Telcos Still Pretending Google Gets “Free Ride”

from the repeating-something-relentlessly-does-not-make-it-true dept

Back in 2005, former AT&T CEO Ed Whitacre (now the head of GM) boldly proclaimed that Google was getting a “free ride” on his company’s “pipes,” and that they should be charged an additional toll (you know, just because). As we’ve discussed several times now, Whitacre’s argument made absolutely no sense, given that Google not only pays plenty for bandwidth (as do AT&T’s customers), but the company owns billions in international and oceanic fiber runs, data centers and network infrastructure. Despite making no sense, this idea that Google was some kind of free ride parasite quickly became the cornerstone of the telco argument against network neutrality. In response,Techdirt has suggested that telco spokespeople should pay for Google’s bandwidth bill for a month if it’s so low — with no takers.

Of course, lost under the circus of the network neutrality debate was Whitacre’s real goal: to get content providers to subsidize AT&T’s network upgrades, something many myopic investors don’t want to pay for. Whitacre was also afraid; he understood Google poses an evolutionary threat, the likes of which traditional phone companies like AT&T had never seen before. Incumbent phone companies had grown comfortable sucking down regulatory favors, subsidies and tax cuts while operating in non-competitive markets. Suddenly, increasingly-ubiquitous broadband allowed companies like Google to enter “their” telecom space, gobbling up ad dollars and offering disruptive products like Google Voice — which threaten sacred cash cows like SMS and voice minutes.

Instead of competing with Google by out-innovating them, Whitacre’s first reaction was to impose an anti-competitive toll system like some kind of bridge troll — which should tell you plenty about pampered phone company thinking. Whitacre’s fuzzy logic was given a new coat of paint in pseudo-scientific studies paid for by phone carriers, and has since floated overseas. In the UK, incumbent phone companies have taken a page from Whitacre, insisting that the BBC should pay them extra money — just because people were using the BBC iPlayer. Now Google’s non-existent free ride has popped up in Europe this week, with Telefonica, France Telecom and Deutsche Telekom all jointly insisting that Google should be paying them a special toll for carrying Google traffic:

Cesar Alierta, chairman of Telefonica, said Google should share some of its online advertising revenue with the telecoms groups, so as to compensate the network operators for carrying the technology company’s bandwidth-hungry content over their infrastructure. “These guys [Google] are using the networks and they don’t pay anybody,” he said.

Yes, Google doesn’t pay anything — except for the billions they pay for bandwidth and extensive infrastructure. Were Google a telecommunications carrier, they’d be the world’s third biggest according to Arbor Networks. It’s absolutely stunning that such a ridiculous argument remains in circulation (and that many press outlets don’t debunk the concept as painful nonsense). If electric companies went to AT&T or Telefonica to inform them that they wanted a cut of revenues on top of payment for electricity “just because” — they’d be laughed out the building. Yet somehow we’re supposed to take phone companies seriously, when in reality they’re simply repeating total nonsense in the hopes that repetition will magically make it true.

About Mark Milliman

Mark Milliman is a Principal Consultant at Inphotonics Research driving the adoption and assisting local governments to plan, build, operate, and lease access open-access municipal broadband networks. Additionally, he works with entrepreneurs and venture capitalists to increase the value of their intellectual capital through the creation of strategic product plans and execution of innovative marketing strategies. With more than 22 years of experience in the telecommunications industry that began at AT&T Bell Laboratories, Mark has built fiber, cable, and wireless networks around the world to deliver voice, video, and data services. His thorough knowledge of all aspects of service delivery from content creation to the design, operation, and management of the network is utilized by carriers and equipment manufacturers. Mark conceived and developed one of the industry's first multi-service provisioning platform and is multiple patent holder. He is active in the IEEE as a senior member. Mark received his B.S. in Electrical Engineering from Iowa State University and M.S. in Electrical Engineering from Carnegie Mellon University.
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