Not another presentation on net neutrality - Iván Rejón & Alfonso Aguado Strategy, Marketing & Com - Observatorio de la ...
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Not another
presentation
on net
neutrality
Iván Rejón &
Alfonso Aguado
Strategy, Marketing & Com
Ericsson at a glance
NETWORKS IT MEDIA INDUSTRIES
Create one network for Achieve business agility Delight the TV Connect industries for
a million different needs with transformative IT consumer every day business acceleration
39,000 1 billion 247 B. SEK
Subscribers
Patents managed by us Net Sales
23,700 R&D Employees 2.5 billion Subscribers
supported by us
180 Countries with
customers
32,8 B. SEK In R&D 66,000 Services professionals 116,000 Employees
Observatorio Industria 4.0 | 2016 | Page 3 Full year 2015 figures
Ericsson
Born in a at a glance:
garage? 140 years OF
INNOVATION
Sources: Google
Observatorio Industria 4.0 | 2016 | Page 4
Ericsson
…, we were
atalso
a glance:
born in
140
a garage
years OF
INNOVATION
140 yr ago
Sources: Google
Observatorio Industria 4.0 | 2016 | Page 5
…, and we invented: Observatorio Industria 4.0 | 2016 | Page 6
INDEX
This session is structured in 3 blocks
1. A complex and controversial topic
2. De-constructing Net Neutrality
• Digital ‘laws’
• Market: a new normal
• Regulation and the basics
• Market asymmetries
3. Towards a level playing field
• Ericsson vision
Observatorio Industria 4.0 | 2016 | Page 7
A complex &
controversial
INDEX topic
Observatorio Industria 4.0 | 2016 | Page 8
OLD stuff? The concept
predates the current debate
…, existing since the age of the telegraph. In In 1888, A. B. Strowger, suspecting his loss of
1860, a US federal law* was passed to business was caused by a telephone operator
subsidize a telegraph line: redirecting his business calls to a competitor,
invented a switch
messages received from any
individual, company, or
corporation, or from any
telegraph lines connecting with
this line at either of its
termini, shall be impartially
transmitted in the order of
their reception, excepting that
the dispatches of the government
shall have priority ... that effectively removed human interference of
telephone calls
Sources: Wikipedia. * Pacific Telegraph Act of 1860
Observatorio Industria 4.0 | 2016 | Page 9
+3,560,000 results on Net neutrality on the web Sources: Google Observatorio Industria 4.0 | 2016 | Page 10
…, highly biased, passionate
Sources: Google
Observatorio Industria 4.0 | 2016 | Page 11…, and ideological discussions
Sources: Google
Observatorio Industria 4.0 | 2016 | Page 12Not based on rational & scientific
grounds
Meaningless & vague Meaningful & scientific
Neutral(ity) • • Stochastic
Discrimination • • Emergent
Throttling • • Random(ness)
Priorit(isation) • • (Non)Deterministic
Violation • • Semantics
QoS • • Probabilistic
Speed • • Statistical Multiplex(ing)
Sources: Slideshare; Martin Geddes
Observatorio Industria 4.0 | 2016 | Page 13Net neutrality*: a couple of
definitions
is the principle that ISPs and governments refers to a debate about the way that ISPs
regulating the Internet should treat all data on the manage the ‘traffic’ carried on their networks when
Internet the same, not discriminating or charging data is requested by broadband subscribers**
differentially by user, content, website, platform, from providers of content, applications or services
application, type of attached equipment, or mode as well as when traffic is exchanged between end-
of communication. users.
The best effort internet is about the equal treatment of
data traffic being transmitted over the internet, no matter
(Wikipedia. *Coined by Columbia University media law professor what it contains, which application transmits the data,
Tim Wu in 2003) where it comes from or where it goes.
