By Nico Detourn (TMF Nico)
December 13, 2000
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The reality is that most ISPs are underdeveloped as businesses and services. They lack the necessary resources to either organically develop or acquire what's needed to competitively differentiate themselves. What gets lost in the talk about consumer choice and the benefits of ISP competition -- whether the arguments are made sincerely or cynically -- is that the would-be competitors don't have much to offer.
Dumb pipes and irrelevant choices
There is no easy way around it: The ISP really is a dumb pipe. A passive conduit. A utility best appreciated when least noticed. Serving this essential function helped build the modern Internet and makes the ISP a pillar of the online experience. But while ISPs rock, they do not rule. That's the main reason the companies are hurting and their stocks have been stomped.
In trying to move beyond dumb connectivity, ISPs start serving as portals and content providers. Yet while their ability to evolve and compete in that way should not be preemptively blocked, the fact is that none of them have been competitive in that arena, including EarthLink. Ensuring their open access to cable networks won't change this, no matter what the terms of the deals or the conditions placed on the AOL/Time Warner merger as a blueprint for future agreements.
On what basis do I choose, say, EarthLink instead of Juno, or @Home instead of EarthLink, to provide the so-called " Internet service" over the monopoly pipe that one -- and only one -- cable company runs into my home? It's in that pipe where the lack of meaningful choice is located, and if I don't like it, I can lump it, or move to another cable franchise.
Using this view, it's not the cable companies that deny consumers choice in high-speed ISPs, so much as the broadband infrastructure itself that undermines that choice by making it practically irrelevant. As a user, what matters is that my connection is reliable and I can browse the sites and launch the services of my choice -- all of which lie beyond the meager offerings of the ISP.
That the cable companies could limit my freedom to surf shouldn't be dismissed lightly, but open access and ISP choice won't necessarily prevent that, nor will it prevent my chosen ISP from somehow limiting my access to the wider Net.
The broadband difference
As a technology, broadband has exposed the weakness and accelerated the decline of the ISP business model, which was built on a plug-and-play system. Unlike the dial up platform, the broadband platform is inherently "closed." It doesn't readily support multiple, plug-and-play providers, each trying to brand essentially identical commodity services. Beyond that, though, the influence of the platform is limited.
When it comes to content and e-commerce, there's no reason to think ISPs will be more competitive as broadband providers operating under an open access scheme than they were as dial up providers when, in fact, they also operated under the equivalent of open access. The difference is that narrowband "open access" arose spontaneously: It's the very nature of the narrowband platform that you can plug in, dial up, and log on to the ISP of your choice. In contrast, broadband open access needs to be regulated, explicitly implemented, and artificially maintained. While that can surely be done, how does it make EarthLink more competitive with AOL or Yahoo! (Nasdaq: YHOO) ?
Issues of fairness aside, the main effect of open access will be to keep the ISPs on life support. Regardless of what regulations eventually govern AOL/Time Warner and other broadband providers, though, I believe the ISPs are on the way out as independent businesses. Their moment for evolving into something more has passed, their evolution to date having left them with neither legs nor stamina, and little to offer competitively. In this game of survival, our sympathy for the ISP, and against the devil, won't count for much.
