Fiberevolution

“The rich are getting gouged and poor are very often left out…”

Must see if you want to understand the reality of the US broadband market.

• Comments 0 Comments
• Categories Broadband, Regulation
• Author Benoît Felten

From Zing Broadband

• Comments 1 Comment
• Categories Broadband, Regulation
• Author Benoît Felten

The Old Till by Benoît Felten

Yesterday’s post was a bitch to write, so I hope you liked it.

Today I’m taking a rest (kind of) but posting something that ultimately relates very much to yesterday’s post and particularly the puzzlement about the “economic signal” argument used against free peering.

Cory Doctorow posted a column in the Guardian entitled “Just because something has value doesn’t mean it has a price“.

The obsession with squeezing monetary value out of every externality that might have value is exactly at the heart of the net neutrality debate: it’s not that the ISPs aren’t deriving fair value from their access business, it’s that they can’t sleep at night accepting that others are too and that they’re not getting paid for it.

It’s really well worth reading and helps me (at least) frame some responses to the argument put forward yesterday.

• Comments 0 Comments
• Categories Regulation
• Author Benoît Felten

Since the recent (and thankfully short lived) decision by Free to block Google’s advertising content for users of their set-top box, the French net (from government to activists) has been abuzz. Even the international tech press has commented on what looks from the outside like an emblematic struggle between an ISP and an OSP (See FastCompany’s French ISP Free Blocks All Web Advertising and the thoroughly researched pre-kerfuffle article on GigaOm YouTube sucks on French ISP Free, and French regulators want to know why).

Government condemnation of Free’s patent net neutrality violation has been mild, to say the least. Fleur Pellerin (French delegate minister in charge of small and medium businesses, innovation and digital economy) did state that Free’s “approach was not acceptable” (Free: Fleur Pellerin demande de mettre fin au blocage de la pub) but that “it is not illegal under French law” (Pellerin : «Free et les éditeurs vont trouver un compromis»). Over the last week-end she even stated that Xavier Niel (Free’s CEO) “asked the right question, a question that needed to be asked” (Blocage de la publicité: Niel a “posé la bonne question”, selon Pellerin).

So it was with some trepidation that I attended a round table at the ministry on Tuesday morning entitled ‘Neutralité de l’Internet’ (Internet Neutrality). A lot of people were in attendance, an interesting mix of greybeards (and future hairy greybeards) and suits. The round table was organised in two sessions with different speakers although to be fair there wasn’t really a clear underlying theme to each. I tweeted extensively, and you can find my tweets here and here. I’m going to try to pull the many threads of the discussions into a coherent whole, using the things I quoted in tweets as anchor points. Forgive me if I don’t fully succeed. One last thing: moderation was excellently handled by tech and economy journalists Solveig Godeluck and Guillaume de Calignon from Les Echos who managed to keep things moving despite too many speakers with too much to say!

The first session started with a somewhat technical explanation by Kave Salamatian of why Net Neutrality was a new issue, the thrust of the argument being essentially that it stems from the Internet’s nature as the first separated delivery network ie. one that isn’t medium specific. Questioned on the academic’s views on what was really happening in the networks, he made an elegant analogy to Plato’s Cave:

Salamatian: we have little quantitative info on #NN. It’s like Plato’s cave: we see the shadows & are left to figure out the truth #nnbercy

— fiberguy (@fiberguy) January 15, 2013

Agustin Diaz-Pines from OECD and Vesa Terava from the Electronic Communications Policy Directorate at the European Commission both presented some slides. Diaz-Pines insisted on the inherent efficiency of the current financial (or, as the case may be non-financial) mechanisms underlying internet connectivity while Terava showed the results of a recent Berec study highlighting the extend of throttling on ISP networks in Europe. Neither really offered solutions though (more was expected there from the EC, and the general feeling in the room was that they were yet again stating the obvious: that there are net neutrality violations in Europe…)