(BEREC 2016, * 'end-users' under EU law)
Sources: Wikipedia, BEREC
Observatorio Industria 4.0 | 2016 | Page 15…, but different flavors
‘Weak’
‘Strong’
Individual prioritization
No direct enforcement Discrimination based
without throttling or Full neutrality
on type of data
blocking
• Enforcement based on • Paid-prioritization of • Reasonable (and • Discrimination in limited
other laws, eg., anti- bandwidth / sponsored transparent) trade-offs conditions, eg. preventing
competitive practices, data agreements can between the requirements spam, malware, or illegal
'commercially induce optimal user of different applications content ensuring privacy
reasonable' practices welfare (eg., low latency and low and security (CL),
jitter: voice and RT video), exceptions for congestion,
rather than neutral security, spam, or legal
transmissions regardless reasons (NL)
of applications
Sources: Google
Sources: Wikipedia
Observatorio Industria 4.0 | 2016 | Page 16…, intertwined with other complex
issues, contaminating the debate
Security and Privacy and
emergency confidentiality
services
Information
freedom
Copyright
Portability
Competition
Consumer
protection
Accessibility and
Interoperability universal service
Observatorio Industria 4.0 | 2016 | Page 17…, and prone to ‘structural’
contradictions and inconsistencies
Imposition of neutrality
obligations to online
intermediaries (eg., anonymity)
other regulations are
requiring them to be more
proactive in content
management, prioritization
and editing
Observatorio Industria 4.0 | 2016 | Page 18De-constructing Net neutrality Observatorio Industria 4.0 | 2016 | Page 19
PACE OF CHANGE
15 yr
50 b connected devices
40
Connections (b)
30
25 yr
5 b connected people
20
100 yr
10 1 b connected places
Source: Ericsson
1875
Observatorio Industria 4.0 | 2016 | Page 22 1975 2000 2020Exponential pace of disruption
Time to reach 100 million users
Pokémon Go 0 25 days July, 6th 2016
Candy Crush 1 yr, 3 m 2012
Apple App Store 2 yr, 2 m 2008
Instagram 2 yr, 4 m 2010
Whatsapp 3 yr, 4 m 2009
Facebook 4 yr, 6 m 2004
iTunes 6 yr, 5 m 2003
WWW 7 yr, 5 m 1990
Mobile phone 16 yr 1979
Source: BCG,
Techcrunch, Wikipedia
Telephone 75yr 1878
Observatorio Industria 4.0 | 2016 | Page 23Combinatorial -
new propositions
1991: Total Cost $3054.82
2015: Smartphone $299.00
Observatorio Industria 4.0 | 2016 | Page 27Combinatorial -
New corporate leaders
The Age of Tech: Market cap of the most valuable companies
Source: The Economist, Statista, * as of August, 1st
Observatorio Industria 4.0 | 2016 | Page 29Combinatorial -
New corporate leaders tech BEASTS
The Age of Tech Beasts
Source: The Economist, Statista, * as of August, 1st
Observatorio Industria 4.0 | 2016 | Page 30A ‘new normal’
In Spain the market has destroyed €9,7 b in the last six years
Revenues (€ b) EBITDA (€ b)
35,0 -5,2
14,0
CAGR -8,9
25,4
Movistar -7% CAGR
Vodafone -6% 8,0
Orange +6% -9,5%
Yoigo +12% -19,8%
Ono +8,1%%
Jazztel
-10%
DTS
2009 2010 2011 2012 2013 2014 2015e 2008 2009 2010 2011 2012 2013 2014
Source: CNMC. Orange includes Jazztel from Q3 2015. Movistar includes DTS from Q2 2015. Source: AMETIC
Vodafone includes Ono from Q3 2014
Observatorio Industria 4.0 | 2016 | Page 36A ‘new normal’
In four acts
New demands
• Eg. #1: from a
New patterns fragmented offering to
• Eg. #1: explosion of convergent bundles
MBB traffic
• Eg. #2: shift from
fixed to mobile
viewing, from linear
TV to streaming
New expectation
• Eg. #1 improve coverage to be New attitudes
captured • Eg. #1: emergence of
• Eg. #2 differentiate app new segments
coverage • Eg. #2: important
• Eg. #3 poor digital reduction of piracy
experiences lead to frustration
and erode NPS
Observatorio Industria 4.0 | 2016 | Page 38A ‘new normal’
New patterns. 1) traffic explosion
Monthly traffic per connection
Fixed (MB) Mobile (MB) 2016 2021
45200 1000 Monthly mobile traffic
40200
35200
900
800
1 EB 6.7 EB 47% CAGR
30200 Monthly mobile consumption
700
x1.5
9
25200
600 2 GB 18 GB X
20200 Growth
500
15200 x2
10200 400 2014 2019
5200 300
Mobile traffic as % of total IP traffic
0
200 0
200
Q4 2012 Q4 2013 Q4 2014 Q4 2015
4% 10% X 2.5
Share
Source: CNMC, Ericsson Mobility Report, Cisco
Observatorio Industria 4.0 | 2016 | Page 39A ‘new normal’
New patterns. 2) from fixed to mobile media experience
Weekly TV/video viewing time, per device
TV Desktop Laptop Smartphone Tablet
~65%
watch TV & video
on their
100%
smartphones,
increase of >135%
since 2012
Smartphone,
75% tablet & Laptop
50%
41%
think it is very
important to watch
25% TV their TV and Video
& Desktop content wherever
they are
0%
2010 2011 2012 2013 2014 2015
Source: Ericsson ConsumerLab
BASE: Population aged 16-59 with broadband at home who watch any type of TV/Video at least weekly in Spain.
