not another presentation on net neutrality · net neutrality*: a couple of definitions sources:...
TRANSCRIPT
Not another presentation
on net neutrality
Iván Rejón & Alfonso Aguado
Strategy, Marketing & Com
Observatorio Industria 4.0 | 2016 | Page 3
Ericsson at a glance
39,000
23,700
66,000
2.5 billion
1 billion
180
116,000
Subscribers
managed by us
Subscribers
supported by us
Services professionals Employees
Countries with customers
R&D Employees
Patents
In R&D
247 B. SEK Net Sales
32,8 B. SEK
NETWORKS
Create one network for
a million different needs
IT
Achieve business agility
with transformative IT
MEDIA
Delight the TV
consumer every day
INDUSTRIES
Connect industries for
business acceleration
Full year 2015 figures
Observatorio Industria 4.0 | 2016 | Page 4
Ericsson at a glance: 140 years OF INNOVATIONBorn in a garage?
Sources: Google
Observatorio Industria 4.0 | 2016 | Page 5
Ericsson at a glance: 140 years OF INNOVATION…, we were also born in a garage 140 yr ago
Sources: Google
Observatorio Industria 4.0 | 2016 | Page 6
…, and we invented:
Observatorio Industria 4.0 | 2016 | Page 7
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 8
INDEX
A complex & controversial
topic
Observatorio Industria 4.0 | 2016 | Page 9
OLD stuff? The concept predates the current debate
Sources: Wikipedia. * Pacific Telegraph Act of 1860
…, existing since the age of the telegraph. In
1860, a US federal law* was 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 the order of their reception, excepting that the dispatches of the government shall have priority ...
In 1888, A. B. Strowger, suspecting his loss of
business was caused by a telephone operator
redirecting his business calls to a competitor,
invented a switch
that effectively removed human interference of
telephone calls
Observatorio Industria 4.0 | 2016 | Page 10
+3,560,000 results on Net neutrality on the web
Sources: Google
Observatorio Industria 4.0 | 2016 | Page 11
…, highly biased, passionate
Sourc
es: G
oogle
Observatorio Industria 4.0 | 2016 | Page 12
…, and ideological discussions
Sourc
es: G
oogle
Observatorio Industria 4.0 | 2016 | Page 13
Sources: Slideshare; Martin Geddes
• Stochastic
• Emergent
• Random(ness)
• (Non)Deterministic
• Semantics
• Probabilistic
• Statistical Multiplex(ing)
•
•
•
•
•
•
•
Neutral(ity)
Discrimination
Throttling
Priorit(isation)
Violation
QoS
Speed
Meaningless & vague Meaningful & scientific
Not based on rational & scientific grounds
Observatorio Industria 4.0 | 2016 | Page 15
Net neutrality*: a couple of definitions
Sources: Wikipedia, BEREC
is the principle that ISPs and governments
regulating the Internet should treat all data on the
Internet the same, not discriminating or charging
differentially by user, content, website, platform,
application, type of attached equipment, or mode
of communication.
(Wikipedia. *Coined by Columbia University media law professor
Tim Wu in 2003)
refers to a debate about the way that ISPs
manage the ‘traffic’ carried on their networks when
data is requested by broadband subscribers**
from providers of content, applications or services
as well as when traffic is exchanged between end-
users.
The best effort internet is about the equal treatment of
data traffic being transmitted over the internet, no matter
what it contains, which application transmits the data,
where it comes from or where it goes.
