From: odlyzko@xxxxxxxxxxx (Andrew Odlyzko)
Date: January 2, 2006 8:34:30 AM PST
To: dewayne@xxxxxxxxxxxxx
Subject: Re: [Dewayne-Net] Telco's Arrogant Stand on Content
Dewayne,
There is plenty of arrogance on both the telco and content provider
sides. But statements such as this one from Budde, and Whitacker's
"What [Google, Vonage, and others] would like to do is to use my
pipes free. But I ain't going to let them do that."
make clear is that the key issue behind much of the posturing about
open access and deregulation is the division of revenues from content
sales between the content owners and the service providers.
I don't know what Budde is referring to when he talks of telcos
getting under 50 percent of revenues from content. In general,
service provider takes are far higher. If you look at cable
companies,
they spend around 25 percent of their revenues on content, and get
to keep 75 percent or so for the maintenance of the networks,
profits, ...
Satellite radio pays someplace between 5 and 10 percent of its
revenues
for the music they play. And NTT DoCoMo's i-mode pays only about
15 percent of its revenues for content. (I don't know what the
revenue
split is on cellphone music ringtone downloads.) So it is natural
that the content industry is salivating at the prospect of getting
more competition in delivery, and boosting their takes. Getting
something like 50 percent would do wonders for their finances.
But what both the content industry and the telcos forget is that
there simply is not enough money in content to pay for all the
telecommunications networks. Connectivity, not content, is where
the real money is, as has been clear for a long time,
<http://firstmonday.org/issues/issue6_2/odlyzko/>
So yes, the content providers and Internet companies like Google and
Yahoo! can build backbones, but they can't afford to provide universal
local connectivity.
Happy New Year,
Andrew
P.S. There are lots of other comments one could make about this piece
by Budde. For example, his rosy prediction for tele-presence flies in
the face of numerous failures in video telephony. But that is another
subject.