*3 years moving average ¼, ½, ¼
Observatorio Industria 4.0 | 2016 | Page 40A ‘new normal’
New patterns. 2) from linear to streaming video consumption
% of people watching different media at least once per day
Scheduled linear TV Streamed on demand video
(YouTube, short clips, movies,
Recorded linear TV TV series and programs)
100%
>50%
watch streamed
on-demand
75%
each day
up from >30%
50% in 2010
25%
0%
2010 2011 2012 2013 2014 2015
Source: Ericsson ConsumerLab
BASE: Population aged 16-59 with broadband at home who watch any type of TV/Video at least weekly
in Spain 3 years moving average ¼, ½, ¼ (self reported)
Observatorio Industria 4.0 | 2016 | Page 41A ‘new normal’
New demands. 1) from a fragmented offering to convergent
bundles
Number of packaged services, by type
10
Opportunities &
9
Challenges
8 2P › Content rights
7 4P › Data monetization, beyond
6
pure connectivity (eg.,
5
games, alarms, etc.)
4 5P
3 › Superior customer
2 experience
3P
1 › Simplification and
0 operational efficiency
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2012 2012 2013 2013 2014 2014 2015 2015
Source: CNMC
Observatorio Industria 4.0 | 2016 | Page 42A ‘New Normal’
New attitudes. 1) emergence of new market segments
% of people watching different % of total TV-time by age group,
media, per age per device
Scheduled linear TV Streamed on demand video TV Desktop Laptop Smartphone Tablet
(YouTube, short clips, movies,
Recorded linear TV TV series and programs) 100%
100%
Smartphone, 75%
75% tablet & laptop
8 out of 10 teenagers 50%
65%
50% watch streamed of all TV/video
content, compared to viewing hrs spent on
2 out of 10 aged 60- 25% a mobile device
25% 69 screen among
TV screen teenagers
& Desktop 0%
0%
16-19 20-24 25-34 35-44 45-59 60-69 16-19 20-24 25-34 35-44 45-59
Source: Ericsson ConsumerLab Source: Ericsson ConsumerLab
BASE: Population aged 16-69 with broadband at home who watch any type of TV/Video at least weekly in Spain BASE: Population aged 16-59 with broadband at home who watch any type of TV/Video at least weekly in Spain
[Showing: Use once per day or more, self reported]
Observatorio Industria 4.0 | 2016 | Page 43A ‘new normal’
New attitudes. 2) pirates of last resort?
% of users of streaming and on demand services
(2011 vs. 2015)
Some factors
96
2015 55 pp. › Availability of a diverse
2011 84 and differential offering
32
25 25
29 › Competition of OTT
22 services (pure and
18 19
16 hybrids)
14
10 9
7
2 2
5 5 4 › Competition between
CSPs: quality, price
Jazzbox
Mi Tele
streaming
TV
Videoclub
Canal+ Yombi
Pirate P2P
TV5/Cuatro
A3Player
Web RTVE
YouTube
Videoclub
Vodafone
Orange
Web
Pirate
Movistar
Source: Ericsson
Base: Spanish on-demand (streaming & downloading content) users (948 users out of 1000)
Observatorio Industria 4.0 | 2016 | Page 44A ‘new normal’
New expectations. 2) from ‘coverage’ to app coverage
Percentage of smartphone users who have App coverage
stopped using apps due to bad coverage
› +50% of ‘power’ and
video-centric app users
report issues
› consumers build
perceptions of network
performance based on
how well their video
streaming apps perform
› the proportion of users
who are satisfied with
using apps drops by
Source: Ericsson ConsumerLab, half when moving from
Base: Smartphone users in Brazil, India, Japan, South Korea, the UK and the US
outdoor to indoor
Observatorio Industria 4.0 | 2016 | Page 46A ‘new normal’
New expectations. 3) poor digital experiences leads to
frustration and erode NPS
If mobile videos take > 2s to
Mobile delays comparable to .., heart rate load, NPS may drop by at
watching a horror movie increases 38% least 4 points
Impact on NPS
1= Max
0.8
0.6 +4.5
+38% Delays
0.4
0.2 No
delays -4
0
Source: Ericsson ConsumerLab
Observatorio Industria 4.0 | 2016 | Page 48A ‘new normal’
…, while fostering the deployment of high performance NGNs
Spain: #1 in the EU in terms of
fiber subscribers
‘in 2020, 97% of Spanish households will have
fiber… 4G coverage will reach 100%. The digital
divide won’t longer exist. We will be the only
country with digital services in every corner’
(L. M. Gilpérez, CEO Telefonica España)
Source: Press clippings, OpenSignal
Observatorio Industria 4.0 | 2016 | Page 50A ‘new normal’
The telco-ecosystem faces some structural changes that torpedo
their traditional business model
change change change change change
#1 #2 #3 #4 #5
Decoupling Customer &
New Platforms,
between Brand
consumption Disruptive Agility, Talent, ...