(BEREC 2016, * 'end-users' under EU law)
Observatorio Industria 4.0 | 2016 | Page 16
Sourc
es: G
oogle
…, but different flavors
• Discrimination in limited
conditions, eg. preventing
spam, malware, or illegal
content ensuring privacy
and security (CL),
exceptions for congestion,
security, spam, or legal
reasons (NL)
• Reasonable (and
transparent) trade-offs
between the requirements
of different applications
(eg., low latency and low
jitter: voice and RT video),
rather than neutral
transmissions regardless
of applications
• Paid-prioritization of
bandwidth / sponsored
data agreements can
induce optimal user
welfare
• Enforcement based on
other laws, eg., anti-
competitive practices,
'commercially
reasonable' practices
Sources: Wikipedia
Full neutralityDiscrimination based
on type of data
Individual prioritization
without throttling or
blocking
No direct enforcement
‘Strong’‘Weak’
Observatorio Industria 4.0 | 2016 | Page 17
…, intertwined with other complex issues, contaminating the debate
Privacy and confidentiality
Competition
Accessibility and universal serviceInteroperability
Consumer protection
Security and emergency services
Portability
Copyright
Information freedom
Observatorio Industria 4.0 | 2016 | Page 18
…, 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 19
De-constructing Net neutrality
Observatorio Industria 4.0 | 2016 | Page 22
PACE OF CHANGE
1875 20001975
10
30
15 yr
50 b connected devices
25 yr
5 b connected people
100 yr
1 b connected places
20
40
Con
ne
ctio
ns (
b)
2020Source: Ericsson
Observatorio Industria 4.0 | 2016 | Page 23
Exponential pace of disruption
Source: BCG,
Techcrunch, Wikipedia
0
Mobile phone
Telephone
WWW
iTunes
Apple App Store
Candy Crush
Pokémon Go 25 days
1 yr, 3 m
2 yr, 2 m
2 yr, 4 m
3 yr, 4 m
4 yr, 6 m
6 yr, 5 m
7 yr, 5 m
16 yr
75yr
July, 6th 2016
2012
2008
2010
2009
2004
2003
1990
1979
1878
Time to reach 100 million users
Observatorio Industria 4.0 | 2016 | Page 27
1991: Total Cost $3054.82
2015: Smartphone $299.00
Combinatorial -new propositions
Observatorio Industria 4.0 | 2016 | Page 29
Combinatorial -New corporate leaders
Source: The Economist, Statista, * as of August, 1st
The Age of Tech: Market cap of the most valuable companies
Observatorio Industria 4.0 | 2016 | Page 30
Combinatorial -New corporate leaders tech BEASTS
Source: The Economist, Statista, * as of August, 1st
The Age of Tech Beasts
Observatorio Industria 4.0 | 2016 | Page 36
Source: CNMC. Orange includes Jazztel from Q3 2015. Movistar includes DTS from Q2 2015.
Vodafone includes Ono from Q3 2014
A ‘new normal’In Spain the market has destroyed €9,7 b in the last six years
2009 2010 2011 2012 2013 2014 2015e
+12%
+6%
-6%
-7%
Jazztel
Ono
Yoigo
Orange
Vodafone
Movistar
CAGR
DTS
-5,2
Revenues (€ b)
35,0
25,4
-8,9
8,0
14,0
-10%
+8,1%%
-19,8%
-9,5%
CAGR
EBITDA (€ b)
2009 201220112010 201420132008
Source: AMETIC
Observatorio Industria 4.0 | 2016 | Page 38
New patterns• Eg. #1: explosion of
MBB traffic
• Eg. #2: shift from fixed to mobile viewing, from linear TV to streaming
New demands• Eg. #1: from a
fragmented offering to convergent bundles
• Eg. #1 improve coverage to be captured
• Eg. #2 differentiate app coverage
• Eg. #3 poor digital experiences lead to frustration and erode NPS
New expectation
A ‘new normal’In four acts
New attitudes• Eg. #1: emergence of
new segments
• Eg. #2: important reduction of piracy
Observatorio Industria 4.0 | 2016 | Page 39
A ‘new normal’New patterns. 1) traffic explosion
