Net neutrality to boost broadband prices?

The price of broadband is set to rise massively if European regulators enforce strict net neutrality, according to a recent story in the FT. It could go up by 30 percent, one analyst reckoned. This raises a number of issues.

But before we get into those, let's lay out the facts. The concept of net neutrality means that a carrier will treat all data alike. Whether it's from the carrier's biggest client, whether it's kids downloading illegal software, or if it's just your emails, all data is given the same priority. The principle behind it is that the deepest pockets should not determine which traffic is prioritised; it doesn't mean for example that your voice over IP phone traffic cannot be prioritised.

One of the fathers of the Internet, Vint Cerf, reckons that net neutrality is vital: “It's vital to innovation. Companies like Google and Yahoo, and eBay and Amazon, and Skype, and so on, got their start without having to get permission from any ISP or any broadband provider to offer services,” he said on YouTube.

What the carriers are currently bellyaching about is a proposal from the EU that net neutrality be legislated. In other words, it'll become illegal for a carrier to discriminate in favour of traffic originating from its biggest client.

The proposal is part of a new telecoms package that aimed at overhauling the EU's telecoms laws. EU ministers are due to discuss the proposal in November.

But consultants at Copenhagen Economics say in a survey to be published next week that the imposition of net neutrality would result in higher costs being passed onto consumers, and so depress demand for broadband.

They even provide sample costs: Swedish broadband rates could rise from €33 to €44 in Sweden and from €29 to €39 in Germany. That's quite a rise.

The Centre for European Policy Studies reckons in a report that the mandating of net neutrality would be undesirable. Compromises proposed include by the CEPS softer legislation which would ensure that consumers are informed about a lack of net neutrality.

However, whatever you think of net neutrality -- and I for one am nowhere near alone in being a fervent supporter of the concept -- I can't help wondering why prices would rise so much if the concept were abandoned.

I've always assumed, it would appear incorrectly, that we currently operate under a regime of net neutrality, that my data take their turn with everyone else's, and are dealt with by the Internet's routers in a first come, first served fashion. If the legislation were passed and put into force, and prices rose by one-third as a result, imagine how much money ISPs are making in return for preferring MegaCorp's data over those of smaller companies or, for that matter, yours and mine.

Would legislating net neutrality really make that much difference to prices? And if it would, why haven't the carriers told the rest of their customers -- the disadvantaged ones -- about it?

Japan's NTT shows the way forward

Just got back from a week in Langkawi, where NetEvents held two conferences back to back.

We were billeted in The Andaman, a large, low-rise hotel snuggled down between the rain-forest and the beach adjoining the bath-warm Andaman Sea. It’s almost invisible until you’re on top of it, and the location, the local wildlife and, above all, the incomparable desire of the people to make your stay a memorable one combine to make it a great venue. Oh yes, and the warm tropical weather...

The first of the two conferences was the company’s inaugural summit meeting for service providers in the Asia Pacific region, which allowed SPs to meet each other to share best practices. It’s an event without parallel, according to the SPs, who were glad of an opportunity to talk to each other without the paraphernalia of a big exhibition.

NetEvents is all about meeting and talking, and that’s what happened at both events, the second being all about the more familiar meeting of vendors and press.

Service providers are often difficult to get in touch with, and I learnt a lot from this valuable opportunity to listen and talk to them. Among the most interesting presentations both to me and to most of the 60 or so attendees I spoke to was the one by Hiromichi Shinohara, from Japan’s biggest telco, NTT.

Here we learnt more about the company’s launch of its award-winning next-generation network or NGN -- alleged to be the first of its kind in the world. It’s analogous to BT’s 21st century network (universally known as 21CN), which has just been officially launched, and offers fibre to the home, which of course enables high-speed broadband access. However, BT's 21CN doesn’t enable fibre to the home but is instead an IP-based backbone network that in the main connects exchanges.

To give you an idea of how advanced NTT's network is, compare most western countries’ ADSL profile, and you’ll find that it’s growing. In the UK, for example, over half the country’s homes now have ADSL-provided broadband access to the Internet. Incumbent telco BT routinely dishes out press releases trumpeting another half-million homes connected -- see here for an example.

By comparison, NTT is way ahead. For example, numbers of Japanese users of ADSL technology, which was once described as an interim technology until we get to universal fibre-connectivity, have been declining. Instead, users are switching to fibre as an access mechanism.

This means NTT reckons it can deliver richer services, for which it can charge more. For example, it plans to offer videophone services, HDTV, video-conferencing and a range of both consumer and enterprise-focused multimedia services. As a result, NTT has been able to increase its average revenue per user or ARPU, a common metric for measuring a telco’s financial performance.

It’s routine for industry observers and analysts to argue that telcos such as BT and NTT ought to add more value to their fat pipes by providing services if they’re to remain profitable in a world where broadband prices fall as demand sky-rockets. If you look at the agenda for the service provider summit, that’s the issue which recurs throughout the event. However, the telcos have not, broadly speaking, been very successful at doing so, often because their networks cannot yet support services such as video on demand. NTT appears to be an exception to this long-standing industry mantra.

While NTT may be first to launch an NGN, depending on how you define “first”, what most at the NetEvents SP summit found interesting is the way that NTT is opening up its network for others to build on by providing a service delivery platform. as part of this process, it set up a forum for third party service providers. In this way, it helps to ensure that service providers help generate revenue for NTT, as well as for themselves. This kind of double-sided business model is one that many telcos are looking at -- and an issue, incidentally, that NetEvents TV will be examining in a future feature.

I hasten to add that I haven’t tasted NTT’s NGN, so have only Shinohara-san’s words to go on. But if the words are translated into reality, then NTT’s model is one that telcos elsewhere might do well to emulate.