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Why a 'sender pays' Internet would be utterly wrong

Posted By TelecomTV One , 08 November 2012 | 2 Comments | (0)
Tags: net neutrality ITU WCIT Internet ETNO

ETNO's proposals to the ITU for Internet regulation and non-neutrality are flawed and duplicitous. By Dean Bubley.

The following is a condensed version of telecoms consultant Dean Bubley of Disruptive Analysis blog on ETNO's (the European Telecommunications Network Operator's body) controversial "sending network pays" and other proposals submitted for consideration at next month's WCIT (World Conference on International Telecommunications) convened by the ITU (see - US delegation prepares to play Whack-a-Mole at ITU meet). This meeting will consider introducing a new set of ITRs (International Telecommunications Regulations) covering Internet business models, cyber-crime, data protection and privacy and Internet security. But the most contentious of the proposals, spearheaded by ETNO, are apparently designed to reverse what many regard as the critical underpinning of the Internet itself - the almost sacred principle of settlement-free peering.  Instead of the network of networks driving itself forward by exchanging connections and therefore expanding capacity (see - Settlement-free peering: why the Internet prospers because of, not despite, it) the ETNO proposals would introduce traffic-counting in the form of "sending network pays" settlements between networks. The scene is set for a battle-royal next month in Dubai. 

My contention is that ETNO is being duplicitous and that its proposals are flawed, ignorant and dangerous to the Internet, telecoms and the wider global economy. I believe that the hidden agenda is to perpetuate legacy telecom-industry business models, and to inhibit consumer choice, despite claiming the exact opposite.
My hope is that ITU delegates at the upcoming WCIT conference in Dubai see through this organisation's transparent lobbying, get past the hypocritical soundbites, and recognise the true implications of what is being promoted and kick it firmly into touch.
Firstly, it is important to recognise that ETNO persists in promoting a "them and us" philosophy, dividing the world between so-called "OTTs" and telcos, ignoring the 130+ Telco-OTT initiatives and other evidence to suggest that they are (or should be) all mutual peers. It apparently seeks to maintain the 100-year legacy of access/service integration. Such a polarising view, while making good headlines, is woefully inaccurate. It also propounds the very old-fashioned view that the telecoms industry is only made up of "services" based on "subscriptions", rather than applications, features and functions with a multiplicity of business models.
Over recent months, I have engaged with Luigi Gambardella, the outspoken head of the European Telecom Network Operators' association, ETNO, primarily via Twitter. He is currently on a mission to persuade the ITU to change its regulatory stance on the Internet, ostensibly in the name of creating a "level playing field" or to enable a "sustainable Internet value chain". Other terms that often crop up involve applying a telecom-style model of "cascading payments" to the Internet, and enshrining some form of "sender pays" principle.
A good example of our exchanges is here. It's worth going through it (use the "read next page" buttons) to get a feeling for the style of discussion. When pushed on precisely which "rules" or which "we" he's referring to (eg access vs.
services side of telcos' businesses), he typically fails to give coherent answers.
My professional opinion is that many of ETNO's proposals need to be ignored - and to understand why, regulators and ministers need to understand much better how the Internet and applications work - and more widely, how the telecoms industry will likely function in the future.
Much of ETNO's argument concerns a rather vague concept of open and unregulated "commercial agreements" between multiple parties in the Internet value chain. While in principle, it is clearly good to have more flexibility in terms of connectivity and application business models, there need to be safeguards where significant asymmetry exists. There also needs to be an awareness of the consumer benefits of the current Internet model, and ensure that those are not threatened.
What is entirely absent from ETNO's proposition is a clear distinction between "public Internet access" and other managed Internet-like access services. As I have argued in the past - and as Ofcom and European regulatory bodies have recognised, there is clear blue water between what users perceive as the "open Internet" (ie neutral), and other broadband services, which include differentially QoS-managed offers such as carrier VoIP, IPTV, eHealth, smart metering and so on which do not transit the public Internet. 
It is absolutely critical that ITU and WCIT enshrine that difference in global telecoms regulation, and that the current shape of the Internet value chain, accessed via public Internet access services is not mistakenly conflated with other broadband connectivity and services. In most countries it is still up to the individual operator whether or not to offer Internet access: it is not forced to, except in Finland where it is now a human right. The important factor here is that Internet users buy access, not end-to-end "quality".
Despite the telecom industry's heritage and vendor rhetoric, it appears that end-users are much less concerned with quality and ubiquity than has previously been assumed.  
The success - and economic and social contributions - of the Internet to date suggests that this "best effort" and net-neutral model is valuable and important to protect. That does not preclude "other" non-Internet broadband services being offered on a QoS-managed basis, and indeed there are many attempts to create the necessary platforms to do so. It is also wrong to conflate "middle mile" technologies such as CDNs with access neutrality. It has also been possible for certain app/content providers to offer "differential quality" simply by buying more/bigger servers, or better access connections from those servers to the public Internet in their data centres. They also have differential quality through use of better codecs or application design. That is entirely different to active discrimination by the user's own access provider in the network.
The fear is that the ETNO proposals for ITU WCIT will be implicit inhibitors of this type of innovation in future. Certain providers may be more capable of paying for quality than others (eg startups), while operators may choose to offer enhanced quality on a discriminatory basis. It is incumbent on all regulators to do thorough due diligence on the likely impact and implications and come to their own decisions.
This is much-reduced version of Dean's blog - he goes on to enumerate in full detail why the ETNO proposals are wrong. Read the full blog here 
See also below. Our 2009 programme on why Telcos might go over the top themselves. 

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(1) 08 November 2012 19:55:18 by Roy Mira

Data traffic leaving an OTT site over its pipe to the Operator, can, through typical global addressing, streaming setups, bit torrent and other Internet technologies, multiply itself and literally explode into data storms so as to clog the operator’s net and impact other Internet users of other services, all of this well away from the OTT initial output pipe. Who’s to pay for the Operator network expansion needed to preserve the quality of all its services, and negatively affected by this new data paradigm introduced by the OTT's? Certainly not the consumers who don’t use the OTT. So, should it be, (a)the customers of the OTT service (by paying higher access rates to the Operator?!...) , or (b) the OTT provider , or (c) the Operator itself, which now has to gracefully eat the expansion cost as charity to the OTT?

(2) 15 November 2012 15:50:00 by Michael Elling

Both arguments are flawed, because they fail to account for how the internet originated and developed. The flat rate dial-up pricing model in the US in the mid to late 1980s was a direct result of "horizontalization" and competition of the WAN. This reactive pricing model on the part of the vertically integrated monopolies along with the bill and keep of the relatively narrowband, store and forward packet/internet world of the late 1980s/early 1990s fostered the notion of "free". The reality today is that nothing is free and the bill and keep model of the internet is not sustainable, nor is the overpriced vertically integrated telecom model. To foster new service creation and relate layer 7 to layer 1 a balanced settlement system needs to evolve most likely out of a series or horizontally oriented "exchange" models that efficiently and effectively "clear" traffic and provide incentives for new service creation and infrastructure investment. The result will be rapid network effects and recoupment of rapidly obsoleting technology at every layer of the stack. The vertically integrated telcos are fighting a losing battled in yesterday's war, while the current internet players are resisting an inevitable future because bill and keep suits their own monopolistic tendencies and blocks new entrants.