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

Corporate Luddites: Cable and Telcos versus Silicon Valley

Posted by Tom Foremski - October 22, 2007

Comcast's blocking of large file transfers is just the tip of the iceberg. And it is only a matter of time before other cable and telco companies will follow suit.

This is the start of a battle for bandwidth that has been caused by enormous amounts of digital media hitting the Internet and the private networks of the cable and telco companies. It is a battle that nearly all Silicon Valley companies are unprepared for and won't be able to win.

Comcast and the others can legitimately limit third party services because they have a contract with their customers to deliver a slew of digital services from digital phone calls, digital music, and high definition TV. They don't have a contract to deliver the digital services of others.

How long before they kill the video stars? For example, YouTube relies on file uploads up to 100 MB in size, other video hosting platforms take larger files.

How long before they kill most of the Web 2.0 companies? They all seek to share files and information between groups, including video and audio. FaceBook, for example, lets users upload 300 MB video files.

What about new services such as Fabrik's Ultimate Backup Service, which offers unlimited backups for $5 a month. Will Fabrik and others be able to build such businesses?

Why should they provide quality access to digital services (YouTube, BitTorrent, etc) if they don't have a contractual obligation? Access to those services comes second or third to their own services and those of partners.

Corporate Luddites

Luddite Leader The cable and telco companies are the most powerful Luddite organizations in the US. They hold a duopoly control over the lines that connect consumers with digital services.

The cable and telco companies are slow in bringing in new technologies, and their wireless operations turn off many technologies, such as wi-fi in cell phones. They have slowed technological progress in the US in so many ways. For example, We have some of the lowest adoption rates and the slowest broadband in the world. We have a huge digital divide.

They will protect themselves from technologies that would disrupt them in the same way early 19th century English Luddites broke industrial machines to save their livelihoods.

The English dealt with their anti-technologists in this way: "Machine breaking" (industrial sabotage) was made a capital crime." (Wikipedia.)

No such luck here. These Luddites have the government on their side, they have among the strongest lobbying groups in Washington, built up over a period of more than 100 years.

The cable and telco companies are anti-competitive and their actions will make sure that the US becomes uncompetitive.

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