Net Neutrality 2.0 - Lubricate The Market

Analyst Note
Net Neutrality 2.0: Don't Block the Pipe,
Lubricate the Market
Telco 2.0 believes that enabling a fair market is the best way to deal
with issues arising from the „Net Neutrality‟ debate.

SEPTEMBER 2010

Contributors:

Chris Barraclough, MD, Telco 2.0/STL Partners
Dean Bubley, Founder and Director, Disruptive Analysis
Andrew Collinson, Research Director, Telco 2.0/STL Partners
Alexander Harrowell, Senior Analyst, Telco 2.0/STL Partners
Catherine Haslam, Senior Analyst, Telco 2.0/STL Partners
Keith McMahon, Senior Analyst, Telco 2.0/STL Partners
Simon Torrance, CEO, Telco 2.0/STL Partners

Excerpt
„Net Neutrality‟ has gathered increasing momentum as a market issue, with
AT&T, Verizon, major European telcos and Google and others all making their
points in advance of the Ofcom, EC, and FCC consultation processes. This is
Telco 2.0‟s input, analysis and recommendations.

Telco 2.0™ keywords
Telco 2.0, Business Models, Net Neutrality

Who should read?
CxOs, Strategists and Marketers from Telco Operators and Vendors, Regulators and advisors.

© STL Partners Net Neutrality 2.0: Don‟t Block the Pipe, Lubricate the Market Page 1 of 17

Executive Summary – ‘Lubricate the Market’
In this paper, Telco 2.0 recommends that the appropriate general response to concerns over „Net
Neutrality‟ is to make it easier for customers to understand what they should expect, and what they
actually get, from their broadband service, rather than impose strict technical rules or regulation about
how they should manage their networks.

Specifically, we make the following recommendations.

1. “Internet Access” should be more tightly defined to mean a service that:
 Provides access to all legitimate online services using the „public‟ internet;
 Performs within certain bounds of service performance as marketed (e.g. speed, latency);
 Is subject to the minimum necessary „traffic management‟ by the ISP, which should only be
permissible in specific instances, such as contention (e.g. peak hour use);
 Maintains consistent delivery of all services in line with reasonable customer expectation and
best possible customer experience (as exemplified in a „code of best practice‟);
 Provides published and accessible performance measures against „best practice‟ standards.

2. Services not meeting these criteria should be named, e.g. “Limited Internet Access”.

3. Where a customer has paid extra for a „Specialised Service‟, e.g. IPTV, it is reasonable to give
that service priority to agreed limits while in use.

4. ISPs should be:
 Able to do „what they need‟ in terms of traffic management to deliver an effective service but
that they must be open and transparent about it;
 Realistic about the likely limits to possible benefits from traffic-shaping.

5. The roles of the regulator are to:
 Develop an agreed code of best practice with industry collaboration;
 Agree, collect and publish measures of performance against the code;
 Ensure sufficient competition and ease of switching in the market;
 Monitor, publicise, and police market performance in line with appropriate regulatory
compliance procedures.

We also outline:

 Principles for a code of best practice;

 A simple „traffic light‟ system that might be used to signal quality and compliance levels;

 „Use Cases‟ for further analysis to help refine the recommended „Code of Practice‟ and its
implementation, including exploration of an „On-Demand Enhanced Service‟ that could potentially
enable new business models within the framework outlined.

Telco 2.0 will be working through these „Use Cases‟ at the next Telco 2.0 Executive Brainstorms –
„Americas‟ Los Angeles, October 27-28, and „EMEA‟, London, November 9-10, 2010. NB We would
like to express our thanks to Dean Bubley of Disruptive Analysis, who has worked closely with our
team to develop this paper.

Contents
Analysis of Net Neutrality Issues ........................................................................................................ 4

„Net Neutrality‟ = Self-Interest (Poorly Disguised) ...................................................................... 4

What, exactly, is the „problem‟ and for whom? ........................................................................... 4

It‟s a Commercial Issue, not a Moral Issue ................................................................................. 4

What causes this problem? ........................................................................................................ 5

Is It Really a Problem? ................................................................................................................ 6

A case of „Terminological Inexactitude‟ ...................................................................................... 6

The Internet: „Appellation Controlee‟? ........................................................................................ 7

The Internet isn‟t really „Neutral‟ ................................................................................................. 8

Don‟t Block the Pipes, Lubricate the Market............................................................................... 9