revenues and experience,
patterns models
traffic Simplicity
..., the binominal ..., digital
..., the telco ..., successful
..., other players brand – service is platforms capture
industry has competition
better satisfy new the new a
entered a non- requires new
demands engagement disproportionate
profit zone capabilities
driver share of value
Observatorio Industria 4.0 | 2016 | Page 53A ‘new normal’
The decoupling between revenues, CapEx and traffic growth
Revenue, CapEx and traffic growth (2010=100)
120 40,000
34,300
110 35,000
30,000
100
100
25,000
90
20,000 Telco revenues (left)
80 Telco CapEx (left)
15,000
Monthly data traffic (right)
70
69 10,000
60 5,000
54
50 0100
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: Ericsson, Ovum
Observatorio Industria 4.0 | 2016 | Page 54A ‘new normal’
…, compromising their viability
No operator can justify
continuing to invest if it cannot
Key competitors variables foresee acceptable return on
capital: Vodafone+Ono, Orange
and Yoigo have ROCE well below
cost of capital (10-12%)
Arthur D. Little
Observatorio Industria 4.0 | 2016 | Page 55A ‘new normal’
A profitability puzzle: the example of US
High Investment Sectors Raking by company Change in CapEx in H1 2016
(2015, $ b) (2015, $ b) Top 10 Investment Heroes
1. Telecom/Cable 48.1 1. AT&T 18.7 1. AT&T -16.7%
2. Energy production/Mining 33.8 2. Verizon 16.6 2. Verizon -14.4%
3. Internet/Technology 30.8 3. Exxon Mobil 11.0 3. Exxon Mobil -44.1%
4. ETE 9.4
4. Utility/Energy Distribution 27.5 5. Chevron 8.6 4. ETE +74.2%
5. Transportation 15.3 6. Walmart 8.5 5. Chevron -42.6%
6. Automotive/Industrial 12.9 7. Alphabet 8.4 6. Walmart -9.7%
7. Retail 8.5 8. Comcast 8.4 7. Alphabet -8.8%
Total 176.9 9. Exelon 7.6 8. Comcast +28.0%
10. Duke Energy 6.6
11. Apple 6.4 9. Exelon +79.5%
12. American Airlines 6.2 10. Duke Energy +41.4%
13. Phillips 66 5.7
‘Investment Heroes’ because 14. Microsoft 5.6
their capital spending is 15. Amazon.com 5.5
16. GM 5.4
helping raise productivity 17. ConocoPhillips 5.1
and wages across the 18. Intel 4.8 …, it seems possible that
country 19. Union Pacific 4.7 the prospect of continued
20. FedEx 4.5
(PPI)
21. Time Warner 4.4 regulatory upheavals is
22. Ford 4.0 influencing capital
23. EPP 3.8 investment
Source: PPI 24. GE 3.5 (PPI)
25. Freeport 3.4
Observatorio Industria 4.0 | 2016 | Page 57A ‘new normal’
Platform business model economics are far superior
How Apple uses developers to drive external investment
$9.5 b (2011)
We run the App Store just Developers
investment
a little over breakeven
Peter Oppenheimer, Apple
CFO 7x
25x
$233 b (2015)
iOS device sales
$1.3 b (2011)
Apple
app store cost
Source: Visio Mobile
Observatorio Industria 4.0 | 2016 | Page 58A ‘new normal’
…, but lead to quasi monopolies
Global Mobile OS Global Mobile US video visits US mobile ad revenue
market share search market share market share market share
(Q2 2016) (Q3 2016) (Q3 2016) (Q3 2016)
Facebook Twitter
Netflix 19%
Yahoo
IOS
8% Hulu
Yahoo
86% 13% 94% 4% 77% Bing 32%
Bing
1% Baidu
Other Google
Other
Other
Android Google Youtube Other
Source: Statista, NetmarketShare, eMarketer
Observatorio Industria 4.0 | 2016 | Page 59Regulation & the basics
Net neutrality Trojan Horse
[ 1700s ] Ben Franklin reorganizes
postal service to operate as
a common carrier
[ 1800s ] Telegraph regulated as
[ Tim Wu. Feb. 2003 ]
common carrier
[ Late 1800s ] Telephone regulated as
• Design principle/'Neutral
common carrier
[ 1934 ] Telephone Carrier regulation
platform'
transferred to FCC • Last mile
[ 1966 ] Computer Inquiries Initiated • Right of users to access
[ Late 1990s ] Open Access Proceedings content, services, applications
of their choice
Network Neutrality, • Operator should not interfere
Broadband with users’ use but can 'police
Discrimination. what they own'
Journal of • A hard rule only if necessary (ok
Telecommunications
if operators uphold the principle
and High Technology
Law, Vol. 2, p. 141,
on their own)
2003
Observatorio Industria 4.0 | 2016 | Page 61Regulation & the basics
It all began in 1999 – last millennium…
Cable ‘walled garden’ fears US/ FCC’s Internet. Policy Statement
• Mergers: cable TV/broadband 2005
companies • BB users are entitled to run Web
• AT&T/MediaOne and apps/services of their choice & connect
AOL/TimeWarner their choice of legal devices to the
network
24 May, 1999. AOL, WorldCom and other US/ FCC’s 2010 open internet rules
Internet companies • Basic rules: transparency, no blocking
• …, urged federal authorities to bar cable and no unreasonable discrimination.
