Telcos Still Pretending Google Gets "Free Ride"

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

Wed, Apr 14th 2010 6:03am — Karl Bode

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.

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Filed Under: bandwidth, infrastructure, network, telcos
Companies: at&t, google

46 Comments

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DH's love child, 14 Apr 2010 @ 6:17am

I am always amazed
by the unmitigated gall of these idiots. What next, they expect mylittlebusiness.co.fr to fork over part of its revenue too? Oh that's right they already do it's called THEY PAY FOR THE F***ING INTERNET CONNECTION!

dipshits
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Michial Thompson, 14 Apr 2010 @ 6:48am

Google should probably get more free rides
Actually I would think that more and more of the LARGE ISPs would want to give Google more of a free ride by placing Google servers behind their bandwith pipes and closer to the customers.

A SMART ISP would put Google Servers near customers and so that the customer accessed the servers on their own internal bandwidth rather than on the backbones where it costs them money.

Customers are going to access Google no matter what, and companies like Akamia (sp??) are already in the business of content replication and making a killing off of it. So why wouldn't local ISP's also use it to manage costs.

Putting a rack of Google Servers in each major city would seem pretty cheap in comparison to the costs of the bandwidth consumed by users. And hell I'd even bet that google would be all over giving them the racks and servers because it also makes their service more efficient.
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Designerfx (profile), 14 Apr 2010 @ 6:51am

google voice has sadly been countered
if you haven't noticed, all carriers have switched from myfaves style plans to including "unlimited calling to any mobile phone".

Well, the numbers for google voice are landline.

This was a direct strike at google, and the telcos didn't even sit a second. Even tmobile switched their plans due to this one.
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ScaredOfTheMan, 14 Apr 2010 @ 6:54am

Just makes me Angry
Every time I read these "(______________) should pay for using our Pipes" It just makes me angry, the outright entitlement expressed by these people is simply astounding. Its not like they don't understand the interent, or peering, or bandwidth exchange...and yet they continue to make ridiculous statements like this.

Why can't they simply be a provider of highly available, fast, internet and just be happy with that. Most of these guys are a monopoly or douopoly so what do they have to complain about?
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Free Capitalist (profile), 14 Apr 2010 @ 7:06am

Re: Google should probably get more free rides
Customers are going to access Google no matter what, and companies like Akamia (sp??) are already in the business of content replication and making a killing off of it. So why wouldn't local ISP's also use it to manage costs.

Yes, "Akamai" (sic) does effectively profit from replicating popular content.

It's just ridiculous for AT&T to be talking about charging more for popular content-providers' bandwidth. For one, the modern AT&T had one of its most successful years ever in 2009 (its good to be king).

And of course there would be no significant ISP business for anyone were there no popular and useful services such as Google.

Myopic, greedy and entitled... sounds familiar.
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Anonymous Coward, 14 Apr 2010 @ 7:12am

What was it that Hitler said? If you repeat a lie long enough people start to believe it's true.
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Nate, 14 Apr 2010 @ 7:14am

Re: Re: Google should probably get more free rides
(Sorry to stroll off-topic, but you can't use "sic" if you correct it. Maybe you meant "FTFY".)

FTFY.
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Anonymous Coward, 14 Apr 2010 @ 7:17am

Re:
...And, Godwin'd in 5.

But, I think Mike's absolutely spot-on with his analogy (these kinds of ridicularities are best exposed with a good analogy): by the same logic, the telcos owe the electricity utilities -- at least -- a cut of the revenue.

Don't try to set a legal precedent you don't want to have applied to you.
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Anonymous Coward, 14 Apr 2010 @ 7:19am

Re:
It worked for piracy == theft.
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Chronno S. Trigger (profile), 14 Apr 2010 @ 7:22am

Re: Re: Google should probably get more free rides
"And of course there would be no significant ISP business for anyone were there no popular and useful services such as Google."