Empower the Customer .............................................................................................................. 9

Not all customers are alike ....................................................................................................... 10

Lubricate the Market ................................................................................................................. 10

The Role of the Regulator......................................................................................................... 11

New „Enhanced Service‟ Business Models? ............................................................................ 11

Example Scenarios / Use Cases .............................................................................................. 12

Telco 2.0‟s Position Vs the Rest ............................................................................................... 13

Conclusion & Recommendations ...................................................................................................... 14

„Lubricate the Market‟ ............................................................................................................... 14

The Telco 2.0™ Initiative .................................................................................................................... 15


Analysis of Net Neutrality Issues
‘Net Neutrality’ = Self-Interest (Poorly Disguised)
„Net Neutrality‟ is an issue manufactured and amplified by lobbyists on the behalf of competing
commercial interests. Much of the debate on the issue has become somewhat distracting and artificial
as the „noise‟ of self-interested opinion has become much louder than the „signal‟ of potential
resolutions.

The libertarian ideal that the title implies is a clever piece of PR manipulation of ideas of freedom of
access of information, and freedom from interference. For the most part, this is far from the reality of
the motives of the players engaged in the debate.

Additionally, the „public‟ net neutrality debate is being driven by tech-savvy early adopters whose
views and „use cases‟ are not statistically representative of the overall internet population.

This collection of factors has created a strange landscape of idealist and specialised viewpoints
congregating around the industry lobbyists‟ various positions.

However, behind the scenes, the big commercial players are becoming increasingly tense, and we
have recently experienced a marked reluctance from senior telco executives to comment on the issue
in public.

Our position is that, beyond the hyperbole, the fair and proper management of contention between
Internet Applications and „Specialised Services‟ is important in the interests of consumers and the
potential creation of new business models.

What, exactly, is the ‘problem’ and for whom?
Rapidly increasing use of the Internet and Specialised Services, particularly bandwidth hungry
applications like online video, is causing (or, at least, will in theory cause) increasing contention in
parts of the network.

The currently expressed primary concerns of net neutrality activists are that some consumers will
receive a service whose delivery has been covertly manipulated by an external party, in this case their
ISP. Similarly, some application and service providers fear that their services are or will consequently
be discriminated against by telcos.

Some telcos think that certain other large and bandwidth-hungry applications are receiving a „free ride‟
on their networks, and their corporate owners consequently receiving the benefits of expensive
network investments without contribution. As a consequence, ISPs argue that they should be entitled
to unilaterally constrain certain types of applications unless application providers pay for the additional
bandwidth.

It’s a Commercial Issue, not a Moral Issue
One of the areas of obfuscation in the „Net Neutrality‟ debate is the confusion between two sets of
issues in the debate: „moral and legal‟ and „commercial‟.

Moral & legal issues include matters such as „freedom of expression‟ and the right to unfettered
internet access, the treatment of pirated content, and censorship of extreme religious or pornographic
materials. We regard these as subjects for the law where the service is consumed / produced etc., but


that have in some places become entangled in the „Net Neutrality‟ debate and which should not be its
focus.

The commercial issue is whether operators should be regulated in how they prioritise traffic from one
commercial application over another without the user‟s knowledge.

What causes this problem?
Contention can arise at different points between the service or application and the user, for example:

 Caused by bulk traffic from users and applications in the „core network‟ beyond the local
exchange, (akin to the general slowing of Internet applications in the evening in Europe due to
greater local and U.S. usage at that time);

 Between applications on a bandwidth restricted local access route (e.g. ADSL over a copper pair,
mobile broadband).

As a service may originate from and be delivered to anywhere globally, the first kind of contention can
only be truly be managed if there is either a) an Internet-wide standard for prioritising different types of
traffic, or b) a specific overlay network for that service which bypasses the internet to a certain „outer‟
point in the network closer to the consumer such as a local exchange. This latter class of service
delivery may be accompanied by a connection between the exchange and the end-user that is not
over the internet – and this is the case in most IPTV services.

To alleviate issues of contention, various „Traffic Management‟ strategies are available to operators,
as shown in the following diagram, with increasingly controversial types of intervention to the right.