operators striking exclusive deals on • For mobile broadband providers, the no
high-speed Internet service blocking rule applied only to the blocking
• Internet providers want to be sure that of lawful websites, or applications that
consumers will enjoy the same open competed with mobile operators’ voice or
access to their services via cable video telephony services. The no
networks that they now have over phone discrimination rule applied only to fixed
lines,...' providers
Observatorio Industria 4.0 | 2016 | Page 62Regulation & the basics
Legislation & ‘Economy'
Private property is the Digital technology, if
ownership, control, employment, unshackled from ownership
ability to dispose of, and What restrictions and payment
bequeath land and other forms requirements is a powerful
of property by persons and prevails ? means for creating a more
privately-owned firms egalitarian society
Do States regulate private infrastructures ?
Not
so new ?
Pacific Telegraph Act of 1860
(US federal law passed to subsidize a telegraph line):
…, messages received from any individual, company, or corporation, or from any telegraph lines connecting with this line at either of its termini,
shall be impartially transmitted in order of their reception excepting that the dispatches of the government shall have priority (…)*
Source: An act to facilitate communication between the Atlantic and the pacific states by electric telegraph, June 16, 1860-
Observatorio Industria 4.0 | 2016 | Page 63Regulation & the basics
Net Neutrality in USA
[Open Internet Order] Feb. 2015 No Blocking: [Internet Service Providers ('ISPs')] shall not block
Protecting and Promoting the Open Internet, GN Docket lawful content, applications, services, or non-harmful devices, subject
No. 14-28, Report & Order on Remand, Declaratory to reasonable network management. 13
Ruling, and Order, 30 FCC Rcd. 5601 (2015) No throttling: [ISPs] shall not impair or degrade lawful Internet traffic
The FCC’s order does not regulate Internet on the basis of Internet content, application, or service, or use of a
interconnection, but it reserves the right to intervene on non-harmful device, subject to reasonable network management. 14
a case-by-case basis No paid prioritization: [ISPs] shall not engage in paid prioritization.
'‘Paid prioritization’ refers to the management of a broadband
provider’s network to directly or indirectly favor some traffic over other
traffic . . .'
15
• FCC adopted on Feb 26th the new Open Internet order. To enable the imposition of strong non-discrimination rules,
the FCC also reclassified fixed and mobile broadband providers as ‘common carriers’, enabling their regulation under Title
II of the Communications Act of 1934
• However, the Order will not apply a full utility-style regulation on ISPs (as implied by this reclassification), expressly
excluding the imposition of any rate or tariff regulation, last-mile unbundling, burdensome administrative filing
requirements or accounting standards
• If, there is a future legal challenge and the courts confirm this reclassification, it will allow for the first time a thorough
substantive legal examination of the merits of strict open internet rules
Observatorio Industria 4.0 | 2016 | Page 66Regulation & the basics
Regulatory approach in EU
From … …, to
Objective Non intervention Light-touch Regulation
Commission Commission Commission EU (28/27)
Non-binding Non-intervention Non-binding Binding
Declaration Communication Recommendation TSM regulation
Dec 2009 Apr 2011 May 2012 Nov 2015
End-users should be able Recognized the need for BEREC/Com. Report: Commissioner Kroes spoke
to access and distribute traffic management. End 20% of mobile internet out against anti-competitive
information, or run apps/ user's experience is not users face restrictions in blocking/throttling of internet
services of their choice disrupted by congestion their ability to access VoIP traffic on May 30, 2013
Annex to the EU 2009 Time to see how EU 2009 Recommendation to Telecoms Single Market
regulatory framework for regulatory framework improve transparency for (TSM) Regulation entered
electronic communications works in practice end users into force on Nov 29, 2015
Observatorio Industria 4.0 | 2016 | Page 67Regulation & the basics
Net neutrality in EU
[Regulation 2015/2120] Nov. 2015 • All end-users have the right to access and distribute legal content,
Regulation 2015/2120 of the European Parliament applications and services of their choice
and of the Council of 25 November 2015 Laying • Providers of internet access services are required to treat all traffic equally
Down Measures Concerning Open Internet Access • Reasonable traffic management is allowed. Providers may use measures
and Amending Directive 2002/22/EC on based on objective technical requirements, not commercial considerations
