The first comment I received in response to my High Cost of Low Prices article was that someone does in fact benefit from low prices -- large corporations.
A nagging question: Do the mega corporations truly benefit from low prices? Or is the mega corporation the only structure that can survive low prices? I think we consumers are the ones who force the creation of mega corporations. Our demand for convenience and low prices is the necessary precondition. For example, who do you think is responsible for the commercialization of the web? And who is responsible for the demise of local bookstores, pet shops, toy stores, etc?
More selections, lower prices, more convenience, longer hours, you name it and poof! We have created the kind of demands on merchants that can only be met via super sizing. How do we solve this problem?
Despite the impact on local economies, the net has allowed small providers worldwide to find new customers. But for this global marketplace to survive, we need a global Internet backbone, global delivery services and local support services. The stove I bought from Sears.com, for example, was delivered and installed by local contractors.
Some entities need to be global and some need to be local. And though I would love to see Powell’s clean Amazon’s clock, Amazon just does too many things right. So a local bookseller has to offer so much more than books. It needs to offer connections; something that is best delivered locally. Many local DC bookshops, for example, feature authors, book clubs, coffee shops and one, Kramers, even fronts a kick-ass restaurant.
And we need to get real about the Internet too. As long as it costs almost nothing to send spam, while costing real money for the ISPs to block it – the system will need to find a way to recapture the costs somewhere. I for one have no problem with outgoing mail limits or a tiered Internet.
The way it is supposed to work is that users like you and I, along with super users like Google and Yahoo, pay for a certain amount of guaranteed bandwidth. End users like you and I either pay for a dial-up sized pipe into the cloud or a DSL or cable modem sized pipe. Google and Yahoo pay for pipes the size of the Chunnel into the same cloud. But either way, we currently have a tiered system at the entry ramps into the net. But once inside the cloud, “parts is parts” as the saying goes – this is the essence of what folks are referring to as “net neutrality”.
But there is a problem with net neutrality. The Internet was built and all the protocols were designed with a singular premise. The premise is that everyone who sends data into the cloud really wants it to be delivered. No one imagined that a time would come when someone would inject data and not care if it was delivered or not.
So the entire net is tuned to find an optimum way to deliver everyone’s data no matter what. So if more data arrives than can be delivered through a pipe, the system just slows down the delivery of all the data so everyone gets something, albeit at a slower pace.
And this seems fair if the singular premise was true. But what happens when a denial of service attack happens to a web site? All of the traffic in the pipes that serve this site gets slowed down to efficiently deliver … the attack.
What if a spammer finds an opening into the defenses of an ISP and floods the system? The system will again slow down to efficiently deliver … the spam.
Something has to give.
The current infrastructure was also set up to automatically reroute real-time transmissions such as voice and video through a separately tuned series of high-speed pipes. However the technology and the marketplace changed so rapidly that most backbone providers did not need to use those capabilities as first envisioned.
I use to sit on the various committees and task forces that were charged with modernizing the net. And I can just envision them brainstorming ways to get back all the investments they have made to implement this technology. And I understand why they want to offer a higher tier of service. It makes good business sense.
Just consider FedEx. We have a tiered service that can be used to compare the possible fall out over removing net neutrality. Not to long ago, we had a choice between using the US Postal Service or the United Parcel Service. And depending on the size of the package, after a certain weight class – UPS was our only choice. Oh sure there were local delivery services. Many department stores employed their own fleet of delivery trucks. And local courier services handled the needs of local businesses. But almost no one offered overnight service ubiquitously.
Enter FedEx, and now everyone is in the overnight delivery business. Now of course USPS and UPS has always offered tiered services, but the high end market, the prime levels of service, did not explode until someone offered that service almost exclusively.
As both a residential user and the owner of several web sites, I might be willing to pay more to ensure that my data rides the VIP lanes within the cloud. But I will switch ISPs in a second if they block access to sites.
For example, I am considering upping the security of my registration and hosting transactions to https. If I could tie the gold level of service to secure transactions, while leaving all the http traffic to the silver lanes, I would be a happy camper – And I would be willing to pay for it. And I would not mind that my email was delivered over the regular Internet.
Now of course, I have no idea how the ISPs and backbone providers were planning to set up the tier levels. But if I can think of a way to split it up to my satisfaction, I am equally sure there are any number of ways to make it worth my while as an Internet merchant.
And just like the Post Office, my regular mail did not slow down because they got into the overnight business. ISPs will still have to compete with each other over acceptable service levels.
My point is this. We either pay more for the services we need, or quit complaining as all the small players such as small ISPs and small online and local merchants get gobbled up in order to survive.