“It’s very obvious that we are pushing the limits of the amount of capacity we have,” Jacobs said, adding that network neutrality regulations should not restrict operators’ ability to manage their networks.

“Operators should have the ability to say: ‘let’s be fair, this person’s moved a lot of data, this person’s used a little’, if they’re paying the same amount, then the person who’s used less will get more access….We are on the side of, yes, you have to be able to do something to manage your network, but it’s not the right thing to go in and say one service or another is OK.”

In other words, Qualcomm (QCOM) favors usage-based throttling. In theory, this should ensure that all customers get their fair share of bandwidth every hour of the day. In practice, however, it has meant something else entirely. So the question remains: If data traffic is to be shaped (and I am not saying that it should be), who will determine how it will be shaped and, more importantly, who can be trusted to make that determination fairly?

Jacobs’s remarks come a day after Federal Communications Commission Chairman Julius Genachowski reiterated the Obama administration’s call for network neutrality.

An industry executive said to be familiar with the company’s plans tells Multichannel News that Netflix plans to extend its Watch Instantly video-streaming service to the Nintendo Wii and to the iPhone and iPod touch as well.

It’s not entirely clear how the company plans to bring Watch Instantly to the iPhone. Presumably, it will use a native iPhone app, since the device doesn’t support Silverlight, Microsoft’s (MSFT) Flash-esque also-ran.

That said, there are some hurdles to negotiate there since native video streaming on iPhone 3.0 doesn’t yet support digital rights management.

Another issue likely to prove problematic: Bandwidth. Watch Instantly streaming typically requires a fair bit of bandwidth and might prove problematic over 3G connections. AT&T (T), which hobbled SlingPlayer Mobile for iPhone over bandwidth concerns, will probably see things that way. Which means Netflix’s app, if it is indeed in development, will be limited to Wi-Fi like the SlingPlayer.

Beyond that and the DRM issue, there’s not much more I can think of to prevent such an app from being brought to the iPhone. There’s not much overlapping content between Watch Instantly and Apple’s iTunes service. And even if there was, there’s no real rivalry here that might inspire Apple to block Netflix’s (NFLX) service. iTunes is run pretty much at break-even to support sales of Apple (AAPL) devices. And a Netflix app for iPhone would arguably help Apple do that as well.

“AT&T does not manage or approve applications for the App Store,” the company said in a statement. “We have received the letter and will, of course, respond to it.”

A flat denial, and one that would seem to throw Apple (AAPL) under the bus for denying iPhone owners access to Google Voice. Though just why Cupertino would take issue with an an iPhone application that offers free text messaging and allows users to make calls, routed via the Internet, for free in the United States and for a small fee internationally is unclear. After all, it’s not Apple’s domestic and international calling business the app is potentially encroaching on.

And AT&T (T) is being somewhat disingenuous here since it acknowledged this past May that it had SlingPlayer for iPhone black-holed from the App Store because of concerns over bandwidth.

So while AT&T may not directly “manage or approve applications,” the carrier is clearly capable of influencing management and approval of them.

Could it be that Apple is contractually bound to reject apps that might compete with AT&T’s service? An agreement like that would certainly make it easy for AT&T to adopt the hey-don’t-look-at-me stance it has taken with the FCC.

That said, it’s entirely possible that the Apple’s rejection of Google Voice apps had nothing to do with AT&T and everything to do with its increasingly complicated relationship with Google (GOOG).

As Daring Fireball’s John Gruber notes, “Google Voice is a mobile phone service provided by the maker of one of the biggest competitors to the iPhone OS. What if Google Voice were instead Microsoft Voice? And what if Windows Mobile were as modern and competitive as Android? Would you be as surprised then that Apple is discouraging iPhone owners from using the service?”

Why the discrepancy? RampRate says Credit Suisse vastly overestimated YouTube’s bandwidth, storage, and data center costs. Worse, it failed to account for Google’s peering agreements, which significantly reduce Internet transit costs by exchanging traffic locally with other large networks. RampRate figures Google (GOOG) pays for about 27 percent of YouTube’s bandwidth. It trades for the remaining 73 percent through peering deals.

Beyond this, Google finds savings in other ways. It’s likely able to negotiate a lower rate for 27 percent of YouTube bandwidth it pays for simply by virtue of the sheer amount of business it’s able to bring to the table. And it keeps hosting costs low by maintaining servers in out-of-the-way locations. Says RampRate, “Regardless of what you may hear, YouTube costs are a fraction of any other company running similar operations. Most of Google’s bandwidth is free or near-free; its hardware is cost-optimized; and its data center costs are mostly committed or sunk.”

