Journalism Issues

ORIGINAL URL:
http://money.cnn.com/2006/01/06/technology/phones_internet/

ANALYSIS BY DAN GILLMOR:
http://citmedia.org/blog/2006/01/06/phone-and-cable-companies-dangerous-to-citizen-media/

Report: Bells to push for Web fees
Phone companies want Internet content providers to pay for data moving
over networks, paper says.

January 6, 2006: 7:14 AM EST

NEW YORK (CNNMoney.com) - Large phone companies are seeking payments from
Internet companies for high-quality delivery of music, movies and other
content that will move over their telecommunications networks, according
to a published report.

The Wall Street Journal reported the push by telephone companies could set
the stage for the next big battle in the ever-changing telecommunications
sector.

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Movielink LLC, a joint venture of five major movie studios that offers
movies to consumers over the Internet, said it has discussed the issue of
payments with BellSouth (Research), the newspaper reported, while
BellSouth said it is in early talks with Internet movie companies and at
least one gaming company over reaching agreements on some kind of
payments.

The Journal also reports executives at AT&T (Research) expressed support
for charging companies to ensure that their content gets priority delivery
over its network, while Ivan Seidenberg, CEO of Verizon Communications,
said he might favor reaching deals with companies to do the same.

"We have to make sure they don't sit on our network and chew up our
capacity," Seidenberg told reporters Thursday.

But the paper reports that the Internet companies are likely to fight the
demands for payments from the phone companies, arguing that making them
pay for priority delivery of their content amounts to holding them ransom,
thus hurting competition and, ultimately, the consumer.

"They want to charge us for the bandwidth the customer has already paid
for," said Jeffrey Citron, CEO of Vonage, a leading provider of telephone
service over the Internet "The customer has to pay twice. That's crazy."

The newspaper reports that executives at large Internet companies such as
Google (Research) worry that broadband providers will exert too much power
over content that travels on their networks if they start charging
providers for delivery. And it reports that smaller companies say they may
not be able to afford paying for premium network access.

But one Internet company, Movielink, said it is open to such a fee
arrangement, according to the report, because its executives believe it
could benefit from high-quality delivery of its products.

"Movielink is certainly interested in increasing the quality of service to
customers," said CEO Jim Ramo. "We're willing to explore a commercial
relationship where we can get that done." But he added that his company's
talks with BellSouth are still in the conceptual stage.

Until recently, phone companies were required to treat all data sent
across their high-speed networks equally and without discrimination,
according to the newspaper. But last year, a Supreme Court decision opened
the door for the Federal Communications Commission to deregulate Internet
services, which it promptly did. The Journal reported the change allows
the type of pricing plans now being proposed by the local phone companies.

William Smith, chief technology officer of BellSouth, told the newspaper
he envisions charging content providers a fee based on the volume of
material they send over BellSouth's network, as well as the bandwidth the
content takes up. He compared his model to that used by Google, which
charges advertisers more for ads with better display. BellSouth intends to
neither to restrict consumer access nor block providers, the paper
reported.

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// posted by newshare @ 9:19 AM