COOPERATION WORKING GROUP SESSION
14 MAY 2015
CHAIR: Hello, everyone, we're going to get the Cooperation Working Group started. I am Meredith Whittaker, and this is ‑‑
MARIA: Maria, also one of the co‑chairs, we unfortunately need Alan, he couldn't attend unfortunately.
But I think we managed Meredith.
MEREDITH WHITTAKER: I believe that we did manage, Maria. We are going to warm up this act a little bit. But first, the theme of this is net neutrality and Internet regulation, we have people up here who we think kind of represent you know this sort of bridge between the technical and political world, but we encourage people who have questions about how these things impact their day‑to‑day operations, questions about how this impacts the network operator community to ask these folks, these are experts who have a lot of insight and can be I think very useful to this community. So we're excited to have people here and we're going to get started people here with a quick intro from Marco from RIPE NCC who is going to tell you about something that's happening.
MARCO HOGEWONING: Yes, my name is Marco, I work for the RIPE NCC, RIPE is an institutional partner of EUROdig, we are part of organising this, disclaimer, we're not involved in this particular session that they are organising which also will be about net neutrality. The organising team however is preparing a statement to come out of EuroDIG regarding net neutrality. Sort of the highlight outline is out here. There is a draft text available on the EuroDIG website on this URL and they are asking the Internet community for comments and feedback. So, if you have got time, please go to this URL, read the document and leave your comments via the website. Please participate. It's important to reflect everybody's opinion in this statement, we think. Thank you.
CHAIR: That's a lightening call for participation. So now we're going to get into the richer content, I'm going to bring up Scott mark us who a sort of a tour deforce in the people who deal with trying to put policy in around technology in terms of doesn't break technology or disrespect political principles, so thank you for your work in the past and you are going to give us an overview on challenges and responses in the EU and the US. There is going fob a fair amount of time for questions, so if people have them, get them ready.
SCOTT MARCUS: Thank you very much Meredith. The mike is working. A couple of words actually about myself first if I might. Those of you who see this, might think otherwise, but those of you with a little grey hair actually know that I come out of you're community. I was the CTO for GTE Internet working for many years, which was one of the largest ISPs in the world at the time and also I was a board member for ARIN from 2000 to 2002. I was also been an adviser to the USSFCC, and actually a lot of the what I'll be talking about today is based on work that I did for the European Parliment last year, so I'm a bit unusual in that I deal with the issue as Meredith said, not only from an engineer but also from an economic and policy analysis side and also in having dealt with it on both sides of the Atlantic.
So, what do we want covered today? Actually a lot of things, I'd like to talk a bit about how we should think about net neutrality, how it's defines in various fora around the world. Why do we care about it? Technical background which, of course, is well known to everybody in the room, economic background which is probably less well known, I'll be tossing around some terms that you don't hear everyday I would guess. A bit about European views on network neutrality based on consultation that the European Commission held a year ago and also a bit about the differences between the European Union and the US, I won't be saying too much about the US, I'm leaving that to my good friend Mike Blanche and also what we ought to be worried about going forward. So that's actually a lot to ever could, so, pay attention, obviously I normally work with pretty meaty slides. I think I have done that again today, and those of course you'll have.
So, network neutrality means lots of different things to different people. It could be the ability of Internet end users to access and distribute information, use applications and services of their choice, that's a definition that many urines will recognise, it's in the directives that deal with this from the European institutions. It can also represent traffic being treated equally without discrimination or interference, independent of sender /receiver type content. The newer definitions often talk about device service or application, that's actually what raises a lot of questions that I think the people here will care about.
Often, particularly in the US context, one speaks instead of an absence of unreasonable discrimination which, of course, poses the difficult challenge what's reasonable discrimination, what's unreasonable. All of these definitions are used, most people think of them as being synonymous, they are pretty far from synonymous, they have different implications for policy makers and different implications all around, different implications in how they are enforced, do they represent rights for consumers or obligations on network operators? So, the implications are clearly distinct.
Now, citizens don't necessarily understand all of this. Some of them do. Some don't. But network neutrality raises strange passions because it's linked to so many things that citizens care about: It's linked to freedom of expression, linked to competitive choice, it's also linked to innovation in ICTs, which I think all of us care about, particularly those in this room. So, it impacts on a lot of things on which people are passionate.
Now I'll say only a few words about the technological aspects, because I think all of this will be well known to people in this room. We often speak of quality of service, we often speak of quality of experience. Important to remember is that quality of service is something, unlike some of the political dialogue, quality of service wasn't invented by greed re monopolists, the TOS bits were there in the IPv4 specifications from the beginning in 1981, and in fact the bit on quality of service in the Internet goes back much further, is goes back into the 70s, it's there for reasons. There is some applications that genuinely benefit or can benefit from managed quality particularly when the network is congested. Voice‑over IP is probably the poster child for these. Video may or may not be. Streamed video, if the user can tolerate a couple of seconds of delay at the outset, doesn't necessarily benefit from quality of service. This is the reason why NetFlix really is pretty indifferent to quality as long as they are not actively degraded.
Two directional communications do matter, and it matters for reasons that those of you who are old enough to remember satellite conversations across the Atlantic will immediately relate to. If it gets to more than 150 milliseconds typically both sides of the conversations start talking at once, it's a problem, the quality of the conversation is degraded. There are many other application where is it could matter as well. One that's often forgotten is the use of public networks to support mission critical services. Public protection and disaster relief for PPDR, I have done work to the the European trail agency. If public networks were used for that and if the signal is delayed the train stops, so there are applications where you truly need managed priority, especially in times of a crisis, for PPDR they care a lot about what happens during the period of a disaster. Quality management has its uses, legitimate uses.
So, that's actually all I'll going to say on technical aspects today. Happy to come back to it in the questions. Again I think this is well known to people in the room.
On the economic side, there is a rather different story. There are different strands of economic thought that often apply to network neutrality. At least three different strands of thought and they have very different implications in terms of what policy makers ought to be doing.
The first is a threat about quality discrimination and price discrimination; the second about economic foreclosure; a third relates to something called two‑sided markets. Let's get into this in more detail. This will be new to many people in the room.
Quality differentiation, price differentiation, economic theory on this goes back into the 19th century. Great paper in 1929, well known to economists, and to everybody in the room. You ride on a train, you buy a first class ticket, you buy a second class ticket. This is not thought of being anti‑competitive. You pay your money, you take your choice. People who are willing to pay a bit more for a different service, do so. Generally, to an economist, this is a benign interpretation of quality differentiation, it means that the operators get a little more pricing power but societal welfare is also increased. In the absence of anti‑competitive discrimination this normally benefits not only the provider of the service, in this case the network operator but also the user recollect the consumer, so this says the differentiation is a good thing. Another interpretation has to do with something called two‑sided markets. This is a newer branch of economics, it especially was developed by some very fine economists in Toulose in 2004. And here, the idea is that you could have a platform that brings the two sides of the market together. A common example is broadcast over‑the‑air television where the transmission platform rings the advertisers together with the end users. Another example is often used is heterosexual singles bars where the bar brings together the right mix of people of both sexes, and in both cases, what an economist says looking at this is: How can be economically ration for one side of the market to be subsidized? How is it that females might get free drinks on Thursday night? How is it that people get over the air television without paying for if? And the answer is, in a system like this, if the platform brings together the right mix of participants on both sides of the market, it can be an efficient outcome even if it differs from what would you normally see in a single sided market.
And things like Internet peering can be analysed on this basis and have been analysed on this basis, I have been involved in this kind of work. This is still a relatively benign interpretation, a relatively happy interpretation. It says, the parties on both sides, let's say, the network operators of the platform, content providers on one side, end users, eyeballs on the other, everybody benefits as long as you get the right mix of participation. When there are disputes, and there can be disputes, it's partly because we don't have a single platform, the Internet as a whole is the platform and the ISPs have interests that are not necessarily commercially aligned. So, when disputes arise, they are really how to split the surplus, how to split the benefits. It's not from an economist's point of view necessarily bad, it could be bad if there are anti‑competitive effects.
