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Vint Cerf Caught Off Guard, Nevertheless Says What Needs to Be Said About Our Misguided Policy

This morning’s mail brought news of a 3 minute 45 second video clip of very candid and very outstanding remarks from Vint Cerf. Vint says very clearly what needs to be said and what needs to be grasped and acted on by the new president and congress next year. The clip was captured, blogged and up loaded to YouTube by Tom Foremski proprietor of IMHO for ZDNet (also reported here on CircleID).

Foremski writes: “I spoke with Vint Cerf at the Fortune Brainstorm conference in Half Moon Bay. I asked him about net neutrality and the problems created by Telcos in trying to own the gateways to the Internet. Here is the video, the quality is very high contrast because of the lighting but the content is fascinating. Mr. Cerf talks about how he was misquoted on the subject of net neutrality and offers a solution to the current issues around broadband Internet.”

My observation is that in my opinion it is not the lighting that is unusual but rather the camera angle. It looks like Foremski is seated with his camera pointed up. The camera is looking at Vint’s chin. If Tom were seated one would expect that Vint would look down at him every now and then. Vint does look in a direction where you would expect him to look if Tom were standing talking to him. A friend actually pointed this out to me.

Consequently I sent Vint an email: “you knew you were being recorded—surely? I hope: in any case the good deed is done… thank you sir.”

Vint replied with permission to quote: “While I was not told that my informal conversation over cocktails was being recorded, and I am not happy about that, I believe that the points made are worth consideration and serious discussion.”

I agree completely with Vint’s response. I have spent a few minutes trying to find a contact for Tom to offer him an opportunity to respond. I have been unable to find out how to promptly reach him.

My opinion is that it is very unfortunate that Vint didn’t know he was on camera. However I hope that good will come of this because what he did say is correct and needs to be said loud and clear from every street corner in the land.

Here is my transcript of Vint’s remarks:

“My candid opinion of Verizon? I don’t know if you followed the network neutrality debates but those guys were misquoting me in full-page ads in the Washington Post, so I have very little warm feeling about those guys. When MCI was being sold into Verizon…” [sentenced left unfinished in the recording]

Vint continues:

“In the places where there is a strong regulatory control, it seems to be working. Although if you are watching the UK the BT guys are making the same kinds of arguments that Verizon ATT and the cable companies are making. Basically it’s like little kids throwing a tantrum—I am not going to build this system unless you give me three scoops of ice cream and a pony.

My reaction to this is quite negative. It is harmful to the national interest to behave in this way. Because this is serious infrastructure. It is very much like the road system and I have been ridiculed for suggesting that it be treated like the road system.

‘Oh you want the government to take over.’

No. What I really want is a split in the regulatory framework for Internet service. I want to see a reintroduction of common carrier responsibilities. I want to see a horizontal treatment of regulation. I want to see the broadband providers split into two parts either literally or at least from the accounting point of view. I want wholesale broadband service to be required. I want them not to be able to interfere with anyone’s applications. I want them to charge themselves the same for their access as they charge everyone else. All of those things. And they will say well we won’t build any more fiber.

I am not an economist and I do not know what the right reactions are other than to say we have to derive incentives that will cause these companies to behave differently or to create an incentive for a competitor to put in facilities that will compete with them.

We need to take away their monopoly management because what we did in the United States is to say okay we will not control you anymore because you are providing Internet access as an information service which is unregulated and in so doing we destroyed the common carrier rule and that we essentially told them do anything you want to. It is your investment and you can do anything you want with the higher-level applications and we don’t care because we think deregulation is wonderful. And frankly that’s [garbage] especially when we have a set of incumbents. If you have a tabula rasa—you remember the telephone system from the 1920s? There were dozens of them and that was bad too because you had to know which telephone company your friend was on…

So we have to have a set of rules that makes sense out of attempts to build multiple infrastructure and in the absence of this we have to make it a privilege to build the infrastructure. There has to be a reasonable rate of return, but there cannot be a confiscatory rate of return and it can’t be abused by allowing people to throttle competitors.”

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Cerf's comments out-of-date Richard Bennett  –  Jul 25, 2008 2:06 AM

Vint Cerf’s comments offering the British model to the US are actually quite odd, as Britain is moving in a direction that’s more US-like, where the next-generation fiber infrastructure will be funded by services. The general idea is that British Telecom can pay for new infrastructure with services and very high wholesale prices for some period of time, and only after that will the wholesale price resemble operational cost. See this article on comments by the head of Ofcom, Britain’s FCC:

The boss of Ofcom has given the clearest indication yet that regulators are ready to offer BT more control over a next generation UK broadband infrastructure in exchange for investment.

In a speech in London at IT bigwig yacking shop Intellect yesterday, Ed Richards sympathised that “operators” who might invest in new infrastructure (read: BT) need to know that watchdogs will let them “make and keep” a rate of return on the investment.

That will likely mean allowing BT to operate a fibre network at a big competitive advantage, via high wholesale charges to other broadband providers who want to use the lines.