Figure 1 – Ofcom’s Traffic Management Continuum

Source: Ofcom


Is It Really a Problem?
Operators already do apply traffic management techniques, an example of which was given by 3UK‟s
Director of Network Strategy at the recent Broadband Stakeholder Group (BSG) event in London, who
explained that at peak times in the busiest cells, 3 limits SS7 signalling and P2P traffic. He explained
that they selected these categories because they are essentially „background‟ applications that have
little impact on the consumer‟s experience, and it was important to keep down latency so that more
interactive applications like Web browsing functioned well. A major „use case‟ for 3UK was identifying
which cells needed investment.

In 3UK‟s case, there was perhaps surprisingly more signalling traffic than there was P2P. Though this
is a mobile peculiarity, it illustrates that assumptions about problems in managing traffic management
can often be wrong, and it is important that decisions should be taken on the basis of data rather than
prejudice.

While there are vociferous campaigners and powerful commercial interests at stake, it is fair to say
that the streets are not often full of angry consumers waving banners reading „Hands off my YouTube‟
and knocking on the doors of telcos‟ HQs. While a quick and entirely non-representative survey of
Telco 2.0‟s non-technical relatives-of-choice revealed complete ignorance and lack of further interest
in the subject, this does not necessarily mean that there is not, or could not be, a problem, and it is
possible that consumers could unwittingly suffer. On balance though, Telco 2.0 has not yet seen
significant evidence of a market failure. We also believe that the mechanisms of the market are the
best means of managing potential conflict.

A case of ‘Terminological Inexactitude’
We broadly agree with Alex Blowers of OFCOM, who said that „80% of the net neutrality debate is in
the definition‟ at the recent BSG conference.

First, the term „Net Neutrality‟ does not actually distinguish which services it refers to – does „Net‟
mean „The Internet‟, „The Network‟, or something else? To most it is taken to mean „The Internet‟, so
what is „The Internet‟? Despite the initial sense that the answer to this question seems completely
obvious, a short conversation within or outside the industry will reveal an enormous range of
definitions. The IT Director will give you a different answer from your non-technical relatives and
friends.

These ambiguities have the straightforward consequence that the term „Net Neutrality‟ can be used to
mean whatever the user wants, and its use is therefore generally a guarantee for mindless circular
arguments and confusion1. In other words: perfect conditions for lobbyists with partial views.

For most people, „the internet‟ is “everything I can get or do when my computer or phone is connected
online”. A consumer with such a view probably has a broadband line and an internet service and is
among those, in theory at least, most in need of protection from unscrupulous policy management
that might favour one form of online traffic over another without their knowledge or control. It is their
understanding and expectation of what they have bought against the reality of what they get that we
see as the key in this matter.

In this paper, we discuss two classes of services that can be delivered via a broadband access line.

1. Access to „The Internet‟ (note capitalisation), which means being able to see and interact with the
full range of websites, applications and services that are legitimate and publicly available. We set

1
We hope this is not the case here

out some guiding principles below on a tighter definition of what services described as „The
Internet‟ should deliver.

2. „Specialised Services‟ are other services that use a broadband line, that often connect to a
device other than a PC (e.g. IPTV via set-top boxes, smart meters, RIM‟s Blackberry Exchange
Server (BES)) or a service that may be connected to a PC but via a VPN, such as corporate video
conferencing, Cloud or Enterprise VOIP solutions.

While „Specialised Services‟ are not by our definition pure Internet services, they can also have an
effect in certain circumstances on the provision of „The Internet‟ to an end-user where they share
parts of the connection that are in contention. Additionally, there can be contention between services
on „The Internet‟ from multiple users or applications connected via a common router.

Additionally, fixed and mobile communications present different contexts for the services, with
different potential mechanisms for control and management. Mobile services have the particular
difference that, other than signalling, there is no connection between device and the network when
data services are not being used.

The Internet: ‘Appellation Controlee’?
One possible mechanism to improve consumer understanding and standards of marketing services is
to introduce a framework for defining more tightly services sold as “Internet Access”.

In our view, services sold as „The Internet‟ should:

 Provide access to all legitimate online services using the „public‟ internet;

 Perform within certain bounds of service performance as marketed (e.g. speed, latency);

 Be subject to the minimum necessary „traffic management‟ by the ISP, which should only be
permissible in specific instances, such as contention (e.g. peak hour use)2;

 Aim to maintain consistent delivery of all services in line with reasonable customer expectation
and best possible customer experience (as exemplified in a „code of best practice‟);

 Provide published and accessible performance measures against „best practice‟ standards.

Where a customer has paid extra for a Specialised Service, e.g. IPTV, it is reasonable to give that
service priority to pre-agreed limits while in use.

