Month: December 2012

WCIT12 finally collapses

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The negotiations in Dubai have failed. Despite the fact that long discussions had created large consensus towards a draft document deprived of the most controversial issues (such as the extension of ITU’s powers over the Internet and the ETNO’s proposal on Internet termination), on December 13, 2102 a last-minute controversial intervention vanished the entire process. The African delegation succeeded in getting approved a resolution which, de facto, would legitimate filtering and monitoring of  Internet traffic. US, European countries and most delegations of Western-liberal States have therefore left the negotiation desk. The WCIT12 is therefore collapsing: even if the Treaty will be now signed, it will not be binding vis-à-vis most of the Internet-centric countries.

While the controversial resolution was deemed to be a non-binding document, then it was surprisingly included in the draft ITRs documents deemed for approval.  Although the legal implications of the resolution were complex, most Western countries have seen an attempt to re-open the issues of governance of Internet and regulation of content by the ITU. They have therefore refused to sign the final draft of the amended ITRs.

This is a real missed opportunity to extend the benefits of competitive and liberalised markets, but the blame lies with those non-European governments that insisted on creating new rights for governments instead of focusing on what’s good for end users. The main responsibility of this failure lies with ITU and his director general Touré, who managed the negotiations with the scope to increase ITU’s powers and too late realized that others could manipulate the entire process.

What will happen then? A stated above, non-signing countries will not be bound by the new rules. Now, in the absence of a common understanding about an agreed international framework, the multistakeholder model for Internet will go ahead as usual. This model will in any case reflect the supremacy of US and in general western developed countries in this area. However, there will be an increasing risk for fragmentation, in the sense that some countries (Iran, China, Saudi Arabia and in general non liberal countries) will be tempted to establish national data networks which will run in parallel with the Internet (like presently in Cuba). As regards spam, cybercrime and security, there might be also national controversial initiatives.

Euroispa, the European association of iSPs, regrets for the failure of the WCIT12 negotiations.

European regulators (Berec) confirm attention over net neutrality

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Berec, the European agency based in Riga representing the European telecom regulators, has adopted a couple of interesting documents on net neutrality, with the aim to provide a concise description of three years of BEREC’s activities in this field. Berec’s document briefly summarize how the Internet works and presents findings related to retail and wholesale relationships and observations in the context of net neutrality. Furthermore, the papers present what national regulators can do in order to promote net neutrality. More specific explanations are available in the document named “Summary of BEREC positions on net neutrality”.

Remarkably, Berec dismiss again the argument of ETNO and incumbents whereby the transportation of content and services over the/their networks would happen at free-riding conditions. It is a confirmation that the campaign launched by ETNO against OTT providers on this subject is deprived of economic and technical grounds, it is just a political game. This position of Berec echoes the document of November where it strongly criticized ETNO’s proposal for the WCIT12 (the negotiations taking place in Dubai in relation to the reform of the ITU telephony agreements, the ITRs).

I report the observations of Berec, which are self-explanatory:

While QoS differentiation may be an appropriate tool to deal with scarcity of bandwidth in access networks, e.g. by prioritising voice services, the situation is different in IP-backbone networks, where additional capacity is cheaper….

Up to now, interconnection with QoS assured across network boundaries has not, or has hardly, existed in practice. As described in BEREC’s comments to specific proposals for ITU/WCIT7, over the internet, a guaranteed end-to-end QoS offer appears neither commercially nor technically realistic. In best effort networks, alternative mechanisms for improving performance have been developed and have proven to be more efficient and cost effective, such as end-point-based congestion control for reduction of the traffic load, Internet Exchange Points and the increased use of peering as well as content delivery networks (CDNs). While QoS differentiation may be an appropriate tool to deal with scarcity of bandwidth in access networks, e.g. by prioritising voice services, the situation is different in IP-backbone networks, where additional capacity is cheaper….

At this stage it is worth noting that there is no evidence that operators’ network costs are not already fully covered and paid for in the Internet value chain, unlike what is sometimes alleged by some ISPs in the net neutrality debate. Both sides of the market, content and application providers (CAPs) on the one hand, and users of applications on the other, contribute to paying for Internet connectivity (and hosting). CAPs also pay for CDN services that bring their content closer to the end user….

