Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Net Neutrality: The shareholders of the IT tech giants are losing out to the "valued customers"

Posted by Tom Foremski - May 3, 2006

I recently wrote a post arguing that Google, Yahoo and all the other online giants have put up a half-hearted defense of Internet neutrality because they have a lot to gain from the absence of neutrality.

The tech giants that have the most to gain from net neutrality are not the web services companies but the infrastructure providers such as Cisco Systems, Intel, Sun Microsystems, IBM, EMC, Dell and Hewlett-Packard. And it is puzzling why they are so quiet on this issue.

If the Telcos and cable TV companies are allowed control the choke point--the last mile connection into the digital home then that cuts out competition. Without competition you have far fewer infrastructure builders.

This means that to get to the next stage of high speed broadband is going to take a lot longer because the Telcos and cable TV companies operate a duopoly in most markets. They'll get around to upgrading their networks when they get around to it.

There is no competitive pushing and shoving to get them moving faster. And there is no competitive infrastructure building which is bad for the big IT vendors.

Plus, it is a bad situation for thousands of Silicon Valley startups (and their VCs) that are banking on ubiquitous high speed broadband connections at low prices. We've been here before: During Internet 1.0 a lot of startups were way too early in their expectation that millions would soon have (low speed) broadband connections and they went out of business.

Now, we have millions with low-speed broadband but it is the rate of adoption of higher speed broadband that will determine the fortunes of the next generations of Silicon Valley startups.

Yet the startups are too tied up with their ventures and blinkered from seeing what is going on in the political realm, where the Telcos have huge sway thanks to institutional connections that span generations. They are very good at lobbying against any legislation that mandates net neutrality.

The leading Silicon Valley companies such as CSCO, INTC, and HPQ, all have much better political connections than the newbies such as GOOG and YHOO. However, the executives at the big IT vendors are extremely shy in speaking out on this issue when in private, some of them will agree with me that the actions of the telcos are harming their markets.

They won't speak up on network neutrality because they don't want to upset their "valued customers." But those valued customers are costing them the loss of a much bigger market.

In my humble opinion they should be taking care of their valued shareholders. They could sell far more infrastructure equipment if the Internet is open, neutral and there is unfettered access to the digital consumer.

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Please see:

Check out this Washington Post interview with Scott McNealy and how this former fearless iconoclast sidesteps the net neutrality issue.

Here is a summary of news coverage on net neutrality from News.com.


Here is Wikipedia on Net Neutrality as law.


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