This will catch on in the rural areas of the USA and . . . .

at some point, HughesNet and the rest of the ovrepriced dial-up-over-the-satellite internet providers will see their paying customer base disappear. A kind self-fulfilling prophecy since they falsely claimed too many people use their service which caused them to ration it in the first place.


You Can't Get There From Here: The myth of bandwidth scarcity and can Team Cringely really make it to the Moon?
By Robert X. Cringely

Several years ago I wrote a column describing a system I had thought up for sharing Internet hotspots that I called WhyFi. Among the readers of that column were some entrepreneurs in Spain who went on to start the hotspot sharing service called FON, which now has more than 190,000 participating hotspots. Those Spaniards have been quite generous in attributing some of their inspiration to my column. And now this week FON signed a deal with British Telecom that promises to bring tens of thousands more FON hotspots to the UK and beyond. This isn't FON's first deal with a big broadband ISP -- they already have contracts with Speakeasy and Time Warner Cable in the U.S. among others -- but it is one of the biggest and points to an important transformation taking place in the way people communicate.

These FON deals remind me of President Lincoln's original Emancipation Proclamation from 1863, which I'm sure you'll recall didn't free ALL the slaves, just those in the rebellious states of the Confederacy. BT is not the largest mobile phone company in the UK, though it IS the largest ISP, so offering the ability for customers to make free or very cheap VoIP calls using FON software running on their home routers or that of another participating BT Fusion customer works well to tie those customers to BT ISP service, where the future of telephony clearly lies. It's good for customers, sure, and I am happy for them, but the reason BT and others do these deals is because it is BAD for their larger mobile competitors.

This is exactly why T-Mobile -- a smaller U.S. mobile carrier -- sells combined GSM/VoIP phones in the U.S. and the other carriers don't. T-Mobile, with no landline customers and no consumer ISP service, can only improve its U.S. business one way, by attracting more mobile customers from other carriers. Adding VoIP capability, while it may hurt mobile revenue a little, also costs T-Mobile almost nothing to provide, so its customer-attracting capability is justified. For exactly the same reason T-Mobile is happy to accept iPhone users who prefer to not use AT&T: it costs T-Mobile nothing more in support (because the phones are effectively unsupported) and costs AT&T mobile customers.

These games are played over and over by communication service companies of all kinds, and at the heart of it all is a big lie -- that bandwidth is scarce.

Bandwidth is not scarce. America and the world are bound by more fiber that is dark than is lighted. If backbones needed to be 10 times larger than they currently are, they quickly could be. On a local basis, the cost of provisioning a 1.5-megabit, 6-megabit, or 24-megabit DSL connection is essentially the same to the ISP, meaning the "bigger" pipes are vastly more profitable and that's all.

Bandwidth scarcity isn't peculiar to the United States, it is just managed differently overseas. You can get a 100-megabit-per-second Internet connection for $12 per month in Korea, sure, but it won't access most non-Korean Internet services any faster than a U.S. DSL or cable Internet connection could. There are few data resources anywhere, in fact, that can be accessed at such line speeds because it isn't in the economic interest of the ISP to make that much bandwidth available. It could be done fairly cheaply, but then who would pay more for a faster line?

Profit is to be found not just in pleasing dissatisfied customers, but in dissatisfying them in the first place so they will then pay to be pleased.

This isn't just a retail phenomenon, either. This week IBM announced to its workers that it is selling its network services business to AT&T. Will this please customers? Probably not. Will it put them in a position where they will pay extra to be pleased? Probably.

To this point AT&T has been just one of IBM's telecommunication service providers, but it has the noteworthy distinction of being by far the most expensive. Handing over the business to AT&T will not save IBM customers any money. IBM intends to continue to provide the same communication services to its customers, though now through AT&T, and AT&T says it expects to gain $1 billion in sales. Those sales have to come from somewhere, and in this case they will come from taking business from lower-cost providers.

What the deal WILL do for IBM is get 2,200 workers off the books cheaply (that $80 million charge against earnings AT&T is taking for the deal will mainly go for picking up the underfunded pension obligations of the transferred IBM workers). It will be good for the workers, too, because they'll be going to a company with a real benefits package and a solid pension plan.

But it won't be good for customers, whose charges will only go up if an IBM sales commission will now be pasted atop overpriced services that were, in the past, often sold at a loss. AT&T is not in the business of selling at a loss. This will have the effect for IBM customers of firmly defying the trend toward lower communication service costs, which maybe was AT&T's whole intent in the first place.

Whatever the cockeyed logical basis of this transaction, it will do nothing to change the deliberate bandwidth scarcity problem that plagues businesses and consumers alike worldwide. The only way to solve THAT problem is by taking back ownership of our own last-mile connections and creating a true competitive marketplace for backbone services. It's a move that would pay for itself almost instantly, but I doubt that it will ever be allowed to happen.

(entire article at site)