Separated at Birth?

April 14th, 2008 by tkarr

Ed Whitacre, Former CEO of AT&T

Fake Grass RootsWhitacre

To BusinessWeek: “Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?”

Neil Berkett, CEO of Virgin Media

Fake Grass RootsBerkett

Berkett told Royal Television Society Magazine, “this net neutrality thing is a load of bollocks.” He claimed that any video content provider that refused to pay Virgin a premium for faster access would have to get stuck in “bus lanes,” having their content delivered to end users at much slower speeds than that of rich content providers. Virgin is the second biggest ISP in Britain.

Berkett in Song

Berkett’s arrogant comments are eerily similar to those of his long-lost twin in San Antonio. And they have already sparked a reaction among the netroots.

Check out OsoTrue’s musical response, in which he croons to Berkett:

“Stop infringing on my Net Neutrality; it’s the way our generation speaks internationally. Cancel my service and bid Virgin farewell, and please tell Mr. Neil Berkett that he can go to hell.”

Alien Warning

This video response from usMembers takes a more galactic view of Berkett:

“We have heard the voices of many speaking out against your actions. You have opened the door to a domino effect that will destroy the very foundation of all we have created,” says a voice from outer space. “You have opened Pandora’s Box and must now face your demons.”

Funny. And sad.

One Response to “Separated at Birth?”

  1. barry payne-economist Says:


    Monopolist network providers like Whitacre pose in camouflage as players in “free market competition” to avoid either competition or the regulation that offsets its absence. That’s their job. They gain either way.

    Sometimes they manipulate regulation to eliminate competition. Other times they eliminate competition to protect their deregulated monopoly, in this case one associated with the powerful scale and scope economies of networks to achieve efficiency. And most of the time, lesser degrees of market power generally apply to this result, particularly duopoly.

    The only way to break into these markets is usually through a difference in technology, such as cable or wireless as a second and third pipe, but even here, parts of the internet backbone are dominated by one technology and due to transaction costs, it’s usually more efficient to have one owner for large areas and distances.

    When Whitacre asserts the application of “Whitacre tiering”, it would be like any network provider of anything going to certain users of the network - those who use the network to conduct business and generate income - and claiming, “why are you using my pipes for free?”. It could have been said, for example, by the electric, gas or water utility, or the interstate highway network, a cell phone provider, or even the famous Wal Mart supply network.

    In which case of course, Whitacre would have been laughed out of town. Everyone knows that at some point in the added value chain, prices are usually assessed to recover the cost of inputs. If they don’t for the reason claimed by Whitacre, it’s called “stealing”, meaning somehow large content providers like Google and Yahoo found ways to bypass the bandwidth meters and take even more of what they’re already paying for.

    Since Whitacre can’t have Google and Yahoo arrested under false charges, the only option is to claim they should pay more. For what? Because they’re in business? What does that have to do with how much bandwidth and GBs they use? Is the meter broken? Did AT&T fire all of its accountants and auditors? Are the earnings of AT&T in jeopardy because ot all the “stolen” bandwidth?

    This is the message of market power over competition, claiming the right to assess an extortion tax over and above the competitive cost of doing business - on other businesses which use its network.

    The only obstacle to “Whitacre tiering” is net neutrality, which acts in the absence of competition to offset Whitacre’s attempt to raise the price of bandwidth to some content providers and not others on the same network, because Whitacre wants to “manage” content in discriminatory, non-neutral ways rather than sell more or less bandwidth and GBs neutrally to all producers and consumers of content.

    When opponents of net neutrality claim it’s going to result in a host of unintended (or even intended) harms to internet consumers (and producers), by definition, they are siding with Whitacre in an attempt to treat content differently through pricing and TOS based on content, even when it uses the same bandwidth or GBs.

    Whitacre is explicity asserting an intent to do this (at least he’s not lying), so in the absence of net neutrality, there’s no effective competition among broadband neworks in most locations under most conditions that would prevent “Whitacre tiering”.

    In other words, the symmetrical argument against net neutrality, in support of Whitacre, by definition would agree that Google and Yahoo are currently “stealing” from AT&T, another “harm” which must be avoided by eliminating net neutrality in order to let the “competitive” market correct itself and allow AT&T to collect more from Google and Yahoo.

    But the additional amount collected would not be a result of competition - it’s the consequence AT&T’s deregulated market power not offset by net neutrality to assess such charges to any producer or consumer of broadband content.

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    Berkett confuses network congestion with GB volume and large digital content, i.e., more GBs instead of less for a given producer or consumer of content.

    Berkett’s reference to getting stuck in slow “bus lanes” without an opportunity to pay one’s way out of the congestion through a premium “fast lane” is another false interpretation of net neutrality.

    In a traffic jam, everyone in the jam contributes “neutrally” to the congestion, generally based on the road space occupied. One bus contributes as much, for example, as three compact cars (or much less if one assumed the bus passengers would be driving cars).

    However from Berkett’s flawed perspective, because a substantial number of vehicles in the traffic jam belong to one entity, i.e, the producers and consumers of all those “digital movie cars”, net neutrality somehow interferes with the possibility of providing them with an option to “pay their way out” of the congested traffic jam.

    Wrong. Premium, uncongested, always-on service already exists under net neutrality, as for VOIP and similar services. Offering dedicated bandwith tiers designed specifically to avoid congestion to anycontent, large or small, particularly on a network that incurs peak congestion on a regular basis, is exactly what net neutrality is about.

    What Berkett and the network providers are usually referring to is the metered pricing of GB volume to justify “fast lanes” or “everything packages”, which is both, a way to raise the price of current service coupled with a reason to degrade current service at the existing price.

    If getting stuck in Berkett’s “slow bus lane” is the problem, why isn’t paying for the same premium uncongested bandwidth afforded to VOIP the solution, which in no way is restricted by net neutrality, which instead actually encourages such solutions? Correspondingly, why isn’t a neutral discount off-peak rate made available to encourage use of spare bandwidth capacity and relieve peak congestion?

    Berkett’s analogy is already flawed because if anything, a bus deserves the “HOV” fast lane for reducing congestion rather than causing more of it.

    Beyond that, moving all those “exaflood” GBs around from a “congested” area to an “uncongested” premium service and leaving the rest in a traffic jam is discriminatory pricing not tolerated under competition. It forces “uncongested service” into a large content “everything package”, effectively denying it to small users, even though both cause the same congestion in peak periods on a bandwidth unit basis.

    In other words, anyone stuck in the slow lane should pay the same, lower unit bandwidth price for whatever “road space” is occupied in a lower quality service, and anyone who pays to get out of the traffic jam into a higher service quality should all pay the same, higher unit bandwidth charge.

    Instead, Berkett is trying to force anyone who wants out of the traffic jam to join the equivalent of an expensive limousine club with special police escort, rather than for example, pay the far more neutral $8 per vehicle charge proposed recently for New York City to control congestion.

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