Monthly mobile consumption
Monthly mobile traffic
47%CAGR
2 GB 18 GB
1 EB 6.7 EB
2016 2021
X9Growth
200
300
400
500
600
700
800
900
1000
200
5200
10200
15200
20200
25200
30200
35200
40200
45200
Q4 2012 Q4 2013 Q4 2014 Q4 2015
x2
Monthly traffic per connection
Source: CNMC, Ericsson Mobility Report, Cisco
Fixed (MB)
0
Mobile (MB)
x1.5
0
2014 2019
4% 10%
Mobile traffic as % of total IP traffic
X2.5Share
Observatorio Industria 4.0 | 2016 | Page 40
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
0%
25%
50%
75%
100%
2010 2011 2012 2013 2014 2015
TV Desktop Laptop Smartphone Tablet
TV
& Desktop
Smartphone,
tablet & Laptop
41% think it is very
important to watch their TV and Video content wherever
they are
~65%watch TV & video
on their smartphones,
increase of >135% since 2012
Source: Ericsson ConsumerLab
Weekly TV/video viewing time, per device
A ‘new normal’New patterns. 2) from fixed to mobile media experience
Observatorio Industria 4.0 | 2016 | Page 41
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)
Source: Ericsson ConsumerLab
% of people watching different media at least once per day
A ‘new normal’New patterns. 2) from linear to streaming video consumption
>50%watch streamed
on-demand
each day
up from >30%
in 2010
Scheduled linear TV
Recorded linear TV
0%
25%
50%
75%
100%
2010 2011 2012 2013 2014 2015
Streamed on demand video
(YouTube, short clips, movies,
TV series and programs)
Observatorio Industria 4.0 | 2016 | Page 42
A ‘new normal’New demands. 1) from a fragmented offering to convergent bundles
0
1
2
3
4
5
6
7
8
9
10
Q12012
Q32012
Q12013
Q32013
Q12014
Q32014
Q12015
Q32015
2P
3P
4P
5P
Source: CNMC
Opportunities &
Challenges
› Content rights
› Data monetization, beyond
pure connectivity (eg.,
games, alarms, etc.)
› Superior customer
experience
› Simplification and
operational efficiency
Number of packaged services, by type
Observatorio Industria 4.0 | 2016 | Page 43
A ‘New Normal’New attitudes. 1) emergence of new market segments
Source: Ericsson ConsumerLab
0%
25%
50%
75%
100%
16-19 20-24 25-34 35-44 45-59 60-69
Scheduled linear TV
Recorded linear TV
Streamed on demand video
(YouTube, short clips, movies,
TV series and programs)
BASE: Population aged 16-69 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]
% of people watching different
media, per age
Source: Ericsson ConsumerLab
BASE: Population aged 16-59 with broadband at home who watch any type of TV/Video at least weekly in Spain
% of total TV-time by age group,
per device
0%
25%
50%
75%
100%
16-19 20-24 25-34 35-44 45-59
TV Desktop Laptop Smartphone Tablet
TV screen
& Desktop
Smartphone,
tablet & laptop
65%
of all TV/video
viewing hrs spent on
a mobile device
screen among
teenagers
8 out of 10 teenagers
watch streamed
content, compared to
2 out of 10 aged 60-
69
Observatorio Industria 4.0 | 2016 | Page 44
Source: Ericsson
Base: Spanish on-demand (streaming & downloading content) users (948 users out of 1000)
% of users of streaming and on demand services
(2011 vs. 2015)
Some factors
› Availability of a diverse
and differential offering
› Competition of OTT
services (pure and
hybrids)
› Competition between
CSPs: quality, price
1416
252522
10
1918
752
3229
9
452
Ora
nge
TV
Ja
zzb
ox
Vo
da
fon
e
Vid
eoclu
b
Ca
na
l+ Y
om
bi
Mo
vis
tar
Vid
eo
clu
b
Pirate
P2P
Pira
te
str
ea
min
g
Mi T
ele
A3
Pla
ye
r
We
b
TV
5/C
ua
tro
96
Yo
uT
ub
e
We
b R
TV
E
842011
2015 55 pp.
A ‘new normal’New attitudes. 2) pirates of last resort?