Universal Service and Users’ Rights Relating to • Blocking or throttling is allowed. Only to block illegal content, counter a
Electronic Communications Networks and cyber attack or deal with exceptional or temporary traffic congestion
Services and Regulation (EU) No 531/2012 on • Services optimized for specific content is allowed. Agreements on services
Roaming on Public Mobile Communications optimized for specific content will be allowed where necessary, but providers
Networks Within the Union, 2015 O.J. (L 310) 1 will have to ensure the general quality of internet access services. Examples:
managed IPTV and high-definition video conferencing
Next steps: • 'Zero-rating' practices are not explicitly banned. Will have to be assessed
Review of the Regulation: by April 30, 2019 and by the NRAs on a case-by-case basis to establish harm to end-users before
every four years thereafter they can be prohibited
• Is NN directly imposed in all member states? Yes
The Regulation 2015/2120 applies directly. Member states do not have to transpose it into national law.
• What happens with existing national NN provisions? Member states should withdraw, by Dec. 31/2016
…, any national regulation, that does not comply with the Regulation 2015/2120
• Is it clear what is expected ISPs? No. Regulation leaves a lot of scope for
interpretation
…, therefore, BEREC, which assembles the European NRAs, has released guidelines that entered into force on Aug. 30, 2016 to be applied by
NRAs on the implementation of the NN provisions
Observatorio Industria 4.0 | 2016 | Page 68 (*) 14 Oct 2016 : The Dutch Parliament has adopted a revised net neutrality lawRegulation & the basics
Net neutrality in EU
What happens with
Is NN directly imposed Is it clear what is
existing national NN
in all member states? expected ISPs?
provisions?
Yes Member states No.
…, the Regulation 2015/2120 should withdraw, by Leaves a lot of scope
applies directly. Member
states do not have to
Dec 31, 2016 for interpretation
transpose it into national law …, any national regulation, …, BEREC, has released guidelines
that does not comply with the that entered into force on Aug. 30,
Regulation 2015/2120 2016 to be applied by NRAs on the
implementation of the NN provisions
Observatorio Industria 4.0 | 2016 | Page 69 (*) 14 Oct 2016 : The Dutch Parliament has adopted a revised net neutrality lawRegulation & the basics
Net neutrality in Spain
Legislation
No specific legislation on net neutrality. (Transitory period for member states to remove any existing
measures not complying with the net neutrality provisions: Dec 31, 2016)
The relevant provisions under the Universal service Directive (USD) were transposed via the Royal Decree-law 13/2012 of March 2012.
The new Telecommunications Law does not contain any additional general provision in this regard
Players and actions Players and actions
Secretary of State for Information Society and National Authority for markets and Competition
Digital Agenda (SETSI). Monitoring of the QoS in (CNMC). Input for the annual implementation
the sector, and specific aspects such as internet reports - deadline for CNMC to report to BEREC
speed and other parameters and the Commission: Jun 30, 2017
Quarterly reports monitoring the quality of F and M BEREC guidelines for NRAs implementing the Telecoms Single
electronic communications services with the objectives of Market Regulation (TSM) net neutrality provisions entered into
force by Aug 30, 2016
facilitating transparency, guaranteeing minimum levels of
quality, regulating the inclusion of these requirements in the
contracts, and the inclusion of due compensation mechanisms
Commission for the monitoring QoS. Includes
several working groups, integrating representatives from the
SETSI, operators, consumer protection authorities and regional
governments
Observatorio Industria 4.0 | 2016 | Page 70market asymmetries
The fact-based narrative
…, (1) telcos capture about …, (2) but growth has migrated to
36% of the B2C business Content, Online Services
In the Digital value chain, …
…, (3) while the Online Services and
User Interface segments show much …, (4) and capture a
higher market concentration disproportionate share of the value
Source: AT Kearney
Observatorio Industria 4.0 | 2016 | Page 74Market asymmetries
The gatekeepers
Services and contents Infrastructures Interfaces
Observatorio Industria 4.0 | 2016 | Page 80market asymmetries
NN does not properly address critical asymmetries
Privacy and
Accessibility and
confidentiality of Interoperability
universal service
conversations
Security and
Portability Customer care emergency
services
Source: Telefonica
Observatorio Industria 4.0 | 2016 | Page 81market asymmetries
EU Net Neutrality Regulation
..., ensure that ISPs do not monitor specific content provided by the end-
users themselves, such as text, pictures and video*
Targeted advertising
based on analysis of
