Is Broadband the Next Oil?

Consumers are nearly livid at the accelerating price of gasoline and heating oil. The price of a barrel of oil seems to have no limit, as traders race to outbid each other on futures contracts. It's a feeding frenzy with no end in sight. Now brace yourself. The next crisis you see could be broadband.

How can broadband, particularly Internet broadband, possibly be anything like oil? Oil is a commodity with over a century of exploitation. It's a product of nature. Broadband is something new. It's a product of technology.

What both have in common right now is that demand is outstripping supply. In the case of oil, we aren't finding new cheap supplies as fast as we are using up proven reserves. Even as developed countries scramble to cope by increasing energy efficiency and pressing alternative resources into service, emerging economies will sop up as much available production as exits.

Broadband capacity isn't limited by a natural resource, such as ancient biomass converted to oil over millions of years. But there is a limit. The installed capacity is a function of the time and money it takes to build-out fiber optic networks and the fiber, copper and wireless delivery systems. The Internet wasn't built in a day and you don't double, triple or increase its capacity by an order of magnitude overnight.

What's precipitating a crisis in broadband is a sudden shift in demand technology. The infrastructure of the Internet was designed around lots of people sending email or browsing Websites, and not all at the same time. What's happened lately is that those uses are overshadowed by an increasing number of people uploading and downloading video content, such as video clips, full length movies and television shows. A dedicated individual couldn't write enough emails or visit enough Web sites to begin to match the bandwidth used by casual video streaming and downloading.

The strain is being felt by Internet service providers, including cable broadband operators, telco DSL providers and wireless and satellite broadband services. Satellite has always had bandwidth limitations due to a limited number of "birds" and frequencies available. Satellite broadband dealt with this through fair use policies that slowed down the connections of bandwidth hogs so that everyone would have fair access.

Recently, the cable companies have been scrambling to do something to throttle the minority of heavy users who are pushing their systems to capacity. In this case, they are not limiting bandwidth but rather planning to charge more for above average usage. That should, in theory, provide the funding to increase network capacity so that more bandwidth is available even as average usage steadily increases.

As with any scarce resource in high demand, something's gotta give. That could be rationing, which could limit bandwidth for everyone and stifle any advance of technology. Or in the case of oil, long lines at service stations and severe economic impact. Another approach is to let prices rise until demand is checked. That also flies in the face of technical progress which as always been better, faster, cheaper. But perhaps in the case of bandwidth, it will manifest itself as tiered service with the well-healed and demanding users charged premium prices for premium speeds.

Both oil and broadband have the possibility of increased production. Oil producers can drill more wells, improve the efficiency of the wells they have, and bring online more of the higher cost resources like oil shales. Broadband companies can light more dark fiber already in the ground, improve efficiency by using denser wavelength multiplexing, and spend a bundle to bring fiber and higher speed copper connections to homes and businesses.

With any luck, the supply crises in both oil and broadband will work themselves out under marketplace forces. But of the two, I think broadband is the one with the brightest future. Now if only they could build a broadband car.

Unlimited Internet's Days are Numbered

Remember the days when you could saunter into an airport, buy a ticket to anywhere, and be treated like a king on your flight? Nowadays you better get there a couple of hours early to hurry up and stand in line, only to sit and wait on the plane, packed in with the other sardines. The royal treatment? You'll get the royal something else if you don't go along with whatever they care to dish out. Well, guess what? That same wonderful experience is coming soon to the Internet.

Perhaps this seems a little far fetched. After all, we've been dining at the all-you-can-eat Internet buffet for over a decade. You can go anywhere, anytime, download as much as you want and there's always more. Even better, the ISPs keep increasing their connection speeds so you can do more and more, faster and faster. What parallel does this have with big jets morphing into flying cattle cars?

The deregulated nirvana that was the airline industry also sowed the seeds of its demise. Cheap readily available air travel got us to fly more often. It was so easy and so inexpensive that we shunned automobiles, trains and ocean liners in favor "hopping on a plane." Decades later we wonder why airplanes are so full and the runways so congested. What happened was that demand caught up to supply. The hubs in the system that make it possible to go anywhere are enormous investments that are hard to site and take years to expand or construct. The recent run-up in fuel prices cut the profit right out of the business, resulting in fewer, not more, planes available to sate the demand of more people who want to go more places but not pay any more.

