Could consumers own their internet connections?
In a study released last Thursday, the same day the Canadian Radio-television and Telecommunications Commission issued a verdict allowing Bell Canada Inc. to continue slowing certain internet uses, Wu suggested an access model that would allow home owners to purchase high-speed connections rather than rent them from service providers.
Under the "homes with tails" model, customers would purchase a fibre wire connection to their home that would provide speeds far in excess of what is generally available in North America today. The fibre would be connected to existing open exchange buildings where a large number of telecommunications pipeline providers have equipment that forms the backbone of the internet.
Customers could therefore bypass cable and telephone companies, who today provide the "last mile" of connection between the exchange and the home, to access the internet and thereby video, voice and other services.
The model would also result in significant monthly cost savings because customers would only have to pay service providers for the true price of their services and not for infrastructure investment, the report said. The majority of monthly internet bills today are to help cable and phone companies recoup the costs of building their networks.
Derek Slater, a policy analyst at Google Inc. who co-authored the report with Wu, says the most important effect of fibre ownership would be that customers could pick their internet connection from more than the two choices they currently have — typically a phone and a cable company.
That increased choice at the exchange level would guarantee net neutrality because if one provider started interfering with connections, customers could switch to one that did not, he says.
"Competition would ensure that consumers were in control of what they choose to use, access and share without any undue interference," Slater says. "Competition would be a bulwark against interference by network operators."
(Although Google has an interest in increased internet usage, the company did not fund the report. Slater says he helped Wu co-author it out of his own interest.)
The idea could have specific relevance in Canada, where service providers are increasingly introducing network management measures that critics say are running afoul of net neutrality principles.
In Ontario alone, the two largest internet service providers — Bell and Rogers Communications Inc. — are both slowing peer-to-peer file-sharing applications such as BitTorrent. Last week's CRTC ruling ensured that many internet customers in the province will be unable to find unthrottled service at least until a net neutrality probe concludes a year from now.
Test project underway in Ottawa
As such, the fibre ownership idea is currently being tested in Ottawa under a pilot project headed by Bill St. Arnaud, the chief research officer for CANARIE, Canada's non-profit advanced internet research network. The Ottawa project is adding an additional incentive for consumers to buy their own fibre by tying its cost to energy usage.
Based on typical energy expenditures in Ottawa, a consumer would rack up a fibre cost of between $200 and $300 per year, or about $1,000 to $1,500 over the five-year lifetime, he says.
The scheme would encourage lower energy consumption, St. Arnaud says, because the fibre would effectively get cheaper as the consumer used less gas or electricity.
"Owning is not going to be sufficient incentive for the customer to make that investment," he says. "If we encourage them by this attraction of reducing their energy bill, saving them money and still giving them fibre, it's a bigger inducement."
Monthly savings on internet bills would also be significant, St. Arnaud says. He estimates the true cost of service from Bell and Rogers to be between $2 and $15, with the remainder of the monthly $40-plus bill going to recouping infrastructure investment and profit.
Finally, fibre would count as an asset to a home owner. According to Wu and Slater's report, studies have found that homes with fibre connections are worth about $4,000 U.S. more than those without.
Concept faces obstacles
The idea faces a number of obstacles, however, not the least of which is convincing consumers to change their mindset toward ownership rather than rental of their internet connection.
That's not an intractable barrier, the report said, since precedents have been set. Computers, for example, were rented out to businesses before companies such as Apple introduced the idea of an owned personal computer.
"It will be strange to people at first, but the line between consumer property and businesses has changed over time," Slater says. "What may seem strange or challenging today may become much easier tomorrow or a few years from now."
Industry analysts, however, say that's not such an easy obstacle to overcome because ownership also means unwanted hassles. "I can buy a water heater for a couple hundred bucks from Home Depot but I don't want the problem of it," says telecommunications industry consultant Mark Goldberg. "If I rent it, it's not my problem."
Maintenance of the fibre connections would also be an issue. Under the current system, cable and phone companies fix any problems that occur on their networks. With the consumer-ownership model, a "condominium" system where households pay monthly maintenance fees would likely be necessary, which would cut into costs savings earned through bypassing a cable or phone provider.
"It's not a free ride after you've paid for the fibre," Goldberg says. "You need to have a fibre manager, and they're not going to do it for charity."
Incumbents likely to resist
The concept's other major problem would be getting service providers to sign on. Cable and phone companies are likely to resist getting cut out of monthly internet access revenue while the backbone service providers at the exchanges may not be willing to go into competition with those firms.
That's exactly what's happening in Ottawa, St. Arnaud says. Despite already having strung fibre, mostly from streetside poles, to about 400 households, the project has been unable to find an exchange-based service provider willing to connect customers and go up against Bell and Rogers.
"The retail internet business in Canada has been destroyed. All you've got left in Ontario is Bell and Rogers," he says. "Nobody wants to make that kind of investment."
One possible solution lays in convincing a big internet service provider from one region to expand into another. Vancouver-based Telus Corp., for example, could get into the business of selling fibre connections in Ontario, where it has no residential internet customers. The problem there for Telus, however, would be the threat of repercussions from Bell or Rogers.
"Their concern is that they'll come back and invade them on their own territory," St. Arnaud says. "They like the idea in somebody else's territory, but not their own."
Still, both Slater and St. Arnaud believe the concept can fly if only one service provider can be convinced to give it a try. The point of the report, Slater says, was to get discussion of the concept moving and to encourage more experiments like the one in Ottawa.
"It's a chicken-or-the-egg problem. How do you get the service providers in on it if they're not used to this model, and how do you get people to want to buy the fibre if there aren't service providers there to begin with?" he says. "These kinds of attitudes can change over time. It's not an insurmountable obstacle."