The third case is the one that economists really worry about and that's something called economic foreclosure. If you got two market segments, one dependent on the other, say virtually related, there is market power in one, the party with market power wants to project the market power up or downstream into the segment that otherwise ought to be competitive. That's the case that you worry about because that's a case that unambiguously harms consumer welfare. The case that we care about here is the case where network operators with market power, and I should add, with market power that hasn't somehow been fixed by regulation, so, with market power not addressed, try to project the market power to favour affiliated content, affiliated applications, that's the bad case, that's the clearly bad case.
So this is the one where if there is a role for public policy, this is where it especially has to be.
Now, what do we know about what the Stakeholders think? Most of this audience is European. Many of you will be well aware that the European Commission put forward a bunch of proposals in 2013 for a so‑called telecom single market. They were roundly criticised for not having done a public consultation as part of the process. What many people missed is they actually did a rather strange thing, they held a public consultation, collected responses, and then never published the results, at least not in full; there was a half page in one document that nobody read.
So, the information was there. In work that I did last year for the parliament, I pulled out the responses and effectively completed the consultation that the Commission started. There is a lot of thoughtful responses provided. There is a bunch of citizens responses that the Commission itself was kind enough to tabulate for me.
So, what do we no? Well among other things, we learned that nearly all of the market players on all sides of the issues, not only network providers, but also content providers, nearly everybody agrees that quality management can make sense under proper circumstances; what those circumstances are might vary but nearly everybody accepts that there is a role for differentiation. Consumer advocates, civil society. They worried a lot about specific areas, voice‑over IP, was a common theme. By the way it's an appropriate theme. It's a problem well known and really never dealt with in Europe.
Thereof wide spread agreement that for a network operator to favour its own applications and content over those of competitors was a bad thing now those of you who were paying attention when I talked about economic foreclosure will understand there is a good economic basis for this view. This is I think a sound perception from the Stakeholders.
And last but to the least, the Stakeholders, a large number them, were worried about different measures in different member states. And if you look by the way at what the commission put forward in 2013, it's pretty clear that they were more worried about different handling in the member states than they were about lack of authority. A law was passed in the Netherlands I think we're going to be hearing more about that in a few minutes, law in Slovenia, newer work in Finland, basically this was a big worry for the commission and it's also a worry for the market players.
Now, what did consumers say? Well the consumers had a clearly different view about 80% of the responses were from consumers who were citizens let's say, who were deeply worried about all forms of differentiation and much less willing to accept any differentiation whatsoever. So, it's a real view and it has to be different seriously. But it has to also be looked at with two caveats.
One is, what's the kind of differentiation that they are actually worried about? 29% of European consumers, according to the survey work done by you're stat, figured they have been blocked sometime in the last year, but there is lots of different reasons to be blocked. You can be blocked by your Internet connection provider, you can be blocked by the application provider, you can can blocked with the geographic restrictions and copy write issues. There is lots of different kinds of blocking not all of these look like net neutrality problems. The other thing you have to remember is that the people who respondented were the ones who chose to respond to a commission consultation, they are probably the ones most passionate about it. To a statistician, this is a self‑selection or preselection kind of bias, there is a new survey being done or completed for BEREC, it will be published in June, I'd encourage to you look at that when it comes out. My day job had the honour of leading that.
Now, what do the regulators think about all this? Well, there is some difference of view, of course, as you go from country to country, but taken as a whole, what the regulators have repeatedly said, and these are staments from BEREC, which is the board of all of the regulators together, not openly for the 28 member states but also for the couple of hangers on in the EE A, the European economic area, so, their collective statement has consistently been there have been very few instances in Europe that were problematic. Whatever has come up we have enough authority today to deal with it and we neither want nor need more authority.
Okay. Now, if we look at what's actually been done, both in Europe and in the United States. First the work in Europe isn't complete but second there are some noteworthy differences. And those differences are important here.
I don't need the slides for the next couple of seconds anyway.
What are the differences? The United States is a very different market and it's a very different regulatory system. The market influences the regulatory system, the regulatory system influences the market. They are both important here. What statistics from the FCC pretty clearly show is that most Americans today have a choice of only two networks. They have got one cable network, they have got one telecoms network. Now, at one level, they are a little better off than Europeans, 80 to 90% of Americans have access to cable broadband if they want it. On another level, they are much worse. All the things that have been working successful here since 2003, unbundled local loop, bit stream, shared access, all of that stuff that's enabled competitive entry, that was wiped out in deregulatory actions by the US FCC between 2002 and 2005. So you had a collapse of competition in the United States, I worked at the US FCC during this period unfortunately, and as a result, it's pretty clear from the data that Americans don't really have competitive choice.
Now, in Europe, we have a system the response to net neutrality problems more than anything else, has been based on informed consumer choice. If people don't like what the network operators is doing, they can leave or at least there is a threat that they might leave. In the United States that can't be effective because informed consumer choice can't be meaningful if there is nothing to choose from.
And we see this in the data which I'll get to in a second ‑‑ and here it is. Which is, at low speeds, 4 megabits down stream, 1 megabit up, about 15% of Americans have a choice between more than two networks. As the speed goes up, there is less and less choice, by the time you get to 25 or 50 megabits down stream, most Americans have only one network that can differ that to them. Often cable. So, there is no place else to go.
And that leads to a substantialey different environment. Now, in the European Union it's a different story, there's been a lot of work done since 2002, 2003 to provide consumers with competitive choices, more successful in some of the member states than others but most consumers have a lot of alternative networks available to em this. There is some argument about how much they actually do jump ship, but the threat of jumping ship probably constrains a network operator behaviour. As I said the regulators have been very consistent in saying we have very few actual problems here. We have a lot of differentiation, but differentiation by itself is not necessarily bad, we have very few problems.
2005, when I first moved to Europe, this wasn't seen as such a big he will deal. By 2009 it had started to bubble up in the political problem and was taken on board seriously in changes to the European regulatory framework that were made in 2009. A couple of things were put in place. One were provisions that required ISPs, many of you will be aware of this, to publish any restrictions you have on the ability to can a success different applications or content. Also to give consumers the right to change without penalty if they don't like a change in your rules you have put in place. So ensuring that consumers are informed, ensuring that switching costs as an economist would say are low. This was the thrust. Informed consumer choice, no hard rules. That's been the European approach to date.
There was also a provision that the national regulators, if they wish, can impose a minimum quality of service standard for all traffic just to ensure that things can't be degraded beyond some level. That's never been invoked, and in fact it was not intended to be invoked. It was intended to be a backup power just in case things got bad. The fact that it hadn't been invoked I actually take as a good sign. But, it probably again has value as a threat. It means that the network operators don't want to go there. So, again, this has been a fairly effective policy to date.
If anything, the current efforts starting in 2013 were driven more by fear of divergent handling in the member states. And that brings us largely up to the present. 2013, September 11, the European Commission put forward proposals to parliament for a so‑called telecoms singlemarket package. It contained a huge number of regulatory measures. Now, I think it's fairly clear, you don't get a single market solely by harmonising regulation. The commission should have figured this out. They didn't. Most of those measures were eliminated by the parliament, one more important one by the Council, so at this point, pretty much the only thing that's left in the package are network neutrality and international mobile roaming. And at the moment, you have got a very active debate, a so‑called try log between the institutions between the European Parliament, the Council and the commission to tomorrow extent refereeing, to some extent making unhelpful comments about why can't you just agree on this. But you still have a not finally resolved position on it.
The lat convenient presidency, as many of you will know, there is a rotating presidency of the Council every six months. The last one was Italy, they had a lot of difficulty making progress on this. The Latvians are doing a better job, and there is a lot of helpful things in their statements. They talk about end users being free to agree with providers of Internet access services on tariffs with particular data volumes and speeds. I think something that the Council understands is that there are reasons why one might want differentiated services, the important thing is somehow prevent the bad stuff while allowing the good stuff, and that's what's very visible in the positions that the Latvian president has been putting forward. Where this will end up at the moment is still anybody's guess, the parliament has fairly hard line positions on this. The Council probably has a wide range of opinions as well. So, we'll know soon what actually comes out of the process.