It’s very unlikely that Ofcom would let BT run a national fibre network as a traditonal incumbent monopoly. German regulators have tried the same trick to tease more investment in fibre from Deutsche Telekom, and are facing court action from the European Commission as a result.

Richards said: “They [investors in fibre] need a time horizon that gives them a degree of assurance for a realistic period in the future; that they know for example that the regulator will not suddenly change the rules of the game to reduce the returns just as the rewards for the risk start to flow in.”

I always laugh when Google complains about “monopolies”. There is exactly one monopoly in the Internet economy, and its name is Google

How many Years Before Fiber to the Home is Just a Utility Like Others? Michael Roberts  –  Jul 25, 2008 4:11 AM

Gordon’s absolutely right - this badly needed saying and it’s great that Vint said it so well, even if off guard.

Verizon recently said that its cost of passing a home with FIOS fiber was generously less than $1000. What other home utility - water, sewer, electricity - comes at such a bargain?  Richard Bennett suggests a “risk” reward for investors.  What risk?  Bill St. Arnaud mentioned the other day a Canadian initiative to allow consumers to pay the capital cost of their last mile connection and cut through all the duopoly baloney.  Millions of us would do this in a minute if there was a bona fide offer.

Suppose you threw a party and nobody came? Richard Bennett  –  Jul 25, 2008 6:38 AM

It’s not clear that the American public harbors a secret, burning desire for hundreds of megabits per second of Internet access bandwidth. Surveys has consistently shown that demand for the highest tiers of bandwidth is modest, so the risk for infrastructure builders is a simple lack of subscribers to pay for the cable plant.

Cerf is displaying an amazing propensity for making rash statements that the Google PR staff have to sanitize. His most previous gaffe, delivered at the Personal Democracy Forum, was an apparent demand for government ownership of first mile networks, and now we have this. I can’t wait for the next, because each is more amusing than the last.

Two years ago, I wrote James Seng  –  Jul 25, 2008 10:22 AM

Two years ago, I wrote an article on the same topic (also on CircleID):

“It is conceivable that this is one of the most important debates as it will change the settlement system on the Internet. In a both-party-pay system, we will have a tariff, where Verizon will charge Google for accessing Verizon’s network but Google could also charge Verizon for allowing Verizon customers to use its services. This would have cascading effect in all other interdependent services on the Internet (even outside US).”

“even outside US” is what I like to say here because it is often overlooked. US policy has a cascading effect.

In the late 90s when Internet is taking off, developing countries were complaining how they got a bad deal off the settlement in Internet traffic. Unlike voice tariff where they are paid what they wanted, the Internet flip it and they end up paying full lease circuit as well as transit to US.

Many were extremely upset at the disappearing cashcow. Some smaller countries GDP literally is supported by revenue from AT&T;. “It cost me X dollars to build that last mile in our countries” they cried. But of course, thats not how the economics of Internet work back then.

You will see the similarity of the arguments of these developing countries on their last miles like how the incumbent argued about the need to protect their risk-reward in the last miles.

“Hopefully one of them would ask if it is in the interest of United State if Google and the likes-of-Google have to pay Verizon and all the likes-of-Verizon in the world.”

And if that were to happened, I think US stand to lose a lot more than what Verizon were to gain the short run.

Red Herring Richard Bennett  –  Jul 25, 2008 11:30 PM

James, there is no reason to believe that either Verizon or Google wishes to charge the other for access to its network. That would be commercial suicide for either. Nobody in his right might takes speculations like this seriously.

I think Verizon made it James Seng  –  Jul 26, 2008 12:03 AM

I think Verizon made it quite clear they want Google to pay. Not a speculation but the CEO of Verizon said so himself.

No he didn't Richard Bennett  –  Jul 26, 2008 12:45 AM

No, James, you're confused. The former CEO of AT&T;, Ed Whiteacre, said that he didn't want Vonage and Google to "use his pipes for free" once upon a time, but the president of Verizon said no such thing. Whiteacre's statement was used by Google's interest group allies to set off a demand for regulation of ISP networks, but it was simply empty bluster. AT&T;hasn't tried to cut off Google, and after Whiteacre has retired. Getting your facts straight before speaking is always a good idea.