Observatorio Industria 4.0 | 2016 | Page 46
App 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
half when moving from
outdoor to indoorSource: Ericsson ConsumerLab,
Base: Smartphone users in Brazil, India, Japan, South Korea, the UK and the US
Percentage of smartphone users who have
stopped using apps due to bad coverage
A ‘new normal’New expectations. 2) from ‘coverage’ to app coverage
Observatorio Industria 4.0 | 2016 | Page 48
A ‘new normal’New expectations. 3) poor digital experiences leads to frustration and erode NPS
Mobile delays comparable to
watching a horror movie
1= Max
0
0.8
0.6
0.4
0.2
.., heart rate
increases 38%
+38%
If mobile videos take > 2s to
load, NPS may drop by at
least 4 points
No
delays
Delays
+4.5
-4
Impact on NPS
Source: Ericsson ConsumerLab
Observatorio Industria 4.0 | 2016 | Page 50
Source: Press clippings, OpenSignal
‘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)
Spain: #1 in the EU in terms of
fiber subscribers
A ‘new normal’…, while fostering the deployment of high performance NGNs
Observatorio Industria 4.0 | 2016 | Page 53
New
consumption
patterns
Decoupling
between
revenues and
traffic
Customer &
Brand
experience,
Simplicity
Platforms,
Disruptive
models
Agility, Talent, ...
..., other players
better satisfy new
demands
..., the telco
industry has
entered a non-
profit zone
..., digital
platforms capture
a
disproportionate
share of value
..., the binominal
brand – service is
the new
engagement
driver
..., successful
competition
requires new
capabilities
change
#1
change
#2
change
#3
change
#4
change
#5
A ‘new normal’The telco-ecosystem faces some structural changes that torpedo their traditional business model
Observatorio Industria 4.0 | 2016 | Page 54
A ‘new normal’The decoupling between revenues, CapEx and traffic growth
50
60
70
80
90
100
110
120
0
25,000
30,000
35,000
40,000
15,000
20,000
10,000
5,000
201320112010 2012 2014 20162015 20192017 2018 2020 2021
Telco revenues (left)
Telco CapEx (left)
Monthly data traffic (right)
100
100
Revenue, CapEx and traffic growth (2010=100)
Source: Ericsson, Ovum
69
54
34,300
Observatorio Industria 4.0 | 2016 | Page 55
Arthur D. Little
Key competitors variables
No operator can justify
continuing to invest if it cannot
foresee acceptable return on
capital: Vodafone+Ono, Orange
and Yoigo have ROCE well below
cost of capital (10-12%)
A ‘new normal’…, compromising their viability
Observatorio Industria 4.0 | 2016 | Page 57
A ‘new normal’A profitability puzzle: the example of US
Source: PPI
1. AT&T -16.7%
2. Verizon -14.4%
3. Exxon Mobil -44.1%
4. ETE +74.2%
5. Chevron -42.6%
6. Walmart -9.7%
7. Alphabet -8.8%
8. Comcast +28.0%
9. Exelon +79.5%
10. Duke Energy +41.4%
Change in CapEx in H1 2016
Top 10 Investment Heroes
1. Telecom/Cable 48.1
2. Energy production/Mining 33.8
3. Internet/Technology 30.8
4. Utility/Energy Distribution 27.5
5. Transportation 15.3
6. Automotive/Industrial 12.9
7. Retail 8.5
Total 176.9
High Investment Sectors
(2015, $ b)
1. AT&T 18.7 2. Verizon 16.6 3. Exxon Mobil 11.04. ETE 9.4 5. Chevron 8.6 6. Walmart 8.5 7. Alphabet 8.4 8. Comcast 8.4 9. Exelon 7.6 10. Duke Energy 6.6 11. Apple 6.4 12. American Airlines 6.2 13. Phillips 66 5.7 14. Microsoft 5.6 15. Amazon.com 5.5 16. GM 5.4 17. ConocoPhillips 5.1 18. Intel 4.819. Union Pacific 4.7 20. FedEx 4.5 21. Time Warner 4.4 22. Ford 4.0 23. EPP 3.8 24. GE 3.5 25. Freeport 3.4
Raking by company