But, there are a few things that I think that the policy makers need to be keeping track of and these are aspects that I put forward in the study that I did for the European Parliament that appeared in December of last year.
First, whatever measures put forward, does it prevent harmful divergence between the member states while allowing the flexibility that the member states need? We have 28 member states plus a few countries that are also subject to the system like Norway and Lichtenstein, okay, Iceland too, I see a smile or two in the back. But, so there is a bunch of countries that are subject to the system. There is a lot of differences between those countries. And to some extent you need some flexibility. The markets are at different states of developments. In the European framework that went into place in 2002, the talk it not uniformity it's about harmonisation, so somehow having approaches that follow the same rules but taking account of local circumstances where appropriate. That's really what it's about. So, here, the intent once again would be to provide the right balance between the two. And, again, on balance, does whatever measure is taken, does it strike the right balance on allowing helpful differentiation. Remember differentiation benefits consumers in many cases while blocking harmful differentiation and discrimination. So therefore again, it's a key point. Actually one metaphor I like is that of a knife, a knife is a very different implement when used in the hand of a chef when used this the hands of a criminal. So the same tool has good and bad uses. Does the instrument deal with this the right way?
Does it enable prioritization for the servers that really need it? Voice‑over IP is an obvious example. Actual the very strange or not so strange thing is that voice‑over IP, the service for which the argument in favour of prioritization is greatest is actually the application that's had the most discrimination against it for competitive reasons for the network operators.
Again, emergency services, various mission critical services, there are cases where you want to allow it, once again are the right thing permitted, are the right things prevented?
Whatever rule is picked, it had better be sufficiently technologically neutral. It had better be sufficiently future proof. It better not be overly intrusive or rigid. Does it balance costs against benefits properly? And does it do it appropriately for the Stakeholders. Last but by no means least, are all terms defined by adequate clarity?
With that I think I'm right on my time slot. And in the slides I left copies of a few of the papers, many of them mine, but also a few others that I mentioned that ‑‑ the reference is on this, this is the study for the European Parliament just out. This is actually the seminal paper about two‑sided markets, so this is actually some work about inter‑connection that I had the honour of doing with that group.
And with that, that's it and I think we'll be ‑‑ Mike Blanche is here and we'll be moving to some questions at some point.
CHAIR: That was awesome. We do have time for questions, so if people want to go up to the mikes, you have a chance to ask the expert.
AUDIENCE SPEAKER: Hi, Matthew Morecroft. I'm curious about regulations can be used in two ways. One of them, and excuse the language in a sec, one of the things I have encountered in my current job and previous jobs in previous part of the world dealing with regulated telecoms, is the especially dominant incumbents using regulations as a mechanism to ‑‑ as barrier. One of the examples is, and it can be about almost any product, but there is, are we have to be fair to everyone, we have to have the same rules for everyone, and I call it ‑‑ it gives us a reason to be an asshole to everyone. We have an extremely high rise price; well, that's what we charge to everyone, we are required to have fair terms. It may not be the outcome of the Regulation C which is a competitive market using infrastructure that was built by an incumbent when they were Government owned and so on. What are your thoughts on that sort of area?
SCOTT MARCUS: It's a wide spread concern, I think this is one of those areas where you need to strike the right balance. One of the reasons I left the United States was I thought that they had gone too far in one direction. But I think it's important also not to go too far in the other direction and so, somehow you need to keep your eye on this.
Now, one of the risks that we historically had in Europe is in many of the member states, it's still the case that the incumbent network operators owned to a significant degree by the national Government. And this can distort the Government's own incentives. This is one of the reasons why the system here has tried to give the national regulator as much independence as possible from the national Government. That's I think the right idea. The implementation is pretty good. I wouldn't say it's perfect. But I think you need to keep an arm's length view. This particular issue I think is not driven so much by that. This one I think is largely driven by consumers that simply worry about loss of freedom of expression or loss of choice.
AUDIENCE SPEAKER: Patrik Felstrom. On one of your slides you had, and I think I got the quote correct here: "Regulation addresses, lost... market power in the fixed network post for the PSTN and Internet, thus fostering competition." This was about like regulation in the EU, you had the US and then EU.
From my perspective, the regulation has been ‑‑ there have been different effectiveness depending on whether the access is over copper or whether it's fibre, specifically because I think the investment level, the view ‑‑ the existence on the investment ladder and the fact that both local loop and bundling and bit stream access should exist is something that I think has been very successful in Europe and copper but has failed on fibre and that is something that I think is not addressed and not discussed so much. Can you maybe elaborate a little bit on that?
SCOTT MARCUS: Well, I think what you are raising is a very good question, and I would actually say at the moment, it's getting discussed an enormous amount. There's ‑‑ in principle, the European system regulates both copper and fibre, but it regulates them in rather different ways. As you are probably aware, there was a recommendation on NGA that came out a few years ago and more recently there was a recommendation about cost modelling and non‑discrimination from the European Commission that provides a somewhat more liberal pricing model for fibre than it does for copper. There's actually a very active debate today about whether the network operators need more latitude and need to be making more money in order to be motivated to roll out fibre.
My own view on this has actually been a little sceptical. I think that Europe has the level of fibre that Europeans want and are willing to pay for, and I think there's more that can be done but I haven't felt radical changes were need and I also haven't felt that radical deregulation is needed. Many network operators have argued otherwise. I would not say that their positions are stupid. There's also some theoretical basis for example a paper by Agion in 2005 that says you get the highest level investments when you have neither too much competition nor too little. He talks about an inverted U an upside down U, and the idea is the happy point is when you are not off at the edges but towards the centre in terms of the amount of competition. It's a complicated discussion. This is very much on the screen of European policy makers today. It's not being ignored. But it's also not resolved.
PATRIK FALSTROM: As you said, I am well aware about those kinds of things. I was more thinking about not so much we have regulation but whether the effect of the regulation is such that we do get, in practice and reality, bit stream and local loop and bundling, both of them, for all the various different kinds of paths of infrastructure we have and what he see is the regulation on copper has been effective but the regulation for fibre has not for various reasons. And the question then is: How come local loop and bundling was so darn important for Europe, so that we actually pushed it through for copper but for some reason that I don't understand, obviously it looks like if local loop and bundling is not important for fibre, and that is something I don't understand?
SCOTT MARCUS: If I could continue on that for just a second. Again it's a very good question. There was actually a study that my own institute, not me, but some my colleagues did a couple of years ago called the next generation access scoreboard and it supported exactly what you said. It basically said that the implementation of these remedies on the fibre side was relatively ineffective. So I'm agreeing with you there.
There are a couple of reasons for that. Again, partly the NRAs, in some cases just haven't been aggressive or effective in dealing with it in. In some cases it was conflicted. In some cases they thought they had get a better build up of fibre if they didn't regulate. I think this is a bad and dangerous argument but it is followed.
There are also some practical issues though, as many of you will be aware, with some of the newer technologies like VDLS vectoring, there is a pretty strong argument that whoever provides ‑‑ there better be one party managing all of the transmission paths on the copper this a single bundle, otherwise the noise cancellation techniques implicit in vectoring can't be effective, so this is again is implying that a slightly different approach to bit stream will have to be taken. The Commission in that package in 2013 had included a proposal for a Europe wide implementation of VULA kind of approach, virtual unbundled loop, similar to what's been done in the UK. And in fact there is a study being done for the Commission right now that's looking at these issues, this is an idea that wasn't carried through in the current TSM discussion, but is part of the discussion, it probably will come back.
CHAIR: Two more questions and we're going to move on. State your name, affiliation and favourite animal please.