Still, what's that got to do with the virtual world of the Internet? Behind the scenes it's not all that virtual. There's a physical Internet out there consisting of fiber optic cables, routers, telephone lines and TV cable drops. Anything physical has limitations and the Internet is getting crammed full. Full of what? Video mostly. Traffic growth was easy to manage as long as there was a steady stream of new adopters moving first into dial-up and then broadband access. Prices of the services and the business case for the build-outs were based on oversubscription formulas that assumed casual browsing and email. In these modes, there are bursts of traffic followed by long periods of inactivity while users compose their messages or read the content of Web sites. Video throws everything into chaos.

What's so different about video? Be it streaming or downloaded, video files are huge packet collections that take minutes and hours, not seconds, to traverse the Internet. Audio has the same problem, but it's a lower rate bitstream and the files are smaller. Music and high resolution images brought dial-up access to its knees. Video put the nail in the coffin and is now chewing up the available capacity on broadband.

The Internet is getting congested, but less at its very core than at the edges. Tier 1 carriers have been lighting up formerly dark fiber and installing faster switches and routers. There's even new undersea cable being installed to Europe and Asia. The providers really in a pickle are the Cable MSOs. Cable TV and Internet service shares a common line that feeds multiple drops to individual households and some businesses. The telcos have it a bit easier in that each location has a unique copper pair that goes all the way back to the central office. Both types of providers have expensive backbone connections that have to be amortized over many users. If some users are pushing the limits with heavy video activity and others are typical Internet surfers, the few will limit the bandwidth to the many. Time Warner Cable believes its just 5% of the users that are causing the majority of the congestion.

The first idea about how to deal with this dilemma was to identify the traffic burdening the networks and either block it or slow it down. In corporate networks, it is common to give preferential treatment to time sensitive or high priority data packets at the expense of other packets in order to keep the network from overloading. ISPs, especially the beleaguered Cable companies, would love to put the squeeze on pervasive BitTorrent streams. But that flies in the face of net neutrality. Net neutrality, the principle that all traffic on the Internet must receive fair and equal treatment with no discrimination, is sacred among watchdog groups looking out for the public interest. Violate it and you may find yourself in front of a Congressional hearing.

If all data must be treated the same but your network is about to buckle under the weight, then your only choices are to increase backbone and last mile bandwidth to such a level that there can be no congestion, an expensive and long term proposition, or throttle the users themselves. The principle of unlimited bandwidth for all is not nearly as sacrosanct as network neutrality. Better to have a few disgruntled users who probably have nowhere else to go than thousands of unhappy campers who can barely run Google searches.

This is exactly what Time Warner Cable and Comcast are experimenting with. In select markets they are setting monthly bandwidth limits, such as 5 to 40 GB, with extra charges if you go over. Sound similar to most cell phone plans? In this case it's gigabytes, not minutes, but the principle is the same. Just like cellular, the idea is to keep a few people from hogging the network and limiting the access of others.

This isn't a unique idea. Web hosting companies routinely impose monthly download limits on their service packages. But those are professional users. How the general public will react to limited access remains to be seen. Right now it may be just a relative handful of video aficionados who are affected. But what happens when YouTube clips become passe and we're all engaged in getting our full length TV shows and new release Blu-ray movies online?

In fairness, ISPs are working with private content delivery networks to have video streams hosted as near to the end users as possible. Build-outs of FTTP (Fiber to the Premises), such as Verizon's FiOS, will relieve that last mile congestion in a least some areas. But the fact remains that we are a bandwidth limited nation. Technology advances such as Internet-based video on demand may well be thwarted until network capacity catches up.

In the short term, bandwidth demand may well outstrip supply. A quick solution is to reduce demand by imposing a cost penalty for exceeding average usage. How successful this will be is likely dependent on where the limits are set and how much extra it will cost to get the content you can't live without. It could be that many users will be delighted by faster downloads while only a few will be stifled by limits on their consumption. But there is also the possibility that tiered service will result in more Internet haves and have nots, as only the well-heeled will be able to enjoy the benefits of high demand technology services.