(2015, $ b)
‘Investment Heroes’ because
their capital spending is
helping raise productivity
and wages across the
country(PPI)
…, it seems possible that
the prospect of continued
regulatory upheavals is
influencing capital
investment (PPI)
Observatorio Industria 4.0 | 2016 | Page 58
Source: Visio Mobile
$1.3 b (2011)
Appleapp store cost
$9.5 b (2011)Developers investment
How Apple uses developers to drive external investment
$233 b (2015)
iOS device sales
We run the App Store just
a little over breakeven
Peter Oppenheimer, Apple
CFO 7x
25x
A ‘new normal’Platform business model economics are far superior
Observatorio Industria 4.0 | 2016 | Page 59
Source: Statista, NetmarketShare, eMarketer
A ‘new normal’…, but lead to quasi monopolies
Global Mobile OS
market share
(Q2 2016)
Other
IOS
86%
Android
1%
13%
Global Mobile
search market share
(Q3 2016)
Bing
Yahoo94%
Other
Baidu
4%
US video visits
market share
(Q3 2016)
US mobile ad revenue
market share
(Q3 2016)
8%
Bing
Hulu
Netflix
Other
Youtube
77%
19%Yahoo
TwitterFacebook
Other
32%
Observatorio Industria 4.0 | 2016 | Page 61
[ Tim Wu. Feb. 2003 ]
• Design principle/'Neutral
platform'
• Last mile
• Right of users to access
content, services, applications
of their choice
• Operator should not interfere
with users’ use but can 'police
what they own'
• A hard rule only if necessary (ok
if operators uphold the principle
on their own)
Regulation & the basicsNet neutrality Trojan Horse
[ 1700s ] Ben Franklin reorganizes
postal service to operate as
a common carrier
[ 1800s ] Telegraph regulated as
common carrier
[ Late 1800s ] Telephone regulated as
common carrier
[ 1934 ] Telephone Carrier regulation
transferred to FCC
[ 1966 ] Computer Inquiries Initiated
[ Late 1990s ] Open Access Proceedings
Network Neutrality,
Broadband
Discrimination.
Journal of
Telecommunications
and High Technology
Law, Vol. 2, p. 141,
2003
Observatorio Industria 4.0 | 2016 | Page 62
US/ FCC’s Internet Policy Statement
2005• BB users are entitled to run Web
apps/services of their choice & connect
their choice of legal devices to the
network
US/ FCC’s 2010 open internet rules• Basic rules: transparency, no blocking
and no unreasonable discrimination.
• For mobile broadband providers, the no
blocking rule applied only to the blocking
of lawful websites, or applications that
competed with mobile operators’ voice or
video telephony services. The no
discrimination rule applied only to fixed
providers
Regulation & the basics It all began in 1999 – last millennium…
Cable ‘walled garden’ fears
• Mergers: cable TV/broadband
companies
• AT&T/MediaOne and
AOL/TimeWarner
24 May, 1999. AOL, WorldCom and other
Internet companies
• …, urged federal authorities to bar cable
operators striking exclusive deals on
high-speed Internet service
• Internet providers want to be sure that
consumers will enjoy the same open
access to their services via cable
networks that they now have over phone
lines,...'
.
Observatorio Industria 4.0 | 2016 | Page 63
Regulation & the basics Legislation & ‘Economy'
Do States regulate private infrastructures ?
Private property is the
ownership, control, employment,
ability to dispose of, and
bequeath land and other forms
of property by persons and
privately-owned firms
Digital technology, if
unshackled from ownership
restrictions and payment
requirements is a powerful
means for creating a more
egalitarian society
What
prevails ?