AUDIENCE SPEAKER: Thank you, Malcolm Hutty. Speaking just as a random person off the street on this subject. On the economic analysis two‑sided markets, you spoke about how in Europe, thanks to rather successful regulatory framework, we have, consumers have a choice of network operators, but from the perspective of the content provider, they don't have a choice. The network operator there, from their perspective, is a monopolist because there is a there is only one network operator that can deliver traffic to their particular customer, this is it go we're familiar with from the old telecoms world, it was called termination monopoly. In the termination monopoly situation, that led to regulated pricing of that, so as to ensure that the monopolists couldn't extract an undue monopoly rent, and that then led to you know all the sorts of things that it was at least associated with, all the things you normally expect when you have regulated pricing, you have got regulatory capture, very high prices, very slow product developments and all the rest of it. We have avoided that in the Internet space because we have good build and key model will will that. Oats only been viable in the one sided market. Now, do you think that we can have a two sided market (that's) where, from the content provider's perspective, there is essentially a bit delivery monopoly without leading to regulator pricing and the associated problems. And how would you see that working out?
SCOTT MARCUS: Well, the short answer is that to some extent that actually is the position that we have today. And so therefore, I have generally argued against radical regulation, because it potentially disrupts a generally healthy position that we have today. Now, what you described actually, I think was being a little more similar to the situation that we have had with broadcasting, for example, over cable. But it's an analogous issue, which is that, for example, if a cable ‑‑ let's say usually the advertisers want to be on every platform. Not just on one platform. And that I think is exactly analogous to the position of the content provider, they want to be able to reach everybody, not just certain people. So in effect, every platform that has unique control over access, potentially is a bottleneck. It's true that once somebody is on a platform, they aren't going to switch just for, just to look at one programme, let's say. So, in that sense, there is a certain market power. I usually don't like to apply call termination monopoly to this, that's a different technical term, it's linked to control over the phone number but the analogy is good. In the broadcast world the concern was that highly valued content has no trouble getting on any platform it wants. Nobody wants to block the Bundes Leaga, right, so everybody wants to see it. The concern had been that when you get to the long tail of the distribution, that the lowered valued content might get blocked.
But from an economic perspective, still the question will be for the network operator, is it cost‑effective to make the customers unhappy by making it harder for them to view things that they want to view? And, with that, it's entirely possible that controls from the consumer side would be enough to deter bad contact even though it would be ‑‑ smaller content providers. This is not a problem for Google, nobody wants to block Google, well, they might like to, but they can't. It's impractical; their customers would hate it.
So, there is the issue. There is a very good doctoral thesis that was done a year ago about Alyssa Cooper of Cisco, she argues that in practice very little consumer switching goes on, and she's probably right. But it may not matter. It may still be the case that there's enough fear of consumer switching to inhibit bad conduct on the part of the operators. The fact that we haven't had much bad conduct in Europe says to me that maybe the current arrangements are working reasonably well and that only a little fine‑tuning of them is needed to make people happy.
AUDIENCE SPEAKER: And you suggest that would be sufficient to protect not only the interests of the consumer but also the interests of the content provider in this market?
CHAIR: I'm going to shut down the mike after that, if you want to hold that till the end. We can have a wrap‑up session, or Scott will be around. One quick comment or question and then let's move forward.
AUDIENCE SPEAKER: Blake Lillis, just a quick footnote on statistics. The data for broadband adoption and speed and so forth in Europe is generally provided by organisations like Eurostat, governments and so forth, and on the US side, just from one of the slides, it's usually provided by what we affectionally refer to in the States as big telco most of the time and that the reality on the ground between the statistics and what's actually happening in the States is a far wider gap, you know, that's the level of 80 to 90% consumers can have broadband and something that's called broadband in the states if they ask for it. In the US, it's very, very different compared to, you know, if you have a similar number for the European market, it's much closer to reality in the States it's more like ‑‑ well I won't go into detail. But everywhere I have been and anything approaching something mildly rural in the US the access options are just terrible and probably better with this than with what you could call cable.
SCOTT MARCUS: In fact, I don't disagree with that. As, you know, I'm a former FCCer, I used to work for the regulatory agency there, so I'm well aware of the limitations and the statistics. In fact, I'd go a little further. Probably more so during the previous administration than during the current one, there was a fairly conscious attempt to distort the statistics, they used to have graphs, for example, on what fraction of lines were provided by competitors, once that number fell through the floor as a result of deregulation they stopped publishing it. The US census Bureau collates pretty good data. For of those you have who deal with this, it's important to have data on how many lines are deployed but a really important crosscheck is to have survey data from a statistically reliable samples in order to know know, what the overlap is, how many people have both this and that, how many people have both fixed and mobile phones versus one other the other, which is also relevant to broadband and other things. And so sure have I data is important. During the republican years, they were capturing the data, they potentially didn't publish it because they didn't like the story it was going to produce. There is a lot of problem in the political institutions in the United States that need to be fixed. That's one of the reasons I prefer doing work here than there. That's why I left.
CHAIR: On that up note. Thank you so much, Scott, and we're going to keep going with Bendert. He also happened to be one of the authors of the Netherlands Net Neutrality law, so he is going to get into some of the ration and irrational aspects of what it takes to make technical policy into law in a political system that may not be calibrated for it. He has no slides, because this is a slide‑free presentation.
BENDERT ZEVENBERGEN: Thanks, Meredith. Thanks, Scott, that was a really great introduction to Net Neutrality.
I'm not going to talk about the technology aspects of everything but I'm going to talk about the political sausage factory that we saw happen when we wrote this law and everything that happened until we got it enacted.
It's basically a kind of a case study of making Internet law. I have got to tell you it's the safe for work version. There is a lot more that happens behind the scenes that can't be said right here. Basically what happened, I was working at a law firm and then I got a job in the European Parliament to work on Internet regulation. So, in the period between switching jobs I did some pro bono work with civil society organisation here in Amsterdam called bits of freedom. I'm sure quite a few of you know T and we were just having lunch and thinking of you know what I could do in those months that I was hanging around there. And one of the things was working on an Internet, or how would we codify Internet freedom in law was kind of the question we came up with. So, me and some people there started working on it, doing some background reading on what actually is Internet freedom, what actually is freedom, and those kind of questions. And then we identified some areas that were interesting.
One was, of course, net neutrality; others was, you know, the wire tapping laws or depacket inspection laws, these kinds of things.
We finished the document, it was quite vague for most people that we presented it to. I went to Brussels, left it to them to maybe do something nice with it. So, you know they started going to journalists to explain what we're actually trying to do here. Journalists didn't really get it. We went to some politicians just to sort of check what they thought of it. Also didn't really get it. It was all a bit too hypothetical. They asked us for examples. So we'd say things like, you know, what if for example, the incumbent telecom operator would accept money from YouTube and then slow town daily emotion and VM O websites for example and then journalist would say yeah, like that's a hypothetical. Like that's not happening, so, you know, we don't get what you're saying. So we started talking about these other pretty bad analgies of, for example, thinking of privatising highways, and then the owner of a certain part of a highway would get the rights to close down the routes to petrol station if they didn't pay their fee. And then people started understanding, but so it was a little bit too hypothetical.
And the issue is if you want to table an amendment or a new law in politics, you only really get one chance or you have to wait several years, so, what you really need to do is get that support beforehand and then find the people who will table that amendment and then just make sure that when the vote happens, the majority vote is in favour. So it was a difficult process.
And just a little bit about this process. When I say we, I was already in the European Parliament but I was following on the steps and I was talking to them. But what they thought is they'd go to the sort of slightly right leaning liberal party in the Netherlands ‑‑ I'm not naming any names, Dutch people know which party I mean ‑‑ because we thought you know, this would be the party that would be most interested in understanding this free market thing that we were trying to create. But, they went to the politician, and the politician wasn't particularly interested at all. This was a representative for the telecom committee. And you know, she wasn't interested and she thought it was nonsense. What turned out later is she used to be the lobbyist for the KPN, the Dutch incumbent telecom operator, in this nice revolving door of politics, she was sitting in the parliament and basically sent this group of people away.
Now, it's no surprise, it's no secret this became a law to this became a huge issue within that party, she just sent them away and they could have had this nice victory. What they then did was went to this slight left leaning party, the party I happen to work in in Brussels, and told the story of net neutrality and they got it. I mean, they are a liberal party, they all for civil liberties, Internet freedom loving. So, my colleague in the Hague called me in Brussels, and he said, you know, Ben, you're our Internet regulation guy, can I send you a document because some lobbyist from, or some activist from bits of freedom just explained this amazing new concept of Net Neutrality to me and I don't quite know what to make of it. I said sure recollect send it other. So I got it and I think I waited for about half an hour, probably went for a coffee, and stared out the window for a bit. Pretended to have read the thing, and I called him back and I said this is great, excellent, you should really, really go for this. Well written, you know, well thought through.
