Sunday, February 22, 2015

What is Net Neutrality Really About?

Let me start by stating my position.  I am very passionate about a low cost, open Internet.  I've shared my opinion with the FCC like thousands of others and advocate for Net Neutrality openly.  However that's about as far as I can go without starting to get into the micro-issues which comprise the real challenge behind Net Neutrality that the average person doesn't understand.  Unfortunately it's not a cut and dry, this or that issue.  Let me shed some light by providing a perspective I have yet to read or hear about in the mainstream or even tech media.

Initial Issue: Fast Lanes
This is the primary concern consumer advocates have latched on to.  Using examples from Comcast and others of intentionally slowing down Netflix traffic; they argue that once one type of data is treated differently than another, the Internet is no longer a level playing field.  Advocates believe the Internet is a tremendous resource driving the global economy because of its equal access.  It's this equal access, proponents argue, which enabled companies such as Facebook, Twitter, eBay and Amazon to blossom.  If Facebook had to pay extra for its bandwidth to get better service, then it would never have survived.  Countering this argument, if Facebook provides a value to their user, their business model should assure their ability to pay for the bandwidth, otherwise there's no market for a Fast Lane.  I too am concerned when any company can arbitrarily advantage themselves by interfering with the service of another company.  Would you react positively to Microsoft Internet Explorer redirecting you to Bing when you tried to access Google's search engine?

Consider who is opposing Net Neutrality: large communication companies who provide consumer Internet access: Verizon, AT&T, Comcast, and Time Warner Cable.  Each of those companies provides, or soon will provide, Internet based video streaming services to compete with Netflix.  Proponents argue this is why Comcast actively throttled Netflix bandwidth, to advantage their own service.  Is that fair?

Netflix doesn't get Internet access for free; they pay for it just like subscribers to Comcast and Verizon do.  And the consumer certainly isn't getting Internet for free last time I checked my TWC bill.  You need to understand what constitutes the Internet.  Large ISP's (Verizon, Comcast, Time Warner, AT&T, CenturyLink, Level 3, Cox Cable, etc.) interconnect their networks to form what we think of as the Internet.  Way back in the early days they decided when connecting to each other there would be an even balance of trade between traffic moving in and out.  As a result the cost implications would be zeroed out and therefore there was no need to bill each other for the traffic switching between their networks.  

Today Internet traffic is not an even balance of input and output.  In fact it's heavily skewed as outflow from producer to consumer.  When the producer and consumer have the same ISP there's no issue.  However once traffic needs to move from one ISP's backbone to another, the receiving ISP now sees a revenue opportunity to re-balance their business model.  They want to use their leverage, their consumer Internet subscriber base which cannot be accessed without their backbone, to extract a payment.  Legally they can't refuse access, so instead they simply limit the interconnection bandwidth unless the producer is willing to pay a premium, the Fast Lane.  However isn't their subscriber already paying for the traffic as part of their monthly fee?  In fact, isn't access to services like Netflix precisely what consumers are paying for?

The answers are clearly YES.  

Again, this is about generating more revenue.  So what are the options for an ISP to increase revenue?  If they don't charge the consumer, the only other option is charging the producer.  Let's assume Fast Lanes are good and play that scenario forward.  Netflix shells out money to the ISP's for the Fast Lanes and as a result Netflix is forced to raise it's subscription fee.  In the end the consumer still pays.  However what's interesting is that ONLY the consumers of Netflix pay; everyone who doesn't use Netflix isn't impacted.  

Let's walk through the other option, charging consumers directly.  There are essentially two models available: 

Option 1: 'Cable TV' Model
In this model, consumers' monthly rates are increased to generate the additional revenue desired by the ISP's.  In doing so, EVERY consumer ends up paying for the traffic of those who consume the most data.  We end up with a subsidy situation analogous to ESPN in Cable TV.  Today the average cable subscriber pays around $6 for ESPN.  However if only those people who watch ESPN paid, the cost per subscriber would be over $40 and thus cost prohibitive.  Cable TV built it's business on a shared burden model just like insurance, sharing costs across the broadest base possible.

