connected to your internet service.
Become a global player like Skype and Netflix, where you can afford a yacht
and four Ferraris even if you only get 0.1% of the market.

You can try to lock your internet service customers into your layered
service offerings with exclusivity.  You could use DPI to make everyone
else's layered service offerings suck (that's what the Americans do, hence
their "network neutrality" debate).
It might even work for a little while.  But deep down you already know
there's no future in it.  The applications and end-users will find ways
around whatever you do to stop them;  the technology you deploy to make
their user experience inferior costs you more than the profit you can make
by selling them TV and voice.

 > As costs come down, competitive pressures will undoubtedly lower the
price  > people pay for services but there always needs to be an adequate
margin or  > the business goes down.

Nobody in Australia gives a crap about whether their ISP's pay-TV service
fails commercially if they can subscribe to another pay-TV service instead.

You're emotionally invested in your business model because it's yours.  Your
customers aren't. They don't care if you have an adequate margin.

 > Of course you can delay paying staff, not pay  > superannuation, avoid
tax and follow other various dubious methods to try  > and outlast the
competition.

You could;  Or you could turn your attention outwards, and ask, "Can I sell
these services to people in India, the UK and the United States?  If not,
why not?"

 > There is nothing stopping you offering free voice calls in the NBN world
-  > go for it if you must.

The only thing standing between free calls and paid calls is whether the SIP
handset your customer has bought has a built-in Skype client and
least-cost-routing engine.

It simply isn't your decision.

I'm not talking about this year or next.  It's obvious that there's
*currently* a tidy market for voice telephony, and I can't *currently* rush
out and buy a SIP handset with a built in Skype client and least cost
routing engine.

(although I can build one myself. Perhaps that's another application for a
Raspberry Pi, eh?)

But the NBN is supposed to be all about the next 50 to 100 years.  
Can you *seriously* see a place for voice carriers in 2062, after we've
brought up several generations of people who have *ONLY* known peer-to-peer
communication systems, and for whom hub-and-scope application architectures
are quaint inefficient historical foreign concepts?

How about 2020?

Welcome to the internet.

  - mark