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Today’s oil prices have been hovering around USD130 a barrel, mainly due to demand and supply issues, although some may argue that oil futures trading is playing a major role in pushing the price of oil to new heights.

Demand for oil will not cease within the foreseeable future with the rapid development of East Asia, with emerging giants like China and India, who satisfy most of their oil needs through imports. Together with the emerging middle class worldwide, energy demand will continue rising due to the increased number of cars on the road and average home energy usage.

On the supply side, we all understand that it is exhaustive, and the output for market consumption is largely determined by the OPEC, whose members state economic performance is directly linked to the price of oil. Since they are in control of the “pipes” they will gladly manipulate the supply of oil to the market to ensure the “black gold” will bring prosperity to their nation for another generation, rather then increase output to deplete their “own resources” and directly reducing their “profit margin”. Who in the right frame of mind will choose this LOSE-LOSE situation?

This brings us to the question: Will bandwidth go the way of oil? Bandwidth now is relatively cheap, with the lowest price plan in Singapore going for around SGD30 for unlimited bandwidth. However, looking at current web developments and taking lessons from the oil debacle, I got a feeling that if we are not careful, I won’t be surprise to be paying $10 / GB, with unlimited bandwidth for a fixed price plan a thing of the past. Here’s why……

There are not only more cars on the highway, they are bigger

The Internet is the highway, and each users connected to the Web are the “Cars” on the highway. Now everyone has a reason to log onto the Web.  You can update and make new friends, shop, do research, find directions, and even checkout your neighbors backyard. So does it come at any surprise that China have overtaken the U.S in having the highest number of netizens, at around 210 million users, and with the emerging countries such as India and Russia, the highway is going to get very crowded. We all know what happens when too many cars are on the road, JAMS!

And did you notice the the cars are getting bigger? Thanks to the Web 2.0 development, we can now talk through the Internet with Skype , watch people do funny things on Youtube , share all your photos with Flickr , and don’t even have to travel for meetings with video conferencing. All these cool things you do only mean one thing, MORE bandwidth. And with the onslaught of high definition EVERYTHING, it can only get worst.

VOIP

One of the most understated web development have to be VOIP . Simply put, the four letters “V.O.I.P” makes the telecommunications giants peep in their pants. Right now VOIP is still not mainstream, and is mostly used for making overseas calls through the desktop PC. However with mobile broadband being the next wave of development, VOIP will soon reach the average consumer and become mobile. By going mobile, mass usage of VOIP will prove to be the first cue to the ISPs in the early stages of bandwidth’s transformation to “Gold” status.

BUSINESS 2.0

I think one word sums up the impact of Business 2.0 on bandwidth, “Cloud “. The promise is simple; cloud computing reduces IT cost and improves business process. It’s a matter of time and technological advancement before this inevitable shift to cloud computing, and when it happens, it will provide the second cue to ISPs that perhaps, bandwidth is worth more.

The issues discussed above concerns the demand of bandwidth, and I am sure you agree that we are just at the beginning of this explosion in bandwidth usage. We should now look into issues of the supply of bandwidth.

Control of the pipes

The supply stories when it comes to bandwidth is simple.  As far as I know, the last dot com era left behind many pipes which were built in anticipation of the boom of the World Wide Web. However since the prophecy didn’t come true, many of these pipes were left unused, and auctioned off after bankruptcies charges were brought against these opportunist. Right now there a few major ISP around the world, owning these “backbone of the Internet”.

Building undersea fibre optics cable is expensive business and the ISP market is one which possess a very high barrier to entry, almost monopolistic in nature. Adding to that the many who were burnt during the last dot com burst, you can be sure its quite an exclusive club. Since supply of bandwidth still outstrips demand now, there really isn’t any issue on hand when people talk about bandwidth, just like it was in the early days of oil.

Demand outstrips supply

There can be two reasons as to why demand will outstrip supply. First reason is obvious, with web developments, more bandwidth is require to deliver content. Next is disruption in supply. This can be due to natural disasters, wars, and sabotage / terrorist attack, and will prove to be the final cue to push the “greedy rich corporations” to realize that: “Hey, I think we got something here”. Corporations are already on the path, think Bandwidth throttling and Quality of service .

When we examine the issues, the supply story of bandwidth has all the ingredients to go the way of oil.

1. Its is controlled by a few major ISPs around the world. (OPEC)
2. Natural disasters such as earthquakes have caused major disruption to the world “supply” of bandwidth, leaving many people “disconnected”.
3. Wars or civil wars have not been a cause of any disruptions to bandwidth yet, however it will be easy to guess that these pipes will be high value targets to any opposing forces. (MIDDLE EAST, NIGERIA)
4. There hasn’t been any sabotage attack that I know of which have disrupted the service of the web. However I personally believe it is a matter of time before such as attack take place, because people just forget how integral these pipes are to the world economy and to the individual’s social life. (KUWAIT)

Of the issues discussed above, 2, 3, and 4 are beyond our control. However, we MUST NEVER let a few major ISP control the pipes around the world, and it can only be enforced through legislation, as the environment and nature of the industry is highly anti-competitive.

Conclusion

The issues discussed above is very much a hypothesis and carries much of my personal opinions. I strongly believe bandwidth will become a commodity, comparable to oil, driving the development in the information age, just as oil was during the industrial age. Thus I look at the current free-flowing bandwidth as a time in history, when our children will look back in future and wonder how this could be possible. So what can we take away from this new found knowledge?

• Bandwidth will be traded as a commodity in future
• Net Neutrality is a Geek’s dream
• Invest in ISPs or related companies
• The Web will become a two tier system, with the upper tier a “pay to enter” Marketplace, the lower tier free in today’s form with no uptime guarantee
• Microsoft and Google will enter the ISP industry

Lastly, I believe the Internet is the victim of its own success.  What started off as a FREE ideology will instead plunge us into the next trap of capitalism. The oil issue will and can be solve with alternative energy sources, but when bandwidth becomes traded, it can potentially plunge us into the next big depression. This is because if the supply of bandwidth is suddenly disrupted due to war and natural disasters, the price of bandwidth may skyrocket to USD 100 per gigabyte. Many business will be affected as they are now dependent on cloud computing, and the ordinary folks will not be able to afford to logon to the Web. As such, the effects is no longer just confined to the economy, affecting our livelihood, but it will affect our social live, with restricted access to communication (VOIP), entertainment (IPTV), and connection with our friends (Social Media). It will be much more difficult to climb out of this slump as it destroys not only your job, but your soul.

Of course, that’s a big IF , so don’t worry, life goes on, and we can still carry on “torrenting” :)

18/07/08 - As Web Traffic Grows, Crashes Take Bigger Toll

21/07/08 - One-Third of the World will be Online Soon

28/09/08 - I came across this article dated 21 Jun 1999, with a familiar name playing a part

30/09/08 - Now we know who owns the pipes