Forget Net Neutrality and Build More!

How net neutrality is understood is that there is a limited resource and specific applications are being favored and some are not. This is not really what is happening.  Data use on the internet is doubling every 1.9 years and this large S-curve style growth curve is driving the need for building, re-building and re-building again, similar to the growth that processors experienced. Most of the growth is fueled by video as broken down here:

http://arstechnica.com/information-technology/2014/02/netflix-packets-being-dropped-every-day-because-verizon-wants-more-money/

Think of the internet as a system of driveways, roads and highways. Now, at a 2 year growth rate, the number of lanes in place on the roads and highways needs to double every 2 years to accommodate this growth.  Otherwise what happens is gridlock, or in the networking world what we call congestion. What happens during gridlock/rush hour? Take an ambulance. Sure, it has priority but it still takes longer to get through during gridlock. It’s much better to just build more lanes right?

What is happening behind the scenes is a debate about business models. How do companies make money while still accommodating this growth? How does the model encourage growth?

The current business models may have worked well for unconverged communications but the reality is that everything has converged. By converged we mean that voice, video (TV), email, literally everything, uses the same physical wires whereas in the past they each had their own wire. Because of how it all came about, the incumbent communications companies own the passive infrastructure, which is to say the cables, buildings, and towers that electronics and radios use (called active infrastructure). This passive infrastructure makes up somewhere between 75-95% of the cost of providing communications. Because of its huge cost passive infrastructure creates a natural monopoly if a company controls both the active and passive infrastructure as typically the company makes money from the active infrastructure.

The business model that benefits the economy & consumers is an Open Access Network (OAN) business model in which the passive infrastructure ownership is separate from the active infrastructure ownership. Passive infrastructure investment should behave like real estate – the owner is essentially looking to place as many active infrastructure tenants as possible to maximize their return. Being freed from the capital outlay, the active infrastructure companies have more money to build, re-build and build some more (and coincidentally there is more competition).

And finally, the country is not overbuilding its passive infrastructure… yes, all of Canada could be serviced well despite the large size as there is an incredible amount of passive infrastructure just sitting empty. Regulation aside, there is no passive infrastructure marketplace like in the USA or the UK making it difficult for active infrastructure participants that do not own passive infrastructure to build networks.

So next time someone asks about “net neutrality”, explain to them what they really want is an OAN and an effective passive infrastructure marketplace.

Want to know more about Open Access Networks and Net Neutrality? Wikipedia has some great summaries:

http://en.wikipedia.org/wiki/Open-access_network

http://en.wikipedia.org/wiki/Net_neutrality

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