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 66
Regulation & the basicsNet Neutrality in USA
[Open Internet Order] Feb. 2015Protecting and Promoting the Open Internet, GN Docket
No. 14-28, Report & Order on Remand, Declaratory
Ruling, and Order, 30 FCC Rcd. 5601 (2015)
The FCC’s order does not regulate Internet
interconnection, but it reserves the right to intervene on
a case-by-case basis
No Blocking: [Internet Service Providers ('ISPs')] shall not block
lawful content, applications, services, or non-harmful devices, subject
to reasonable network management.13
No throttling: [ISPs] shall not impair or degrade lawful Internet traffic
on the basis of Internet content, application, or service, or use of a
non-harmful device, subject to reasonable network management.14
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 67
Regulation & the basics Regulatory approach in EU
Commission
Non-binding
Declaration
Dec 2009
Commission
Non-intervention
Communication
Apr 2011
Commission
Non-binding
Recommendation
May 2012
From …Objective Non intervention Light-touch
EU (28/27)
Binding
TSM regulation
Nov 2015
…, toRegulation
Commissioner Kroes spoke
out against anti-competitive
blocking/throttling of internet
traffic on May 30, 2013
Telecoms Single Market
(TSM) Regulation entered
into force on Nov 29, 2015
End-users should be able
to access and distribute
information, or run apps/
services of their choice
Annex to the EU 2009
regulatory framework for
electronic communications
Recognized the need for
traffic management. End
user's experience is not
disrupted by congestion
Time to see how EU 2009
regulatory framework
works in practice
BEREC/Com. Report:
20% of mobile internet
users face restrictions in
their ability to access VoIP
Recommendation to
improve transparency for
end users
Observatorio Industria 4.0 | 2016 | Page 68
Regulation & the basics Net neutrality in EU
• 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
[Regulation 2015/2120] Nov. 2015Regulation 2015/2120 of the European Parliament
and of the Council of 25 November 2015 Laying
Down Measures Concerning Open Internet Access
and Amending Directive 2002/22/EC on
Universal Service and Users’ Rights Relating to
Electronic Communications Networks and
Services and Regulation (EU) No 531/2012 on
Roaming on Public Mobile Communications
Networks Within the Union, 2015 O.J. (L 310) 1
• All end-users have the right to access and distribute legal content,
applications and services of their choice
• Providers of internet access services are required to treat all traffic equally
• Reasonable traffic management is allowed. Providers may use measures
based on objective technical requirements, not commercial considerations
• Blocking or throttling is allowed. Only to block illegal content, counter a
cyber attack or deal with exceptional or temporary traffic congestion
• Services optimized for specific content is allowed. Agreements on services
optimized for specific content will be allowed where necessary, but providers
will have to ensure the general quality of internet access services. Examples:
managed IPTV and high-definition video conferencing
• 'Zero-rating' practices are not explicitly banned. Will have to be assessed
by the NRAs on a case-by-case basis to establish harm to end-users before
they can be prohibited
Next steps:Review of the Regulation: by April 30, 2019 and
every four years thereafter
(*) 14 Oct 2016 : The Dutch Parliament has adopted a revised net neutrality law
Observatorio Industria 4.0 | 2016 | Page 69
Regulation & the basics Net neutrality in EU
(*) 14 Oct 2016 : The Dutch Parliament has adopted a revised net neutrality law
Is NN directly imposed in all member states?
What happens with existing national NN
provisions?
Is it clear what is expected ISPs?
Yes …, the Regulation 2015/2120
applies directly. Member
states do not have to
transpose it into national law
Member states
should withdraw, by
Dec 31, 2016 …, any national regulation,
that does not comply with the
Regulation 2015/2120
No.
