Means and Ends toward the Broadband Society: Net Neutrality and Over-the-top Players
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Transcript of Means and Ends toward the Broadband Society: Net Neutrality and Over-the-top Players
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Means and Ends toward the Broadband SocietyNet Neutrality and Over-the-top Players
Toshiya JITSUZUMI, D.Sc.,Kyushu University
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015)
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 2
Purpose and agenda The purpose and conclusion:
- to reconsider what Prof. Wu suggested in his
famous 2003 paper.
◦ A strict net neutrality principle is not optimal
and should be relaxed to accommodate the
local needs of individual markets and reflect
their developmental stages.
◦ Net neutrality is a means not an end.
Agenda
1. Means and Ends
2. Case of developing nations
3. Case of developed nations
4. Conclusion
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 3
What Prof. Wu said in 2003 is….. Network neutrality, as shorthand for a system of belief about innovation policy, is the end, while open access and broadband discrimination are the means (Wu 2003, p.144)
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 4
Means and Ends The goal of telecom regulators is to maximize social welfare by means of broadband development.◦ Many governments have been improving their nations’ broadband
environments because broadband is widely believed to be a precondition for economic prosperity and social progress.
Indeed, in the Open Internet Order, the FCC says that ◦ “The open Internet drives the American economy and serves, every
day, as a critical tool for America’s citizens to conduct commerce, communicate, educate, entertain, and engage in the world around them.” (para.1)
Because there are a variety of policy tools to improve broadband environment and depending on the development stage of individual nation, priority among each tool must be adjusted accordingly.
Case of developing nationsT. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 5
"IMF Developing Countries Map 2014" by BernardoTe - Own work. Licensed under CC BY-SA 3.0 via Commons - https://commons.wikimedia.org/wiki/File:IMF_Developing_Countries_Map_2014.png#/media/File:IMF_Developing_Countries_Map_2014.png
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 6
Priority for developing nations’ telecom policy
In the early stage of ICT development, increasing broadband coverage and penetration as well as closing national and transnational digital gaps are the most important telecom policy objectives.
20052006
20072008
20092010
20112012
20132014
20150
10
20
30
40
50
60
70
80
90 Individuals using the Internet
per 100 inhabitants
DevelopedDevelopingWorld
20052006
20072008
20092010
20112012
20132014
20150
10
20
30
40
50
60
70
80
90
100 Mobile BB per 100 inhabitants
DevelopedDevelopingWorld
20052006
20072008
20092010
20112012
20132014
20150
5
10
15
20
25
30
35 Fixed BB per 100 inhabitants
DevelopedDevelopingWorld
Source: Created based on the ITU database
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 7
The reason behind this divide One main reason for this divide is differences in income levels.
◦ Zhang (2013) showed that GDP per capita has a positive correlation with the speed of Internet diffusion.
◦ Andrés, et al. (2010) empirically discovered that, when considering network effect for the period 1990–2004, “low- and high-income countries clearly in different phases of the process of Internet adoption” (p.335).
◦ As for fixed broadband penetration, using data related to OECD countries, Lin and Wu (2013) found that income, education, and the variety of Internet content can facilitate broadband adoption in the innovator and early adopter stage.
In summary, although ICT development has reduced the cost of Internet and broadband usage every year, for people in developing nations, broadband remains a luxury.
But it is also plausible that Internet adoption, especially broadband adoption, is an essential means for economic development and higher income.
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 8
Expectations from the international society "Broadband networks offer perhaps the greatest opportunity we have ever had to make rapid and solid advances in global social and economic development – across all sectors, including healthcare, education, new job opportunities, transportation, agriculture, trade and government services.
In the twenty-first century, broadband networks therefore need to be considered as basic critical infrastructure, like roads, railways, water and power networks.”
Mr. Houlin Zhao, ITU Secretary-General
Source: http://www.itu.int/en/action/broadband/Pages/default.aspx
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 9
Some empirical findings using panel data sets Gruber et al. (2014)
◦ This paper found that the overall future benefits in broadband outweigh the investment costs for the European Union as a whole for the highest performance technologies and that same conclusion could hold also for the majority of member states individually. They further extrapolate the returns by country, suggesting a rationale for the governmental support for broadband development.
Koutroumpis (2009)◦ Using the data of 22 OECD during the period of 2002–2007, this paper found a significant causal positive
link especially when a critical mass of infrastructure is present.