That's was I was thinking. Without content, ISPs would not be there. That's the ISPs reason for being, it's only reason for being: to serve sites like Google. AT&T should be paying Google.
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Anonymous Coward, 14 Apr 2010 @ 7:23am

Re: Re:
Would this mean that local and federal governments would then more heavily tax businesses for making more money?

Pft. Who am I kidding? Big companies need tax breaks. Let the peasantry subsidise the government.
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John Duncan Yoyo (profile), 14 Apr 2010 @ 7:29am

What would AT&T internet be worth without Google?
Lets ask the question that these telcos seem to forget- what would their internet offerings be worth without Google?

It certainly would be less than they are worth now. Heck the way I use the internet they would be worth next to nothing. Google is the index, my mail and lots of the content i consume. Without Google it would hardly be worth paying AT&T.
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Dark Helmet (profile), 14 Apr 2010 @ 7:43am

Re: Re:
"But, I think [Carl]'s absolutely spot-on with his analogy..."

FTFY

Tons of posts from more authors lately. I've made the mistake too, so not trying to be an ass, but we're all going to have to start paying attention to who the author is....
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Free Capitalist (profile), 14 Apr 2010 @ 7:49am

Re: Re: Re:
Hi TAM!
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Anonymous Coward, 14 Apr 2010 @ 8:03am

To be honest, nobody knows what Google pays for their bandwidth. I actually expect it is zero due to peering agreements.
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Anonymous Coward, 14 Apr 2010 @ 8:08am

Re:
Whoops, hit submit too soon.

The big flaw in the telco's reasoning is that Google isn't pushing this stuff over their pipes, their customers are initiating the exchange. If their customers are using too many bits, then charge them more.

I don't think it's that unreasonable to have tiered plans based on speed or number of bits used. They shouldn't discriminate on the type of traffic or its destination.

In other words, be dumb pipes. I think the first company to come along and really embrace that philosophy is going to make a killing. Be the best damned dumb pipe you can be and slash costs (especially advertising) and deliver huge value to your customers.
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Dark Helmet (profile), 14 Apr 2010 @ 8:10am

Re: Re: Re: Re:
Er....what? You think I'M the artist formely known as anti-mike?

I'm hoping you responded to the wrong post, because that would be stupid on a biblical level....
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John Duncan Yoyo (profile), 14 Apr 2010 @ 8:13am

Re: Re:
Well Google has to pay to run it's bandwidth which it swaps for peering relationships. But what would the pipes be worth without it?
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Anonymous Coward, 14 Apr 2010 @ 8:33am

Re: Re: Re: Re: Re:
I think he's commenting on the fact that TAM now posts as AC, yet is too stupid to understand that everyone knows it's him. When someone sees a post that is obviously his, he replies "HI MIKE", as if Mike is the only person who could detect that it is TAM posting, even as AC.

So when you posted that there are other authors than Mike, he reversed the "Hi Mike" meme. Not so funny when you explain it fully.
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Dark Helmet (profile), 14 Apr 2010 @ 8:38am

Re: Re: Re: Re: Re: Re:
Wow, that is one hella-complicated joke...
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Hephaestus (profile), 14 Apr 2010 @ 8:58am

Re: Re: Re: Re: Re:
"I'm hoping you responded to the wrong post, because that would be stupid on a biblical level...."

Dark helmet, not having any god like or god inspired powers, backs up a dump truck of week old dead trout to Free capitalists convertable ...
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Hephaestus (profile), 14 Apr 2010 @ 9:10am

hmmm ....
Why arent the telcos going after Microsoft, Yahoo, Amazon, e-bay, etc?

With what Google pulled in china I would be very cautious if I was running a telco.

from : google.com
to : google mail and applications user

Due to the charges being levied against us by you telcom provider we are with drawing google.com from your telcom provider as of xx/yy/zzzz. We will no longer be providing search, e-mail, apps, reader, .... (two pages later) ....finance, translate, and blogs. We will how ever be opening stores to sell the new google data pad, and cell phones all of these products work on our new 4g network. The cost will be less than you are being charged by your current provider and there will be no disconnect fees by EU law.
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Dark Helmet (profile), 14 Apr 2010 @ 9:25am

Re: Re: Re: Re: Re: Re:
Yikes, I just reread that and saw how it sounded like a threat, which isn't what I intended....