private conversations
Source: Google, my own Yahoo Mailbox. * BEREC’s guidelines on EU Net Neutrality implementation
Observatorio Industria 4.0 | 2016 | Page 82market asymmetries
EU Net Neutrality Regulation
…, between specific content, applications or services there should be no
discrimination*
+45%
engagement
based on pure
relevance
rather than
Google own
ranks
By concept Google’s
Pagerank algorithm ranks
content, ie., not all
content is equal
…, and Google skews
search results which give
Source: Digital Trends, RT, Harvard Business School. * BEREC’s guidelines on EU Net Neutrality implementation own services priority
Observatorio Industria 4.0 | 2016 | Page 83market asymmetries
EU Net Neutrality Regulation
…, between specific content, applications or services there should be no
slowing down*
Google will now favor
pages that use its fast-
loading tech
X4
times
faster
load
Source: Wired. * BEREC’s guidelines on EU Net Neutrality implementation
Observatorio Industria 4.0 | 2016 | Page 84market asymmetries
EU Net Neutrality Regulation
…, between specific content, applications or services there should be no
blocking*
Facebook has quietly
developed software to
suppress posts from
appearing in people’s
news feeds
(The NYT)
Source: Facebook. * BEREC’s guidelines on EU Net Neutrality implementation
Observatorio Industria 4.0 | 2016 | Page 85market asymmetries
EU Net Neutrality Regulation
…, [NN] exceptions are limited to: traffic management to comply with a legal
order, to ensure security*
Source: WhatsApp. * BEREC’s guidelines on EU Net Neutrality implementation
Observatorio Industria 4.0 | 2016 | Page 87Towards a level playing field Observatorio Industria 4.0 | 2016 | Page 88
Towards a level playing field
• …, is a concept about fairness, not
that each player has an equal
chance to succeed, but that they
all play by the same set of rules
o In a game such as rugby, one team
would have an unfair advantage if
the field had a slope. Since some
real-life playing fields do in fact
have slopes, it is customary for
teams to swap ends of the playing
field at half time
• A metaphorical playing field is said
to be level if no external
interference affects the ability of
the players to compete fairly
Source: Wikipedia
Observatorio Industria 4.0 | 2016 | Page 90Towards a level playing field
OTTs in the market place
OTTs Operators
• Do not pay network costs but derive large • Have lessor scope for revenues (flat rating) and
revenues (sale of databases to brands or higher costs associated with network investment
sponsorships) • Have traffic consumption that is out of line with the
• Increasing in number and an offer taking up greater reality of use and beyond expectation;
bandwidth • Generate value for the production of national
• Do not contribute to the national creativity policy content, (contributing to audio-visual development)
(giving value predominantly to international
content)
Not
so new ?
Pacific Telegraph Act of 1860
(US federal law passed to subsidize a telegraph line):
…, messages received from any individual, company, or corporation, or from any telegraph lines connecting with this line at either of its termini,
shall be impartially transmitted in order of their reception excepting that the dispatches of the government shall have priority (…)
Observatorio Industria 4.0 | 2016 | Page 91Towards a level playing field
A more balanced framework
OTTs Operators
• Do not pay network costs but derive large • Have lessor scope for revenues (flat rating) and
revenues (sale of databases to brands or higher costs associated with network investment
sponsorships)
Limited •
Nat./reg./local value
Have traffic consumption that is out of line with the
• national/regional/local
Increasing in number and an offer taking up greater creation
reality of use and beyond &
expectation;
bandwidth contribution • Generate value for the production of national
employment/taxes
• Do not contribute to the national creativity policy content, (contributing to audio-visual development)
(giving value predominantly to international
content)
• Communication functions are routinely included • All OTTs’ services – as well as services
into digital services (on-line gaming, social provided by telcos – being similar from the end-
networks, e-commerce, CRM, e-administration, users point of view, should be subject to the
voice or video services) Fair same horizontal consumer protection rules
competition
Future proof framework
Same services need to fall under the same rules
… end-to-end quality, emergency call functionality or any-to-any connectivity based on phone numbers are crucial when choosing services
Specific rules for communication services, where necessary, should be applied independently from the nature of the
provider but based on the characteristics of the service
Observatorio Industria 4.0 | 2016 | Page 92Towards a level playing field
