There needs to be a debate about Net Neutrality, but the question is where should such a debate be held and who should be invited to it. But if a definitive debate were held, it would also have to ‘unconfuse’ an awful lot of people.
In one discussion we had last week we heard that it was about downloaders, who illegally stole video files, who took up 90% of the internet. Why should they not be made to pay more. But right now the Net Neutrality debate is NOT about data caps or payment rates, though that is a related discussion, that’s a pure market issue. If operators can get away with adding data caps to their existing ISP customers then go ahead and do it. But that step becomes far easier if and when Net Neutrality is dead as a concept, which is perhaps why some operators want to kill it. After all, if rival services appear slow, then why worry about them, why not pay a bit more for the ISPs own content services rather than a lot more for downloading slow services which are above a cap.
Comcast didn’t want to add a cap and charge more for delivering Bit Torrent files, it wanted to block the files or slow them down artificially. This way it argued, it could provide a better service to other customers. But the truth is very different. Comcast has a business model, as do all of the other ISPs , which is predicated on constant capex and driving up of the average broadband speed, and a gradual lowering of help desk costs per customer, increasing reliability and network robustness, and a set number of rivals in the fixed ISP market.
It can make money on this business model. A lot of money. However if either a) it doesn’t have to spend any money on Capex, because it gets back huge chunks of its access network or b) it can offload the cost of building out its network to payments made to it by the companies that take up a lot of bandwidth or c) It can make extra money from internet content that it puts out itself, then it can make a lot more money.
Net Neutrality is about being able to use one ISP broadband line much like any other, and getting the same type of performance, from the same websites or web services, over comparable lines. It is about doing a good job of bit carriage. There is no reason why an ISP should not go into the content business, but it should compete on a equal footing with all the other content services, not be able to slow down their services to the benefit of its own. In fixed line services that’s tantamount to creating a walled garden where one does not currently exist. At least in cellular the walls to the Walled Garden are coming down in most parts of the world, primarily because of competition, and the need to offer the best services. In fixed line internet access, operators are trying to put up a walled garden, which is very retro indeed.
It is very different in mobile broadband because right now it has a truly finite capacity. This type of cellular data network already uses data caps widely both in the US and Europe and if someone tried to download a Bit Torrent file over a capped cellular line, they would a) shut out lots of other users from the network and b) cost the downloader a lot of money.
In a way data caps do go a long way to solving the Bit Torrent problem, as long as they are not punitive in nature. Right now when someone steps over a data cap their data costs increase by about 100 fold per Mbit. This secondary pricing is way too high to justify the cost of the network time it is using. If perhaps it doubled or trebled above the cap, that wouldn’t be so bad and people might still use the internet connection to download films from legal sources, as the Over The Top video revolution gets under way. Allowing ISPs to block such files simply cuts out the potential for that extra revenue and makes it not worth buying a capped data service in the first place.
This week we had more dumb rhetoric, this time from European operators, highlighted in the national press, talking about companies like Google getting a free ride. We are sick of this expression free ride. Without Google and one or two other web sites, there would be NO mobile or fixed data broadband requirement and the 100s of $billions in ISP fees would never have been possible for all these operators who suddenly want to punish Google by insisting on a percentage of its advertising revenues.
There have been moves this year such as Vodafone calling for an antitrust probe into Google and now we have Telefonica, France Telecom and Deutsche Telekom all being attributed (according to reports in the London Financial Times) with calling for shared payments from Google for carrying its traffic.
Let’s just put that in perspective. All of these companies get paid for fixed and mobile broadband by consumers. Without it their revenues and share values would be in the basement. It has sustained them for about five years. However Google brings itself to the internet, through which ever ISP or if it runs its own Internet hubs and is its own ISP, there are peering charges to pay to neighboring ISPs.
Where ISPs trade traffic the net imbalance is paid for. So if AT&T is shipping requests to Google’s ISP to ask for searches and those searches are being supplied back the other way, then the net imbalance in data traffic (let’s face it a Google answer is way heavier in data terms that the query) is paid for on a wholesale traffic basis. If anyone thinks this does NOT apply to Google, will someone tell me just how they think Google gets traffic from a Google server to an AT&T customer? Same is true for Telefonica, France Telecom and Deutsche Telekom.
So already Google is paying the going rates for attaching to the internet as a supplier of data, and given the amount of data that it shifts, that means it is probably the largest payer of connectivity in the world. So Google is already paying to ship data over the internet.