Ng et al. (2013)◦ Using the panel data of 10 ASEAN countries from 1998 to 2011, this paper found that broadband
deployment has a positive relationship with economic growth.
Auriol and Fanfalone (2014) ◦ A three-fold increase in mobile broadband penetration in developing regions of the world will attain a B/C
ratio ranging from 14.41 to 21.74. This means that every dollar spent will generate between $14.41 and $21.74 to the society.
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 10
Positive feedback loop These findings suggest positive feedback loops: higher broadband penetration will increase the income level of a nation, which in turn facilitates further broadband penetration.
More broadband
Higher income
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 11
Different pictures when US data are usedHolt and Jamison (2009)◦ This paper could not conclude the connection between
information and communications technologies and economic growth from the US broadband experience.
Kandilov and Renkow (2010)◦ This paper found no evidence that loans received as part
of the current Broadband Loan Program provided by the USDA have had a measurable positive impact on recipient communities.
Whitacre, Gallardo, and Strover (2014) ◦ This paper suggested that high levels of broadband
boosted rural economy in the US, but broadband availability demonstrate only limited impacts.
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 12
There are several means for attaining such a policy goal.1. If the government is sufficiently rich, spending public money in order to deploy broadband to the
people is straightforward.◦ However, because governments in developing nations usually have additional policy concerns that
receive higher priority and because most of those governments lack investment money, traveling such a path is practically impossible.
2. Private players take the initiative.◦ However, relying on private initiatives may result in a suboptimal outcome because broadband
investment has positive externalities and leads to spillover benefits, as suggested by Gruber et al. (2014)
Priority for developing countries is then… Thus, the policy focus in developing countries must be o facilitate broadband usage as quickly as possible with the objective of generating the benefits of broadband through the positive feedback loop.
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 13
“Profitable project” vs. “unprofitable but worthwhile project”
Cost borne by a private
firm
Revenue captured by
a private firm
Cost borne by a private
firm
Revenue captured by
a private firm
Cost borne by a private
firm
Unprofitable project Profitable project Unprofitable but socially worthwhile project
Good Projects
Revenue captured by
a private firm
Positive Externality
orSpillover
Bad Projects
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 14
Complementary supports for the e-Japan Strategy The e-Japan Strategy released in 2001 successfully expanded broadband availability to 30 million households and fiber-to-the-home availability to 10 million households in less than three years, which is two years ahead of schedule.
2000 Interconnection rules for DSL services (i.e. unbundling, collocation)Subsidy for DSL expansion (1.85billion yen)
2001 Unbundling rules for fibersAmendment of the Telecommunications Business Act to introduce asymmetric regulation, Universal service fundEnlargement and Improvement of the Act on Temporary Measures concerning Telecommunications Infrastructure Improvement• Improvement of the subsidy conditions for rural area development• Expansion of the support coverage to include facilities related to DSL, FWA, and cable
InternetFinancial support for building the local intranet infrastructure
2002 Enactment of the Act on Broadcast on Telecommunications ServicesSubsidy for FTTH expansion (1billion yen)
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 15
The problem is money Developing nations, where broadband development is highly needed, usually do not have sufficient financial strength to offer stimulus packages to broadband operators or have other priorities.
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 16
Internet.org, an attempt to internalize externality In this circumstance, Internet.org and Google Free Zone should be considered as a private attempt to internalize positive externalities, without requiring spending of less well-off governments.◦ Because OTT firms are the most probable beneficiaries of
spillover benefits of the higher broadband penetration.
However, it is true that this is not a perfect scheme.◦ Most importantly, this scheme does not cover all the OTT
providers, because each of them has a different future business perspective.
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 17
But there remain issues around “neutrality”
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 18
Internet.org does have a positive side for developing nations But I still think this should be positively evaluated from the viewpoint of facilitating broadband development.◦ In this scheme, OTT providers are helping mobile
broadband operators’ marketing campaign by providing a simpler version of their services free of charge, in the hope of recovering such expenses in the future.
◦ Considering the aforementioned positive feedback loop, the net neutrality principle, which will ban this kind of management maneuvering by network operators, should be deprioritized.