Since we talking about getting James Seng  –  Jul 26, 2008 4:43 AM

Since we talking about getting "facts right", 1. I stand to be corrected that it is not CEO of Verizon who said that. Instead, it is John Thorne, SVP and deputy general counsel of Verizon, in Feb 2006, who called for "End of Google Free lunch" and I quote ""It is enjoying a free lunch that should, by any rational account, be the lunch of the facilities providers." 2. John made that statement around the same time Ed Whiteacre made his statement then, also around Feb 2006. The timing is critical because the Congress was about to debate on H.R 5252, which was submitted on March 2006. It should be noted that the original H.R 5252 was due to the lobbying effort of the telcos (AT&T;was trying to launch their IPTV) but added a "Net Neutrality" clause that allows the telco to priorities their traffic as they like (which was totally opposite of the meaning of the word Net Neutrality). The logic for the latter clause is plausible however, since in order for AT&T;to provide IPTV services, it is necessary for them to allocate bandwidth for their IPTV video streams. This is where the "two-tier Internet" phrase pop up in the early 2006 where got everyone upset altho the intention is somehow missing after repeating n times. 3. The latter was also what trigger the "Net Neutrality Act of 2006", which is what I think got you pretty upset. Based on your articles and posting elsewhere, minus off your emotion rants against Google "monopoly", is that as an network engineer, you see that your work would inevitably involved monitoring and prioritizing the traffic and that "Net Neutrality Act of 2006" would therefore forbid you from doing so. But what you missing out is that NNA 2006 actually have exception clause where it allows broadband provider to "manage its network, as long as it does not result in discrimination against unaffiliated providers" and "offer varying levels of transmission" 4. It should also be pointed out that you are mistaken that it was Google who kick start the debate of Net Neutrality. The trigger was HR 5252 which was introduced by the telcos. Internet companies like Google is just reacting to HR 5252, and they rightly should. 5. Your other complains is that Google is an evil company who does lobbying. But thats the game that is being played at the Congress, like it or not. In April 2006, AT&T;donated $1M to a community center founded by Rep. Bobby Rush, who is also the member of the Energy and Cmmerce Committee, that is responsible for HR 5252. I am not suggesting any wrongdoings, and I am sure AT&T;do it all above board, but lobbying, soft money and money politics is part of the game. If you don't play it, then prepare to lose it. 6. I sympathize with your position as a Net-head who strongly disagree with any government intervention of the Internet. Sadly, Internet is no longer the geeks playground and the intervention is not within our control. So rather than fighting that eventuality, I rather focus on working with it to make sure we keep the spirit of Internet alive. It won't be the same but the alternative could be a lot worst.

Confused about the timing Richard Bennett  –  Jul 28, 2008 11:09 AM

I don’t recall the statement by the Verizon SVP, but in context it probably had a different meaning than you attribute to it. If you have a link to the actual story, I’d like to see it, as even Whiteacre’s comment about Vonage and Google makes more sens when you see that he was talking about VoIP service that didn’t have to follow the same rules re: 911 and other services as PSTN telephony, and wasn’t paying its fair share of interconnect fees.

The nationwide video franchising bill, HR 5252, didn’t have anything to do with the Internet, other than making the Four Freedoms binding. It was seized on by Google’s front groups because it was a convenient vehicle for making the advantage enjoyed by Google’s private CDN insurmountable. NN is simply a mechanism for preserving CDN privilege.

The video franchising concept provides Americans with an alternative to cable companies, and it has passed in all the states where it has been introduced, most notably California and New York.

And yes, Google has a monopoly on search advertising, the most lucrative and meaningful monopoly in the entire Internet economy.

1. John Thorne statement is James Seng  –  Jul 28, 2008 11:43 AM

1. John Thorne statement is published on Washington Post, among others http://www.washingtonpost.com/wp-dyn/content/article/2006/02/06/AR2006020601624.html By that time, Vonage was not an issue really. 2. Whether it is seized by Google front or whatever you call it is your opinion but the fact remains HR 5252 is the anchor that started it, and that it was introduced by the telco. The Net companies, was dragged into in a reaction. You see Google as the bad guy who lead that effort but not everyone share that opinion.

The NN debate is much older Richard Bennett  –  Jul 28, 2008 9:30 PM

Professor Google, Larry Lessig, has been promoting a more regulated Internet since 1999, James, the debate didn’t just start in 2006. What happened then was Google paid to have the issue become a hot political topic as opposed to private concern of a few ivory-tower academics at Google-funded programs like the Berkman Center and the program Lssig co-founded at Stanford on Google’s dime.

Prof Larry Lessig is known James Seng  –  Jul 29, 2008 12:03 AM

Prof Larry Lessig is known for his work on Creative Commons. Have you read his books?

Berkman Center existed long before Google did. Prof Charles Nesson attention is on “online poker” (check “Global Poker Strategic Thinking Society”) and if you don’t know what that has to do with “net regulation” and why he is doing that, then you have no idea whats going on that front*. Prof Jonathan Zittrain is the last person on earth you can accuse of being against an “open platform”.

Anyway, these people and groups are respected members of the community who has done more to ensure the Internet Freedom. As I said, you are entitled to your opinions but not everyone shares that.

* That is another interesting topic on soft money and lobbying, something to blog about in future about the conversation I had with Prof Nesson last year.

Yes, I was aware that my opinions are my own Richard Bennett  –  Jul 31, 2008 11:15 PM

And also yes, I’ve read several of Lessig’s books and find them generally appalling. His grasp of networking technology is weak, and his attempt to extract principles of network design and impose them on human societies is scurrilous. I regard Lessig as America’s greatest living charlatan.

But you’re entitled to your own opinions, so we’ll just have to agree to disagree.

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