If that’s the case, why didn’t Google take issue with Credit Suisse’s (CS) projections? Why does it allow this perception of YouTube as money pit to persist? Well, silence is golden, is it not? “Any appearance of profits leads to more draconian revenue share demands from partners and additional lawsuits from owners of unlicensed content,” Ramprate explains. “An apparent loss deters this behavior, making it eminently advisable for Google to let rumors of YouTube’s losses grow and compound….

“The trail for this strategy was blazed long before YouTube. Apple’s poor-mouthing of iTunes served it exceptionally well for years in holding back the tide of higher revenue share demands (even as labels privately suspected the service was much more profitable than reported). The apparent stability and maturity of the business finally culminated in recent price increases. Google can only hope that its run with YouTube lasts as long as Apple’s luxury of $.99 pricing.”

“Eventually we’d like to make money out of it.”

– Google CEO Eric Schmidt on YouTube

It’s been well over two years since the $1.65 billion acquisition and Google has yet to truly monetize YouTube. And while the company persists in claiming it has the “luxury of time” to develop the business model through which it will recoup its investment in the popular video site, it’s clear that time is running out. To wit, a report this week from Credit Suisse that predicts YouTube will earn $240 million in revenue in 2009. Which wouldn’t be half bad were it not for the fact that YouTube is on track to lose $470 million in 2009. The research house figures YouTube will rack up about $711 million in operating expenses this year–$360 million on bandwidth alone.

An unfortunate disparity, that. Is it one that can be corrected? Credit Suisse seems to think so. “In our view, the issue for YouTube going forward is to increase the percentage of its videos that can be monetized (likely through more deals with content companies) and to drive more advertiser demand through standardization of ad formats and improved ad effectiveness,” it explained in a research note. Of course, this is exactly what YouTube is doing. On Monday the company said it has agreed to an ad revenue-sharing partnership with Disney (DIS) that will see it putting ABC and ESPN videos on YouTube. A small first step, but one that could portend a trend. Especially, if as Google (GOOG) CEO Eric Schmidt says, the company hopes to eventually make money out of it.

But the same cannot be said for Martine Rothblatt, the entrepreneur who founded Sirius (SIRI) nearly 20 years ago. She feels Sirius’s chances for real success may have died years ago–dealt a mortal blow by the FCC, which delayed its launch, depriving it of the competitive advantage it might have had over MP3 players like the iPod and later free Internet radio services.

“There has been a huge growth in terrestrial alternatives,” Rothblatt told Fortune. “As we move from third-generation to fourth-generation cellular, there’s going to be ever more bandwidth available to distribute content totally via terrestrial cellular infrastructure. And that will leave fewer and fewer unique market attributes to satellite radio. Technologies have their ideal times and places, and in my opinion the better time for satellite radio was 10 years ago.”

So much for that first-mover advantage…

A grim assessment for Sirius, which had just seemed to be getting an edge on its daunting troubles. But Rothblatt has a point. Internet radio is gaining traction and once cellular networks evolve to the point where they can deliver it to cars and other devices, how can satellite compete? Howard Stern’s going to retire sooner or later…

PREVIOUSLY:

• Sirius to Shareholders: Put Down the Mylanta
• Call Me Mel “Save-My-Own-Keister” Karmazin
• Sirius-EchoStar-Liberty: Ménage-à-Blah
• Sirius: Give Me Liberty or Give Me Ergen
• A Bankruptcy Filing, Mel? Surely You Can’t Be Sirius…
• Sirius Rolls Out New 24 Hour Investor Keening Channel
• Sirius Debt Problems? Call EchoStar! No Upfront Fees!
• Sirius XM: The Beginning of the End or the End of the Beginning?
• Your Report Card Is Your Stock Price? Guess Sirius Is Making Straight $.13’s…
• Trade You 77 shares of SIRI for 1 Month of “Sirius Everything”

How could a company whose Chief Internet Evangelist, Vint Cerf, once told the Senate Commerce Committee that allowing “broadband carriers to control what people see and do online would fundamentally undermine the principles that have made the Internet such a success,” approach those carriers with a proposal that would seemingly do just that?

There’s a very simple answer to that question: Google is not doing that, and reports suggesting that is are misguided. Yes, Google (GOOG) “has approached major cable and phone companies” with a plan to “place Google servers directly within the network of the service providers.” Yes, this plan would improve content delivery speeds.