Simplified ver. for Internet.org Standard version
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 19
Non-neutral mobile broadband in Japan
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 20
Case of developed nations"Gdpercapita" by Quandapanda - Own work.. Licensed under CC BY-SA 3.0 via Wikimedia Commons - https://commons.wikimedia.org/wiki/File:Gdpercapita.PNG#/media/File:Gdpercapita.PNG
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 21
As of Dec. 2014 The U.S. Japan OECD averageFixed BB per 100
DSLCableFiber
SatelliteFixed Wireless
Other
9.617.7
2.80.80.30.2
3.74.7
20.70.00.00.0
13.49.14.80.20.40.2
Mobile BB per 100Standard mobile
Dedicated mobile data
104.0NANA
124.196.028.1
81.3NANA
Source: Created based on the OECD Broadband statistics (http://www.oecd.org/sti/broadband/oecdbroadbandportal.htm)
Issues in these two nations
Source: http://static.guim.co.uk/sys-images/Money/Pix/pictures/2011/9/29/1317296416685/A-snail-on-a-ethernet-cab-006.jpg
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 22
A congestion problem with a little twist
Three reasons that market dynamism does not work and traditional transportation economics cannot be applied.
1. Internet backbone is a collective commons supported by many individual operators.
2. Prevalence of best-effort quality may inhibit network investment while causing no damage on ISPs if competition is insufficient.
3. There exists a serious information asymmetry concerning network QoS between ISPs and end users.
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 23
Twin problems in the developing nations
Low barriers to entry
High barriers to entry
Demand management
Capacity development
Short-term solution
Long-term solution
How to achieve efficient and fair traffic management in the dynamic condition?
How to calculate the optimal capacity and how to finance it?
Congestion control over the Internet backbone facing the exaflood of network demand
Controlled by vertically integrated network providers
Leverage into the neighboring market
How to discipline the behaviors of SMPs in the communication market?
Is it efficient?How to restrain the anti-competitive behaviors?
Control the monopolistic leverage of SMPs
ISPs
Network operators
UsersContent providers
Application providers
Natural monopoly
Unique business practices
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 24
US approach to the twin problems
2015 Open Internet Order
Merger review
Anti-trust law
Duopolistic fixed ISP market
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 25
Japanese approach to the twin problems
Self-regulation by ISPs
Interconnection rulesSMP Regulations
NTT Law
Anti-monopoly act
Competitive fixed ISP market
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 26
US approach vs. Japanese approach
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 27
Reason #1: Development of wireless technology
Fiber range
ADSL range
19921994
19961998
20002002
20042006
20082010
20122014
20161,000
10,000
100,000
1,000,000
10,000,000
100,000,000
1,000,000,000
Maximum download speed (bps)
Mobile PHS
2G 3G 3.5G
3.9G 4GSource: Created using data from NTT Docomo’s website and Wikipedia.
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%0
5
10
15
20
25
30
35
40
45
Share of users among respondents
Usag
e tim
e (m
in.) PC
Smartphone
Feature phoneTablet
Internet TV
Source: Created based on MIC data (2014b).
The BB market in Japan will become similar to that in the US.
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 28
The BB market in Japan will become similar to that in the US. Reason #2: Fiber wholesale of NTT East/West
Source: http://www.ntt.co.jp/news2014/1405eznv/ndyb140513d_01.html
NTT Docomo announced today that it will begin offering "docomo HikariTM," a superfast optical-fiber broadband service, combined with "docomo Hikari PackTM" bundled discounts with mobile subscribers.
… By integrating ISP, wired and wireless services, Docomo's one-stop service will simplify the subscription process and customer support.
Source: Press release by NTT Docomo (Jan. 29, 2015). https://www.nttdocomo.co.jp/english/info/media_center/pr/2015/0129_00.html
Virtual integration of NTT Docomo and NTT East/West
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 29
Fixed vs. Mobile
Dominant network operator in the fixed market
(NTT East, NTT West)
Dominant network operator in the mobile
market(NTT Docomo, KDDI,
Softbank)
In-houseISP function
Independent ISPGroup ISP
Fixed Broadband Mobile Broadband
Independent ISP
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 30
Possible outcome: Domination of BB by mobile carriers
Local Loop Unbundling (dark fiber, dry copper, and line-sharing)
Pre “3G and Fiber Wholesale”
Wholesale or Interconnection
Fixed BB
AccessWholesaler
Independent ISP
NTT East/West
PhysicalFacility
BroadbandAccess
ISPRetail
Service
Now
Fixed BBMobile BB
Mobile Operators
ISPMVNO
Service-based
Operator
Facility-basedOperator
ISP ISP
Service-based
Operator
Facility-basedOperator
NTT East/West
ISP
Near future
Fixed BB
Mobile BB
Mobile Operators
MVNO
Facility-basedOperator
NTT E/W
Service-based
Operator
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 31
Share of the Japanese mobile BB market (as of the end of Mar. 14)
mobile phone, grouped
mobile phone
mobile ISP, grouped
mobile ISP
0% 25% 50% 75% 100%
40.2%
42.5%
28.4%
28.1%
31.4%
29.4%
40.2%
40.4%
25.8%
25.8%
2.6%
2.6%
22.9%
22.6%
2.8%
2.9% NTT group
NTT Docomo
KDDI group
KDDI
UQ
Softbank group
Softbank
eAccess
Willcom
Wireless City Planning
Source : Created based on in MIC ( 2014 ) data
The future market share of the overall ISP market may look like this, if Internet usage becomes 100% mobile-based.
