It’s no surprise that the carriers might be a little jealous of the new economy wunderkinders. In one less guarded moment, Ed Whitacre, now the chief executive officer (CEO) of AT&T (at the time he was the CEO of SBC, which bought AT&T but adopted its name), told Business Week last November what he really thought of companies that publish content or host applications: "They don’t have any fiber out there. They don’t have any wires. They don’t have anything," Whitacre said. "For a Google or a Yahoo or a Vonage or anybody to expect to use these pipes for free is nuts!"

The Road to Riches

Whitacre’s frustration may soon be a thing of the past. Telecom officials argue that they need to be able to treat different types of data differently in order to meet the demands of today’s and tomorrow’s high-bandwidth traffic. "Some products are only useful if they come as a constant bit stream, like IP TV, video gaming and, to a lesser extent, voice over IP," says Bill McCloskey, director of media relations for Bell South. "If you are watching the Super Bowl on an IP TV, and someone down the street decides to download a tune, we think that the video signal should have priority. The small delay for the tune just doesn’t matter, and it would matter even less for an e-mail. But it matters to a video signal."

So using the vision outlined in the Cisco white paper, the telecoms are proposing that they build dedicated lanes on the Internet for high-bandwidth traffic. The rub is that these lanes will be toll lanes, with companies needing to pay for access. The telecommunications companies say this pay-to-play model gives them an economic incentive to innovate on the network itself, which will lead to services that businesses will want. AT&T declined to be interviewed for this story. However, in a prepared statement, AT&T said: "We will succeed or fail based on whether or not other providers see value in engaging in commercial agreements that enhance their content or applications. And that means not just capacity or speed, but guaranteeing things like security against viruses, worms and spam."

Christopher Yoo, a professor at Vanderbilt Law School whose research is sponsored in part by the National Cable and Telecommunications Association, thinks that as telecommunications companies move to this tiered approach, complicated payer/payee relationships will evolve, with content providers and network owners negotiating based on their relative strengths in the market. This happens now in the cable TV world. The cable carriers pay channels with large audiences such as ESPN about $2.50 per subscriber and an established niche channel without a large following such as Oxygen about 25 cents. And not only would cable carriers not pay a brand-new channel anything, but in all likelihood, that channel would have to pay the cable carrier promotional fees to use its pipes.