2016 - moldova, anrceti - benhmark on regulation of ott services

Benchmark on Regulation of Over The Top Services (OTT)

2-3 June 2016,Chişinău, MoldovaEaPeReg Workshop on New Trends on Competition Regulation in Markets

Republic of MoldovaMD-2012, ChişinăuBd. Ştefan cel Mare, 134

E-mail: [email protected]: www.anrceti.md

Tel: +373 22 251 317Fax: +373 22 222 885

Roman BAHNARUChief of BEWG EaPeReg

Consultant Executive Regulation Department [email protected]

mailto:[email protected]

New services – New business model

Chisinau, 3 June 2016

The world’s largest taxi company owns no vehicles

The largest voice international traffic provider owns no network

The fastest growing television network lays no cables

The most valuable retailer has no inventory

The most watched video-sharing portal created no video content

The most popular media provider creates no content

The most valuable photo company sells no cameras

None of these companies existed fifteen years ago

History of telco in one slide


1876…………………….......………...2000

BIG Three

Nowadays (2016)

Information Society

Fixed telephony

Technical View

Smartphones adoptions

Broadband penetration

3G/4G/FTTx

Net neutrality

OTT Services


Communication TV and Video Community

Music Technology Productivity

Global OTT Messaging Services


Most popular global mobile messenger apps as of April 2016, based on number of monthly active users (in millions)

Skype Traffic vs Traditional international traffic


Total International traffic Increase in International traffic

While the volume of international telephone traffic remains far larger than international Skype traffic, Skype’s minutes are growing much more rapidly.

In 2014, we see a decline for the first time in traffic TDM Minutes: it fell 1.4% in 2014, a very troublesome trend, especially for international voice carriers.

Business models of OTT


Advertising Services funded by viewing advertisements or the collection of data to sell to advertisers

Google, Facebook, Line, Pinger, Apps like Spider Man, Angry Birds etc.

Unit pricing Revenue derived from offnet calls and messages or terminating incoming calls

Microsoft/ Skype,Viber

Hardware Services add value to the device and promote market presence within a segment defined by device ownership

Apple, Samsung, Blackberry, Nokia

Subscription Recurring charge either for basic service or additional features

Microsoft/ Skype, Viber, WhatsApp,payTV services, Game Apps like Lumosity

Software Licensing

Services can be bundled with hardware or offered on a white-label basis

Microsoft/ Skype, Apps like Minecraft,Heads Up etc.

In-app purchases/content

Users can purchase extra features such as stickers or download content such as games

Kakao, Line, Tencent(WeChat), Apps like Bad Land

The business models of most OTT apps are predominantly advertisement driven.

OTT Challenges


The growing popularity of OTT services worldwide is posing a major challenge to the TSPs. Yet, this growth largely depends on the availability of existing telecom infrastructure in a particular area and market dynamics, i.e. if infrastructure (access to bandwidth) improves, there will be a further growth of OTT apps.

The rapid pick-up in OTT growth can be attributed to the following five sets of drivers:

- Technology readiness

- Cost incentive

- Social propensity to adopt OTT

- Strength of OTT platform

- Scalability of the services

Regulatory Imbalances


Area of Regulation Telecom Service Providers OTTsSpectrum allotment and use Need to bear costs and adhere

to rulesNo such costs

Spectrum related charges Need to bear the costs No such costs

Interconnection Yes, required as part of regulatory regime. Requirement to interconnectentails costs.

No such interconnection required as they are ‘Over the Top’ networks

Authorization/Licensing Yes No

Quality of Service Parameters Required as part of regulatory regime No such requirement

Infrastructure sharing Need to bear the costs No Infrastructure sharing

Security conditions Need to adhere to rules No such requirement

Monitoring services i.e. Lawful interception and monitoring

Required as an authorization/ licensecondition

No such requirement

Apart from communication services, there are other areas where OTTs are, in effect, bypassing local regulations e.g. taxi regulation for Uber is a case in point.

EU Digital Single Market Strategy


Last year (6 May 2015), European Commission released its Digital Single Market Strategy and in doing so confirmed its intention to overhaul the telecoms regulatory framework, Commission sets out 16 initiatives to make it happen.It is built on three pillars: 1. better access for consumers and businesses to digital goods and services across Europe; 2. creating the right conditions and a level playing field for digital networks and innovative services to flourish; 9th initiatives: present an ambitious overhaul of EU telecoms rules. This include …. ensuring a level playing field for all market players, traditional and new;3. maximizing the growth potential of the digital economy.

