Here's what WCIT has really become about: money


These predictions are part of a longer article on the conference covering how it will work and what has happened so far.

The topic of Charging and Accounting will be where there will be the most heated exchanges occur at the WCIT conference.

In a nutshell, some countries want to apply the traditional telecoms (think: telephone) pricing models onto the Internet. Nothing focuses the mind like billions of dollars in lost or gained revenue.

It is notable that the country that has been making the biggest noise about WCIT - the United States - has this issue of pricing as its number one priority.

It is no coincidence either that the ambassador (and so head of delegation) that has been specially chosen for WCIT, Terry Kramer, used to be a senior executive at Vodafone. Nor that Kramer has consistently identified the pricing issue as his number one priority at WCIT. Kramer is expected to have 101 reasons why the pricing model of the telephone should not apply to the Internet - and he may need them all.

Here's how it works

Very broadly, this is how telephone charging works at the moment. You call someone within your country and you (rather than the person you call) pay the bill to the carrier (AT&T etc). However if you call outside your country, it costs the company in the country money you are calling to connect the call.

In the same way it's unfair to charge someone for calling them, telco operators think it's unfair to have to pay the cost of someone else using their network. And so the originating carrier pays the other country's carrier (this is called "sender pays"), and they charge their customer the extra cost. These agreements are usually on a carrier-to-carrier basis and that's why international telephone rates vary so widely - it all depends on the deal struck.

Now, ideally, the other country's carrier would charge no more than what it cost them to connect the call. But of course in the real world, if the other company is obliged to pay them, they try to make as much money as possible. And that's why it is so ridiculously expensive to call abroad and whole markets exist to try to bring the cost down.

Nevertheless, this is a model that telecoms companies are used to and so happy with. They also make quite a lot of money from it. And so they want to extend to the Internet - especially since services like Skype continue to cut away at their profits.

The Internet works almost the other way around. There are still many bilateral agreements between Internet providers but because of the different way that the Internet works (which is behind much of its success) these agreements have typically led to everyone agree not to charge one another anything.

The Internet works by breaking up data into small packets and then sending them by whatever route the network decides is the fastest. As a result, data sharing between companies is much more fluid with agreements reached very, very quickly. The end result is that this system would become enormously complex if you tried to apply old telecoms rules to it - and hence expensive. It would also damage the enormous flexibility that the Internet has and likely cause a lot of problems down the line.

So why are telecoms companies pushing for the old pricing model to be imposed?

Well, three reasons:

  1. They are not getting anywhere near as much revenue from the use of their networks. They used to make small fortunes from almost the exact same network; now they watch as Facebook and Google become huge, powerful companies on the back of data that is flowing across their networks.
  2. They need to invest in new infrastructure to deal with the increasing demand for data - something that has leaped thanks to online video. It is expensive to put new cables in the ground and the sea. So, at the same time as revenues go down, telecoms companies are having to spend more money building out their networks. This problem is particularly acute in poorer companies that don't have large telecoms networks in place.
  3. That's the way it's always been. Telecoms companies have been all-powerful for many decades, sharing extraordinary influence and wealth. Both are diminishing, and they don't like it. So they are using that influence to try to bend the rules of the game back to them.

If you're interested in understanding more about this, we would recommend Geoff Houston's article "Number misuse, telecommunications regulations, and WCIT".