Things started heating up a little when French MPs started talking. Laure de la Raudière and Corinne Erhel spoke about the main results of a parliamentary investigation they published on the topic nearly two years ago. It was quite clear from Laure de la Raudière’s arguments that at a political level there’s a mix of very different threads that should (in my opinion) be unraveled for the debate to move forward. This is what I said in the heat of the moment:

In @lauredlr‘s speech I hear attachment to #NN, “freerider” argument and “Facebook pays no taxes” argument. Shouldn’t we unravel? #nnbercy

— fiberguy (@fiberguy) January 15, 2013

I thought MP Christian Paul‘s statements were much sharper in that respect. He started by stating that the dichotomy between managed services and “the rest” was dangerous:

Christian Paul (MP) warns against fragmentation of the ecosystem between managed services and low-fi “internet” services. #nnbercy

— fiberguy (@fiberguy) January 15, 2013

He then addressed the often heard argument of ISPs needing a contribution from OSPs (in France, the polite way of saying it is “a better share of the value accross the value chain”) by asking if we really believed that more revenues in today’s networks would mean more investment in tomorrow’s network:

Christian Paul : “Why would we think that better monetizing of today’s networks will finance tomorrow’s networks?” #nnbercy — fiberguy (@fiberguy) January 15, 2013

He didn’t lay it thick on that argument, but considering the French operators’ track record in FTTH so far, it’s certainly a potent argument. Finally he ended his short adlib intervention by stating that the emergency was to legislate on non-discrimination now:

Christian Paul: “As Free/Google showed, today it’s the law of the jungle. Thus non-discrimination needs to be framed in a law.” #nnbercy — fiberguy (@fiberguy) January 15, 2013

And indeed, this ties back to the minister using the argument that it’s not illegal to absolve Free in one of the above interviews. On that note the first panel came to a close with Corinne Erhel stating the important notion that relationships between players on the internet should not be reduced to the (often contentious) relations between the big guys:

Corinne Erhel: “Let’s not limit the debate to relationships between big ISPs & big OSPs. The magic of the net is in its diversity” #netneut — fiberguy (@fiberguy) January 15, 2013

Consensus from the first panel was that non-discrimination was an issue everyone was in agreement on and the sense from the MPs was that the government should legislate on that. The twitter feed (mostly in French), especially during the EC presentation was very much all “enough commissions and studies and reports and hearings, we all agree on this, let’s act”. The second panel was a little more fact oriented, if only for the participation of Benjamin Bayart, the head of FDN a small not for profit French ISP. Bayart is vocal, articulate and seems afraid of nothing. On the same panel was Octava Klaba, the CEO of OVH, the largest French hosting company (and one of the largest in the world). In a sense, while their participation was very welcome, it also highlighted the complete absence of representatives from large ISPs or the large OSPs on either panel. The first real numbers mentioned all morning came from Klaba (whose name I originally misspelt):

Octave Clavat (OVH): 50% of our peering is free. Above 20Gb/s of peering, ISPs start pressuring us to pay. #netneut — fiberguy (@fiberguy) January 15, 2013

One of the things he stated also that I was waiting for someone to express what the piddly little amounts that this whole debate revolves around:

Octave Klaba: “The amounts we’re talking about are not that big…” At last someone states the obvious… #netneut — fiberguy (@fiberguy) January 15, 2013

When Yves Le Mouël started talking, we were hoping for some action at last: as a representative of ISPs in France, he’s known for being pretty adamant in defending their positions. I don’t know if he felt cornered (which, to be fair, he probably was, both on the panel and in the audience) but he wasn’t very combative. He tried to explain that the whole discussion was not really about the money

Yves Le Mouel (FFT): “We do not seek (through the ‘economic signal’) to finance the networks. The amounts are not comparable. #netneut — fiberguy (@fiberguy) January 15, 2013

That in itself is interesting since that argument is repeatedly put forward by his members’ representatives. In fact he himself used that same argument a few minutes later stating that ISPs (more specifically network operators) represented 90% of the investment in the sector (and conveniently ommiting to mention how much of the revenue they represented) and as such deserved some solidarity. I wasn’t very convinced by that argument, to say the least:

Le Mouel: “ISPs need the solidarity of other players”. Should we weep for them too? #netneut — fiberguy (@fiberguy) January 15, 2013

The way he framed his argument though, probably paves the way for the way the government is framing theirs since a lot of his rhetoric was covered in the Minister’s speech a little later (sorry if I’m getting ahead of myself here). The core concept is that of an ‘economic signal’. When asked to explain exactly what that meant, how that signal was to be sent, to whom and what the results would be, Le Mouël was less than clear. What I could gather is essentially that because most of the peering does not lead to an exchange of actual money, it doesn’t send an inherent economic signal to the parties involved. And that’s wrong. As nebulous as that sounds, it seems to be the latest track that the steam train of legislative reform is on. Or rather regulatory oversight. Indeed, Le Mouël insisted that his members (ISPs) did not want a law, they just wanted to have the ability to appeal to the regulator (which, as I understand it they already can). Of course, he could not end by not stressing (quite subtly) that there’s an “us” vs “them” thing going on here. For full transparency, in the following tweetquote, the stuff in brackets is mine, not his:

Le Mouel: “There is an asymetry, both fiscal and regulatory between us (Big French ISPs) and them (Big US OSPs)”. #netneut — fiberguy (@fiberguy) January 15, 2013

In fact, Laure de la Raudière mentioned something about that recourse to the regulator a little earlier, she said:

@lauredlr: “It’s not necessarily reassuring that ARCEP was never asked by any party to arbitrate an #NN dispute…” #nnbercy — fiberguy (@fiberguy) January 15, 2013

ARCEP was on the second panel and seemed to take a relatively hands free approach, stating that they believed peering should be the result of commercial negociations and not regulation of legislative action. In a sense, that comment which came towards the end of the panel was a good summary of the panelists position. I’ll come back to what I think that means later, but the contrast with the minister’s speech which followed was striking. In that speech, she outlined again most of the arguments that had already been mentioned, strongly reaffirmed attachment to non-discrimination but argued for a more balanced share of revenues accross the value chain and expressed a (non-specific) need for an “economic signal”. In other words, she built the case for intervention… only to conclude that she would ask a commission to examine the issue. After that, there was a bit of a Q&A which I won’t bore you with, I’ll just quote a couple of statements from the panelists which I thought were both spot on and provocatively framed:

@bayartb :”When one deliberately deploys asymetric technology in the access, complaining about the asymetry of traffic is absurd!” #netneut — fiberguy (@fiberguy) January 15, 2013

Loïc Rivière: “End-users don’t buy broadband because they’re in love with copper but because they’re in love with Internet content” #netneut — fiberguy (@fiberguy) January 15, 2013

@bayartb: “Taxing evil US OSPs to finance good French ISPs will result in killing French start-up OSPs who can’t afford the taxes.” #netneut — fiberguy (@fiberguy) January 15, 2013

At the Q&A I raised two questions, one about asymetry and one about paid transit. The first one was aimed at Yves Le Mouël. I asked him if his members would be willing to pay the OSPs if the traffic flows reversed in a few years time when symmetrical access became the norm, as seen already in some Nordic countries. He hesitated and answered that his members would address that issue when the time came if it ever came.

My second question was to the minister who has been using the example in several interviews that Dailymotion paid for peering when Youtube didn’t and that wasn’t fair. I asked her if the fact that Dailymotion was the property of Orange might not make their example a little biased. She answered that the fact they were owned by Orange didn’t mean they didn’t peer with Free, SFR and other French players and therefore was neither here nor there. But then Octave Klaba took the microphone and made a statement that really stunned me:

Klaba: “Dailymotion does not pay for peering in France because they’re hidden behind Orange’s peering”. Contradicts the minister… #netneut

— fiberguy (@fiberguy) January 15, 2013

That tells me I need to investigate this, which I’ll do in the next few days. I don’t know which payment the minister is referring to (since none of this is public), or who is right, but I’d sure like to know.

