Tuesday, March 31, 2015

Net neutrality... so what?


[...] 
In the US, on February 26, days before the mobile world congress, the Federal Communications Commission released a declaratory ruling on “protecting and promoting the open internet”. The reclassification of fixed and mobile network services under title II telecom services by the FCC means in substance that network operators will be prevented from blocking, throttling, and prioritizing traffic and will have to be transparent in the way their traffic management rules are applied.  This is essentially due to an earlier ruling from the DC circuit Verizon v. FCC that struck down FCC’s rules against blocking and traffic discrimination but remarked that “broadband providers represent a threat to Internet openness and could act in ways that would ultimately inhibit the speed and extent of future broadband deployment.”

It is a great issue that broadband providers in this case are exclusively network operators, and not OTT providers, who have, in my mind the same capacity and have a similar track record in that matter. The FCC tried to provide “more broadband, better broadband and open broadband” and in its haste has singled out one party of the ecosystem, essentially condemning network operators to a utility model. This nearsightedness is unlikely to continue as several companies have already decided to challenge it. Less than a month after its publication, the order is being challenged in court by the United States Telecom Association, a lobbying group representing the broadband and wireless network operators as well as Alamo, broadband provider in Louisiana. There is no doubt that legal proceedings will occupy and fatten lawyers on both sides for years to come.

In Europe, the net neutrality debate is also far from being settled. After the European Commission seemed to take a no throttling, no blocking no prioritization stance in its “Digital single market” initiative, network operators, throughout their lobbying arm ETNO (European Telecommunications Network Operators’ association) started to challenge these provisions at the country level. Since the European Commission has not yet passed a law on the subject, the likeliness of a strong net neutrality stance will depend on support from each nation. In November 2014, compromises in the form of “non-discriminatory and proportionate” plans were discussed. The result is that net neutrality is still very much a moving target, with a lot of efforts being expanded to enable a managed internet experience, with a fast and a best effort lane. The language and ideas surrounding net neutrality is very vague suggesting either a great lack of technical expertise or a reluctance to provide an enforceable guidance (or both). It is more likely that countries at their individual level will start passing law to regulate some aspects of traffic management until a consensus is found at the European level.


In conclusion, there is obviously much debate over net neutrality globally, with many emotional, commercial, technical implications. There is at this stage no evidence of any regulatory authority having a good grasp of both the technical and commercial realities today to make a fair and enforceable ruling. As a result, politics, public sentiments, lobbying and lawyers will dictate the law for the next 5 years. In the meantime, it is likely that loopholes will be found and that collaborative approaches will show a lucrative business model that is likely to make the whole debate obsolete.

More analysis on traffic encryption, mobile advertising, data, video, mobile and media trends in  "Mobile video monetization 2015". 

Wednesday, March 18, 2015

OTT as MVNO… or MNOs



This is an excerpt from my latest report "Video monetization 2015" .

OTT providers on their side might have some slightly different plans and views from mobile network operators. Most of them have built a business predominantly digital, based on internet-based delivery and had had to navigate the intricacies of creating an ecosystem (content creation, aggregation, distribution,…) and a business model (free, freemium, ad sponsored, hybrid, subscription, sponsored…) for the internet. 

This effort has resulted in partnerships and value chains, where content delivery is a little part of the value and when third parties like CDN can’t provide suitable or economical service levels, they are replaced by homegrown solutions, as illustrated by Netflix and Google’s caching strategy.

As a result, I believe that Google’s SVP products Sundar Pichai’s announcement at mobile world congress 2015 is likely to be a sea change. The company has decided to put rumors of becoming an MVNO to bed by integrating vertically the value chain one step further. The company will launch a MVNO service in the US, probably on Sprint and/or T-Mobile networks, blending cellular and wi-fi coverage. It starts to look increasingly like the dystopian future described here.

It is very likely that Google being who they are, will be looking at extending their services to mobile in a very different fashion than a mobile network operator. One can muse that in all likeliness, a Google subscriber (!?) with an Android device on YouTube or G+ is unlikely to pay for minutes of voice or Megabytes of data. It is likely that this first attempt to translate the very basics of mobile network economics into an ad sponsored model will have a very disruptive and durable effect on the whole value chain.

If you remember, this is not the only initiative that Google has with mobile networks. Since 2013, the company has been exploring the possibility to build and operate wireless networks in Southeast Asia and sub-Saharan Africa. If you put this with the recent announcement that Telstra in Australia, Vodafone in New Zealand and Telefonica in South America have all agreed to participate in live trials of the Loon project, it is likely that Google will look at being increasingly involve in cellular networks. The project now supports LTE and balloons can stay up for about 6 months. 

Driving the nail farther in operator’s coffins, Mark Zuckergerg at the same show was advocating for Facebook’s initiative internet.org that is promoting free mobile internet access in emerging countries. The rationale here is that free internet promotes usage, which promotes engagement, which promotes new revenues. Current experiments in Millicom Paraguay or Tanzania, saw increases of data users by the tune of 30% and 10x increase in smartphone sales.


All in all, OTT providers have fundamentally different view of services and value different things than mobile network operators. The reconciliation of these views and the emergence of a new coherent business model will be painful but necessary.

More on the subject, as well as strategies from OTT and mobile network operators to monetize video in "Video monetization 2015".