Figuring out how to pay for real-time Internet content

The Internet is severely limited by its current business model, which is different from the business models of companies that provide services over the Internet. Improvements to the former could have untold benefits to the latter.

The main limitation is the single-service-level paradigm, which

results from a “”best-efforts”” approach to quality of service. Higher-speed access is an improvement, but as most users know, it does not guarantee a higher quality of service from one end of the network to the other. Performance can be limited by the Internet backbone or by access facilities at the remote end. Also, high-speed access does little to overcome limitations imposed by content providers that restrict output rates in order to control their costs.

Consider video streaming. You may be willing to pay to access high-quality television content, but whom do you pay? Generally, all you can buy now is higher-speed access. Content providers face difficulty in establishing subscription-based services while the end-to-end quality of service cannot be guaranteed. The network service providers will not provide service level guarantees without being paid. But who pays them? The problem is that paying for content and paying for the network are now inextricably linked.

Various groups avoid some of the Internet’s limitations, generally by creating their own networks. However, those solutions do not directly help to create a new public Internet. There are many technical solutions to these problems, but they require funding and may not be in the interest of some of the current players. Consider ongoing trials of IP television that perpetuate the current delivery model. In your area, you are dependent upon a single broadcast distributor which, along with a regulator, decides what programs they will make available to you. This could be characterized as a “”single-source-push”” model. However, the new Internet will blow that away by producing a “”multi-source-pull”” delivery model for television. It will allow users to decide not only what and when to watch, but from which sources anywhere in the world. The Internet allows this today, but not very well, which brings us back to the business model. Both market forces and political forces will determine the exact path to a new business model; however, uncertainty about that path does not prevent our viewing the likely result.

Single-source-push model will fail

In some respects, Internet telephony will lead the way, for example, by addressing some of the needs of real-time communications. In other respects, it will hinder progress by, again, perpetuating the current delivery model. The so-called “”triple play”” (voice, video, and data services) being fought over by telcos and cablecos is a desire to further entrench the “”single-source-push”” delivery model, which is doomed to failure with the new Internet. Users will be able to choose service providers and content providers located beyond some arbitrary geographic boundaries.

The new business model will let users pay for higher quality network services in order to access new content services, such as television programs, and new applications, such as high-quality telephony and video conferencing. Users will pay the content providers, enabling content providers to pay for higher quality network services. An ideal arrangement — perhaps. But what about resistance from incumbent service providers? Should regulators continue to allow network service providers also to be content providers? The arrival of the new Internet will revive an old argument.

Ron Scott is principal of Scott & Associates. He can be reached at

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