No free ride

Here is Part 1 of an interview with the legendary Vint Cerf talking about accusations that Google is getting a "free ride" from the Internet providers, and why the telcos' business plans are based on old (dare I suggest obsolete?) business models.

Somebody should remind AT&T CEO Ed Whitacre of the parable of the goose that laid the golden egg. People don't want bandwidth if there is nothing to download with it. AT&T made a nett income of almost $1.5 billion in the first quarter of 2006. But that's not enough: they want to strangle Internet technologies, charging them twice, three times, four times for the same service, because of some mental allergy to the concept of value-add -- Google pays for a service from AT&T, adds their own value, and makes money from the deal. Whitacre believes this is "getting a free ride". (Funny, I didn't notice AT&T providing Google with a server farm with thousands of PCs.)

This is prima facie evidence that one can become successful, rich company CEO of a giant multi-national corporation without having the foggiest concept of what a free market is or how it works. (Some would argue that, in a truly free market, executives like Whitacre would be earning a lot less money; but that's an argument for another day.)

Still, I think the telcos have got a point. I mean, when a carpenter buys timber and nails from his hardware supplier, and then builds furniture which he sells as a profit, he's "getting a free ride" too isn't he? Why shouldn't the hardware supplier get compensated for the carpenter's success? Sure, the supplier has already been compensated once, when the raw material was bought. But that was before they knew just what a great job the carpenter was doing. Now that they know he's talented and skillful, it's only right that they charge him extra. Stands to reason, right?

When a chef buys meat and vegetables, and creates a meal which he sells for a profit, surely that too is "getting a free ride"? Just because chef, like Google, has already paid his suppliers doesn't mean he shouldn't have to pay again and again.

That's what AT&T say, anyway.