Wyatt Earp, Telegraphs and Net Neutrality

This is not a post about why internet access needs to be fair and equal – there are a lot of great posts on the importance of net neutrality. No, this is a post about why I believe the recent ruling on net neutrality will be a watershed event – the moment when major tech players realized that they need to start imagining a world without TelCo’s as we currently know them. Take a step back with me and let’s consider the telephone business. Sure, new technology allows us to send increasingly large amounts of information around the world at greater speed and lower costs. Fiber. Satellite. Wireless. They’re all awesome. But, honestly, how much has the Telephone business changed since the days of the telegraph?

Go with me back to the Old West

When John Sutter (he discovered gold in California in 1849) or Wyatt Earp (of Tombstone, AZ fame) or The Lone Ranger (Yes!) or whomever wanted to communicate with someone far away, how did they do it? They went to their local Western Union office and paid for access to the wires that would carry their message. Let that sink in. Yes, the process has changed significantly, but when you strip away all the shiny buttons on your mobile phone and bright lights blinking on your cable (or DSL) modem, you’re left with the fact that how we pay to communicate over distances remains entirely unchanged for the past, oh, 150 years. Still a skeptic?

John Sutter paid based upon how far his message was going

The farther the message had to travel, the more infrastructure (wires, etc) it required to support the data. Someone had to pay for all those wires – hence, the message was more expensive. Which is interesting because this sounds a lot like the argument used by Verizon against Net Neutrality – someone has to pay for all the infrastructure to send all the messages… Not to mention, while national calling plans are pretty much the norm these days, have you tried making an international call? Long distance! Which boils down to a simple fact – you’re still paying for distance.

Wyatt Earp paid based upon the length of his message

This is a no-brainer – the length of the message related to how much time the ‘wires’ were in use transmitting your message ‘data’. The more the wires were in-use sending YOUR message, the less they could be used to send everything else. It’s almost like this issue of fixed supply of bandwidth and variable demand for access hasn’t really changed… ever. And it never will. There will never be enough ‘wire’ to support demand because we all know that, regardless of the amount of capacity, people will find ways to exhaust it. More interestingly, as I was reminded the other day when I got an email informing me that my daughter was nearly over her data limit on her phone, we’re still being charged based upon this same pricing formula today.

The Lone Ranger paid for urgency

Ironically, this is the heart of the net neutrality debate. When the masked man needed to jump to the head of the line, he had to pay a premium. Want it sent as a lower priority? That would be cheaper. This was a classic supply-demand solution to the problem of capacity – want a premium experience? Pay premium pricing.

Stagnation creates opportunity

When you look at the telecom industry through the above-lens, you can’t help but feel that the service offerings may have evolved, but the pricing-model has not. Stated more bluntly – from a business innovation perspective, all of these businesses have essentially stagnated over the past 150+ years. And where you have stagnation, there is an opportunity for disruption. Massively. Which brings me to the point of this post. I believe that the realization that a service provider can play favorites with access to its wires poses an unacceptable existential threat to the companies currently investing large amounts of money in building ‘the cloud’. And as we all know, nothing motivates action like fear, which is why I believe that the Telecom industry is ripe for massive disruption as a result of this ruling. Agree? Disagree? Drop me a line and let me know your thoughts