The point of defining such an experience would be to give consumers a reference point, or perhaps a
„Kitemark‟, to assure them of the nature of the service they are buying. In instances where the service
sold is less than that defined, the service would need to be identified, e.g. a „Limited Internet Access
Service‟.

2
There may be some further possible extra exemptions, such as where international transit is expensive, or other variable-cost
network resources are consumed.

The Internet isn’t really ‘Neutral’
To understand the limitations and possible advantages of „traffic management‟, and put this into
context, it is worth briefly reviewing some of the other ways in which customer and service
experiences vary.

Different Services Work in Different Ways
Many Internet Services use already use complex mechanisms to optimise their delivery to the end-
user. For example:

 Google has built a huge Content Delivery Network, using fibre to speed communications between
data centres, dedicated delivery of traffic to international peering points, and equipment at ISPs
for expediting caching and content delivery, to ensure that its content is delivered more rapidly to
the outer edges of the network;

 BBC News Player uses an Akamai Content Delivery Network (CDN) similarly;

 Skype delivers its traffic more effectively by optimising its route through the peer-to-peer network.

Equally, most ISPs are able to „tune‟ their data services to better match the characteristics of their
own network. Although these assets are only available to the services that pay for, own, or create
them, none of these techniques actively slows any other service. Indeed, and in theory, by creating or
using new non-congested routes, they free capacity for other services so the whole network benefits.

Consumer Experiences are Different too
Today‟s consumer experience of ISP services varies widely on local factors. Two neighbours (who
happen to be on different nodes) could, in theory get a very different user experience from the same
ISP depending on factors such as:

 Local congestion (service node contention, loading, router and backhaul capacity);
 Quality and length of local loop (including customer internal wiring);
 Physical signal interference at the MDF (potentially a big issue where there is lots of ULL);
 Time of day;
 Router make and settings (particularly relating to QOS, security).

These factors will, in many cases, massively outweigh performance variation experienced from
possible „traffic management‟ by ISPs.

But Internet Protocols try to be „Fair‟
The Internet runs using a set of data traffic rules or protocols which determine how different pieces of
data reach their destinations. These protocols, e.g. TCP/IP, OSPF, BGP, are designed to ensure that
traffic from different sources is transmitted with equal priority and efficiency.

Further Technical Fixes Are Possible
Network congestion is not an issue that appeared overnight with the FCC‟s 2005 Comcast decision.
In fact, the Internet engineering community has been grappling with it with some success since the
near-disaster in the late 1980s that led to the introduction of congestion control mechanisms in TCP.

Much more recently, the popular BitTorrent file sharing protocol, frequently criticised for getting
around TCP‟s congestion control, has been adapted to provide application-level congestion control.


The P4P protocol, created at MIT and tested by Verizon and Telefonica, provides means for P2P
systems and service provider networks to cooperate better. However, it remains essentially unused.

A further consideration is that it is necessary to be realistic about what can be expected – we have
heard the benefits from traffic-shaping cited as an extension of around 10% in the upgrade cycle in
the best-case scenario.

It‟s Complex, not Neutral
It is therefore simply not the case that all Internet services progress from point of origin somewhere in
the cloud of cyberspace to the end-users via a random and polite system. There are assets that are
not equally shared, significant local variations, and there are complex rules and standards.

„The Internet‟ is a highly complex structure with many competing mechanisms of delivery, and this is
one of its great strengths – the multiplicity of routes and mechanisms creates a resilient and
continually evolving and improving system. But it is not „neutral‟, although many of its core functions
(such as congestion control) are explicitly designed to be fair.

Don’t Block the Pipes, Lubricate the Market
In principle, Telco 2.0 endorses developments that support new business models, but also believes
that the rights of end-users should be appropriately protected. They have, after all, already paid for
the service, and having done so should have the right to access the services they believe they have
paid for within the bounds of legality.

In terms of how to achieve this balance, it‟s very difficult to measure and police service levels, and we
believe that simply mandating traffic management solutions alone is impractical.

Moreover, we think that creating a fair and efficient market is a better mechanism than any form of
regulation on the methods that operators use to prioritise services.

Empower the Customer
There are three basic ways of creating and fulfilling expectations fairly, and empowering end-
customers to make better decisions on which service they choose.

1. Improving Transparency - being clear and honest about what the customer can expect from
their service in terms of performance, and making sure that any traffic management approaches
are clearly communicated.