Option 2: 'Data Plan' Model
Instead of offering subsidies, the other option is to bill consumers based on actual consumption.  Most likely the ISP's would adopt a mobile phone data model whereby the consumer would pay for a specified amount of data traffic per month with overage fees for exceeding the limit.  People like predictability.  Comcast, Time Warner Cable and others tried this model and it failed miserably.  Opposing the idea, invariably someone argues a 'Data Plan' model disadvantages the poor by disproportionately impacting their scarce income.  In truth, tech geeks including me, who constitute the majority of bandwidth use, enjoy being subsidized by those in the bottom half of the spending curve.  Did you happen to notice this is the same financial model as charging the producers directly?  Only those who use the service pay, but by charging the producer the model is significantly more efficient and therefore will be cheaper to deliver than bringing a 'Data Plan' model to consumer Internet subscriptions.  I not an insider, but I have to believe the failure of 'Data Plan' attempts is the primary driver behind Fast Lanes; achieving the same objective by another means.

Whoa!  What did I just admit to?  Yep.  So it would appear by advocating for Net Neutrality I'm just a selfish oaf who wants to benefit from the subsidies of the common man by forcing ISP's into a corner where Option 1 is the only option.  If that were true, understand I wouldn't be the only one.  According to research on the side of Net Neutrality, someone has determined that Time Warner Cable runs a 97% profit margin on their Internet services, using the numbers provided by TWC in their financial reporting to the SEC.  They're not exactly a charity.

When considering the original argument, supporting Net Neutrality to ensure equal access, the better model is actually Option 2 or the existing controversial Fast Lane model.  In truth the large ISP's are, in essence, subsidizing the Internet by not charging interchange fees to carry traffic.  So is it unfair of them to now ask companies like Facebook and Netflix, who generate billions in revenue via advertising or subscription fees, to pay their debt?  It quickly devolves into a circular argument, because without Facebook, Netflix et al there would be very little consumer demand for the Internet and thus a small subscriber base.

So what's the REAL problem?
Since revenue generation is at the heart of the issue, the real question driving the Net Neutrality debate is whether or not the profitability of ISP's should be limited.  However that question obscures a more fundamental question which is rarely raised in the debate but is the reason I advocate for Net Neutrality: should a monopoly be restricted in its rates?  

When it comes to broadband Internet access, an area where the US lags much of the world and something considered a fundamental requirement of a strong economy today, most consumers have little to no choice in ISP.  For example at my house, to get greater than 5mbps I have one choice: Time Warner Cable.  By definition that's a monopoly.  TWC has worked hard over the past two decades to prevent other companies from entering their markets, just as all the other communications companies have done.  I was involved in a project in 2000 when a new company, Carolina Broadband, secured almost $300M in funding to develop a broadband offering in North Carolina.  They were fought at every turn by Bell South and Time Warner and eventually evaporated.  
Monopolies are a perfectly legitimate business model, but only when properly regulated.  The free market requires competition to work.

As a result, Net Neutrality is a legitimate argument ONLY in those markets where there is no competition for broadband access, such as my market.  To foster competition, the FCC should learn from California's tentative approval of the Comcast, Time Warner Cable merger.  In it they effectively force Comcast to open access to their network to enable competition, the same approach advocated by the cable companies to ensure access to the telephone network 20 years ago.  Of course since the enemy of my enemy is my friend, the big ISP's have banded together to fight any such approach on data networks.

What's it all mean?
In the end, network bandwidth is a limited resource just like everything else is in the world: money, water, healthcare and NFL caliber talent who obey the law.  In Econ 101 you learned about supply and demand; the greater the demand the higher the cost until supply can re-balance the equation. Unregulated monopolies have a long history of restricting supply to drive revenue.  We don't need Net Neutrality, what we need is Broadband Competition.

And that is what Net Neutrality is REALLY all about!

Tuesday, February 3, 2015

Disposable Software

For the past 20+ years we have been on a journey in application development; moving from large, monolithic stovepipes to decomposed, distributed services.  Along the way we've identified, tried and discarded more approaches than any one person can possibly remember.  Over time we evolved to a point where we differentiated between back-end enterprise service, such as billing or scheduling, and the user interface.  That's the point at which the whirlwind began and software development exploded along with the democratization of technology.  

