Net Neutrality: As the discussion matures, who will be the winners?
By: Ajit Jaokar, Director of futuretext
07 September 2012

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The Net Neutrality discussion has always been emotive on both sides (Internet providers & users, and Telecoms). However, the discussion has now matured.

However, the discussion has now matured. If you attend typical Telecoms conferences like the LTE conference in Barcelona, we see a shift in mood. No longer are the Web players seen as purely a threat, but we see a reluctant willingness from Operators to work with the Internet players – whom they fondly call OTT (Over the top) players. But the shift towards the middle ground has not been driven by Telecoms alone.

The Facebook IPO debacle demonstrates that mobile is seen as a strong avenue for revenue growth for Facebook. The same trend is also reflected in the instagram acquisition. The respected investor Fred Wilson (Twitter, Zynga, Forusquare) also now advocates a Mobile first-Web second philosophy. Led by this new-found pragmatism from both sides, a new phase is dawning in the traditional net neutrality debate. Both the Web and the Telecom players need each other more than ever now. However, in this mix – we also have the Customers (consumer rights) and Regulators who are expected to work on behalf of the customers to manage a resource.

The Net Neutrality discussion has indeed matured and now the question is: Who will be the new winners and losers?

Background

On first impressions, not much has changed with respect to Net Neutrality:

Evolution

At a superficial level, based on the above, we could be led to think that – not much has changed because all players seem to be entrenched in their respective current positioning. However, here are some key changes driving the evolution of Net Neutrality:

  • There is now evidence to indicate that Smartphones are hardly used for making calls. The biggest threat to Operator revenue is not VOIP but messaging and social communications. There has been a major evolution in how people communicate, including with tools such as Facebook, or Twitter, their profile pages, etc. This is perhaps even more marked in emerging markets such as in SE Asia where Facebook usage is almost universal amongst those connected

  • SMS is said to be ‘resisting the success of WhatsApp and other messaging providers’ but a recent report from Telco 2.0 suggests that within three years, 40 percent of messaging and 21 percent of voice revenues will vanish due to over the top (OTT) players

  • The Telecom industry is pinning its hopes on RCSE — not many others are convinced. Rich Communication Services (RCS) is a Telco industry effort focused on the use of IP Multimedia Subsystem (IMS) for providing mobile phone communication services. However, much of the capability of RCS is already available from Internet service providers

  • The Internet has shown that it can effectively mobilise itself against regulation like SOPA and ACTA.

Analysis

So, Net Neutrality is likely to evolve in the near future. Firstly, from a purist perspective:

  • Net Neutrality means all packets are treated as (commercially) equal . This viewpoint excludes content delivery networks like Akamai – which do not commercially distinguish between packets. Content delivery networks are concerned with technically optimising network services. They do not differentially charge for packets. Thus, the purist definition of Net Neutrality maintains that all packets are treated equal.

  • A network is a public resource (because Spectrum is a public resource and must be utilised for the common good). The issue of ‘public good’ makes a difference from other forms of networks like Twitter who have been criticised for being closed (but do not use a public resource – hence not affected by Net Neutrality conditions)

  • Transparency is a sacred principle i.e. any business that charges its customers must do so in a fair and a transparent manner

  • As an extension to the above (transparency), if Operators charge more for VOIP or charge VOIP providers for transport, Operators are liable for the transport if charged extra i.e. they have to guarantee a level for service for which they are charging

  • Tiered pricing may be part of the answer but with tiered pricing must also come billing granularity and transparency

  • While the mobile network is seen to be a finite resource, there are many who question the current spectrum allocation techniques and call for dynamic spectrum allocation

Despite purist perspectives and public posturing from Telecom Operators, Web players and Governments, there has been a tendency to find interim solutions – for example the Google – Verizon agreement on Net Neutrality which has been criticised by the EFF. On the other hand, Operators are adopting a more open approach in some areas: For example the Firefox mobile OS

Conclusion

At the outset, the question was: Who will be the winners and losers as the Net Neutrality discussion matures? I believe that in a pragmatic ‘mobile first’ world – while we see public posturing – we will see new strategies and new loci of emphasis – specifically:

1. Abuse of market power/anticompetitive behaviour from the network providers. In the EU case, as seen by the extended consultation launched by commissioner Neelie Kroes – (On-line public consultation on "specific aspects of transparency, traffic management and switching in an Open Internet"), we are looking beyond traditional anticompetitive/competition law/transparency

2. An emphasis on transparency

3. A discussion on QOS, its significance and willingness to pay.

And the winners?

I think it will be the consumer because: Even if Operators want to be paid for data in a tiered format, they will have to be transparent in their billing. On the other hand, the Web providers have come to realise that for the next stage of their evolution they need good networks. In either case, the customer wins.

However, there is a note of caution. Over the last decade, we have moved forward a lot in the debate – but there is a still a long way to go. In terms of customer choice and switching options, the mobile ecosystem is not the same as the Internet. A decade ago, even in the ‘walled garden’ days of AOL, customers still had many options to choose Internet providers. The same is not true on mobile. Even in the more advanced markets, customers have as few as five providers. Switching between providers is hard and consumer choice is guided by price plans and other network conditions.

So, the extended question remains: Can the market protect net neutrality? In today’s mobile markets, concentration is much fiercer, and resources being finite dictate a very different dynamic. Therein lies the significance of the EU consultation which emphasises specific aspects of transparency, traffic management and switching. In other words, the net neutrality discussion has become more granular from the older days of ‘blocking providers’

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