The problems that Vonage is having right now with some of the regional telcos (and some not so regional or telco) represents an interesting analog to what could happen in the IPTV or Internet video space.
As far as Vonage is concerned, they are providing a service over an existing broadband connection. Data is data, whether it’s a voice package, e-mail, Web page, or MP3 file. However, it appears that the DSL providers might be forming a different opinion. As far as they are concerned, Vonage is freeloading. They’re providing a valuable service over expensive infrastructure and not providing commensurate compensation to the owner of said infrastructure. (Worse still, they’re not even getting taxed like a voice call, bastards!) As a result, it appears that some of the more aggressive providers are actually snooping these lines to identify the VoIP traffic and engaging in various efforts to “block” or otherwise hinder the free transport of these packages to the detriment of the consumer (and Vonage).
At first blush, this is a rather odd position for the DSL provider to take. I mean, why would they make a distinction between Vonage’s VoIP traffic and, say, a subscription to RealOne? Both provide value for the consumer on top of basic DSL access and both charge the consumer a fee for access to their respective service. Both are services that the DSL provider could theoretically provide themselves. Neither pays the DSL provider anything for the use of their network in this endeavor. What’s the deal?
Well, it doesn’t really make any sense, unless you’re the DSL provider watching all these valuable services traveling over your network and realizing that you are rapidly approaching low-margin commodity status. I mean, here you are, spending all this money to acquire the customer, (in many cases) building out the infrastructure, subsidizing the consumer hardware, educating the consumer and handling support calls, etc., all for a flat monthly fee. You’re getting paid, but the $20-40 per month is starting to look like chicken feed compared to the exploding amount of commerce being conducted over YOUR network. And now, some upstart is going to offer phone service over this network and kill your cash cow (the same cash cow that is funding the roll-out of your DSL network). Nope, you’re going to take a stand, because it’s either now or never.
The problem is, the DSL provider doesn’t like the future in which they’re providing broadband access in a highly competitive market with no real competitive differentiator and no ability to profit from the services traveling over their network. They want to start stacking the services themselves and putting up barriers to those that would try to piggyback. I think they’re starting with voice because it’s obvious, but I don’t think there is any reason to believe they will stop there if they are successful in this effort.
Let’s say these telcos get Vonage to pay for some sort of Quality of Service guarantee (QoS). Vonage may not feel it is necessary from a technology perspective, but they might make a calculation that the lost customers and bad press justify some settlement. Why wouldn’t the DSL provider then take this “winning” strategy further and attempt to monitor their network for other “high-value” traffic? Why not slow down the transfer of audio and video unless the consumer pays more or the service provider pays for a similar QoS guarantee?
Anyway, the point is, if I sell a service to a DSL consumer that provides for the simple download/upload of videos through my aggregation point (be it Ourmedia.org, Yahoo!, Google, or CozmoTV) and I’m not sharing the revenue generated from the sale of services, content or advertising, then I’m a worse freeloader than Vonage. Because in my case, I’m not a “bandwidth-light” thief, I’m a “bandwidth-heavy thief.” I would be costing the DSL guys a lot in terms of bandwidth and infrastructure. And, while I believe it would also be illegal (or at lest highly unethical) for any of these providers to interrupt delivery of this content, there is no reason to believe that they wouldn’t make the same calculation they made with Vonage.
Anyway, it begs a simple question. Do providers of broadband dependent services work with DSL providers (and maybe even the cable guys once video really starts to shift to IP only) and pay a QoS (or related) bribe, or do they tell the DSL guys to go f*ck themselves and scream bloody murder to the regulators when they start degrading service. It’ll be interesting to see how this whole situation with Vonage shakes out. I think there is more at stake than simply the fate of a VoIP pioneer.