BEREC proposes to evaluate the ‘reasonableness’ of traffic management practices and contractual restrictions by applying the following assessment criteria:

(i) Non-discrimination between players. The practice is done on a nondiscriminatory basis among all CAPs.
(ii) End-user control. It is an important indicator of reasonableness when the practice is applied on the request of users at the edge, who can control and deactivate it. The level of control is deemed higher when the user does not incur costs for removing a restriction.
(iii) Efficiency and proportionality. The measures should be limited to what is necessary to fulfil the objective, in order to minimise possible side effects. The intensity of the practice, such as frequency and reach, is also important when assessing its impact.
(iv) Application agnosticism. As long they are able to achieve a similar effect, BEREC expresses a general preference for ‘application-agnostic‘ practices. This reflects the fact that the decoupling of the network and application layers is a characteristic feature of the open Internet, and has enabled innovation and growth….

Competition plays a vital role in guaranteeing net neutrality: the greater the pressure created by competition, the higher the quality of access products and the less incentive an ISP will have to diminish the quality of its own services. Competition is expected to discipline operators and result in the best offers for end users.
In accordance with the European framework, NRAs have a duty to stimulate competitive dynamics in the retail markets with ex-ante regulation at the wholesale level”.

The controversial European reform of network regulation

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In July 2012 Mrs. Kroes announced a fundamental reform of the Commission’s policy in the matter of broadband and high-speed networks (NGA: next generation access). The Dutch commissioner is convinced that this attempt will encourage more investments in the sector and enhance competition.

Despite Kroes’s belief, the proposal appears controversial and many stakeholders fear that the new regime  will dramatically harm consumers’ interests and competition in Europe, bringing back the telecoms’ clock to the ‘80s. The arguments of Kroes’ opponents (mainly alternative operators and consumers associations) are the following.

Broadband prices will increase in general throughout Europe. Kroes is proposing to fix the access price of traditional copper networks (i.e the infrastructures build 50 years ago thanks to the money of taxpayers, and currently owned by privatised telecom incumbents) for a long period, at least 8 years. The draft proposal indicates a price of 8/10 Euro month, to be subject to inflation adjustment (up and upper!). This will result in an increase of retail BB prices in many European countries, while in others the decrease of retail prices, even if possible because the copper networks are old and depreciated, will be prevented. Thus, consumers will pay the same amount, or even more, for a very long period (8 years in the telecom sectors corresponds to a geological era), irrespective of network depreciations, market developments, new technologies. The European Union has never experienced such kind of intrusive economic dirigism. It is not a coincidence that even in Belgium, a country where BB prices are amongst the highest in Europe, Belgacom has just announced an increase of broadband prices as from February 2013, and for the same BB services.

Competition (and innovation) will be reduced: Kroes intends to reduce the number of operators in Europe, and as a result consumers will experience less choice and innovation. The idea of solving Europe’s investments failures by reducing the number of operators is simply naïf: the number of European operators is a consequence of the fragmentation of the European market (27 national markets, a problem that the Commission is unable to address), therefore such kind of comparison is a non-sense. In any case, if you compare fixed network operators of a single European country with respect to US, Brazil, China and Japan, you will find out that in Europe we have fewer fixed network operators per country (1 or 2 against 3 or 4 on average). In any case, what matters is competition, not the number of operators. In US AT&T and Verizon invested because of the competing cable Internet offers. Without such competition, they would have not.

Fibers investments will be even more uncertain and scarce: apart from copper-based VDSL upgrades (which are already happening and are natural for networks operators), it is still unclear why incumbents should invest the huge and stable profits of the copper networks into NGA networks. Kroes believes that “stability” will encourage investments, however she mixes price and legal stability. Price stability does not produce network investments in the absence of competition, it rather produces “financial investments” in shares and dividends instruments issued by the “winners” (old legacy incumbents). On the contrary, the draft proposal will inflate legal uncertainty into the entire European regulatory framework, because it multiplies different variations and conditions for non-discrimination remedies as well as for relaxation of cost orientation obligations. A real roulette for the national regulators.

To sum up: there are convincing evidences that Kroes’ reform will bring the telecom sector back to re-monopolisation: the dilemma “build or buy” for alternative operators may result in the majority of operators leaving the market (the operators which invented BB, ADSL and many Internet stuff, by the way). The decrease of competitors (and competition) will make even less attractive and reasonable the business case for fibres investors. 15 years of telecom liberalization will be lost.