Leaves a lot of scope
for interpretation…, BEREC, 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 70
Regulation & the basics Net neutrality in Spain
LegislationNo 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 actionsSecretary of State for Information Society and
Digital Agenda (SETSI). Monitoring of the QoS in
the sector, and specific aspects such as internet
speed and other parameters Quarterly reports monitoring the quality of F and M
electronic communications services with the objectives of
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
Players and actionsNational Authority for markets and Competition
(CNMC). Input for the annual implementation
reports - deadline for CNMC to report to BEREC
and the Commission: Jun 30, 2017BEREC guidelines for NRAs implementing the Telecoms Single
Market Regulation (TSM) net neutrality provisions entered into
force by Aug 30, 2016
Observatorio Industria 4.0 | 2016 | Page 74
Source: AT Kearney
market asymmetriesThe fact-based narrative
In the Digital value chain, …
…, (1) telcos capture about
36% of the B2C business
…, (2) but growth has migrated to
Content, Online Services
…, (3) while the Online Services and
User Interface segments show much
higher market concentration
…, (4) and capture a
disproportionate share of the value
Observatorio Industria 4.0 | 2016 | Page 80
Market asymmetriesThe gatekeepers
Services and contents Infrastructures Interfaces
Observatorio Industria 4.0 | 2016 | Page 81
market asymmetriesNN does not properly address critical asymmetries
Privacy and confidentiality of conversations
Accessibility and universal service
Interoperability
Portability Customer careSecurity and emergency
services
Source: Telefonica
Observatorio Industria 4.0 | 2016 | Page 82
market asymmetriesEU Net Neutrality Regulation..., ensure that ISPs do not monitor specific content provided by the end-users themselves, such as text, pictures and video*
Source: Google, my own Yahoo Mailbox. * BEREC’s guidelines on EU Net Neutrality implementation
Targeted advertising
based on analysis of
private conversations
Observatorio Industria 4.0 | 2016 | Page 83
market asymmetriesEU Net Neutrality Regulation…, between specific content, applications or services there should be nodiscrimination*
Source: Digital Trends, RT, Harvard Business School. * BEREC’s guidelines on EU Net Neutrality implementation
By concept Google’s
Pagerank algorithm ranks
content, ie., not all
content is equal
…, and Google skews
search results which give
own services priority
+45% engagement
based on pure
relevance
rather than
Google own
ranks
Observatorio Industria 4.0 | 2016 | Page 84
market asymmetriesEU Net Neutrality Regulation…, between specific content, applications or services there should be noslowing down*
Source: Wired. * BEREC’s guidelines on EU Net Neutrality implementation
Google will now favor
pages that use its fast-
loading tech
X4
times
faster
load
Observatorio Industria 4.0 | 2016 | Page 85
market asymmetriesEU Net Neutrality Regulation…, between specific content, applications or services there should be noblocking*
Source: Facebook. * BEREC’s guidelines on EU Net Neutrality implementation
Facebook has quietly
developed software to
suppress posts from
appearing in people’s
news feeds (The NYT)
Observatorio Industria 4.0 | 2016 | Page 87
market asymmetriesEU 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 88
Towards a level playing field
Observatorio Industria 4.0 | 2016 | Page 90
Source: Wikipedia
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
Observatorio Industria 4.0 | 2016 | Page 91
Not
so new ?
Towards a level playing fieldOTTs in the market place
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 (…)
OTTs• Do not pay network costs but derive large
revenues (sale of databases to brands or
sponsorships)
• Increasing in number and an offer taking up greater
bandwidth
• Do not contribute to the national creativity policy
(giving value predominantly to international
content)
Operators• Have lessor scope for revenues (flat rating) and
higher costs associated with network investment
• Have traffic consumption that is out of line with the
reality of use and beyond expectation;
• Generate value for the production of national
content, (contributing to audio-visual development)
Observatorio Industria 4.0 | 2016 | Page 92
OTTs• Do not pay network costs but derive large
revenues (sale of databases to brands or
sponsorships)
• Increasing in number and an offer taking up greater
bandwidth
• Do not contribute to the national creativity policy
(giving value predominantly to international
content)
Operators• Have lessor scope for revenues (flat rating) and
