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The Fall of the Stupid Network

Stocks in this article: T PCS VZ DISH CMCSA DT

NEW YORK ( TheStreet) -- Carriers hate bits. Carriers prefer services.

A decade ago, in his "Rise of the Stupid Network," now hosted at Hyperorg.com , engineer David Isenberg explained how, by pushing complexity into phones and PCs, we could have networking abundance.

Network owners should focus on moving as many bits as possible, he wrote, and leave translating their meaning to the edge, to user devices and Web site software.

Carriers hate the stupid network. They see the stupid network as limiting their cut from traffic. They want voice to be voice, fax to be fax, TV bits to be defined as TV channels. They prefer carrier-mediated scarcity to abundance. They want what they had before the Web was spun, the power to define, control and profit from every bit sent.

The stupid network still defines today's core Internet, which is a shared infrastructure. I pay for bits you move, you pay for bits I move, and we all have an incentive to move more bits. It's a business model built for abundance.

But it breaks down in the last mile.

Take wireless networks. They have to buy spectrum, build out entire networks, then sell the result. Money from bits doesn't generate a positive return on this capital, especially as radios keep getting better, requiring frequent updates.

This has led to consolidation among carriers. T-Mobile was nearly bought by AT&T (T - Get Report) last year until the Federal Communications Commission said no. Now, T-Mobile is buying Metro PCS (PC) in a deal that gives parent Deutsche Telekom (DT) 74% of a new, publicly-traded entity, reports The Westside Story. One it can gradually sell its way out of.

In demanding competition between incompatible networks, with each network owner carrying all its own costs, the FCC is demanding something that can't exist. Today's wireless market is practically a duopoly, a shared monopoly between AT&T and Verizon (VZ - Get Report) Wireless, both of which stay afloat only with monopoly pricing.

Now there emerges a possible savior with a cunning plan. The Financial Times' Deal Reporter says DISH Network (DISH - Get Report) has been poking around the wireless bones, looking to craft a "triple play" of satellite, wired and wireless broadband, that it might sell at one price.

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