Maybe "stupid on a cosmic level...." would have sounded better?
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neil, 14 Apr 2010 @ 9:26am

Re: Re:
This isn't a problem for the telcos. all they have to do is block all access to google until google agrees to pay on a per packet basis.

most ISP also are our phone providers and remember they like to charge those long distance fees that's how they think. google pays a small set of isps for the bandwidth it uses but although isp x gets some from google traffic goes to isp y to get to the customer and it is y that wants some money ie long distance charge.
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Anonymous Coward, 14 Apr 2010 @ 9:29am

Re:
Ther seems to be alot of that nowadays
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Anonymous Coward, 14 Apr 2010 @ 9:36am

The political incompetence of countries scares me.

It is obvious that with an ever more interconnected world those kind of disputes will only get amplified in the future and still those governing doesn't seem to grasp the height of the wave coming their way in the not so distant future.
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Free Capitalist (profile), 14 Apr 2010 @ 10:01am

Re: Re: Re: Re: Re: Re: Re:
Cosmically stupid... now that's an achievement!

You're OK in my book DH :D
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Anonymous Coward, 14 Apr 2010 @ 10:05am

Re: Re: Re:
I think you're right. Phone companies (especially cellular phone companies) have this mindset of "you need to pay to get access to our customers".

Honestly, I can't blame them for trying to do this. They have very little to lose and a lot to gain. When a situation that comes along that's all upside, why wouldn't they pursue it?
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Anonymous Coward, 14 Apr 2010 @ 10:24am

Re: google voice has sadly been countered
I always wondered how they can tell if the call is terminating on a mobile phone. They used to know just by the prefix, but with number porting, that's not reliable any more, is it?
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Hephaestus (profile), 14 Apr 2010 @ 10:36am

Re: Re: Re: Re: Re: Re: Re: Re:
"Cosmically stupid... "

now what group of people do we know that we can apply that to?
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Hephaestus (profile), 14 Apr 2010 @ 10:44am

Re:
"those governing doesn't seem to grasp the height of the wave coming their way in the not so distant future."

I keep saying this is going to be fun to watch ...
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Kirk (profile), 14 Apr 2010 @ 11:15am

Re: Re: Re: HaHa
I agree that it's not a problem for the telcos. If google blocks access to their subscribers they will quickly realize how little of a problem google is. In fact, similarly to Youtube/Warner, RIAA/College Radio, the telcos would immediately go crying to congress the minute google removed their reason for complaining. The telcos need to seriously grok on what business they're in.
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Al, 14 Apr 2010 @ 11:45am

Shoes on both feet
For some of the carriers, there's a fight on two sides of battle:
- for Internet services, carriers claim the content producers are getting a free ride;
- for television, the content producers (broadcasters) claim it's the carriers (cable and sat providers) getting a free ride.
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RobShaver (profile), 14 Apr 2010 @ 11:45am

Didn't we pay for upgrading the Internet already?
I heard years ago somewhere that the FCC and the Telcos struck a bargain where the Telcos got to keep the new fees for phone features such as call waiting, caller ID, etc. In exchange the Telcos were supposed to use that revenue to upgrade Internet infrastructure.

Does anyone here know anything about that? I don't remember any more details than that.
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chris (profile), 14 Apr 2010 @ 12:32pm

Re: google voice has sadly been countered
if you haven't noticed, all carriers have switched from myfaves style plans to including "unlimited calling to any mobile phone".