2. Enabling DIY Service Management - some customers, particularly corporate clients and
advanced users, are able and can be expected to manage significant components of their Internet
services. For example, mechanisms already exist to flag classes of traffic as priority, and many
types of CPE are capable of doing so. It‟s necessary, however, that the service provider‟s routers
honour the attribute in question and that users are aware of it. Many customers would need
support to manage this effectively, and this could be a role for 3rd parties in the market, though it
is unlikely that this alone will result in fairness for all users.

3. Establishing Protection – for many customers, DIY Service Management is neither interesting
nor possible, and we argue that a degree of protection is desirable by defining fair rules or „best
practice‟ for traffic management.


Not all customers are alike
„Net Neutrality‟ or any form of management of contention is not an issue for corporate customers,
most of whom have the ability to configure their IP services at their will. For example, a financial
services trader is likely to prioritise Bloomberg and trading services above all other services. This is
not a new concept, as telcos have been offering managed data services (priority etc) to enterprise
customers for years over their data connections and private IP infrastructure.

Some more advanced consumer users can also prioritise their own services. Some can alter the
traffic management rules in their routers as described above. However, these customers are certainly
in the minority of Innovators and Early Adopters. Innovation in user-experience design could change
this to a degree, especially if customers have a reason to engage rather than being asked to do their
service provider‟s bottom line a favour.

The issue of unmanaged contention is therefore likely to affect the mass market, but is only likely to
arise in certain circumstances. To illustrate this we have selected a number of specific scenarios or
use cases in which we will show how we believe the principles we advocate should be applied. But
first, what are our principles?

Lubricate the Market
There are broadly three regulatory market approaches.

1. „Do nothing‟ – the argument for this is that there is no evidence of market failure, and that
regulating the service is therefore unnecessary and moreover difficult to do. We have some
sympathy for this position, but believe that in practice some of direction is needed as
recommended below.

2. „Regulate the Market‟ – so that telcos can do what they like with the traffic but customers can
choose between suppliers on the basis of clear information about their practices and performance.
A pure version of this approach would involve the specification of better consumer information at
point of sale and published APIs on congestion.

3. ‘Regulate the Method‟ – with hard rules on traffic management rather than how the services are
sold and presented. The „hard‟ approach is potentially best suited to where the „market‟ is
insufficiently competitive / open. This method is difficult to police as services blur and „the game‟
then becomes to be categorised as one type of service but act as another.

Telco 2.0 advocates a hybrid approach that promotes market transparency and liquidity to empower
customers in their choices of ISP and services, including:

 Guidelines for operators on „best practice in traffic management‟, which in general would
recommend that operators should follow the principle of “minimum intervention”;

 Published assessments on how each operator meets these guidelines that make understanding
operator‟s performance on these issues straightforward for customers.

The criteria of the assessment would include the actual performance of the operator against claimed
performance (e.g. speed, latency), and whether they adhere to the „Code of Best Practice‟.

How might it work?
The communication of this assessment could be as simple as a „traffic light‟ style indicator, where a
full Internet service meeting best practice and consistently achieving say 90% of claimed performance


would be „Green‟, while services meeting lower standards / adherence or failing to report adequately
would be signalled „Amber‟ or „Red‟. The principles used by the operator should also be published,
though utilising this step on its own would run the risk of the "Licence Agreement" problem for
software - which is that no-one reads them.

We‟ll be working on refining our guidelines and thoughts on how an indicator or other system might
work by working through some specific „Use Cases‟ outlined below. In the meantime, we recommend
the suggestions made by long-time Telco 2.0 Associate Dean Bubley in his Disruptive Analysis‟s
„Draft Code of Conduct for Policy Management and Net Neutrality‟.

It is our view that as long as Telcos are forced to be open, regulator (and consumer bodies) can
question or, ultimately, regulate for/against behaviours that could be beneficial/damaging.

The Role of the Regulator
We believe that the roles of the regulator(s) should be to:

 Make it as easy as possible to switch providers by reducing the „hassle factor‟ of clumsy
processes, and by releasing consumers from onerous contractual obligations in instances of
non-compliance with the code or performance at a „Red‟ standard;


We draw a parallel with what the UK regulator, Ofcom, used to do for telephony:

 Force all providers with over a certain market share to report key performance metrics;
 Publish these (ideally on the web, real time and by postcode);
 Make it as easy to switch providers as possible;
 Continuously review the set of performance metrics collected and published.

