Core issues and new business models
DigiWorld Institute by IDATE has recently published its market report “Net Neutrality – Core issues and business models” which explores the technical-economic issues surrounding Net neutrality and its current status in markets around the globe. It also delivers analysis of the traffic management practices and technical measures needed to control costs. And, finally, looks at the new business models we are seeing emerge through an examination of stakeholders’ models, along with synthesis of the state of affairs in each country.
“The many debates that have taken place over Net neutrality these past several years have now been whittled down to chiefly technical-economic questions over network financing, taking into account the increase in traffic and the need for on-going services. A host of players now make up the value chain (IP transit providers, CDNs, ISPs, service and content providers, users) all operating very different business models and all looking to capitalise on the basic rules that enabled the Web’s development”, says Vincent Bonneau, Director of the Internet Business Unit at DigiWorld Insitute by IDATE. ”But when it comes to the Internet’s overall business model the status quo does seem hard to maintain. Some longstanding rules could be called into question, especially the system of settlement-free peering now with the rise of asymmetrical traffic, along with offers of unlimited traffic that are often extended to users.”
Status of Net neutrality around the world
The degree to which Net neutrality debates have progressed – as much in terms of identified issues (ISPs’ traffic management measures, operators’ and content providers’ stated positions, etc.) as regulation (sector-specific or under general competition laws) varies a great deal from country to country. Even within each country we find disparate approaches being taken to fixed and mobile networks. The Netherlands is in fact the only country among those being examined here that has introduced specific Net neutrality legislation for mobile networks. It was joined by Chile which became the first country in the world to introduce Net neutrality into Law in July 2010.
The debate has picked up steam in Europe over the past several years, even if concrete instances of traffic management practices, notably on fixed networks, are still rare. But European regulators are not necessarily looking to introduce severe sector-specific regulation, and continue to work more on encouraging competition. In addition to intra-modal competition, regulators can also draw on the Telecoms Package for provisos concerning traffic management practices. Any identified problems are today being handled chiefly by soft laws or general competition law, as has been the case in Italy (P2P) and in Germany (mobile VoIP), with the Netherlands standing out as an exception, with Belgium due to follow suit.
An analysis of 13 countries in Europe, North America and Oceania reveals several similarities in:
• The content and services targeted by traffic management measures. Although the Net neutrality debate aims to be one of general principles, it often focuses on a few services and types of content, namely P2P file sharing and online video (UGC and catch-up TV) on fixed networks, and VoIP (or SMS over IP) and P2P on mobile networks. Discussions centre on who should finance the network (especially wireline ones), and/or on bottlenecks and, to a lesser degree, on operators’ ability to favour their own managed services over services delivered on the open Web. Access providers that are introducing traffic management measures on P2P are endeavouring mainly to alleviate bottlenecks, while those applying differentiation measures to video are working to ensure financing for their network.
• Volume-based billing and bandwidth throttling and capping. Volume-based billing is virtually ubiquitous on mobile and cable networks. AT&T and Deutsche Telekom were among the first telcos to (re)introduce this approach on their wireline networks. So the issue of network financing becomes a different one since, in addition to there being a traffic cap, customers’ will either see their charges vary according to the traffic they generate or their available bitrate diminished. Volume-based billing is applied across the board in Australia which, due to a geographical particularity – i.e. most traffic comes from the rest of the world and is routed in via costly undersea cables – cannot offer unlimited access plans. So the Net neutrality debate there is focused mainly on bottlenecks, even if network financing remains an important topic of discussion as well.
• Major local content and service providers’ often heavy use of CDN solutions. All of the Web’s major players are working to improve the availability of their content and services through traffic optimisation solutions. The Internet’s titans are installing their own infrastructure, in particular to develop their own content delivery networks. Major telcos such as France Telecom, Telefónica and AT&T are also becoming interested in content delivery networks.
• The European regulatory framework and various approaches across the EU. Aside from Norway and the Netherlands on the matter of mobile networks, all European countries are focused more on inter-modal competition for access provision than on Net neutrality, per se, as it creates a more competitive marketplace. This therefore creates a situation that makes differentiation impossible unless all operators apply it. Otherwise customers will naturally chose the operators who are not billing based on traffic or QoS. European players also have a common regulatory framework on transparency in traffic management practices with the Telecoms Package.
Internet Business Unit Director
DigiWorld Institute by IDATE