Now these operators want an additional charge and there’s a danger that we might be swayed by the phony rhetoric to allow the operators to gang up on Google and to allow it to happen.
To take a road usage analogy, they currently say that every car has to pay to use the roads. OK. But now additionally they propose charging both the people traveling over the roads and the people they are visiting. Well actually no, that is already the case on the internet, operators and ISPs are already doing that. What this request really is, is a request to have some of the money that those visitors spend when they arrive at their destination, as well.
Well actually it’s more than that if we stretch the road analogy a little further. Operators want to charge the traveler, the people they are visiting and have some of the money they spend while they are away from home AND have the power to decide that some journeys are not profitable enough for them as road owners, and have to ability to put them in a slow lane or turn them back.
The regulators in Europe know this is nonsense and they will not take these ideas seriously, not even if they are presented from every operator in concert or if they begin imposing them collectively without regulation (which of course is tantamount to an illegal cartel).
So when we hear comments from people like Stephane Richard, new head of France Telecom, who was quoted in the FT saying: ‘Today, there is a winner who is Google. There are victims that are content providers, and to a certain extent, network operators. We cannot accept this’. What he really means is today we tax the people, and the content owners and the internet innovators, but some of them still make money, so we want to go further and completely kill the goose that has laid the golden eggs for us. Sure he has a point about Google damaging content owners, but that’s a separate issue.
Rene Obermann, CEO of Deutsche Telekom, talked being fed up offering Google its networks for free ‘ and yet last year it made around €6 billion on 15 million broadband lines in Europe, not counting its mobile broadband which is not so well broken out, which amounts to around €400 ($544) a year or €33.33 ($45) a month per user. That’s quite a lot better than free and 10 years ago that number would have been zero, so it’s a lot to thank internet content sites for.
There continues to be a net neutrality debate in Europe but it has yet to result in any EU Directive forcing the introduction of legislation, which is the usual way these things come into law. The EU information society commissioner Neelie Kroes has said that no local government should jump the gun on bringing in Net Neutrality laws, and that the European Commission’s forthcoming NGA Recommendation and Spectrum Policy, was likely to be the best place to start to deal with net neutrality issues, and that it would not be rushed, but well considered with lots of opportunity for comment from stakeholders. Kroes is probably referring to law-making that has already begun in Italy that might end up running out of step with EU proposals, and the possibility that France’s egalitarian culture might also try to run with their own law, sooner rather than later.
But already there are pockets of resistance to Net Neutrality as a concept in Europe, for instance recently Skype traffic began being blocked by T-Mobile in Germany, despite the fact that other similar services such as Microsoft Messenger, which has a VoIP voice element, are not blocked, in effect distorting competition. Russia however has gone the other way, enshrining operator rights to block whatever traffic they want. If we have a different policy in every country there will be internet anarchy.
So there needs to be a long and deliberate debate, if only to address some inconsistencies. For instance software like Bit Torrent should be seen in a different light from other data delivered over the internet. Each Torrent stream is treated by the internet as a single request for content, whereas 20 or 30 streams run concurrently, and this means that right now existing systems are being fooled into offering Bit Torrent priority, instead of parity over things like legitimate Over The Top services. A well considered Net Neutrality law might correct this so that any other single service has as much chance of delivering content as Bit Torrent has.
There are only two places for the debate, the European Commission or the FCC ‘ the US or Europe. Right now there is so much public hostility in the US towards Net Neutrality that we wonder if the debate there will be full and frank and out in the open. But if it could be made to be, then that is the right place to cement a legislative process, because it would reverberate around the world and become the standard approach in probably 180 countries or so. European law is not quite such a global thought leader as the US, though likely to be better explained, transparent and not solely reflect big business interests ‘ read operators.
However if there are two debates and US and European laws are not kept in step with one another, then it will be a disaster and the matter will not be settled, so what really needs to happen is that the FCC needs to begin a process that openly addresses all of the concerns and allow time to reach a consensus which perhaps cannot be delivered in an FCC ruling because it would have to undergo further legal challenges, but instead needs to be built into a legal Act, presented by and passed by Congress. If that is the case, Europe, which is already a long way down that process, is likely to reach the finish line first, and set the tone for the rest of the world. Which is why operators have begun making public comments against Net Neutrality in Europe and their opinions need to be counter balanced before irreparable market harm can be done.