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Forget Fast Lanes. The R... Tech News and Analysis
Forget Fast Lanes. The R... Tech News and Analysis
engaging in price discrimination and threatening net neutrality. The practice should be banned in U.S.
and Europe.
photo: PeterPhoto123/Shutterstock
According to Digital Fuel Monitor data, eight incumbent telcos are sabotaging net neutrality with an
orchestrated launch of zero-rated apps over their mobile networks in nine European Union markets.
This means theyre favoring their own or their over-the-top partners apps by zero-rating the data
volume not counting it against the end users data volume allowance.
In the U.S., AT&T has flirted with zero-rating with its Sponsored Data, which lets developers and
brands pay [http://gigaom.com/2014/01/06/att-launches-sponsored-data-inviting-content-providers-topay-consumers-mobile-data-bills/] to deliver content to consumer smartphones outside their data
caps. Earlier this week, AT&T announced a $500 million investment to create a video streaming
service similar to Netflix. Will AT&T zero-rate its video streaming app or let it compete on equal terms
with Netflix and the rest?
Zero-rated mobile traffic is blunt anti-competitive price discrimination designed to favor telcos own or
their partners apps while placing competing apps at a disadvantage. A zero-rated app is an offer
consumers cant refuse. If consumers choose a third-party app like Dropbox or Netflix, they will either
need to use it only over Wi-Fi use or pay telcos hundreds of dollars to use data over 4G networks on
their smartphones or tablets.
[http://gigaom2.files.wordpress.com/2014/04/shutterstock_110566613.jpg]
Photo by Bruce Rolff/Shutterstock
Mobile internet connectivity is different from fixed. Firstly, it requires the use of spectrum, which is a
scarce public resource. It is one thing if telcos zero-rate their IPTV app over their cables, but quite
another when they use a licensed, scarce public resource to foreclose the communication, media and
cloud storage markets.
Secondly, contrary to fixed-lines, internet over smartphones and tablets comes with very restrictive
volume caps in most markets. Moreover, in protected markets like the U.S. and Germany where
incumbent telcos face no challengers, the gigabyte price of open internet access is prohibitively
expensive. DFMonitor tracking data shows that U.S. and German consumers pay 25 times more per
smartphone GB than Finnish consumers. In Finland and the U.K., you can buy smartphone plans that
come with truly unlimited data (no tethering or any other application restrictions) for 20. In markets
like the U.S. and Germany, where open mobile internet gigabytes are excessively overpriced by all
telcos, zero-rating bandwidth intensive apps like video streaming is a game changer. Can consumers
watch HD movies on a 2GB monthly data allowance?
Zero-rated mobile traffic doesnt need to be delivered at higher speeds and with a higher quality of
service, nor does it need to be prioritized. The European Parliament must, on its second reading,
adopt provisions that explicitly prohibit the practice. The U.S. should not go down the slippery road
and allow the creation of a two-tier internet. Like the EU, it should ensure that fast lanes are not used
to the detriment of open internet access, and should ban zero-rating.
Antonios Drossos is a managing partner at Rewheel [http://www.rewheel.fi/], a Helsinki-based
boutique management consultancy specializing in pro-competitive telecom strategies. At Digital Fuel
Monitor [http://dfmonitor.eu/], Rewheel tracks prices, quality, adoption and consumption of open
mobile internet connectivity in EU and OECD countries.
Related research
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9 Comments
Fool
Saturday, April 26, 2014
Well, thats a new spin on two-tier Internet. All this weeping and gnashing of teeth just means that
companies that have depended on consumer subsidization for their business plans will actually have
to start INNOVATING in order to attract paying customers willing to pay the additional cost of
streaming their services.
In the US the FCC says it doesnt want the ISPs to give themselves unfair advantages over the big
companies that have, so far, gotten a free ride on the backs of consumers who havent been using
their services.
Pay-as-you go is the only fair way to pay for the Internets infrastructure.
Infostack
Sunday, April 27, 2014
nick
Sunday, April 27, 2014
Hey, the internet is a great thing for our citizens, it empowers them and educates them.
Unlike in Europe, in the USA with its federal system, state PUCs and regulatory commissions can play
a countervailing role vis-a-vis the FCC seek and destroy mission and should.
In California in the 80s, as the Reagan FCC was destroying the unitary national telecom network, our
CPUC and Legislature working together succeeded in repelling its attack, winning substantial
regulatory autonomy in the US Supreme Court. Thus we saved our states most unique and vital
infrastructure, its telecom network, from fracturing. Its since become one the contributors to Silicon
Valleys and Californias prominence dominance in high tech innovation and services as actual or de
facto home to Apple, IBM Google, eBay, Facebook, Wikipedia, Vidyo, PARC, SRI, two dozen great
universities, the media industry, and on and on plus it serves the needs of 35 million residents).
Faced with Wheelers duplicity, the states (including California, still the busiest and most telecomdependent economy in the world per capita) should challenge his FCC. Theres no doubt now that
the FCC is going to throw the game again. The FCCs allegiance will continue to be to the telecom
industry and not its business, government, and consumer customers the 95% rest of us. The
states should pick up the gauntlet and run with it, exercising their power in concert, right up to the US
Supreme Court if necessary. This is one of those times where states rights really matter.
Robert Jacobson, Ph.D.
Principal Policy Consultant
Telecom & Information Policy
Assembly Utilities & Commerce Committee
California Legislature, 1981-1989
Bob Jacobson
Sunday, April 27, 2014
Two edits:
Line 9. prominence and dominance
Line 10. IBM Almaden Laboratory, Google
The rest I stand by.
Infostack
Monday, April 28, 2014
Bob, arguably the 1983 divestiture (not an FCC, rather judicial act) was just the thing to sow the
seeds of competition in the WAN and turbo-charge the silicon revolution concentrated in CA. I
would argue that the CPUC (or any state) had little to do with it. Sorry, but network effect (aka
Metcalfes law) wins out all the time. Thats been proved out in the wireless, wired and application
markets.
Value is both concentrated and driven from the core; not the edge. Now that TCP/IP is the
dominant layer 3-4 standard, not sure what an individual state can do. The real power lies with
those that have achieved scale in the control and app layers (Apple, Google, FB, Netflix, etc).
Given the lack of north-south or east-west settlements to replace the byzantine rate-setting of past,
the FCC naively believes they are helping the balkanized edge access providers by pushing the
WAN/MAN demarc closer to the core and extending the moat around last mile layer 1-2 access.
mikegulett
Sunday, April 27, 2014
What about the millions of people around the world who cannot afford Internet access mobile or
wired?
Providing low cost, or free, access in exchange for the user accessing certain content providers (or
other businesses) is better than no access at all.
This would accelerate connecting the unconnected which is good for all.
MIke Gulett
FreeBand Technologies
Alicia Levine
Monday, April 28, 2014
I wrote an article about the impact of zero-rating applications like Facebook and Google in emerging
markets. Take a look here https://medium.com/tech-talk/7136fc3e5925
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