Well it was fairly obvious that the online leaders would not sit quietly if these telecom majors start charging for every online movement of data as they are proposing! The promise of web and the TV/Music delivery will go to the wayside if that were to occur!
Analysts are speculating that Internet and media companies could team up to bid for radio spectrum in order to launch wireless broadband services, as a way around the phone companies.
Rumors that nontelecom companies could bid for wireless spectrum have floated around for a few years. The new speculation focuses on large Internet content firms such as Google, (GOOG) Amazon.com, (AMZN) and eBay. (EBAY)
Phone companies want to charge Internet firms for moving movies, video games, music and other bandwidth-hungry content over their networks. This is aside from the subscription fees they charge broadband subscribers.
Under their plan, Internet firms would pay extra to transmit content via faster and more secure lanes on the Internet highway.
Internet firms object. They want lawmakers and regulators to guarantee network neutrality. That means all Internet traffic would be treated the same, and that phone company customers couldn’t get special treatment over others.
Phone companies and cable TV operators provide most high-speed connections to homes. Cable firms are part of the debate, but for now phone outfits are in the forefront.
By owning their own radio spectrum, Internet and media firms could deliver services to homes via their own wireless broadband pipe. But that’s only if they pay the billions of dollars the spectrum is expected to garner at auction, plus build wireless networks.
Few Taking Any Bets
That’s a big if, but phone companies are watching closely because the stakes are so high.
"It wouldn’t shock me to find a range of unusual bidders in the upcoming spectrum auctions," said Jim Cicconi, AT&T senior vice president for legislative affairs.
But there’s no question about his point of view.
"Experience has shown that some companies haven’t needed a well thought-out business plan to bid (in earlier auctions)," he said.
The federal government has two big spectrum auctions in the works. One is scheduled for June and involves spectrum in the 1710-1755 and 2110-2155 MHz frequency bands.
The second auction would involve frequency in the 700 MHz band. That auction depends on TV broadcasters returning spectrum to the government after they move to high definition. That auction might not occur until 2008.
Cicconi suggests that wireless broadband might not be the best business for Internet or media firms. He says they might be better off cutting a deal with AT&T or other phone companies, which are experienced network operators.
"Any content provider would have a build vs. buy (bandwidth) decision to make," he added. "What’s the cost of building out your own network as opposed to contracting for a service?"
Real-Time Video Isn’t Easy
Cicconi adds that it would be challenging for Internet firms to deliver streaming video services reliably via wireless broadband.
Some methods that Internet and media firms seem to be eyeing don’t involve real-time streaming.
Instead, video or other content could be downloaded to a computer, digital video recorder or portable device. That’s less taxing on a network.
AT&T and other phone companies have promised not to block network access or degrade service to companies that don’t agree to pay a premium rate.
And current services that gobble up bandwidth — such as Google’s video store and Apple Computer’s (AAPL) iTunes music service — seem to be doing fine.
Internet companies are eyeing bigger bandwidth-hungry services, analysts say. Amazon, for one, is expected to launch a digital distribution service including music and movies by year-end.
Phone carriers say it’s unfair for them to invest more in network infrastructure to carry Internet firms’ content if they can’t make more money as the middleman.
It’s unclear whether Congress or the Federal Communications Commission will adopt any broad policies involving network neutrality. One bill in Congress would let the FCC address complaints from content firms on a case-by-case basis.