The Fall of the Stupid Network

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) 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) 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) 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.

By selling programs or channels or blockbuster movies using the bundle Dish could turn bits into services. Just as voice calls are a service. Services bring more money than bits, maybe even enough to justify a continued network build.

The services model is coming to the wired world, too. If you use Comcast ( CMCSA) for Internet (or a number of other ISPs) you're paying an "up-charge" to use Disney's ( DIS) Watch ESPN web service, whether or not you like sports. You probably didn't know that. It's the first nose under the tent for moving the cable pricing model of "programming services" onto the Internet.

Former ICANN board member and Obama technology adviser Susan Crawford writes this week at Wired that our obsession with services over bits is costing us in the global broadband race.

Crawford writes that countries such as New Zealand are beating us because they separate the construction of Internet capacity from the delivery of Internet services. She calls what the carriers are doing to destroy the stupid network "harvesting," and suggests that fiber be driven onto streets through loan guarantees, with open access made a requirement for getting rights of way.

Private interests will always seek to harvest profit from what they have, supporting scarcity over abundance. Until the public is willing to acknowledge that fact and act on it, the stupid network will continue to be destroyed, and our global competitiveness will be harmed in the interest of short-term profit.

At the time of publication, the author had no position in the companies mentioned..

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

If you liked this article you might like

Judge Says AT&T Doesn't Have Right to Access White House Correspondence

Judge Says AT&T Doesn't Have Right to Access White House Correspondence

AT&T 5G and 4 Other Top Stories You Need to Know Before You Trade Wednesday

AT&T 5G and 4 Other Top Stories You Need to Know Before You Trade Wednesday

Wendy's, Roku, GM, AT&T and 3M - 5 Things You Must Know

Wendy's, Roku, GM, AT&T and 3M - 5 Things You Must Know

Profit With Technical Analysis: Cramer's 'Mad Money' Recap (Tuesday 2/20/18)

Profit With Technical Analysis: Cramer's 'Mad Money' Recap (Tuesday 2/20/18)

Goldman Bankers (Mostly) Upbeat on Tech M&A and IPO Trends

Goldman Bankers (Mostly) Upbeat on Tech M&A and IPO Trends