And, no, doing so does not violate the concept of network neutrality. If it did, companies like Akamai and Limelight, which also have servers hosted at broadband provider facilities, would long ago have been tarred as anti-Net neutrality villains. Colocating caching servers is a common practice that improves bandwidth usage by bringing data closer to the end user. And while it will certainly make Google’s services faster and more responsive, it won’t do so at the expense of non-Google services. That would be a violation of Net neutrality.

“Some critics have questioned whether improving Web performance through edge caching–temporary storage of frequently accessed data on servers that are located close to end users–violates the concept of network neutrality,” Richard Whitt, Google’s Washington telecom and media counsel explains. “As I said last summer, this myth–which unfortunately underlies a confused story in Monday’s Wall Street Journal–is based on a misunderstanding of the way in which the open Internet works…. All of Google’s colocation agreements with ISPs–which we’ve done through projects called OpenEdge and Google Global Cache–are non-exclusive, meaning any other entity could employ similar arrangements. Also, none of them require (or encourage) that Google traffic be treated with higher priority than other traffic.”

So Google is not negotiating exclusive deals for privileged access. It is not proposing “a fast lane for its own content.” It is not seeking to prioritize its traffic in violation of the Net neutrality principles it espouses. Frankly, this story has little to do with Net neutrality at all. “Network neutrality is about the routing of packets,” Tech Liberation Front’s Tim Lee explained earlier this year when Akamai was accused of violating Net neutrality. “A network is neutral if it faithfully transmits information from one end of the network to the other and doesn’t discriminate among packets based on their contents. Neutrality is, in other words, about the behavior of the routers that move packets around the network. It has nothing to do with the behavior of servers at the edges of the network because they don’t route anyone’s packets.”

Still, it sounds promising. With downlink speeds in the 2-4Mbps range, Xohm is about twice as fast as current cellular broadband networks. Sprint’s service plans include a $25 monthly home subscription, a $30 “on-the-go” plan and a $10 day-pass program. All three require a PC card or modem and a subscriber agreement permitting Xohm to “use various tools and techniques designed to limit the bandwidth available for certain bandwidth-intensive applications or protocols, such as file sharing.”

So much for that “open network” promise. Well, at least Xohm is up and running, right? Sprint Nextel (S) first announced plans to deploy a nationwide WiMax network in August 2006.

“Our goal is to allow every person on the planet to participate by making the upload process as simple as placing a phone call,” Hurley wrote in an, ahem, “visionary” post to Google’s blog celebrating the company’s tenth anniversary. “This new video content will be available on any screen–in your your living room, or on your device in your pocket. … In 10 years, we believe that online video broadcasting will be the most ubiquitous and accessible form of communication. The tools for video recording will continue to become smaller and more affordable. Personal media devices will be universal and interconnected. Even more people will have the opportunity to record and share even more video with a small group of friends or everyone around the world.”

And YouTube will have even more video content to fail to monetize!

Well, presumably Google (GOOG) will have figured out a way to turn YouTube into a profitable business by 2018. Hurley best hope so, because YouTube’s rumored $1 million-a-day bandwidth bills are a bit steep, even for Google.

Together, the three companies are investing $750 million in 16 low-earth orbit satellites that collectively will provide Internet back-haul capacity to areas that lack it. This additional capacity will make it substantially easier and less expensive for others to deliver high-speed Web access to underserved locations. Indeed, according to Larry Alder, product manager in Google’s (GOOG) alternative access group, the project could drop the cost of bandwidth in those regions by 95 percent. Said Alder, “This really fits into Google’s mission to extend Internet use around the developing world.”

Fits nicely into Google’s mission to extend Google use around the world as well. “Google has an interest in boosting the Internet all over the world to reach new masses,” said Bank Degroof Group fund manager Wim Zwanenburg. “The growth market for Internet and mobile phones is in emerging countries.”

If you’re the owner of an iPhone 3G and you haven’t already updated to the iPhone 2.0.2 firmware, do so today–for your sake and that of all iPhone 3G owners.

Why?

Well, according to sources at AT&T (T), the reception problems that have plagued the device won’t be resolved until you do. iPhone’s running 2.0 or 2.0.1 firmware mistakenly demand too much power from 3G networks. And when they do this en masse, they can cause the network to refuse new requests for 3G bandwidth. That in turn causes the reception issues we’ve been hearing about since the device first arrived at market in July. And those issues will persist as long as handsets running iPhone 2.0 and 2.0.1 continue to strain the 3G networks.

That’s the story, anyway. And it does sound plausible. Although, you’ve got to wonder why this issue is specific to the iPhone. Presumably, there’s a multitude of other 3G devices out in the world requesting a 3G signal from the same networks the Apple (AAPL) iPhone is overwhelming. Why aren’t they suffering similar problems?