So, the party ‑‑ and this is politics, this is how it goes. It's not in the committees when everyone has their positions and stuff it's all about who do you know and who did you speak to over drinks or what did you write before.
So, the party did decide to support this amendment. But still, it was quite a fairly small party in the Netherlands, I can't remember the percentage, but it's usually around 15% of the parliament they have which is far from the 50% that you need. So, they went to some other parties, for example, the labour type party or the green party, and there was some understanding of why it was relevant, but also, you know, there was no urgency, so there was no real support.
The party of the sitting Minister, of economic affairs was the Christian democratic party. A fairly conservative party, not known to be particularly tech savy, they didn't understand the concept. So, basically decided not to support, because it's a shame because the Minister was the main guy who would, you know, would have to enact this.
So, all these parties were a bit confused, and they went to the very right wing party, which is you know, as the sort of Internet freedom civil liberties kind of activist group, you don't want to work too much with this anti‑immigration, but you still you know, they needed support. This party was quite big at the time. It was kind of being ignored by some other parties in the parliament. But, they spoke to the guy who was responsible for Internet and telecoms stuff, and he understood this, he said, because back in the day, back in the nineties, he used to have a website where he had MP 3s, so he understood what Internet freed was all about, he was the fore runner of spot identify. So he understood what net neutrality meant, he said, and I think probably he did.
And then there was ‑‑ so, that party actually decided to support this as well so the support was growing. But then there was a problem with the very strict Christian parties, I think there is two in the Netherlands at the moment, they wanted to have a Christian Internet, which would be filtered at ISP level, so, and they had been talking to some companies who were able to provide this biblical view of the Internet. So, they could not support net neutrality. But when they started explaining it's more beneficial for people who want that to filter on their home computer instead of burdening the rest of society with that view.
Anyway, much confusion, many technical discussions that most politicians weren't able to follow. But then the magic happened. We call it What'sApp Gate, so the Dutch incumbent telecom operator in London at their shareholders meeting announced that they had found the way to regain the income that they have been losing from people using What'sApp, people were using SMS less, cash cow, they had you found the thing they were going to use as new awesome some technology called depacket inspection and they were going to find out who was using WhatsApp and charge them either for the messages or either using the messages. That would compensate for the loss of SMS and everyone would be happy again. This was filmed. A journalist found it, put it on a website and there was a general uproar in the Netherlands. This was in 2011, I'm sure several people here remember it, that consumers felt cheated, that there was this new service, you know that's based on data, it's innovation, and it was a free messaging service. So you know, it should have been fine.
This bits of freedom organisation was also quite quick to, you know, put out some oil to this fire, and what they did is they created this website where you could report KPN to the police for illegally wire tapping you for this depacket inspection or privacy innovation. The police didn't really know what to do. Probably prosecuted, didn't really know what to do. This created a lot of media hype. So, suddenly, all these parties were super interested in this amendment, because that was what it was about, it was about you know, keeping WhatsApp alive and getting rid of this SMS compensation. And then the funny thing was that in these discussions with the Minister at the time, he really didn't understand it, he also really didn't care, and suddenly, he saw this political opportunity, which these guys explained to him, they said if you now support Net Neutrality, then all these young voters, all these people who are about to become of voting age, will like you. So, without really ‑‑ I should probably not be saying this ‑‑ I think without really understanding what he was doing, he recorded a video saying I'm in full support of this net neutrality law, published it online really quickly, everyone was surprised by what he would say there and then suddenly all the parties decided to support it as well, amendment went through pretty quickly, it was quite a chaotic vote, of course, with the right leaning liberal party that the certain politician was not able to vote in favour, but more or less everyone else did and that's how this law came to be.
CHAIR: That was delightful. Does this anyone have a quick question?
AUDIENCE SPEAKER: Filiz Yilmaz, thank you for the insight, this was very enlightening. I reside in Netherlands so I got a bit of extra information here. I'm wondering, since you are one of the authors in who helped with these laws, now, they have been in place for a while, do you go back and check what has been the impact and how the providers were using them or not using them or what the impact was and have there been other projects within their own that they work around maybe, come up with certain services or not to come up with them. Do you have a follow‑up after this?
BENDERT ZEVENBERGEN: Not me, I had a different job then. I was working on ‑‑ sometimes on European net neutrality laws but I have also left that now. I'm nought in academia. But not me I know that the people at Bits of Freedom did actively follow up and the people working at the Dutch ministry really scrutinised the law and checked it on all different sides. I'm unsure about if there were detailed measurements taken to see specifically in the Netherlands. I know BEREC, have done Europeanwise measurements, but I haven't followed it closely unfortunately because I have shifted my focus to other topics.
AUDIENCE SPEAKER: Well, Meredith. Just as a note for the Chair then and Maria as well, that would be a nice thing that I would like to see as a next follow‑up for this.
CHAIR: Noted totally. And for anyone who is interested, Bits of Freedom will be speaking in a second Cooperation Working Group this afternoon, they are talking about their privacy work but you may be able to make a connection and see what they are up to there. Thanks Ben.
Next up we have Mike Blanche is going to be given an overview of the FCC's open Internet order.
MIKE BLANCHE: Good morning everyone, apologies, this is isn't in the order it was originally scheduled, I got a bit confused about timing and so on, but thank you Scott and Ben for really interesting presentations and filling in there.
And I think it's really interesting to see the overall European approach from Scott, and then a particular kind of situation in the Netherlands from Ben. So I'm going to talk about the FCC and what's happening across the pond in the US and, so the first thing to say is although I work for a well known search engine, everything I say here is my personal opinion, this has nothing to do with anyone else's policy or position on anything to do with anything.
With the disclaimer done, there we go. This is a little bit dense but seeing the timeline of what's been happening in the US is interesting because it seems to follow kind of like a five year cycle. Back in 2005, the FCC adopted what was called the Internet policy statement, which made some kind of broad guarantees about users having the freedom to use their Internet connections kind of in any way they want as long as it's legal. But the thing about a policy statement from the FCC is, it's not kind of actually law, it's just something that the FCC writes, and I don't think this one was actually ever published, it was kept internal to the FCC, so it was ‑‑ this is the kind of the way we're going to approach any issues we have like this going forward. But it's not set down as a kind of a formal set of rules that are kind of could be defended or attacked in court.
A couple of years later Comcast decided to block BitTorrent traffic, it was causing, they said, problems with their network, and they decided to block certain ports. The FCC on the basis of this policy, issued an order telling the FCC to stop ‑‑ telling Comcast to stop doing that, Comcast did stop, but then they appealed to the courts saying that the FCC didn't have jurisdiction to telecom cast to do this.
It took two or three years to go through the courts as these things tend to do, but by 2010 the courts decided that the FCC didn't have the jurisdiction to control Comcast network management practices by, just by virtue of the Internet policy same they had.
So, FCC went back and did their homework again, and later in 2010, they actually passed an order, an order is an official kind of set of rules. And this was the open Internet order of 2010. And this affected fixed line ISPs and they were told no you're not allowed to block anything, to blocking BitTorrent is not allowed. If it's legal you can't block it, and BitTorrent fitted the definition of being legal, what people do over BitTorrent is something else. And then also no unreasonable discrimination and ISPs have to provide for transparency around their network management practices. The predictably the ISPs didn't like this very much and this time was to or eyes on who went to court to get it overturned and it took three or four years to go through the courts but by 2014, the FCC were told that under the level of powers that he had at the time they didn't have the authority to impose the no‑blocking and the no‑unreasonable discrimination rules because they were not regulating ISPs as what were called common carriers, which is this title to a thing you might have heard about. So a common carrier is a telecoms provider, it's someone providing who has been providing voice service, and the rules that are set for that are set in the communications act of 1934, so they go back 75 years to the time when there was one telecom company in the US, there were ‑‑ and they built that law on the kind of using the railroad, the railways as the model, because there was problems with monopolies in the railways, there was only one ‑‑ made sense to build one set of railway, but maybe you want to have multiple companies running services over the railways. So there was all these ‑‑ there was these issues to do with the railways and so in 1934, when they implemented the communications act, they kind of used the railways for the mental model of how this was going to work. Sop of this stuff goes back quite a long time.
