FCC Net Neutrality Debate Obscures 'Last Mile' Dilemma

NEW YORK (TheStreet) -- The people protesting the Federal Communications Commission's "net neutrality" decision, claiming it will "ruin the Internet," need to answer a hard question.

How do we pay for the last mile?

Specifically, how do we pay the estimated $100 billion cost of bringing fiber to every home, or even most of them?

The FCC is saying that it will let last-mile ISPs -- carriers like Comcast (CMCSA) and AT&T (T) -- create a "fast lane" for content and charge for it. This follows Comcast's recent agreement with Netflix (NFLX) , under which Netflix pays for the fat pipes needed to deliver massive streaming to customers.

The Internet's rules don't forbid this. They endorse it. Peering is based on equal traffic going in both directions. When you're streaming video, traffic is mostly one-way -- Netflix is sending bits and Comcast is taking them for you.

TheStreet's Leon Lazaroff reports Comcast insists this is the way things should work, regardless of the regulatory scheme. 

It sounds like bullying but it's accurate. Lazaroff also writes that content companies will win, regardless. Again, he's right.

What net neutrality advocates like Craig Aaron, writing at MSNBC, demand is the FCC "reclassify broadband," treating it as a common carrier, the way phone companies have been regulated for a century.

That's how we got into this mess. Utilities like AT&T don't invest new money without a guarantee they can get it back and more.

Before Google (GOOG) will consider running fiber to homes, it demands concessions. Its fiber-ready checklist includes fast, cheap access to a city's whole infrastructure, with detailed plans aimed at cutting Google's costs.

AT&T has a competing offer called Gigapower, but the hidden costs are high.

State legislators are being told that if they want AT&T GigaPower, they have to completely deregulate, eliminating limits on prices and the requirement that the company serve all customers.

Customers are being pushed to let AT&T watch what they do online and sell ads accordingly, according to the tech site Ars Technica. 

Against this onslaught, consumer rights groups have only one effective answer -- let cities build their own networks to be run as a public utility. Phone company lobbyists are moving to prevent that but even if they didn't it would be ferociously expensive and few cities could afford it.

The fact is, it costs more to serve the "last mile" than it does to serve every other mile combined. The Internet was designed to connect offices and university campuses, where traffic was equal in both directions and where the telephone switches needed to make connections were nearby.

For residential customers, this distance varies. I have a phone switch a block from my house but most people don't. Suburbs, exurbs, and rural areas may be many miles from either a switch or a cable head-end. It may cost many thousands of dollars to run trucks and wires to each such location.

How will these customers get the future, and who will pay for it?

 

At the time of publication the author had a position in GOOG.

Follow @danablankenhorn

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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