New ‘Enhanced Service’ Business Models?
Additionally, we see the following possible theoretical service layers within an Internet Service that
could be used to create new business models:

1. „Best efforts‟ – e.g. „We try our best to deliver all of your broadband services to maximum speed
and performance, but some services may take priority at certain times of the day in order to cope
with network demands. The services will not cease to work but you may experience temporarily
degraded performance.‟

2. „Protected‟ – akin to the ambulance lane (e.g. Health, SmartGrid – packets that are always
delivered/could be low or higher bandwidth e.g. a video health app but the principle of priority
stands for both).

3. „Enhanced Service‟ – e.g. a TV service that the customer has paid for (e.g. IPTV) or that a
network will (or might) pay extra to deliver assure a higher degree of quality.


One possibility that we will be exploring is whether it could be possible to create an ‘On-demand
Enhanced Service’. For example, to deliver a better video streaming experience the video provider
can pays for their traffic to take priority over other services with the express consent of the customer.
This may be achieved by adding a message to the Enhanced Service e.g. „Click here to use our
Enhanced Video Service where we’ll pay to get your video to you quicker. This may cause
degradation to the service to other applications currently active on your broadband line while you are
using the Enhanced Video Service‟.

We have long thought that there is scope for innovation in service design and pricing – for example,
rather than offering a (supposed) continuous 8Mbps throughput (which most UK operators can‟t
actually support and have no intention of supporting), why not offer a lower average rate and the
option to “burst” up to high speed when required? ISPs actually sell each other bandwidth on similar
terms, so there is no reason why this should be impossible.

Example Scenarios / Use Cases
We‟ve identified a number of specific scenarios which we will be researching and developing „Use
Cases‟ to illustrate how these principles would apply. Each of these cases is intended to illustrate
different aspects of how a service should be sold to, and managed by / for the customer to ensure
that expectations are set and met and that consumers are protected appropriately.

Fixed ‘Use Cases’

1. Contention between Internet services over an ADSL line on a copper pair, e.g. Dad is editing a
website, Daughter is watching YouTube videos, with a SmartGrid meter in operation over a
shared wireless router. This is interesting because of the limited bandwidth on the ADSL line, plus
consideration of the SmartGrid monitoring as a „Specialised Service‟, and potentially also as a
„Protected Service‟ in our exploratory classification of potential service classes.

2. Contention between Internet and Specialised Services over an ADSL line on a copper pair, e.g.
Dad is streaming an HD video on the internet, daughter is watching IPTV. This is interesting
because of the limited bandwidth on the ADSL line and the additional factor of the IPTV service
over the broadband connection. Unlike a DOCSIS 3 cable link, where the CATV service is
additional to the Internet service and in fact can be used to offload applications like iPlayer, the
DSL environment means that “specialised services” will contend with public Internet service.

3. Managed Vs Unmanaged Femtocells over an ADSL connection. An Unmanaged Femtocell is e.g.
a Sprint Femtocell over an AT&T ADSL connection, where the Femtocell is treated purely as
another source of IP traffic. A Managed Femtocell is e.g. a Softbank Femtocell operating on a
Softbank ADSL line, using techniques such as improved synchronisation with the network to
produce a better service. An examination of alternate approaches to managing Femtocell traffic is
interesting: 1) because a Femtocell inherently involves a combination of mobile and fixed traffic
over different networks, so draws out fixed/mobile issues, and; 2) it is useful to work through how
a Managed Femtocell Use Case might work within the market approach we‟ve defined.

4. A comparison of a home worker using videoconferencing with remote colleagues in two
scenarios: one using VPN software and configured router; the second using Skype with no local
configuration. The objective here is to explore the relative difference in the quality of user
experience as an illustration of what is possible in a advanced user „DIY‟ management scenario.

5. The „Use Case‟ of an „On-demand Enhanced Service‟ for a professional web video-cast, with the
consumer experience as outlined above. The idea here is that the user grants temporary
permission to the video provider and the network to temporarily provide an „Enhanced Service‟.


This role of this „Use Case‟ is to explore how and whether a „sender pays‟ model could be
implemented both technically and commercially in a way that respected consumer concerns.

