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Old January 27, 2011, 10:59 AM
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Perineum Perineum is offline
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Competition between ISPs fosters competition elsewhere

87. With every speed increase, the Internet's disruptive impact has widened its reach. Underground services such Napster sewed the seeds that would make iTunes the world's largest music store in just 9 years. Once internet speeds higher than 5mbps appeared, legacy television distribution became a target.

88. The internet is a bastion of free enterprise, innovation and competition. Entrepreneurs will find ways to use the internet's efficient distribution to challenge any/all legacy businesses.

89. Pure play Internet Service Providers have not complained about rising internet usage and welcome the challenge of serving customers with increased needs. And because internet transit is a competitive arena, costs are driven down, so ISPs have no problems purchasing extra capacity.

90. However, incumbents are quite different because they have monopoly in last mile and have vested interests in legacy television distribution (even more now that they also own broadcast networks) and know that the internet could do to their TV business what iTunes did to brick and mortar music stores.

91. An Incumbent retail ISP business is in a conflict of interest against its entertainment business. New competitors such as Netflix, Apple TV, Google TV and ZIP.CA in Canada are emerging. When a customer rents a movie from iTunes or Netflix, this is one less pay per view revenue for the BDU (cable/satellite company).

92. ITMPs such as UBB are a means to curb, delay or even prevent the adoption of these new services, protecting incumbent's legacy TV distribution revenues. Incumbents know that once an application has expanded beyond early adopters, it is unstoppable. YouTube is a good example. So the goal is to nip the TV competition in the bud before it is too late. To this end, the incumbents are using their market power to ensure that no ISP gives the market the choice between incumbent's walled garden legacy TV distribution and innovative Internet-based entertainment.

93. From a competition point of view, the solution which supports the Policy Direction is quite simple: give the market the choice. This means preventing one company from imposing retail restrictions such as UBB and behavioural throttling onto another (or worse: all others). This allows some ISPs to hinder certain new applications while other ISPs will welcome their adoption and the market will then decide which is best.

Where should the money go ?

101. Why should a government reward incumbents who charge punitive rates in order to curb growth and delay/reduce its capacity investments ? Since they claim that the sole reason for UBB is to act as an ITMP, then the collected money does not need to go to the incumbent, especially since they refuse any cost justification for those rates. Therefore, all UBB revenues should go to a broadband fund that would help develop competitive facilities.

102. Perhaps incumbents would change their rethoric on UBB if they were faced with the prospect of getting the reduced usage from ITMPs but not their revenues.
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