The FCC realised that they probably shouldn't appeal that ruling but go away and do their homework again and try and come up with some new rules. And last year there was a very noisy public comment period when the FCC was accepting comments from both the industry and the public and civil society and so on about what the FCC should do about this. And at the same time, there was some noisy blog posts going backwards and forwards between people like NetFlix and Comcast and horizon and level 3 will problems that certain parties were having accessing end user ISP networks in the US, and this is similar to a discussion Malcolm Hutty and Scott were having a bit earlier about termination monopolies and so on.
And it was all kind of a little bit of an academic discussion until a late night comedian, British comedian, called John Oliver, who has a TV show in the US did a skit, which is available on YouTube, all about net neutrality and his view of what the telecoms companies wanted and how that might affect how the Internet would run and you can look up this clip‑on YouTube and it's very funny.
And after that, the FCC got about 4 will million comments to their consultation, whereas normally they might get a few hundred, a few thousand, this time they got 4 million and crashed their service for a while and it was quite unprecedented.
So, finally, in March 2015, the FCC releases their new open Internet rules, so another five year cycle is completed and this is what they cover.
So, I think the first thing to say is they don't, they are not called network neutrality rules and the words network neutrality and net neutrality appear very rarely in the whole 400‑page document. Because, as Scott explained, net neutrality can kind of mean different things to different people. And.some people think that net neutrality means you are not allowed to have any data caps at all on your Internet service that you must be allowed to use as much traffic as you want at all times, and other people disagree with that.
Whereas, the concept of the open Internet is perhaps more well defined, and especially around these kind of principles here.
What was different this time is this time, the open Internet order covered both wired and wireless ISPs, whereas previously it only covered wired ISPs. So, by going through the cycle of releasing some rules that telecoms companies complaining against them and launching lawsuits against them and the FCC coming back and rewriting them, each time that the sausage factory machine goes round, it seems to get a little bit stronger, which is perhaps not so good for companies.
It has the same key kind of tenants that were in the previous open Internet order, around no blocking, no throttling, no fast lanes on the Internet. There was even more increased transparency asked for by the FCC at this time around charges and what users were charged for, what data caps they have the and also, for the first time, around network performance. So, FCC particularly focused on packet a loss as a measure of network performance. I think that may need to be refined going forward because there is many other measures of network performance other than packet loss, so if operators solely focus on that then that could have a some negative side effects and other stuff.
There is also a very broad kind of over arching kind of principle of, taken on a case by case basis review they can review pretty much anything that could unreasonably interfere or disadvantage access to services across the Internet. This was probably a catch‑all to try and stop any kind of trickiness that perhaps doesn't fit into the earlier principles but could still cause problems.
Also for the first time the FCC asserted their authority over peering, over inter‑connection. So between ISPs and other providers on the Internet. Although they did recognise that this was a new area for them and that they hadn't got involved in Internet inter‑connection before, they were certainly involved in voice inter‑connection because that's been part of the FCC core role for the past 50 years or so, but on the Internet they know much less and so they are kind of taking a little bit of wait and see, watch and learn approach here. But they do assert the authority to taken forcement action if things are not happening the way they want them to.
And to provide a legal basis for all of this stuff, they classified ISPs as a telecoms service for the first time rather than information service, under these title 2 regulations which come from the Communications Act of 1934, so that they have some legal foundation and hope three they won't get sued again, so
So there was a lot of if you had, fear uncertainty and doubt around some of these rules as they were coming up and as they were released. I think there was some things clear, there won't be what's called and Internet tax. Some people thought that because the ISPs are now being classified as common carriers, all the requirements around universal service and fees and so on will apply to Internet service. The FCC said that wasn't its case. Broadband prices are not going to be regulated by the FCC. ISP investment will still happen, leading up to the release of this one ISP said they wouldn't be able to invest in the new network any more, that still seems to be happening much. And peering will not be regulated kind of ex‑anti before the fact, it will only be regulated if there is a problem that the FCC thinks needs to be resolved.
There is a couple of things that's unclear on it in terms of differentiation treatment of traffic so things like zero rating of services and paid zero rating, so AT&T have a service called sponsored data where content providers can pay AT&T so your traffic is zero rated to users. Some people this think that that is not permitted under the FCC rules, others think it is. AT&T are still advertising it so it's going to be interesting to see what happens there.
Predictably there's been some legal challenges against the order already from various sets of acronyms which represent the cable industry, the telephone industry and individual ISPs, some big once like AT&Ts and century link and a small one in Texas, all Alamo broadband. I suspect Texas is a special case as they don't like to be ruled by anyone, so having the FCC interfering is not their cup of tea.
There was a bit of a partisan order in that the FCC voted 3 to 20 to implement this. And the two people that dissented from this were republican members of the FCC so republicans in Congress are trying to prevent this happening. There was something on the 2nd May where the FCC said ‑‑ there was a petition to top this stuff from being implemented. The FCC said no the people in the companies and organisations involved have actually gone back to court today to say that the FCC doesn't have the jurisdiction to say that this stuff can't be implemented.
So, there's some open questions, this is my last slide and it's going to be interesting to see how this develops over the next few months. The legal challenges will continue. Will they ultimately succeed? Will the circle of the life go around again and the FCC come back in five years with some even stronger rules? Who knows. How will the rules be interpreted and enforced is going to be interesting to see, if people bring complaints about the FCC Inns gates enforcement action. And then quite importantly, what data does the FCC need to make some decisions here? Especially on things such as inter‑connection. How does the FCC determine if peering terms are unfair or if it's ‑‑ be if the term they use is just and reasonable. Is there a problem with inter‑connection between two particular parties?
And I think the work that the measurement lab did last year on measuring performance over inter‑connections was quite important here.
And then whatever the FCC does, does seem to translate into other countries laws and so, it will be interesting to see how what the FCC has done gets translated into other countries, and in some of the European parliament resolutions that I have seen, I have seen wording that looks kind of strange and then I think where have I seen that before?
And I go back and search FCC documents and I say oh yes that exact same phrase comes from an FCC document. So people do kind of take hints from other countries and other regions as to what they should do when looking at this kind of stuff and so it's going to be interesting to see how that develops.
So, thank you. Does anyone have any questions?
CHAIR: Quick questions? Thank you mike.
AUDIENCE SPEAKER: Hi, Milton reel err, Syracuse University and an old telecom policy guy. First of all I just wanted to ‑‑ I mean it was a good overview of the situation in the US on the whole but you really made some mistakes. And I hate to see these things kind of develop into urban legends which is what they sometimes do if you don't correct them. So number one, the 2005 policy statement was published, it's right here, it's document 2005‑151, it's in the record, adopted August 5th, 2005.
The reason that's important is that the FCC had basically established a net neutrality policy which they had no legal basis for, but it was applied to things like the mad son river case where they stopped a telephone company from blocking VoIP for example.
And then the Comcast case happened and then they challenged the statement and said it had no legal basis. Then they tried to develop the open Internet order. Now here is are you can really point the finger at the Verizon if there's somebody here from Verizon and say you guys really blew this because the original open Internet order did not require classification but it did enforce network neutrality, and I would argue that that is a much more preferable situation than what weened up with. And here is my question for you.
You got up there and you completely dismissed the idea that the reclassification is going to have any impact on inter‑connection regulation. I think that's a complete fantasy. You have to understand what you have done here. You have classified ISPs as a common carrier and the FCC are saying we're not going to regulate you, but the law says that cannot discriminate and anybody who complains about discrimination in inter‑connection, which is fundamental at the core of the Internet, they are going to have a case to bring to the FCC, and ultimately, if you are quibbling about discrimination, there is no way cannot start quibbling about the prices charge. So if you want to insert the US Government and the political process into all of these thousands of private peering and transit agreements, maybe you think that's a good thing. I think that it would have been very nice if Verizon hadn't challenged original open Internet order and we had state there, I think reclassification could be a disaster.
