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Monday, April 20, 2015

Net Neutrality vs. Not: Four Unexplained Paradoxes

In all the media and lobbying furore about Net Neutrality, most of the discussion is about either political, ideological or academic angles. We regularly hear about the anti-capitalist risks of "regulating the Internet", the importance of Neutrality as a representation of free speech, or the theoretical efficiencies of two-sided markets and so on.

Frankly, all of those arguments will go on ad infinitum, because there is no objectively "right" answer to any of them. Unless regulators do multi-year massive field trials of neutral / non-neutral rules, there won't be any real data on actual consumer welfare, rates of innovation and so on. It will also just be rhetoric and theory.

But there is a particular subset of claims and assertions in the telecom/Internet industry which are mutually contradictory, where the industry itself has created a paradox. Regulators should challenge market participants to clarify the dichotomies, as a more rigorous thought process might lead to a few problems simply disappearing.

I've spotted four of these self-contradictions:

Paradox 1:
  • "There is a data tsunami, leading to congested networks and ultimately a 'capacity crunch' & so we need more spectrum"
  • "We want to zero-rate some mobile apps & give the data away for free"

Paradox 2:
  • "We can expose QoS capabilities to 3rd party app & content companies such as VoIP & videoconferencing players, monetising QoS capabilities in the network"
  • "People will use and value VoLTE & ViLTE, because it's the only QoS-managed voice and video service. The rest are best-efforts only"

Paradox 3:
  • "About 10-15% of cell sites face congestion"
  • "We're going to make a lot of money from paid prioritisation"


 Paradox 4:
  • "We're aiming for customers to move to larger data-plans, or incur overage fees"
  • "We'll sell sponsored data to content/app companies [at wholesale prices]"

Now, in all of these there's a little wiggle-room, despite the self-contradiction. 

It might be that operators carefully craft their zero-rating plans, so they only generate more (free) data traffic in uncongested areas, or at uncongested times. Or perhaps more cynically, creating more near-term congestion is a tactical positive, as it helps sway spectrum policy with longer-term benefits.

Perhaps operators will expose commercial QoS APIs only to those companies that don't offer competing VoIP/video communications services, or will price it on a discriminatory basis, so that VoLTE has a cheaper cost basis. Or maybe it will be "semi-skimmed QoS" available to app developers, with "full-fat QoS" only available for in-house services.

Maybe paid-prioritisation (let's assume it works; many think it doesn't) will be offered at such a small uplift of data transmission price, that content companies will be willing to buy it like an insurance policy, covering 100% of locations/times/users, even though they know that the risks are only real for 10% of locations, 10% of the time, for the 20% of users who aren't on WiFi anyway. Or perhaps they'll price it at a huge premium to the baseline cost, so that app devs will just use it in a real emergency situation.

Maybe telcos with sponsored data platforms can develop a mechanism that encourages use just for new mobile apps and content, rather than replacing retail data plans paid by users, with discounted wholesale traffic bought in bulk by content firms.

In my view, a lot of the supposed "use cases" and "business models" that opponents of Net Neutrality put up are straw-men. They simply don't work - either technically or commercially. Many of them will actually lead to lower revenues, or have unintended market and regulatory consequences. 


(If selling QoS to third parties is ever to become feasible, it will probably need laws for non-discrimination, transparent pricing & maybe even structural separation)

We already see the failure of AT&T's Sponsored Data programme to make any meaningful impact. We also see a lack of any app or content co's clearly asking for prioritisation to be sold to them - nobody actually wants it, at least on mobile networks. And I'm willing to bet that the first time a regulator asks a telco's execs why they need more spectrum, when they're generating excess traffic with free zero-rated usage, it will cease to be a big deal.

That's not to say that other Neutrality problems aren't real - there clearly is blocking of certain apps, or deliberate degradation/throttling of others. But many of the "hot topics" for activists and lobbyists are simply worthless, unworkable ideas. 

Regulators should focus on these apparent paradoxes - as clarifying the answers (and making all involved think through them clearly) - will make most of the points of contention simply evaporate.

These issues and many others are addressed in Disruptive Analysis research on new mobile data monetisation & "non-neutral" strategies. Click here for details.


1 comment:

Innocenzo Genna said...

Further paradox:
"We need to charge Content providers and OTT in order to be able to make our infrastructure investments".

However, I do not understand why a telco should invest in infrastructure once it has the right to charge OTT and content provider. At the point, the business case would be in acting as gatekeeper towards OTT and Content providers, while the capacity of the network will not be relevant