Friday, February 03, 2006

The Chicken, The Egg, and AT&T

Much has been made lately of the end of the internet post. It's an interesting post, but seems to be a lot of speculation, and no one really seems to know for sure what is going on. First off, the quote from AT&T's Whiteacre is out of context, which is never very trustworthy, so keep that in mind as you read on.

The Quote:

"Why should they be allowed to use my pipes? The Internet can't be free in that sense, because we and the cable companies have made an investment, and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!"

The way I understand it is this:

Telecoms and other ISPs have the users that Content Providers need, ISPs therefore think that they should be able to charge the CPs for access to the users. Essentially if you want our customers you're going to have to pay.

The rationale behind this is flawed however. The power is with the CPs not the ISPs. If an ISP tries to create a walled garden in which only sites that are paying the ISP get included, it will fail. If ISP1 is offering a limited selection of sites, the value of that connection is diminished. Especially, if ISP2 (say an ISP created by Google) allows access to all sites on the internet. Thus unless the ISP can establish a monopoly (which it can't) it will fail because it is offering an inferior product.

As the web stands currently ISPs (typically) are not paying content providers and content providers (typically) are not paying ISPs. This is the way it should be. Yes, ISPs do bring value to CPs in the form of users, but without the CPs the users would not want the ISPs in the first place. AT&T is having a chicken and egg problem.

This is really a failure of AT&T to understand what their consumers want, and an example of how bad ideas can be if you think about profits first and customers second - a situation that usually leads to less profits as customers move away from your services.

A side note for AT&T:
how about including a web address on your hundreds of billboards, so that potential customers can find more information and you can track the success of your campaign.

No comments: