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Google Won't Pay Bell South
grandgator writes "Google has offered
a clear response to Bell
South's proposal to charge content providers an additional fee for access
to their network: They won't pay. In an email, Google's Barry Schnitt told the
folks at networkingpipeline:
'Google is not discussing sharing of the costs of broadband networks with
any carrier. We believe consumers are already paying to support broadband access
to the Internet through subscription fees and, as a result, consumers should have
the freedom to use this connection without limitations'"
Rethink my advertising partnership for one thing.
GetOuttaMySpace - The Anti-Social Network
About time someone in the content business stood up and flatly, publicly opossed the idea of charging content providers for sending their data.
I even run a small ISP, and I agreee that charging content providers for traffic is a horrible idea. The only way to fairly do this would be to have huge burdensome regulations (like the phone companies who receive money through a regulatory scheme for each call they receive from another carrier).
I hate intrusive regulation more than I hate bandwidth hogs. Besides, Bell South could just charge by bandwidth instead of by link capacity if they really wanted to cover the costs of some traffic consuming more resources than others. They won't do this of course because the consumer is hooked on unlimited traffic--much like what is happening more and more with unlimited phone calls.
This is what happened to the British Penny Post in the 19th century: originally you had to pay a different amount depending on how far your mail was traveling, within Britain. However, Rowland Hill showed that it would actually be cheaper for NEARLY EVERYONE to charge a flat rate, because the postal service wouldn't have to pay people to determine the postage rate for every darned letter.
More recently, I believe this explains why the Internet took off quicker in the US than in France: in 1997, when I lived in France, *no one* that I knew in my high school had Internet access, while practically everyone I knew had access in the USA. The reason was simple: in the US you pay a flat monthly fee for local calls. In France, you get a pamphlet that goes something like this (I'm not exaggerating):
So in France in 1997, not only did you pay per call, and not only did the rate vary depending on the time of day and day of the week, but ON TOP OF THAT the amount of time that each billing unit was good for was constantly shifting. It was a mess. No wonder no one wanted to use their phone line for Internet access.
My bicyles
We've already established in the last article about Bell South that ISPs generally don't have common carrier status.
It takes a man to suffer ignorance and smile
Be yourself no matter what they say
Well yes there is a ton of dark fiber out there. But let me explain about how cheap it is. I work for a cable installation company. We plow in new phone/power/cable tv systems. If you have a fiber in the ground and we come along, then you have to mark it so that we can cross it without cutting it. Minnesota one call laws and others states as well define the liabilty on this pretty well. If it's not marked we aren't liable. So even if the fiber is dark(not in use) it causes expense, someone has to pay the locator. If it gets cut it's lost inventory unless fixed(a typical, say 4 fiber, cut is around 20 grand to splice now). so the cost is still there on dark fiber even though there is no revenue being generated. The fiber in question remains dark for a reason. Generally it's due to one of three things. The Company that owns the fiber has no current need for it. The fiber doesn't go to an area where it is needed. Or the usual scenario is that it is simply surplus. We often place 96 fiber through an area. Only 10 of those are needed, so the other 86 are dark. This is what MOST of the dark fiber out there is. Dark fiber then becomes somewhat of an urban myth. So yes broadband costs go up due to what seems like basic reasons, but which are actually far more complicated. If we only placed the 10 fibers that we needed now, and then found that 10 more were needed in say 2 years, we actually cause more expense. How? Well, now we need to locate the existing fiber($), buy new fiber to place($), pay someone to place it($$), and maintain it($). So in essence references to "dark fiber" are misleading at best. Just 2 cents from someone on the inside of the construction part of the scene.
There is even a name for this. It's called "Good Will." Traditionally it has been considered one of a company's assests that even carries a cash value.
Not exactly. The "Good Will" that you see on an accounting balance sheet isn't the same thing at all. It's really more of a fiction invented by accountants as a placeholder for the fact that the value of a company isn't the same as the value of its tangible assets. If Google manages to generate a huge amount of the non-accounting, karmic Good Will through its actions, that doesn't mean it gets to increase the goodwill number in its quarterly report. The way goodwill is acquired is through mergers and acquisitions.
As an example of the meaning of the term as accountants use it, suppose that Google buys KFG Enterprises for $100M, but KFG only has physical assets of $20M. So when Google's accountants update the balance sheet, they subtract $100M from Google's cash balance, but add only $20M in assets. On paper, it appears that the purchase was a very bad deal which lowered Google's total value by $80M. This isn't true, because everyone knows that $100M was actually an excellent price for KFG, but that's how it looks on paper.
This presents the accountants with both a problem and an opportunity. The opportunity arises because they'd love to report that $80M "loss" to the IRS and take a big bite out of the year's taxes. On the other hand, they do *not* want that $80M loss showing up in the SEC filings and making the company look less profitable in front of the shareholders.
Goodwill addresses both problems. What the accountants do is to add a goodwill line item to the asset side of the balance sheet, in the amount of $80M. That way, the net effect of the transaction on the balance sheet is neutral, the company neither made nor lost anything by buying KFG. This is nice for the SEC filings.
For the purposes of dealing with the IRS, goodwill becomes a depreciable asset, which the accountants can write off over time (in spite of the fact that the company may actually be acquiring more karmic Good Will by playing nice, and may even be capitalizing on the intangible value of KFG that the fictional goodwill stood in for). Each time they write off a chunk of goodwill, they take the hit on their assets in their SEC filings, and they also get to claim the tax deduction. I'm sure there are some rules about how and when they can claim those "losses", but I think they do have some latitude which they can use to juggle the numbers.
I am not an accountant, but this is how a corporate accountant friend explained it to me (with lots of qualifiers that he was oversimplifying nearly to the point of inaccuracy).
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
"However, Rowland Hill showed that it would actually be cheaper for NEARLY EVERYONE to charge a flat rate, because the postal service wouldn't have to pay people to determine the postage rate for every darned letter."
:D
From wikipedia:
Financially the penny post scheme was a disaster. More than 30 years elapsed before revenues were back to the pre-1840 level.
I guess NEARLY EVERYONE doesn't include the postal service?
Terminating those ends costs a lot more than the lines themselves. They don't just tie a string can onto the ends of a fiber -- a nice XENPAK transceiver to cap a 10 gigabit Ethernet connection is going to run 5 to 10 thousand bucks PER END. Not to mention you need a blade to toss it in that supports it. If someone feels like showing me how stupid I must be, please retort with a counter example.
slashdot: where everyone yells sarcastic metaphors to themselves to understand the issue
Thats essentially correct, but it isn't really done because they don't want to show an 80M loss on the balance sheet...its because it is a "balance sheet" and obviously things must balance. If I pay $100 million for your company, then obviously it is worth $100 million. So I need to record $100M of assets. Since there are specific depreciation rules for things like physical assets and other rules for things like contracts and whatnot, I record those as I normally would. But you have to record the premium over book value somehow, because otherwise the transaction doesn't balance and your accounting system breaks down. And that is where good will comes from. It is the plug that makes the transaction balance. Now in theory you should eventually depreciate your goodwill as well, though that is a very complicated subject in accounting terms because the period of time isn't obvious at all.
Time Warner ALREADY does provide DEDICATED bandwith for their voip service. It is allocated a specific portion of the cable pipe's spectrum (seperate from the internet service), just as the cable TV is allocated it's own dedicated portion. The high speed internet portion of the pipes bandwith is the only shared portion (with your neighbors) and would be the only option for any competiting voip providers at this time. Now just because they already do this (because they can with their big fat pipes) does not mean it's detrimental to the other providers, but it does give them the option....