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 32
In order to deal with the traffic congestion… The focus of the problem is how to deal with the traffic congestion efficiently and mitigate the sluggishness of the broadband from the viewpoint of maximizing the consumers’ welfare.
The fact: Users do not consume bandwidth.
Enjoying applications and contents smoothly is what they are paying for. In that sense, stress-free connectivity is the most important factor.
Source: http://www.wica.intec.ugent.be/research/quality-of-experience
ISP side User side
Marginal Cost for Investment
Marginal Value of QoE improvementThe conclusion:
Maximizing end users’ utility or QoE is not necessarily equal to maximizing QoS.
Policymaker’s Judgement
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 33
Need for a new bottle Thus far, the net neutrality concept has been interpreted as an equal treatment of all packets transmitted over the Internet.
However, a fair treatment of all QoE for users is much more essential.
To ensure appropriate policy-making for telecom regulators in developed countries, a different concept other than “net neutrality” is required, or the concept should be reinterpreted.
Source: http://markmcmillion.com/new-wine-and-old-bottles/
The remaining problem is whether the current market system can find an efficient equilibrium under such a new policy requirement.
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 34
How can the market mechanism deal with QoE? Problems in the demand side
◦ Average users lack proper level of ICT literacy and therefore tend to end up with suboptimal broadband setups.
Results by Measurement Firm A
Measurement specification:Location of the server ………….Measurement method ……….Sample size ………….Sampling period/frequency ………….
QoS results:ISP α at Location A
Radio field intensity ………….Average downloading speed ○ ○ MbpsAverage uploading speed ○ ○ MbpsJitter max.○ ○ msPacket loss × × %Average latency □ □ ms
ISP β at Location A……….
Results by Firm B
Results by Firm C
Results by Firm D
QoSmeasurement.com(Website for measurement
comparison)
Easy-to-understand and personalized ISP recommendations are provided for ordinary end users.
ISP sommelier
Disclosed information from ISPsIndependent survey of clients’ Internet usage
Competition among ISP sommeliers
Detailed raw data are directlyprovided for professional users.
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 35
How can the market mechanism deal with QoE? Prerequisite of supply side
◦ Keep the market as competitive as possible, and◦ In order to provide appropriate QoS to build sufficiently-
tailored QoE, ISPs should prepare network access diversity as much as possible and provide enough variety of QoS.
◦ Because a naïve net neutrality principle may work against such diversification, which is a prerequisite for QoE maximization, we must relegate net neutrality to the backburner.
T. JITSUZUMI@ITS Regional Comference (LA, USA, Oct. 25-28, 2015) 36
Summary◦ Many governments have been improving their nations’ broadband environments since broadband
is widely believed to be a precondition for economic prosperity and social progress.◦ There are a variety of policy tools to improve broadband environment; and depending on the
development stage of individual nation, priority among each tool must be adjusted accordingly.◦ Net neutrality, which (in its most basic form) requires “equal” treatment for all Internet traffic,
should be considered merely a means of improving broadband rather than a stand-alone policy target.
◦ Thus, when this concept is not the most appropriate, it is best left on the backburner.◦ In the early stage, the policy focus must be to deploy broadband
networks as quickly as possible. The net neutrality principle, which may ban some management maneuvering by network operators, is best left on the backburner
◦ In later stage where consumer welfare and investment efficiency matter, a naïve net neutrality principle may work against more competition and thus counter-productive.
Thank you for your attention.