We are now entering a new age where our success will drive us to ingest the last vestiges of "traditional" software development, and in the process make applications truly indispensable to business success.  We are entering the era of disposable software.

The days of building applications are over; we're done, or we'd better be very soon.  Business executives have lost their appetite for large software projects spanning multiple time zones with timelines measured in months and budgets measured in millions of dollars.  Emboldened by the stories of success, business software has advanced from a nice to have to a core requirement, from a solution you go somewhere to use to a solution you use wherever you are.  Software is now expected to work when needed, where needed, and be no more difficult or expensive to implement than the often repeated story of Flappy Birds.  

If you're not among those on the inside of this transformation, look to the mobile app world for inspiration.  Apps are built by leveraging pre-engineered services and frameworks.  Agile is the approach because it accommodates imperfect requirements and short windows of opportunity.  The leaders in this space have made software so invaluable it's become disposable.  First, enabled by cloud SaaS services, open source, and the ability to rapidly develop new solutions; business users can no longer be held captive by their software solution.  The pace of business and rate of change require solution owners to seek solutions which maximize agility, efficiency and elasticity.  Any software unable to meet these requirements will increasingly be disposed of, not updated.  Second, the line separating the apps we use in our personal lives and those at work is blurring rapidly. Just as the public is always on the lookout for newer, better, more innovative apps; so are business users.  

The reality of disposable software requires us to look differently at how we manage our development teams and budgets.  We need the back-end services plus several supporting services to be in place and accessible across a distributed infrastructure.  We need frameworks which minimize the time spent in foundation work so our end customer can see the majority of the value of their spend.  Finally, we need to rethink how we hire, train and incent our developers so they are focused on collaboration, communication and reuse rather than viewing software as their magnum opus.  Of course wrapping all of this together highlights the importance of DevOps; the glue which makes this approach work.

I know many experts bristle at my advice.  They liken modern software development to "hacking", and defend it as nothing more than shoddy software engineering.  These are the very people who will be waving from the side of the track as this train roars through their careers.

Wednesday, May 7, 2014

Where's the Business?

Despite all my attempts it appears cloud computing continues to be a technology topic, at least in the Fortune 1000. Over the past few years secrets of cloud, including Facebook's private cloud, Zynga's use of 12,500 Amazon EC2 instances, and NetFlix creation of their Chaos Monkey, have made big company executives ask their CIO "what are we doing with public cloud? What are we doing that we can tout in Fortune magazine or at our next board meeting. After 30+ years of being beaten into submission that IT is about avoiding risk, now CIO's are being asked how far outside the box they're thinking, how entrepreneurial they are.  I'd be amazed if none have broken down in heaving sobs or curled up on the floor with their thumb in their mouth.  The truth is, cloud doesn't start with the CIO, it ends at the CIO.

The preconceived notion is that cloud is all about TECHNOLOGY. Guess what, it's not! In reality each of those examples, and the ones CEO's and CFO's trot out to "motivate" their CIO's have nothing to do with technology. Rather, each has to do with the business. It's the needs of the business which drove the application of the technology, not vice versa. Therefore the right question is not CEO to CIO but CIO to the CEO: "Here is what cloud enables businesses to do differently. How can we take advantage of it?"

As clouds are being built, the enemy of efficiency, fiefdom, is following right along. With the number of business savvy CIO's in the Fortune 1000 I'm surprised at how few have engaged the business in a discussion outside of cost savings. Great, run applications and all at a lower cost. But that wasn't the goal of Facebook, Zynga, Twitter, or just about anyone other cloud based company.  Just look at NetFlix who single-handedly put Blockbuster out of business and forced the cable operators to take notice.

Cloud is a platform, a new business enabler for the 21st century.  It's about revenue generation,  It's about providing an on demand foundation to deliver technology where needed, when needed, in the most efficient manner possible.  How it happens isn't important.  The focus needs to be on WHY!

(I held on to this post for a year or two before publishing to validate it's applicability.  Then, all of a sudden, I started seeing a torrent of posts and articles on this very subject.  So then I held on to it for a few more months.  But finally I've come to my senses, so my apologies for helping to push the conversation earlier.)