Future-proof EU framework will have to review current NN
rules
Digital Single Market
Better access for Innovative services and Enhance the growth
consumers and advanced digital potential of the digital
businesses networks economy
• Unlock the potential of e- • Digital Content Initiative • Digitizing European
comm. o AVMSD update Industry
o Ending unjustified geo- o Assessment of online o Coordination EU/Nat
blocking platforms Regulation initiatives
o Consumer trust by • Cybersecurity PPP o Mobilize €50 billion PP
harmonized rules • Telecom review: investment
• Copyright modernization encouraging investment • European Cloud Initiative
and better access to in connectivity • ICT Standards to ensure
digital content by: interop. & facilitate uptake:
• Enabling cross-border 5G, Cloud, IoT, Data Techs,
portability Cybersecurity
• E-Government Action
Plan
Yet to come: Yet to come: Yet to come:
VAT modernization E-Privacy Review Data Economy initiative
IPRED review
Observatorio Industria 4.0 | 2016 | Page 93Towards a level playing field
Current NN rules will have to be reviewed according to ECC
objectives
Connectivity package:
Connectivity package:
Reforms, programs,
Strategic Objectives for 2025
initiatives
1. All main socio-economic drivers should 1. New European Electronic
have access to extremely high - Communication Code (ECC)
gigabit– connectivity and BEREC regulation to help
2. All urban areas and major roads and build future networks
railways should have uninterrupted 2. The 5G action plan to foster
5G coverage and 5G should be European Industrial leadership
commercially available in at least one 3. WiFI4EU (targeted voucher
major city in each EU Member scheme)
State by 2020
3. All European households, rural or
urban, should have access to
connectivity offering a download speed
of at least 100 Mbps
Observatorio Industria 4.0 | 2016 | Page 95Towards a level playing field
A dynamic discussion
• 5 Nov 2016. Forty U.S. Internet companies, including Amazon,
Facebook, Google, and Twitter, have sent a letter to President-elect
Donald Trump with a list of policy priorities, under the banner of the
Internet Association
• Some of the proposals might align with Trump's priorities, such as 'easing
regulation on the sharing economy, lowering taxes on profits made from
intellectual property, and applying pressure on Europe to not erect too
many barriers.' Others might clash with Trump's vision, such as
maintaining net neutrality rules
• 'Donald Trump's presidential election victory has increased the
chances that President Barack Obama's landmark net-neutrality
rules could be rolled back'
• 'Trump transition team picks regulation foe as telecom point man'
• 'Trump Could Spell Big Trouble for Broadband, Net Neutrality'
Source: Press clippings
Observatorio Industria 4.0 | 2016 | Page 97Wrap-up Observatorio Industria 4.0 | 2016 | Page 99
Wrap-up
some Myths and realities (1/2)
Layer Conclusion Myth
Infrastructure • Access policies are insufficient to spur ultra-broadband Concentrated markets
network investment always hurt the
• PPP are necessary to sustain growth in higher layers above consumer
bare infrastructure
• Regulation can distort., eg. incentivizing short term
technologies
• Structural remedies are excessively rigid and extremely
difficult to manage (eg., UK, Canada)
Logic • NN can hardly achieve some of the objectives it is • The ‘more’ neutral,
supposed to address the better
• NN depends on a careful cost and benefit analysis, non on • NN promotes
ideological positions diversity in terms of
contents and apps
Source: Andrea Renda. CEPS
Observatorio Industria 4.0 | 2016 | Page 100Wrap-up
some Myths and realities (2/2)
Layer Conclusion Myth
Platforms • Responsible cooperation with platforms may be the Best Online platforms
regulatory approach • stifle innovations and
• Competition regulation has to be carefully adapted to prohibit the entrance
economic and Business dynamics of digital platforms of other players
• ignore ‘niche’
contents
User • Internet ecosystem depends more on its e2e architecture, • Users want a ‘neutral’
stimulating freedom tan on being ‘neutral’ network
• Users benefit of a balanced regulatory framework: all layers • Early standardization
have to be considered to provide an unique user experience is always good
• Users are willing to trade-off some privacy for innovative
and value-added services
Source: Andrea Renda. CEPS
Observatorio Industria 4.0 | 2016 | Page 101Wrap-up
As NN is a highly biased,
passionate and even ideological
debate on an extremely complex
issue (technical, economic,
societal and legal)
…, we need an informed
discussion to ensure that the very
principles of NN are guaranteed:
ensure that the internet
ecosystem can continue to
flourish as an engine of
innovation and freedom of
expression
Observatorio Industria 4.0 | 2016 | Page 102You can also read
