04 October 2005

Economic sustainability of the Internet?

Johnna Till Johnson wrote the following as part of this column:

"Quite simply, it may cost more to operate the Internet backbones than the carriers earn - and running at a negative profit margin, as we all know, eventually results in bankruptcy."

This article is part of a series that she has written (links are in the article), and are quite appropos to the leadup to WSIS. How do governance models affect profitability? Is Google seeking to effectively separate itself by subsidizing an end-to-end network with ad revenues (through GoogleNet)?


James Twigger said...

I would argue against allowing the government to take over the Internet backbone. First, in general, I believe that the government overall would operate much slower in any decision making processes than would happen were the Internet backbone controlled by private business. Second, to me, it seems as if the government always tends to inflate the costs (both material and people costs) of any type of work it does. Therefore, although the Internet backbone might be safe, I do not believe that the backbone atleast in the United States would be able to able as quickly to any kind of changes that take place. Additionally, although the costs to operate the backbone may be high now, I believe the goverment would end up making these costs go up even more. Industry typically tends to find the most cost-effective and beneficial solution, assuming a free-market environment.

I also think that eventually Internet backbone providers will find other ways to subsidize the costs, whether it be thru new video services or thru ads.

If Google were to find the appropriate price (if not making the service free), then Google could develop a stronghold on the Internet backbone market. Everyone will be willing to view ads were the price right, or if it were a free service.

Martin Weiss said...

Would you extend your reasoning to Internet governance in general? There are some position papers on Internet governance as a leadup to WSIS that give a variety of views on this issue.

James Twigger said...

I would only argue my previous statements only to a certain extent. I think that government should only be involved in the more high-level parts of the Internet (such as top-level domain names i.e. .us and IP addressing schemes (assigning different countries certain network addresses). However, when it comes to any technical implementations, I think this would be most successful if it were done by private businesses. To me, I can just imagine the government trying to determine whether to route a OC3 thru New York or Philadelphia...in general, I believe there would end up being too much politics involved, instead of considering the most efficient and cost-effective methods.

Martin Weiss said...

But there is some discussion on the domain name issues as well ... there are folks that argue that anyone ought to be able to build a root server for a TLD that they own. For example, you could build a ".twigger" domain if you wanted to, and anyone who wanted a name on this domain would have purchase it from you.

This would give you a monopoly for the ".twigger" domain (unless regulations existed that required you to subcontract name management to any registrar who requested the ability to do so). Under the current structure, TLDs are restricted, and competition exists for names via different registrars.

Which model makes the most sense? Both are technologically possible.