QOS Fees Could Change Everything

The revelation that BellSouth Corp. (NYSE: BLS) is looking to charge content providers – especially gaming companies and movie download sites – for a premium ride across its network is good news for several gear vendors. But, at the same time, the trend is causing a stir among standalone VOIP companies.

BellSouth's plans, first reported last week in the Wall Street Journal, hits the topic of "net neutrality" – a belief that owners of broadband networks shouldn't discriminate against the kinds of applications and content sent across their network. (See Chirac Loves FTTH and Brand X Decision Stokes VOIP Worries.)

The notion that service providers would charge extra for quality of service (QOS) challenges the idea of net neutrality, and could put third-parties using broadband connections for VOIP and other services demanding low-latency connection at a distinct disadvantage.

"Broadband providers are taking an unpopular stance and saying, 'We won't provide QOS for any other services but ours,' " says Benoit Legault, VP of marketing at Ellacoya Networks.

The move, of course, could provide a boost to those producing "packet inspection devices," or traffic management. Deep packet inspection technologies, such as those sold by Caspian Networks Inc. , Cisco Systems Inc. (Nasdaq: CSCO), Ellacoya Networks Inc. , and Juniper Networks Inc. (Nasdaq: JNPR), to name a few, would be in high demand once a service provider decides to give paying content providers traffic priority over emails, file downloads, and even consumer VOIP phone calls.

VOIP providers, meanwhile, aren't so thrilled.

Critics say the phone companies are cooking up these new fees as a way to book more revenues without significantly upgrading their networks. Bryan R. Martin, CEO of Packet 8, is excited that BellSouth is reselling his company's VOIP service, but that doesn’t mean he agrees with the idea of carrier QOS fees.

"We're hopeful that the networks will get better, but if one of these companies were to approach 8X8 and say, 'Would you pay X many dollars a month in order to get some sort of improved access' – be it bandwidth or latency or whatever – we would just laugh at them and say, 'No,' " says Martin.

Proponents of net neutrality worry that if BellSouth starts charging for premium access, it may decide to limit what kinds of content users have access to – or it may charge users more money for sharing home videos or other high-bandwidth applications.

BellSouth spokesman Jeff Battcher says that his company isn't interested in being the content police or trying to limit what people can do on the Net. Rather, he says, they're trying to provide a service in the video world that's analogous to what companies get when they buy a 1-800 telephone number.

"When you call a 1-800 number to Lands End… they're willing and want to pay for that call so they can receive your business," Battcher says. He says that similarly, companies are approaching BellSouth to ask for a faster pipe to some consumers so those consumers won't be disappointed and, in turn, blame the content provider for a bad experience.

But if content providers don't pay for BellSouth's premium service, then nothing much will change, Battcher says.

BellSouth and other carriers haven't arrived at a firm conclusion as to whom they'll charge, whom they won't charge, and what kind of money is at stake.

BellSouth's Battcher says that none of BellSouth's deals with gaming companies and content providers will involve making the consumer pay more for a DSL connection. However, the very technology that BellSouth would use to deliver on those deals can be applied in reverse to allow consumers to pay for brief periods of higher bandwidth bursts. (See BellSouth's Smith Details IPTV Plans.)

Deep packet inspection companies say some network congestion problems can be solve by broadband providers looking at their network's traffic and applying some "proportional enforcement" to those heavy users of, for instance, P2P file-swapping services.

Junaid Islam, VP of marketing at Caspian, says in China one big carrier used proportional enforcement to keep P2P traffic from ruining the experience of casual Web users. The more often users downloaded large files during peak usage hours, the slower the downloads would occur. No traffic was blocked, but the slowdowns forced businesses and other heavy downloaders to either upgrade their services or wait to do their heavy use until odd hours.

In the U.S., deep packet inspection companies say that some very large carriers are looking at applying policy-based routing and other ways of building in QOS throughout their networks. And, to the chagrin of VOIP companies, the early discussions suggest that such services won't be free.

One motivating factor in going to the QOS model is that it would come before broadband has really hit its growth peak – and thus it would ensure better profitability going forward. For example, a carrier like BellSouth has hooked up less than 20 percent of the potential customers it can reach.

BellSouth last reported that it had 2.7 million DSL customers, and the carrier will update those figures during its next earnings call on January 25. Some 85 percent of the 16 million households the carrier serves – about 13.6 million households – can be reached by at least a basic 1.5-Mbit/s DSL connection.

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— Phil Harvey, News Editor, Light Reading