Well, the numbers for google voice are landline.

that's a good thing. that's what competition is for.

now google will counter, and the telcos will counter, and in the end we the customer end up paying less than we did before google voice came along.
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chris (profile), 14 Apr 2010 @ 12:59pm

Re: Re: google voice has sadly been countered
the telephone network has a bunch of stuff built into it behind the scenes for billing and peering and whatnot. one example is ANI. it's easy to fake/spoof callerID and virtually impossible to spoof ANI.

http://en.wikipedia.org/wiki/Automatic_number_identification
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Anonymous Coward, 14 Apr 2010 @ 2:06pm

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. This is one of the major problems for all US internet customers. The companies need to expand the infrastructure, but won't based on the short term drop in profits. This is why so many rural customers of large phone companies are still stuck on dial-up. When I asked the local phone company rep (Century Link)directly why they wouldn't upgrade to fiber like some rural co-ops have, the response was "because they have other sources for money". Like the millions in profits aren't a legitimate source for upgrades to their infrastructure.
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Karl Bode (profile), 14 Apr 2010 @ 2:42pm

Re: Google should probably get more free rides
There's plenty of money for ISPs to make by collaborating with Google, and some are just starting to figure this out -- but these older phone companies generally move very slowly...right now they're still busy crying because they think this ad money belongs to them because it travels over their network (Verizon has even been busy lobbying to push Uncle Sam's investigation into the AdMob deal)....
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Karl Bode (profile), 14 Apr 2010 @ 2:44pm

Re: Didn't we pay for upgrading the Internet already?
In reality Americans have paid for upgrades many, many times over if you look back historically. Phone companies have been given billions in subsidies and tax breaks for promising to upgrade (in some cases to even last mile fiber) -- only to have the regulators buckle and wimp out when enforcement came around.
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Derek Kerton (profile), 14 Apr 2010 @ 2:46pm

Re: I am always amazed
Yeah, you're right. It's not just Google: if the "logic" applies there, then it could be applied to a tiny blog with a few ads on it.

"You're making money off our pipes, we should get a cut."

Not like they're already double dipping: charge consumers to get to Google, and the also charge Google for its Internet traffic. Should we be paying three times for the same connection?
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Derek Kerton (profile), 14 Apr 2010 @ 2:51pm

Re: Re: Re: Re: Re: Re:
Dude,

I love that you figured this out...and are probably right.
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Derek Kerton (profile), 14 Apr 2010 @ 3:04pm

YouTube
YouTube.

I mean, that's really what this is about. I'm surprised it hasn't come up in the comments yet. Most of you are talking about how Google search or mail or blogs is what you use, etc, but I don't think that's what this is about.

This is about the tremendous amount of capacity that is consumed by YouTube, and the impact it has on the carrier's networks, and their capital expenditures.

Not that it changes any of your arguments. Most commenters here, and Karl's article are spot on.

Really, what's going on here is the telcos are pissed at YouTube for filling their pipes, making money for another company, beating them to offer compelling services, edging out their video offerings, and forcing infrastructure upgrades.

And the carriers really have only two solutions:
1) Suck up to regulators, charge Google for causing increased demand for the product the telcos sell, or
2) Charging customers more for using more of the product telcos sell.

Number 2 is going to be a very unpopular solution, as feedback here at Techdirt has illustrated in the past. And the eventual public backlash can mostly be blamed on the same ISPs who have ingrained the "unlimited" expectation into customers.

Why did they ever promise "unlimited" if it was never what they meant? Because they didn't envision something like YouTube. Oops. If it wasn't YouTube, it would be something else, guys. Maybe Netflix or Amazon.
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errr-wat?, 14 Apr 2010 @ 5:02pm

Re: Google should probably get more free rides
whoa ... hold on a sec ...
is this bizarro Michial Thompson?

Where is the old Michial Thompson cheap shot artist?
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Chargone (profile), 14 Apr 2010 @ 5:50pm

Re: Re: Re: Re: Re: Re: Re: Re: Re:
somewhere in excess of 90% of humanity?

also telco execs and RIA(wherever)s

and newspaper execs

and...

ok, there's way too many.

oddly, probably not cosmonauts though.
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Anonymous Coward, 15 Apr 2010 @ 5:44am

Re: google voice has sadly been countered
What does "unlimited" mean ?
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Anonymous Coward, 16 Apr 2010 @ 1:29am

Google's on the road to becoming a telecommunications company and it scares the shit out of the incumbents because Google has the clout to bury them outright,
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