MIKE BLANCHE: Thank you for the statement and thank you for finding the original policy statement.
On the inter‑connection piece that I think if the CC said inter‑connection was not going to be regulated as title 2 for exactly the reasons that you say. Most peering inter‑connection happens without regulatory involvement, and OECD studies show that 99.5% of it happens without even a contract. It's just done on a handshake and I am personally a very big fan of the fact that this low friction kind of low overhead way of connecting networks together helps to make the Internet nor resilient, it helps to keep costs low, and it helps the Internet become a better place.
So, there was some inference in your question that I'm a fan of peering regulation and I'd just like to make clear that I'm not a fan of peering regulation.
However, there are challenges in certain situations, some of which were talked about earlier in terms of the potential of their termination monopoly, and that the FCC is clearly seeing such issues in these kind of noisy computes between people like NetFlix and Comcast and Verizon on level 3, saying something has to be done but we don't quite know what. Given the circumstances Ivan they have probably taken a sensible approach of kind of we say we could do something here but they explicit say we don't know a lot about this stuff so we're going to try and figure out the best way to move forward here.
It is very difficult to apply voice inter‑connection rules to Internet peering, and the FCC's kind of overall approach of just and reasonable inter‑connection terms is very hard to kind of decipher. What does "just and reasonable" mean? What's just and reasonable for me is not necessarily just and reasonable for the people that I'm trying to ‑‑ for the people that want to connect to me.
So it's going to be interesting to see how that develops over the next few years but I hope that the FCC realises that in the vast majority of cases peering inter‑connection works very well without inter‑connection ‑‑ without regulation, and they don't need to step in, in most cases.
CHAIR: So I see a question here and I'm really aware that we're running way behind time. So I'm going to ‑‑ apologies, let's save questions for the end of the session, and thank you for that clarification, Mike. We have Mani Manimohan has been who is going to give us an overview of the mobile perspective, again we're running over, that's because it's so good so maybe it's not a huge deal, I understand if you have got to leave.
MANI MANIMOHAN: Thank you Meredith. Probably you have heard enough about net neutrality for the day and I know we are running late so I'll try to keep it as short as possible. I work for GSMI which is the mobile operator association, but I have on different hats during my working life, being an algorithm designer and realtime software developer to being a software strategist for a couple of startups, more recently for GM, just before that I worked for off come which is the regulator for telecoms broadcaster and most in the United Kingdom and I saw some interesting questions around fibre models and termination, voice termination which for a couple of projects I worked on. Today I'm really going to wear my GSM hat primarily, and talk about net neutrality.
So I think net neutrality is a very complex topic. And simplified analgies or a very simplistic viewpoint doesn't help to understand the complexity of this topic, and therefore I would not try to attempt to define net neutrality neither the FCC in its open Internet order, nor the European Ministers Council decided to do so, and therefore I wouldn't either.
However, I think there are five principal policy aspects that one needs to consider when looking about net neutrality. And one of them is the basic principle of open Internet. If you look at all the debates from different sites, whether ISPs, content providers, policy makers, consumers, commentators, I think they all agree that the Internet should be an open platform for expression, innovation and socio and economic development. I mean there is an ongoing debate about net neutrality in India, you can look at public comments from different operators and they all make this point.
The second is traffic management. Traffic is ‑‑ data traffic is growing, both in terms of volumes and in terms of complexity. And that needs to be managed, especially in a mobile environment, where there is a constraint in the capacity that could be allocated.
Third, investments. Operators in the US, Europe and many advanced countries have rolled out 4G networks. Many countries in the emerging parts of the world are starting to roll out 4G networks and the mobile industry is starting to define what 5G might look like. Mobile networks by the way, they are constructed, require very significant upfront investment.
And the future in terms of both innovations and disruptions is very difficult to predict so I think utmost care should be taken to avoid any unintended consequences regarding innovation or investment incentives for operators.
All those techno economic principles also have been to be considered in light of the changes in the market place, there is a shift in the competitive landscape in which traditionally operators have marketed their services and sold their services. We have seen the emergence of a wide variety of Internet players. They have adapted very different business models, description bases, zero rated, two‑sided business models, etc., and therefore the traditional notion of telecom economic bottleneck needs to be reconsidered and I think it's already happening, so the regulators in the European Union as well as the European Commission which recently launched its digital single‑market strategy are looking at this question.
Finally, of course, the digital agenda objectives which may not be relevant to the European and the American markets, but particularly in several emerging markets where Internet access is less than, is available to less than 20% of the population. It is also important to look at how could broadband be made available to all the citizens and there is one aspect of the debate, one critical aspect of the debate in India. I was in India a couple of weeks ago and several policy makers and several other commentators, who had well‑intentioned objects around net neutrality, are struggling with trying to reconcile these two such objectives.
So I think fundamentally we have to approach this topic from three questions.
Are consumers provided with choice?
Is there effective competition in the provision of services? Effective competition depends on the number of players, whether it's two, three, four or eight, I think is up for debate.
And is the environment conducive for continuous investment?
So what is the view of GSMA and its members. This is something that I drafted maybe in 2012 and there was the initial consultation around the European Commission.
So, I think we are committed to the principle of Open Internet and that is because it is in the strategy interests of operators to do so. They build the networks and they want consumers to use it as much as possible. Mobile networks have connected more than 2 billion consumers so far and expect to double that amount over the next five years.
Now, blocking is the narrative that captures the attention. As we have seen from what Ben explained and previously what Scott mentioned and also the examples of Madison communications that were cited before. And I'm not going to stand here and say that it didn't contribute to the initial reaction to a net neutrality and then the subsequent legislation on that front. But I also want to point out, those blocking cases were very isolated examples. If you look at the market widely, if you look at mobile access widely, VoIP blocking has only been applied in a very few cases, and over time, competition has ensured that those kind of practices don't prevail.
Secondly, the point has been well made by others, but I think traffic management is essential for operators. So operators should have the ability to differentiate between traffic times and I don't think that desire contradicts the belief in the open Internet. In fact, I would argue without being able to differentiate, it would be very difficult to maintain an open Internet. Quality differentiation and price differentiation is beneficial, yes, there are some concerns in the outlying cases and the question there is whether there is sufficient regulatory and competition law frameworks to handle those outlying cases and I think the answer is generally, yes.
And the third element that we put forward is competition. So, if you look at many economic studies and analysis in the literature, they all focus on a monopolististic ISP providing services to a similar type of content provider, only recently in the last couple of years, you have seen papers coming out that consider competition in the ISP space as well as content variety in the content and application provider space.
And I think the general conclusion is that competitive markets in mobile definitely has delivered choice and innovation and keeps delivering it. And so, what's the problem we are trying to fix? And the question I would ask is: Why regulate something that seems to be working? It could be that regulators could try to improve transparency of what is being offered to consumers so they can make better choices and transparency across the entire Internet value chain should be considered for that purpose.
I think many people have talked about traffic management already and therefore, I'll skip this as quickly as possible, but I think there are four reasons why traffic management is necessary. One, traffic data volumes are growing. The complexity is growing, we're not talking about three types of services, voice, messages and minimal data. We're talking about a large number of services: Music, video, maps, search, news. Cisco predicts there will be ten‑fold increase in mobile data traffic over the next four years and video will be a key driver of that traffic and as you all know, video places an inordinate amount of network resource demands and it needs to be managed.
There are also other reasons, operational reasons, for example, to second world networks, to protect children on the online safety experience, ensure parental controls.
I think we heard from the previous speakers, about the rules Netherlands and Chile is another country which enacted net neutrality regulations around 2010 and 2011, driven by, primarily driven by a political desire to have some legislation and very restrictive legislation, I think a lady asked a question about what's the enforcement follow‑up has been on Netherlands and there's a recent case where two operators were fined for using zero rating practices, similarly in Chile, the regulator issued a general prohibition on zero rating, but Wikipedia is zero, which provides a zero rated service in Chile, approached the regulator and made the case that zero rating, a complete prohibition of zero rating would be harmful to its citizens and the regulator had to backtrack. We have a situation here where if you have strict legislative rules there is a question about enforcement which can lead to some unintended consequences despite the well‑intentioned objectives.
