Not so neutral net neutrality?

Finnish MEP candidate Otso Kivekäs from the Greens recently compared the internet to road infrastructure. In his analogy, he said that removing net neutrality would be like allowing “the company that builds the highways to put different speed limits on different car brands: Audis could drive 100 [km/h] and all others 60 [km/h]. And everybody would pay the toll.”

If ISPs could discriminate as they wished and simply adjust the speed of different services, either according to the highest bidder or simply because of their own preferences (goodbye, Skype), this would surely be a great injustice to all internet users. A removal of net neutrality left completely unregulated is not ideal, to say the least. But let’s look at it from another perspective.

Wonder why Netflix, Google and Apple are such great supporters of this “consumer right”? Because 30 % of US internet traffic is used by Netflix, 15 % by YouTube and 2 % by iTunes, according to a study by Sandivine.  Still, these companies pay nothing for the infrastructure yet benefit from it immensely. It is not difficult to see why ISPs would seek to receive compensation from the two companies that use half of all bandwidth.

Sandivine: internet traffic statistics

Netflix and YouTube obviously top the charts because they are immensely popular services and because video uses a lot of data, especially full HD.

Now, using the road analogy once more, this is essentially a case where two companies fill up all the roads with their trucks and continue to be treated like regular commuters on their way to work.

An article from Financial Times also addressed this issue, and according to the editor, “net neutrality no longer works.”  FT applauded the FCC’s decision, expressing that “if customers are willing to pay more for a premium service, as they do with mobile phone contracts or business class travel, then they ought to have the right to do so.”

Business class travel is hardly a good analogy, as people already pay for faster internet subscriptions. Rather, one could take the road analogy one step further. There are a lot of rules which already dictate traffic in order to make it more effective: bike lanes, bus lanes, toll discounts for car pools, the obligation to give way to trams and so on.

What if internet traffic that serves the public interest could be given right of way? Setting aside the difficulty of defining the public interest for a moment, one could think of at least access to public documents and services to begin with. Services that eat up a disproportionate amount of all bandwidth (read: Netflix and YouTube), on the other hand, could then be “taxed” for their  excessive bandwidth use, a fee which would be earmarked for investment in new broadband infrastructure. Now, this might not be what the FCC (or FT) had in mind, but it is a conceivable alternative to net neutrality as we think of it today. Doesn’t positive net discrimination have a nice ring to it?

This would also prevent ISPs from using broadband infrastructure investment as their hobbyhorse excuse. Whenever proposals might make business more difficult (or less profitable) for ISPs, they always state that new regulation will slow down investment on broadband infrastructure (see here, here and here). The arguments are, of course,  just corporate BS, since in Europe broadband infrastructure has been highly dependent on tax money (roads anyone?). By combining so-called “premium access fees” with broadband investment, the ICT giants could help maintain the infrastructure they make their billions from.

 

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Big Data Dystopia pt 1: Banks and insurance companies converge

One of the more discussed developments in the field of media is that platforms are converging: tv companies are going online, telcos are providing streaming services, radio channels are becoming online media and so on. This convergence or “vertical integration” is of course challenging for law-makers and courts that have to apply antitrust laws to completely new cases.

Vertical vs horizontal integration:

Source: Wikipedia Commons / Martin Sauter

Technological developments in the communications industry are also affecting how other markets work. Let’s take the example of banks and insurance companies.

Insurance premiums are, somewhat simplified, based on calculating risk. In order to calculate what a person’s life insurance premium should cost,  factors like age, work and medical history are taken into account. These factors determine the probability of the insured falling ill or getting into an accident. The more detailed information on the insured’s life, the better.

Banks (and several app developers) are waking up to the fact that electronic payment means that it is possible to know a whole lot more about their customers than in the cash and check days. Consumers can click away and define every single purchase they make, be it clothing, food, home electronics or alcohol. A great service for the banks’ customers,  who can plan their home economy better than before and pinpoint where their salaries are going. Or as Pridmore and Zwich (2011, 273)  would have it, “[c]onsumers often happily participate in the personal information economy and the surveillance practices that underpin it. ”

In some countries, insurance companies and banks are converging – either insurance companies begin to provide banking services or banks buy insurance companies. This way customers can choose to buy their insurance and their bank services from the same provider – often at a better price. This is when it gets interesting.

The consolidation of banking and insurance data means that, theoretically, insurance companies could adjust insurance premiums according to the purchases being made by the same company’s banking clients. Failed to renew your gym membership, money spent on alcohol gone up two thirds? Several visits to the doctor in the past months? Perhaps the next insurance premium won’t be as affordable.

The question is, are the new banking services provided with the consumer in mind, or is this simply another way to solicit data from people in order to create business elsewhere? One thing is certain: insurance actuaries would love to have access to that data.

References

Pridmore, Jason and Detlev Zwick. 2011. Editorial: Marketing and the Rise of Commercial Consumer Surveillance. Surveillance & Society 8(3): 269-277.

 

Fair use and the removal of data roaming charges

The Connected Continent Regulation was widely celebrated as a victory for net neutrality and data roaming Europeans. Although credited for removing data roaming charges across Europe, the actual proposal for a regulation did no such thing. For most people (and MEPs especially), the removal of roaming charges is a very welcome initiative, but if it sounds too good to be true, it probably is:

Article 6a
Abolition of retail roaming charges
With effect from 15 December 2015, roaming providers shall not levy any surcharge in comparison to the charges for mobile communications services at domestic level on roaming customers in any Member States for any regulated roaming call made or received, for any regulated roaming SMS/MMS message sent and for any regulated data roaming services used, nor any general charge to enable the terminal equipment or service to be used abroad.

Yes, roaming charges will be  removed, but the concept of “fair usage” is added instead. Article 6b of the new proposal states the following:

1.  By way of derogation from article 6a, and to prevent anomalous or abusive usage of retail roaming services, roaming providers may apply a ‘fair use clause’ to the consumption of regulated retail roaming services provided at the applicable domestic price level, by reference to fair use criteria. 

What are these fair use criteria then? No one knows.  The Body of European Regulators for Electronic Communications (BEREC) will lay down some “guiding principles” for how they should be applied by the end of this year, but this will probably not affect pricing significantly.

Why is the removal of roaming charges, a development which would benefit consumers all over Europe, so hard? What are the problems associated with removing data roaming charges?

The short version: because the telecommunications industry doesn’t like it.

The long version:

1. Mobility is uneven.

Certain telecom networks would be put under much more stress than others. For example, France is one of the most visited countries in the world in terms of tourists. This means that French telcos would be put under much more stress than telcos in less-visited countries. If no restrictions apply, people would probably use their phones as much as  at home.

2. Pricing is uneven.

In Finland, TeliaSonera offers 10 GB of data and free roaming in the Nordic countries as well as the Baltic countries for 20€/month at a speed of 21 mbps. In Sweden, TeliaSonera offers 10 GB of data at full 4G for 599 SEK (70€) but only inside Sweden’s borders. Same company, completely different price level. This means that if the telecommunications market were truly single, telcos would have to compete on a European level – same prices everywhere. According to market logic, this would drive prices down.

Critics of the proposal to remove all charges say that such a development would likely drive prices up nationally especially in smaller countries, since the telecoms would have to find new sources of income.  But if the market were truly single, there would be no such thing as “national markets” and thus a telco from France could offer their services to Swedish citizens.

3. Roaming is profitable.

According to a study by Informa Telecoms & Media, European companies made $19.7 billion in roaming fees in 2013. Few telcos would like to see that cash cow go.