The holy cow of net neutrality: Should Operators be the only ones feeling guilty about net neutrality and are we confusing net neutrality with tiered pricing?

holy cow of net neutrality and tiered pricing.jpg

This could be an interesting and controversial blog ..

It elaborates a question I asked at the LTE world summit event in Amsterdam where I was an analyst / speaker. BTW, The Informa LTE world summit event is fast becoming a must attend event in the Telco space globally. It brings the Operator community together but also the rest of the ecosystem thinking about the ‘Beyond 3G’ vision. And it was a great event!

I asked this question in the panel session Open Networks and Net Neutrality – Does it Prevent Operators from Developing a Subscriber Centric Pricing and Service Strategy?.

The panelists were: Kim Kyllesbech Larsen, EVP Technology Service & International Network Economics,T-Mobile International, The Netherlands; Jonathan Morgan, Senior Director, Product Marketing, Starent Networks, USA(now Cisco), Dimitris Mavrakis, Senior Analyst, Informa Telecoms & Media, UK, John Yeomans, Director, First Capital, UK and Jean Claude Perrin – Vice President of LTE at Gemalto

Essentially, my question was: Should Operators be the only people feeling guilty about net neutrality? and by extension – are we confusing tiered pricing with net neutrality?

Below is an extended version of my argument elaborating the question ..

The concept of Net Neutrality for Telecoms cannot be viewed in isolation ..

According to wikipedia: Network neutrality (also net neutrality, Internet neutrality) is a principle proposed for user access networks participating in the Internet that advocates no restrictions by Internet Service Providers or governments on content, sites, or platforms, on the kinds of equipment that may be attached, and on the modes of communication allowed, as well as communication that unreasonably degrades other traffic.

For most people, this is a valid definition ..

However, putting this in content, Net neutrality originates in context of the Web/Internet. And today, ironically we find that the Web players are violating the net neutrality principles.

Here are some examples:

If Twitter is a platform, then Twitter should be agnostic of services i.e. in a purest sense, Twitter should let OTHERS create services on its platform and should itself focus on creating the ideal/agnostic platform. However, we find that increasingly Twitter is getting into the services game – for instance in its acquisition of Tweetie. NY times says(and I agree)

Twitter, which has flourished thanks to tools built by outside developers, is taking more of those tools under its own wing. In a move that is sure to rattle its developers, Twitter has agreed to acquire Atebits, the start-up that makes the Tweetie apps for using Twitter on Mac computers and iPhones. The acquisition price was not disclosed. This signals a new strategy, as Twitter makes its first foray into providing a mobile and desktop client itself. On Friday, Twitter also announced that it helped Research In Motion build an official Twitter app for BlackBerrys.

Also consider the Facebook-Zynga episode(Zynga is makers of Farmville based on Facebook ) and Zynga almost came close to leaving Facebook and now the two have a five year truce. The issue centers around Face book credits(facebook’s currency) which FB wanted to push upon the developers(of which Zynga is one). Gigaom says ..

By way of background, though Facebook and Zynga have had a mutually beneficial co-dependent relationship for the last couple years, it’s gotten ugly lately. Facebook wants to push forward with its own standardized currency — Facebook credits — within applications on its platform. It sprung this on app developers at a particularly bad time, just after reducing functionality for them to notify their users, resulting in significant active usage drops. And worse, Facebook is taking a 30 percent cut of all credits, just like Apple does on its iPhone platform, but without justifying such a large share by adding new functionality or marketing beyond what it’s long given away for free. App developers were particularly concerned that Facebook would, as it fully rolls out the credits program, require them to use it exclusively and disallow cheaper options like PayPal.

Commercially, the key observation is: while the innovators and early adopters might care two hoots about using an “official app”, it is the next wave of people that are the low-hanging fruit.

So, we see that the NET players are violating the net neutrality principles ..

Now, what are the implications for Telecoms?