"Our economies and societies are going digital. Future prosperity will depend largely on how well we master this transition. “Günther H. Oettinger - Commissioner for the Digital Economy and Society

EU Digital Single Market Strategy, 9th initiative


“Telecoms operators compete with services which are increasingly used by end-users as substitutes for traditional electronic communications services such as voice telephony, but which are not subject to the same regulatory regime. The review of the telecoms rules will look at ways of ensuring a level playing field for players to the extent that they provide competing services and also of meeting the long term connectivity needs of the EU. “

A Digital Single Market Strategy for EuropeSource: http://eur-lex.europa.eu/

http://eur-lex.europa.eu/

http://eur-lex.europa.eu/

European Commission - The public consultation on the evaluation and review of the regulatory framework


One of preliminary trend observed in the replies (244), without prejudice to the results of the analysis of the consultation (still in process):

While administrations of several Member States, the regulatory community and consumer organisations still see a need for a sector-specific end-user protection based on high-level minimum harmonisation, the telecom sector calls for more reliance on horizontal legislation and full harmonisation, especially for services.

The telecom sector in general but also some administrations argue that same rules should apply to similar services while other administrations, so-called "Over-the-top" players, software and equipment vendors, cable operators and some broadcasters are of the view that the concept of electronic communications services as currently defined has proven itself.

Definition of ECS Services


As defined in Article 1 of the Framework Directive (Directive 21/2002) , the scope of ECN/S Framework is meant to cover ECNs, ECSs and associated facilities and services.

Article 2 (c) of the Framework Directive provides the following definition of ECS:‘Electronic communications service' means a service normally provided for remuneration which consists wholly or mainly in the conveyance of signals on electronic communications networks, including telecommunications services and transmission services in networks used for broadcasting, but exclude services providing, or exercising editorial control over, content transmitted using electronic communications networks and services; it does not include information society services, as defined in Article 1 of Directive 98/34/EC, which do not consist wholly or mainly in the conveyance of signals on electronic communications networks”

BEREC - Definition of OTT Services


BEREC define OTT service as “content, a service or an application that is provided to the end user over thee open Internet.”

This means that the term OTT does not refer to a particular type of service but to a method of provision, namely provision over the open Internet. BEREC considers the following taxonomy the most useful one: OTT-0: an OTT service that qualifies as an ECS; OTT-1: an OTT service that is not an ECS but potentially competes with an ECS; OTT-2: other OTT services

OTT Taxonomy

Regulatory issues related to OTT


1. The definition of ECSThe definition of ECS still leaves its application to specific services unclear. This is especially acute in the assessment of OTT services, which blur the boundary between ECSs and the content services. The definition of ECS should be clarified and/or reconsidered in order to ensure that it keeps pace with the current technological developments, that it is future proof and that still is the correct foundation that determines which services are regulated under the ECN/S Framework. 2. Absence of legislation on information gatheringArticle 5 (1) of the Framework Directive states that NRA shall ensure that undertakings providing ECN/S provide all the information, including financial information, necessary for national regulatory authorities to ensure conformity with the provisions of, or decisions made in accordance with, the ECN/S Framework. However, this provision does not give the competence to gather information from OTT-1/2 providers for example for the purpose of market analysis.

Net Neutrality


Earlier, across the globe, there were demands to keep the Internet open and free for all without any restrictions. This was primarily advocated by various Application ServiceProviders (ASPs) driving the internet. They advocated regulatory measures to ensure open internet access. But, over the years, the situation has changed and the TSPs are employing various strategies to deal with the challenge posed by OTTs.

And currently, Net neutrality (NN) is a topic of great debate across the world.NN is generally construed to mean that TSPs must treat all internet traffic on an equal basis, no matter its type or origin of content or means used to transmit packets. All points in a network should be able to connect to all other points in the network and service providers should be able to deliver traffic from one point to anotherseamlessly, without any differentiation on speed, access or price. The principle simply means that all internet traffic should be treated equally.

However, with the Internet becoming more crowded and improvement in traffic management tools, NN is difficult to sustain. Net neutrality is a slippery concept.

Partnership Telco & OTT


Partnerships between ECS and OTT providers have become increasingly common over the last couple of years. Although these commercial agreements in general lie outside the scope of NRA’s competence, their indirect effect on competition and consumers on the markets for ECS are relevant to consider. The transition made by ECS providers, from a revenue model primarily based on voice to one based on data, has been important for the development of OTT/ECS partnerships. As data traffic has become the focus of future revenue, OTT providers have come to be viewed as potential business partners by ECS providers instead of competitors to voice and SMS revenue or as the main source of cost for increasing data traffic.