6. HDTV to the living room TV. This is interesting because the huge bandwidth requirements needed
to deliver HDTV are far beyond those originally envisaged and have a potentially significant
impact on network costs. Would user expectations of such a service permit e.g. buffering to
deliver it without extra cost, or might this also enable a legitimate „two-sided‟ sender pays model
where the upstream customer (e.g. the media provider) pays?

Mobile ‘Use Case’

7. VOIP over mobile. Is it right that VOIP over mobile networks should be treated differently from
how it is over fixed networks?

Telco 2.0’s Position Vs the Rest
There is reasonably common ground between most analysts and commentators on the need for more
transparency in Internet Access service definition and performance and management standards,
though there is little clarity yet in the ways in which this clarity might be achieved.

The area which is most contentious is the notion of „non-discrimination‟ – that is of allowing ISPs to
prioritise one form or source of traffic over another. AT&T are firmly in favour of „paid prioritisation‟
whereas Google/Verizon are not, and says „wireline broadband providers would not be able to
discriminate against or prioritize lawful Internet content, applications or services in a way that causes
harm to users or competition‟.

Interestingly, in the Norwegian Government‟s Net Neutrality Guidelines issued in 2009, provision is
made that allows operators to manage traffic in certain circumstances in order to protect the network
and other services.

Free Press are a US activist movement who champion „Net Neutrality‟. While we have accord with
their desire for freedom of speech, and understand the imperative to create a more level-playing field
for media in the US, our position is not aligned in terms of enshrining total neutrality globally by
regulation.

In terms of the regulators‟ positions, the UK‟s Ofcom is tentatively against „ex-ante‟ regulation,
whereas the FCC seems to favour non-discrimination as a principle. The FCC is also asking whether
mobile and fixed are different - we say they are, although as the example of 3UK shows, the
differences may not be the ones you expect. Ofcom is also already looking at how it might make
switching easier for customers.

We also note that US-based commentators generally see less competition on fixed internet services
than in Europe, and less mobile broadband options for customers. Our position is that local
competitive conditions are a relevant consideration in these matters, albeit that the starting point
should be to regulate the market as described before considering a stronger stance on intervention in
circumstances of low local competition.


Conclusion & Recommendations
„Net Neutrality‟ is largely a clever but distracting lobbyists‟ ploy that has gathered enormous
momentum on the hype circuit. The debate does create a possible opportunity to market and measure
broadband services better, and that‟s no bad thing for customers. There may also be opportunities to
create new business models, but there‟s still work to be done to assess if these are material.

‘Lubricate the Market’
1. “Internet Access” should be more tightly defined to mean a service that:
 Provides access to all legitimate online services using the „public‟ internet;
 Performs within certain bounds of service performance as marketed (e.g. speed, latency);
 Is subject to the minimum necessary „traffic management‟ by the ISP, which should only be
permissible in specific instances, such as contention (e.g. peak hour use);
 Maintains consistent delivery of all services in line with reasonable customer expectation and
best possible customer experience (as exemplified in a „code of best practice‟);
 Provides published and accessible performance measures against „best practice‟ standards.

2. Services not meeting these criteria should be named, e.g. “Limited Internet Access”.

3. Where a customer has paid extra for a „Specialised Service‟, e.g. IPTV, it is reasonable to give
that service priority to agreed limits while in use.

4. ISPs should be:
 Able to do „what they need‟ in terms of traffic management to deliver an effective service but
that they must be open and transparent about it;
 Realistic about the likely limits to possible benefits from traffic-shaping.

5. The roles of the regulator are to:
 Ensure sufficient competition and ease of switching in the market;

We also outline:

 Principles for a code of best practice;

 A simple „traffic light‟ system that might be used to signal quality and compliance levels;

 „Use Cases‟ for further analysis to help refine the recommended „Code of Practice‟ and its
implementation, including exploration of an „On-Demand Enhanced Service‟ that could potentially
enable new business models within the framework outlined.

Telco 2.0 will be working through these „Use Cases‟ at the next Telco 2.0 Executive Brainstorms –
„Americas‟ Los Angeles, October 27-28, and „EMEA‟, London, November 9-10, 2010.


The Telco 2.0™ Initiative
Telco 2.0™ is a collection of research, brainstorming and consulting services designed to catalyse
change in the Telecoms-Media-Technology sector.

 Telco 2.0™ Research & Analysis
 Telco 2.0™ Executive Brainstorms
 Telco 2.0™ Consulting

The Initiative stimulates new ways of thinking about Business Models, Service Portfolios and
Technical Architectures.

