Cogent and Network Competition

With all the noise recently about about telecom providers charging high rates for low-bandwidth services like SMS, Bell Canada rumoured to charge for mapping (while impairing competitors), and mobile providers blocking or impairing VoIP (via their control of user appliances), it was refreshing to read this Forbes article about Cogent and its CEO, Dave Schaeffer.

While I have nothing to say about his aggressive, though legitimate, business tactics, the network logic is compelling despite being an old story: keep the network stupid and cheap, and watch telecom innovation and usage explode upward. As Cogent is showing, competition in the backbone (transport between carriers and between the core and the access networks) is vibrant, fierce and dirty, and fairly healthy.

Contrast this with the edge. That's where there is still a monopoly, or oligopoly at best, and so service providers try to squeeze every penny they can from customers. While I don't blame them for doing so, after all it's their job to make money for shareholders, it smells of desperation. They seem to be rushing headlong, often clumsily, to find new things to charge for and to fight every competitive option by leveraging their privileged position as network "gatekeeper". I believe the tide has turned against them and these efforts to stem the tide will, in retrospect, be seen as futile.

I don't claim this position as an ideological rant, but rather as a reasonably informed and (mostly) disinterested observer. Consumers, including businesses, are becoming far too aware of how they are paying more than they ought and this in turn creates a market for new competitors. The access network oligopoly is ever-so slowly being wedged open and as it does so it becomes too difficult for the incumbents to push the door closed; the opening will only grow wider.

Those who want this to happen can all help bring it about in their choices as telecommunications consumers. Choose providers and equipment vendors that are increasing competitive options. This makes them stronger and thus able to make further investments. There can be a cost of inconvenience since, as we see, the incumbents will fight back by trying to impair the services or business of the upstarts, whether through technological or political means.

Ultimately there will be broad economic benefits as telecommunications get cheaper and both technology and content providers have easier access to the market. The biggest cost will be that the incumbents will lose their dominant, or perhaps just their privileged, position. That's an acceptable cost to all but their shareholders.