Tug of war

Partnership Telco & OTT, business objectives


Regulatory intervention worldwide


OTTs present a problem to regulators worldwide. Regulators in different countries are dealing with the OTTs in a variety of ways.

For communication OTT services, developed countries such as US, EU and Japan are tending towards netneutrality to promote openness and non-discrimination. But, even in their cases, there is no unanimity or policy announcement on net neutrality just yet. And, in the EU there are variations on the theme.

On the other hand, some countries have altogether prohibited OTT services (or insisted on regulatory compliance). For example, some governments in the Middle East have blocked Skype.

Regulatory intervention worldwide, USA


Adopted on February 26, 2015, the FCC's Open Internet rules are designed to protect free expression and innovation on the Internet and promote investment in the nation's broadband networks. These rules, called as bright-line rules are:• No Blocking: broadband providers may not block access to legal content, applications,

services, or non-harmful devices.

• No Throttling: broadband providers may not impair or degrade lawful internet traffic on the basis of content, applications, services, or non-harmful devices.

• No Paid Prioritization: broadband providers may not favor some lawful internet traffic over other lawful traffic in exchange for consideration of any kind—in other words, no "fast lanes." This rule also bans ISPs from prioritizing content and services of their affiliates.

Regulatory intervention worldwide, South Korea


South Korea is a strong market in OTT services because of its broadband penetration.Korea Communications Commission (KCC), the telecom regulator announced “Net Neutrality (NN) and Internet Traffic management Guidelines” in 2011. Its objective was to foster an open and fair internet usage environment, and create a healthy and sustainable ICT ecosystem through basic principles for net neutrality and internet traffic management. The four requirements included in the Guidelines were:

• Transparency;

• No blocking;

• No unreasonable discrimination

• Reasonable traffic management.

Regulatory intervention worldwide, France


French Telecom regulator ARCEP has demanded that Skype register as a Telecom Operator in the country. ARCEP’s view is that by providing French users with services that allow them to make phone calls to or from a device connected to the internet, (a computer or a smartphone) as well as to the traditional telecoms network (e.g. landlines), Skype is in fact providing electronic communications services. The regulator has said that whilst Skype is not required to obtain administrative approval to become an electronic communications operator in France, it is however obliged to declare itself compliant with the French Postal and Electronic Communications Code (CPCE). ARCEP also says that the operator must meet certain obligations as they are in the business of providing electronic communications; this includes routing of emergency calls and implementing measures required to perform legally ordered interceptions.But, Skype has refused to register as a telecoms operator in France. It insists that Skype islargely free VOIP telephony service and nothing more than an IT application.

Regulatory intervention worldwide, UK


United Kingdom, have taken a different approach founded on the premise that allowing ISPs to develop additional revenue streams from preferential traffic would be the bestmeans of incentivizing investments in the broadband infrastructure.

They can provide preferential treatment in the form of tiered services or toll-boothing, for example, by giving online companies who are willing to pay for faster flow of data packets than other internet traffic. The incremental revenue from such services could be used to pay for the building of increased broadband access to more consumers.

Hence, in the UK, price discrimination (service differentiation) is perfectly in order.

Regulatory intervention worldwide, Indonesia


Indonesia’s Ministry of Communications and Information Technology (MCIT, also known locally as KemenKominfo) has published a draft ministerial regulation governing the provision of content over the internet by over-the-top (OTT) providers. In brief, the draft requires that: • the OTT operate in the form of a permanent establishment [but can be] either foreign or local

players; • OTT players must register their business forms and activities to the Indonesian Telecommunications

Regulatory Body (ITRB) no later than 30 working days prior to providing services in Indonesia by attaching the required documents;

• if the OTT is in the form of foreign direct investment (FDI) then they shall attach the permanent business licence from the Investment Coordinating Board (BKPM).

Furthermore, it is understood that the regulation will also require the OTT service provider to comply with the provisions of the legislation in the field of: prohibition of monopolistic practices and unfair business competition; trading; consumer protection; intellectual property rights; broadcasting; film; advertising; pornography; anti-terrorism; taxation; transportation and logistics; tourism and hospitality; finance; health; and / or regulations and other relevant legislation.’

Purposes for Internet Use, % in Moldova


Internet is used mainly for socializing and communication: - over 90% of the Internet users indicated on making use of chats when being online, using social networks - 86 % of the Internet users are using social networks.

Also it’s important to mention that31% of respondents stated they holding phone conversation via Internet/VoIP (12% increase)

Telco OTT App in Moldova


R&D: OTT and Net Neutrality

BIG Three

Startups

Startups

Thank you!

2016 - moldova, anrceti - benhmark on regulation of ott services

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