higher costs associated with network investment
• Have traffic consumption that is out of line with the
reality of use and beyond expectation;
• Generate value for the production of national
content, (contributing to audio-visual development)
Fair
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
Towards a level playing fieldA more balanced framework
• All OTTs’ services – as well as services
provided by telcos – being similar from the end-
users point of view, should be subject to the
same horizontal consumer protection rules
• Communication functions are routinely included
into digital services (on-line gaming, social
networks, e-commerce, CRM, e-administration,
voice or video services)
Limited
national/regional/local
contribution
Nat./reg./local value
creation &
employment/taxes
Observatorio Industria 4.0 | 2016 | Page 93
Better access for
consumers and
businesses
Digital Single Market
Innovative services and
advanced digital
networks
Enhance the growth
potential of the digital
economy
• Unlock the potential of e-
comm.o Ending unjustified geo-
blocking
o Consumer trust by
harmonized rules
• Copyright modernization
and better access to
digital content by:• Enabling cross-border
portability
• Digital Content Initiativeo AVMSD update
o Assessment of online
platforms
• Cybersecurity PPP
• Telecom review:
encouraging investment
in connectivity
• Digitizing European
Industry o Coordination EU/Nat
Regulation initiatives
oMobilize €50 billion PP
investment
• European Cloud Initiative
• ICT Standards to ensure
interop. & facilitate uptake:
5G, Cloud, IoT, Data Techs,
Cybersecurity
• E-Government Action
Plan
Yet to come:
VAT modernization
IPRED review
Yet to come:
E-Privacy Review
Yet to come:
Data Economy initiative
Towards a level playing fieldFuture-proof EU framework will have to review current NN rules
Observatorio Industria 4.0 | 2016 | Page 95
Connectivity package:
Strategic Objectives for 2025
Towards a level playing fieldCurrent NN rules will have to be reviewed according to ECC objectives
Connectivity package:
Reforms, programs,
initiatives
1. All main socio-economic drivers should
have access to extremely high -
gigabit– connectivity
2. All urban areas and major roads and
railways should have uninterrupted
5G coverage and 5G should be
commercially available in at least one
major city in each EU Member
State by 2020
3. All European households, rural or
urban, should have access to
connectivity offering a download speed
of at least 100 Mbps
1. New European Electronic
Communication Code (ECC)
and BEREC regulation to help
build future networks
2. The 5G action plan to foster
European Industrial leadership
3. WiFI4EU (targeted voucher
scheme)
Observatorio Industria 4.0 | 2016 | Page 97
• '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'
• 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
Towards a level playing fieldA dynamic discussion
Source: Press clippings
Observatorio Industria 4.0 | 2016 | Page 99
Wrap-up
Observatorio Industria 4.0 | 2016 | Page 100
Wrap-upsome Myths and realities (1/2)
Layer Conclusion Myth
Infrastructure • Access policies are insufficient to spur ultra-broadband
network investment
• PPP are necessary to sustain growth in higher layers above
bare infrastructure
• Regulation can distort., eg. incentivizing short term
technologies
• Structural remedies are excessively rigid and extremely
difficult to manage (eg., UK, Canada)
Concentrated markets
always hurt the
consumer
Logic • NN can hardly achieve some of the objectives it is
supposed to address
• NN depends on a careful cost and benefit analysis, non on
ideological positions
• The ‘more’ neutral,
the better
• NN promotes
diversity in terms of
contents and apps
Source: Andrea Renda. CEPS
Observatorio Industria 4.0 | 2016 | Page 101
Wrap-upsome Myths and realities (2/2)
Source: Andrea Renda. CEPS
Layer Conclusion Myth
Platforms • Responsible cooperation with platforms may be the Best
regulatory approach
• Competition regulation has to be carefully adapted to
economic and Business dynamics of digital platforms
Online platforms
• stifle innovations and
prohibit the entrance
of other players
• ignore ‘niche’
contents
User • Internet ecosystem depends more on its e2e architecture,
stimulating freedom tan on being ‘neutral’
• Users benefit of a balanced regulatory framework: all layers
have to be considered to provide an unique user experience
• Users are willing to trade-off some privacy for innovative
and value-added services
• Users want a ‘neutral’
network
• Early standardization
is always good
Observatorio Industria 4.0 | 2016 | Page 102
Wrap-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