Created by boutique analyst and consulting company, STL Partners, the Telco 2.0™ Initiative was
launched in May 2006 and is supported by the GSM Association, among other organisations around
the world.

Since we launched the concept of the 'Two-Sided Telecoms Business Model', the approach has been
finding increasing resonance at senior levels in both mature and fast growth markets.

Why does it exist?
Key challenges for strategists who work in or with the telecoms industry are:

 Overall Strategy: How is the digital economy evolving, what are the best strategic responses and
the most profitable market opportunities?

 Voice and Messaging: How best to innovate core service offerings to add value and grow
revenues?

 Data and Broadband: How to ensure incentives and rewards are better aligned across the
[digital content] value chain?

 New Communications Services: How can latent telecoms capabilities be better exploited to
address new market opportunities?

Conventional Answers are Unsatisfactory
Leading strategists now agree that today's predominant 'one-sided' telecoms business model does
not provide sufficient answers to these questions, for telcos or for other players in the digital economy.
Something new is needed.

Challenges to the Telecoms Industry
IP has changed the game and many growth markets are maturing rapidly. The lines between
industries are blurring and everyone is after the same consumers. This is causing disruption in the
telco industry, for operators and their partners. Greater levels of creativity are needed to address the
following issues.

 The vertically integrated Telecoms business model is under attack from all sides: tougher
regulation, new technology (most notably VoIP and open spectrum), disintermediatory new
entrants, and advancing customer expectations.


 P/E ratios suggest little investor belief in this improving. They have low confidence in 'converged'
or triple/quadruple-play bundles providing high returns.

 Operators are making investment decisions in Network & IT, Products & Services, and Mergers &
Acquisitions without a clear view of the future.

 92% of respondents to an STL online survey replied that 're-thinking the strategic role of the
operator' is a key priority.

 85% of senior execs said the current telco business model will no longer deliver sufficient growth.
(Telco 2.0 Survey, November 2008)

 There is an urgent need for all players in the telecoms value chain to review and renew their
business models.

The Opportunity
Fortunately telecom's companies possess a whole host of assets that could be exploited much more
to support new, sustainable market growth. The key is for telcos to create open platforms that help
other service providers (enterprises, SMEs and government) interact with end-users in more efficient
ways than they can today.

Telco 2.0™ 'two-sided' telecoms business model

We call this the 'two-sided' telecoms business model, delivering value to and generating revenue from
3rd party service providers as well as end-users. The 'two-sided' business model has consequences
for the design of existing services such as conventional voice, messaging and data/broadband
products (e.g. see Voice & Messaging 2.0 "What to learn from - and how to compete with - Internet
Communications Services") and also creates opportunities to create new revenues and B2B Platform
Services.

Our analysis shows that in 10 years time this new business model could deliver up to 30% growth in
annual revenues to operators and dramatically enhance the value of the industry to the wider 'digital
economy' (Please see: Future Broadband Business Models "Beyond bundling: winning the new
$250Bn delivery game" and The 2-Sided Telecoms Market Opportunity "Sizing the new $125Bn
platform services opportunity")


To realise this ambition we need to re-think not only our organisational and technology structures, but
also how we collaborate across a wider ecosystem.

How to get involved?
 To start to explore the opportunities in more depth see our reports or attend one of our Executive
Brainstorm events

 To access our searchable knowledge base of information, case studies and learning, please see
our Executive Briefing Subscription Service here

 To engage and act with the industry we invite Telcos to join the Telco 2.0™ Operators Club and
Vendors join the Telco 2.0™ Partners Programme
(email: contact@telco2.net)

 To explore the strategies appropriate to your organisation arising from these developments use
our consulting services

 We also use our insights, contacts and experience to help clients evaluate and implement
innovative strategies and applications, and to create new business opportunities - email
contact@telco2.net

 To keep up to date with the latest news please see our widely read blog or sign up to our
newsletter

For more detail, please see the full Telco 2.0™ Manifesto

Who to contact?
Enquiries to: contact@stlpartners.com


Net Neutrality 2.0 - Lubricate The Market

Recommandé

Recommandé

Contenu connexe

En vedette

En vedette (7)

Similaire à Net Neutrality 2.0 - Lubricate The Market

Similaire à Net Neutrality 2.0 - Lubricate The Market (20)

Dernier

Dernier (20)

Net Neutrality 2.0 - Lubricate The Market