My feeling at the end of the conference was as follows:

I don’t think the ISPs want to push for a law, or even any more interference from the government or the regulator in this matter. I think they’ve been painstakingly building the arguments for government to tolerate known breaches of net neutrality as long as they’re not too visible. Since the OSPs don’t want government intervention (but would support a non-discrimination law) it’s a deadlock. What’s completely polluting the debate is the tax issue. The French government, like other governments in Europe, is mightily pissed off at Facebook, Google, Amazon and others for not paying proper taxes in France through tax evasion. I think they’re right to be pissed off about this. But the ISPs are using that as an argument to justify their misbehaviour: it’s the nice French guys who dutifully pay their taxes vs. the evil American guys who don’t.

That political ire is tainting the debate, and that’s why the government wants to be seen to take it seriously while not acting really (at least that’s my interpretation). The consensus on non-discrimination is there, from all political sides and both greybeards and suits. But there won’t be a law anytime soon. Because in the eyes of the government, the quid pro quo has become: be dutiful tax-paying companies, OSPs, and then we’ll look into it. Of course they’d never admit that that’s how it’s now framed, but I strongly believe it is.

All the rest, “economic signals”, “traffic asymetry”, “network investment”, it’s all window-dressing, aimed at suggesting that there is a legitimate reason to examine all of these issues when in fact it weighs so little in the cost structure of the ISPs that it shouldn’t even be a point of interest for government.

That leaves me a little concerned. On the one hand, I think (I hope) it’s unlikely that the economy of traffic exchange will be affected by any government decision anytime soon. On the other hand, the evident sympathy that Free has garnered with the government by dropping their little bomb a fortnight ago is worrying. That my government – or in fact any government – would think that such an action need not be strongly condemned is a big concern. That they might further think that it’s a good way of framing the argument is even more preoccupying.

More than ever I believe that network neutrality needs to be protected. If it won’t be protected by law, it must be protected by citizens who understand what there is to lose if breaches are tolerated any further.

Photo Credit: Sylvain Courant photographies

• Comments 5 Comments
• Categories Access, Regulation, Services
• Author Benoît Felten

A couple of months back, the New Zealand Commerce Commission (the telecom regulator) announced that copper prices would be drastically reduced as the result of a switch in pricing methodologies from retail minus historically to cost based. As a consequence, the wholesale copper prices were due to go down from $NZ21 to $NZ9. One of the side effects of such a drastic drop in pricing was that the whole migration plan for ultra-fast broadband switchover, part of which relied on wholesale fiber access prices being lower than copper access prices for a much better performance were understandably in jeopardy. In fact it was one of the key risks we pointed in our report on the otherwise very smart New Zealand fiber transition model in our report Can the New Zealand NGA Model be Replicated?

Today, Prime Minister John Key proposed to overturn (or ignore, I don’t quite know what the appropriate term is) the Commerce Commission’s decision. This article from the New Zealand Herald (Key’s stance on the broadband decision gob-smacking) brings in some detail, as well as some very strong negative opinion on the decision. I have to say that, distant as I am from the theater of operations, my opinion on the matter is less clear-cut.

Obviously, over-ruling a theoretically independant regulator is never a good idea, it undermines a well-needed separation of powers and is certainly not something I’d condone on principle. As the NZ Herald article points out, the decision to switch from retail minus to cost was furthermore a government decision as part of the telecoms act of 2011.

Having said that, the fact that the regulator admitted to benchmarking only two international operations to establish its costing methodology (citing the lack of comparable projects as the reason for it) and the fact that the whole process was completely disjointed from the ultra-fast broadband migration makes me think that the result (of overturning the decision) is the right one.

So I’m torn. I really find the method distasteful, and it’s not like this couldn’t have been anticipated by government and regulator alike. But I absolutely think it’s crucial that wholesale copper prices be maintained higher than wholesale fiber prices. If you have a bit of time to read ahead of you, check out the Ventura / Portland Advisors study that argues that copper 15% higher than fiber should be the reference to ensure switchover.

In other words, a typical case of the right hand not talking to the left…

Photo: Auckland City by chuckbiscuito

• Comments 2 Comments
• Categories