1) By net neutrality principles, any device should be able to connect to the network. The network should not discriminate against a specific device or a service

2) However, in my view, that does not rule out tiered pricing. If we start with the proposition that the cellular network is not free i.e. it has value and if we agree to the idea that the network should not discriminate against a SPECIFIC application, then there is nothing which says that a network can have tiered pricing for ALL applications provided it is transparent to the customer. In other words, the idea of net neutrality needs to be separated from tiered pricing and this works as long as specific applications are not blocked and there is transparency for the customer

3) What could this mean in a wider context for Telecoms? Consider that any device can attach to the network. That’s fine. But now, suppose the Operator sells a camera with a priceplan. The camera allows you to take video and pictures and upload them on ‘one click’ to the network. To do this of course, we need the network to be used. So, there needs to be a ‘policy management function’ on the camera which provides the network services for a fee. That may well be the SIM card but conceptually, such a policy management function could exist. Note that this is not to say that ALL cameras should have a SIM card. It is saying that the NETWORK OPERATOR could get in the business of selling connected cameras. Conceptually, this is the same as what Twitter and Facebook are doing

4) There are other ways of course to handle the whole issue of data deluge which is also related to the whole subject. Example – Fixed line demise: Could we be wrong after all?

5) One could argue that the net neutrality argument strictly applies to the packet level and not always to the service layer. This would put DPI (Deep packet inspection) under net neutrality scrutiny and that’s a valid argument

I had to leave the conference after this session so could not stay much longer for other questions but someone asked me outside what Operator I worked for :) They don’t read my blog(OpenGardens) obviously. But seriously, its exactly BECAUSE I talk of OpenGardens that I can see both sides of the issue that I could raise the question

To conclude:

1) Net neutrality is a word which comes with too much baggage. Perhaps it is time to create a new term and to reframe the discussion. At the LTE conference, Dean Bubley mentioned ‘Happy Pipes’ instead of ‘Dumb Pipes’. That overcomes the dichotomy of ‘Over the top’ vs. ‘Under the ground’. I posted this same idea in 2006 when I said that Pipes are so Mobile Web 1.0 … because in a user generated content world, there is no ‘un pipe’

2) If viewed in a wider context, then no one really is ‘net neutral’ including many of the Web players like Facebook and Twitter

3) Transparency is the key .. as is customer acceptance. Today, when people talk of moving away from fixed rate pricing .. they forget the options (non use by the customer – as many Telecoms services like MMS will testify). Nothing will work unless we get the customer on our side!

In either case, a debate is valid and I think we are mixing two things: confusing net neutrality with tiered pricing and maybe they need to be separated.

Comments welcome

Image source: Rick London/Joel Coughlin

Comments

  1. Aswath Rao says:

    I agree with you to a large degree. ISPs operate at the Network Layer and they should be free to charge anything at that layer. It could be flat rate, tiered or QoS dependent pricing. But that price should be levied to their subscribers. The problem is many of the C-levels, in particular previous AT&T CEO would like to charge the far-end so as to avoid any backlash from their subscribers. This brings to the Internet a federation and peering model. So what happens to a startup that may be liked by end-users but can not see the light of the day b/c they are not able to sighup peering deals with all the ISPs. If the ISPs say that any traffic delivered to a peering point will be delivered to their subscribers at the QoS requested by the user, but the users will be charged accordingly. This is net neutrality for me.

  2. Nice post; really nice post, and definitely something to clarify the topic.
    Concerning implication to telecoms #2: that idea, or rather proposal to change the behavior to displayed transparency to the consumer and therefore the entire industry, seems to be at the core of the fears for telecoms in this subject. It is much easier to muddle the topic when usage, billing, and processes are implied and not as held towards some kind of accountable means. Its another thing to be completely open about how the “pipes” are being used, and what is being used through them.
    Telecoms would risk an amazing kind of class action suit if/when they do decide to go open as it wouldn’t take long for several people to figure out how long they’ve been putting into a system that wasn’t as financally needy as was proported by the carrier/ISP. The move to LTE will accent this point even more.

  3. Thanks for the post. There are a lot of debates around net neutrality, but it’s up to you to decide. Companies like twitter have to adjust their strategies due to rapid development of social media.