Prediction: Reciprocal Comp and CABS Coming to Broadband

It's a funny thing: Though it's one of our core businesses, we often hear from our customers that they're not sure how much longer intercarrier compensation will last. It's true that rates have plummeted, and it's true we've been watching the all-you-can-eat-voice-offering take hold for some time. But, at the end of the day, no carrier wants to presume that traffic is completely balanced over their networks... so they measure it, and charge for it.

An article in this morning's New York Times caught my eye.

With Yahoo, Google, Apple and others racing to deliver video over broadband connections, what impact will that have on 'last-mile' providers such as the Baby Bells and the Cable companies? Won't the bandwidth consumption needed to download that latest episode of "Desperate Housewives" require a kind of dedicated high-speed lane, provided by the carrier?

The short answer is, of course, yes... But it remains to be seen who will pay for it. It's conceivable that the broadband providers (and by that I primarily mean DSL and CableModem providers) will create new tiers of 'usage' for their heaviest users. But, with competition already tight (not to mention the growing use of terms like "parasitic" to describe the likes of Vonage because they benefit completely from others' hardware investments), it's much more likely they'll pursue an 'intercarrier doctrine' with the content providers.

Besides, it's ingrained in the Bell tradition (brought on by divestiture itself) and there are a lot of 'Bell heads' looking for a place to hang their hat in the new world. Devising a new Carrier Access Billing System standard (with the new C perhaps standing for 'Content') for the interplay of content providers and network operators is something that should get done and - my prediction here - will start in earnest in 2006.

PS A follow up to my post. Some readers wrote in deriding this idea as a new revenue source for the carriers. But, there's no reason to assume the carriers will be 'net beneficiaries' any more than the Bells thought they'd be 'net beneficiaries' of recip comp agreements with the CLECs. After all, we know that most Bells are working hard to get into the TV business (Notably, AT&T and Verizon). To do so, they'll have to sign the same kind of content deals that have been the staple of Cable for so long. So it might be that a new CABS arrangement would offset content rights (a revenue stream to the content providers) with network-usage (a revenue stream to the Bells and others). Steve Jobs did this with the record-labels. His revenue sharing model works like this: "Let me sell your song for 99cents, and I'll give you - roughly - half in royalties. I'll make the rest of my money selling the IPOD hardware. How the song's bits and bytes gets to the IPOD will be some network provider's problem. We'll leave them out of the equation for now. Call it CABS without the middleman, and let's hope it lasts for a while."

No wonder the Bells want a new arrangment.