Recently the debate is much about the FCC rules and the European Union connected content package which includes a net neutrality. The FCC rules, the three bright line rules, no blocking, no throttling, no paid prioritization make all the attention. If you look at all the 300 pages of the document you will see there are several exceptions, some of them for example enterprise services are outside the scope of the rules. Traffic management of other data services, so tele medicine, bundle kindles, e‑readers, facilities based voice, these are outside of the rules.
Reasonable traffic management is allowed, even within the rules. And FCC will consider the different underlying technologies in making those assessments. When I put that up to see that it's very difficult to legislate, if you start with the very simple assumption that all bits should be equal, then you try to legislate it, you would have to have several exceptions and therefore the enforcement of those rules are doubtful.
And of course it's good to point out that many other countries, Korea, Singapore, the United Kingdom, have what I would call voluntary guidelines, work together with the industry, to agree some certain principles and the off com continues to monitor them for example, Korean regulator now the ministry conditions to monitor them and makes sure the operators play ball with what they have promised to do. I think that's probably a better approach which allows flexibility for operators to manage traffic offer different types of services but still provide some level of guidance to operators and the wider community as to what they expect in terms of the accessibility to the Internet.
I had a five minute notice, I will just try to wrap up here.
So, I think policy makers should not try to rush to make decisions on this complex topic. I think they should have an informed debate, I mean, there are valid concerns on both sides and they arise from well intentioned objectives and therefore it's necessary to hear a wide range of opinions before making a policy decision.
And the primary question should be this: Do public authorities, so policy makers and regulators, have the ability to foster effective competition and to address anti‑competitive behaviour? And in many countries the regulatory framework and the competition law around anti‑competitive agreements, vertical relationships, allow those public authorities to enter and to make decisions and we have seen recently, for example, the statement of objections issued by European Commission in relation to Google as one example of how they can use competition law rather than ex‑anti‑specific regulations to deal with potential competition issues.
The technology is the service models, zero‑rating is a very recent concept. Traffic management is evolving. There are ideas such as software defined networking, network virtualisation technologies. These fundamentally might change how the networks operate and regulations should not reduce the investment incentive for operators to engage in those kind of models. And therefore I would say strict net neutrality is not the right way to go. And on the competition, operators have the incentive to attract as many customers as possible, allow them to access as much content as possible, and reduce the level of condition for consumers, otherwise they will switch. I think competition is the right way to go and that could be adopted by using much more principle‑based approach rather than very specific regulation.
CHAIR: Thank you to those of you who stayed. That was a great presentation, and I'm here if there are questions, I think Mani, if you are able to field some questions, a lot to think about. Okay.
AUDIENCE SPEAKER: Trevor Davis, I also happen to be on the board of Internet Telephony Service Providers Association in the UK, and I'd just like to question the competition working aspect of making everything transparent and net neutrality. In fact, it has taken two or three years of really heavy lobbying on the part of different Stakeholders in industry with the Government to get to the point where the Government threatened some of the mobile operators with legislation if they didn't tow the line in terms of removing the, Ts and Cs such as blocking Skype, and over‑the‑top VoIP networks from using their own services. So, its competition hasn't totally worked in the way that you are describing it there.
MANI MANIMOHAN: I mean, as I say, I completely acknowledge that there was blocking of VoIP services. But I think the instances were limited, but you know, yes, there was blocking. And I think, I mean that wasn't any specific regulation to address that. I think what probably the Government and OffCom did was to have what I would call could have levers on operators, so ensure that they don't block and if you look at the European telecom package of 2013, there is of course a provision there about allowing consumers to access the continent services they want and they could be interpreted if necessary as meaning there is a restriction on blocking. So what I was trying to say ‑‑ I'm not going to sit here and argue that blocking is a valid business tactic. But are they trying to go all the way to say that we should limit, prohibit all types of traffic management or commercial practices, is I think the other extreme and it's necessary to find some kind of a middle ground and I think a lot of informed people move from what they called a strict net neutrality position to a bit more weaker net neutrality position which is maybe no blocking, no throttling but allow reasonable traffic management.
CHAIR: The champion of reasonableness.
AUDIENCE SPEAKER: John Jack. Speaking in a personal capacity. I think Malcolm Hutty put a good point earlier so I'm not going to repeat his question.
I just wanted to come back on the point you made about isolated cases and therefore isolation, meaning that we do not require regulation. I wonder if you could not then comment about your definition of "isolated" or "limited" as you just replied, because I'm just looking at the BEREC report of 2012 into traffic management practices, it says that 44% of mobile networks in Europe restricted VoIP. So is that isolated?
MANI MANIMOHAN: So, I think I mean Scott also touched upon the BEREC report, and the sampling of that. So, what I meant isolated was, if you assume that the market is competitive, which is what the case is, none of the regulators in Europe have found the mobile market to be nothing other than competitive. And the question is then, is there ‑‑ I mean, so there is no market power type finding and therefore I think if you look at the legislation as it exists, there is no non‑discrimination obligation on operators, it only applies to providers who have found to have significant market power. And then if you look at ‑‑ so in that context, if you look at VoIP blocking in particular, I think consumers have always had the choice of adapting a package where VoIP is allowed. There have been cases where on low tariffs VoIP packages have been blocked. But I think ‑‑ if you see ‑‑ I mean in 2012 maybe, there were some instances of VoIP blocking but if you look at 2015, those instances are found very rare, we have found very little examples of VoIP blocking because I mean most of the operators and most of their tariffs allow unrestricted access. And the point that I was trying to make was that the competition would get rid of practices that are not in the interest of consumers over time.
CHAIR: Thank you.
AUDIENCE SPEAKER: Karen from the Internet institute. Correct me if I'm wrong busically a part of your augmentation is net neutrality is very complicated to regulate. It can't be done perfectly, hence we should be careful doing this. However, this goes for a lot of laws. That's not necessarily an argument to not do it. Especially, and this might obviously shows I'm a European and I have a European view of what what regulator is and what it does but when we see these developments to what it does comes to zero rating especially into the global sales. I am not entirely sure that the corporate sector are doing things that is in the best interests of the consumers in the end. What you get is a locked‑in type of Internet where you only have access to certain services.
MANI MANIMOHAN: So I think, I mean the point I would make on zero rating, so zero rating is not traffic prioritization, it is a price discrimination model, so there isn't a particular net neutrality issue as such. You make a very valid point about is this a concern that it could favour certain services over the other. Now zero rating doesn't mean that a consumer can't access the other sites. He may have to pay for it. And zero rating doesn't prevent any other consent provider to enter into an agreement with an operator to get their services zero rated either so. The operator is not choosing to be zero rated, it's offering a platform and we see these in many other industries, so if you take newspapers, for example, the classic example of a two‑sided model, where consumers space advertisers space and we're not saying that shouldn't happen. Newspapers should always only charge for consumers. So, I mean my point would be, yes, if operators only zero rate some of their services, and there is then a finding of anti‑competitive behaviour in the sense they are favouring their own services over the others, then that should be looked at. But I think the competition law already allows for authorities to intervene in those cases, as we have seen with Google and specialised search, to intervene and then come up with remedies if necessary. So I don't think that needs to be specific reason to include zero rating within the net neutrality, that's what the FCC has done and that's what the current European Union legislation is moving towards.
CHAIR: Well, thank you. In the newspaper analogy you missed the compensation of authors, but that's another thing. Thank you so much for that presentation, and thank you for everyone who stayed and over time through lunch to see this.
Okay. We're going to wrap up and have another coop session with a different theme after lunch. So come back and thanks again to all the presenters.
LIVE CAPTIONING BY MARY McKEON RMR, CRR, CBC
DOYLE COURT REPORTERS LTD, DUBLIN, IRELAND.