Wireless Network NeutralityWireless Network NeutralityOverview Overview

A Presentation at theA Presentation at the

WIK Consult International ConferenceWIK Consult International ConferenceNetwork Neutrality – Implications for Europe Network Neutrality – Implications for Europe

Bonn , Germany Bonn , Germany 3 – 4 December 2007 3 – 4 December 2007

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Rob Frieden, Professor of TelecommunicationsRob Frieden, Professor of TelecommunicationsPenn State UniversityPenn State University

rmf5@psu.edurmf5@psu.eduWeb site Web site : : http://www.personal.psu.edu/faculty/r/m/rmf5/http://www.personal.psu.edu/faculty/r/m/rmf5/

Blog site: Blog site: http://telefrieden.blogspot.com/http://telefrieden.blogspot.com/

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The Network Neutrality Debate The Network Neutrality Debate Highlights the Stakes in Next Generation Highlights the Stakes in Next Generation

Network DevelopmentNetwork Development NGNs will converge technologies and services probably relying on wired and NGNs will converge technologies and services probably relying on wired and

wireless IP-centric conduits. wireless IP-centric conduits.

To recoup the cost of network upgrades and to exploit new NGN capabilities, To recoup the cost of network upgrades and to exploit new NGN capabilities, network operators will seek to change terms and conditions relating to access, network operators will seek to change terms and conditions relating to access, interconnection, pricing and service provisioning.interconnection, pricing and service provisioning.

The crux of the Net Neutrality debate juxtaposes consumer protection (and The crux of the Net Neutrality debate juxtaposes consumer protection (and accommodating users’ service expectations) with diversifying ISP business accommodating users’ service expectations) with diversifying ISP business plans. plans.

Ironically, the Apple iPhone highlights carrier limitations on handsets and Ironically, the Apple iPhone highlights carrier limitations on handsets and network access even as this phone offers greater versatility.network access even as this phone offers greater versatility.

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The Network Neutrality Debate The Network Neutrality Debate Highlights the Stakes in Next Generation Highlights the Stakes in Next Generation

Network DevelopmentNetwork Development (cont.) (cont.)

ISPs need to diversify services without adversely impacting the ISPs need to diversify services without adversely impacting the Web’s accessibility, competitiveness, synergies and serendipity. Web’s accessibility, competitiveness, synergies and serendipity.

The wireless net neutrality stakes may exceed wireline, in light of The wireless net neutrality stakes may exceed wireline, in light of increasing reliance on wireless networks and a regulatory increasing reliance on wireless networks and a regulatory classification closer to conventional telecommunications services classification closer to conventional telecommunications services than information and value added services.than information and value added services.

Despite qualifying for more regulatory scrutiny, wireless network Despite qualifying for more regulatory scrutiny, wireless network operators masterfully have avoided the kinds of regulatory operators masterfully have avoided the kinds of regulatory obligations net neutrality would impose.obligations net neutrality would impose.

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Two Wireless Neutrality IssuesTwo Wireless Neutrality Issues

1)1) What contractual rights can wireless carriers What contractual rights can wireless carriers reserve regarding subscribers’ use of their reserve regarding subscribers’ use of their

handsets? (focus on the handset)handsets? (focus on the handset)

2)2) What nondiscrimination access What nondiscrimination access requirements requirements must wireless carriers satisfy? (focus on the must wireless carriers satisfy? (focus on the

wireless network)wireless network)

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Wireless Net Neutrality Wireless Net Neutrality HypeHype

Advocates for and against net neutrality have overstated their cases: “curtains for the Advocates for and against net neutrality have overstated their cases: “curtains for the free world” vs. “a solution in search of a problem.”free world” vs. “a solution in search of a problem.”

The concept of wireless net neutrality has entered the debate belatedly, probably because The concept of wireless net neutrality has entered the debate belatedly, probably because most consumers remain enthralled by the benefits of mobile radiotelephone service, most consumers remain enthralled by the benefits of mobile radiotelephone service, despite mediocre performance. despite mediocre performance.

Net neutrality advocates want to apply longstanding wireline telephony policies that Net neutrality advocates want to apply longstanding wireline telephony policies that separate service from handset sales, and allow end users to use any device to access any separate service from handset sales, and allow end users to use any device to access any carrier, service, content source and application.carrier, service, content source and application.

These advocates tend to frame the issue as a referendum on whether the Internet will These advocates tend to frame the issue as a referendum on whether the Internet will remain open, nondiscriminatory and able to contribute to national productivity, remain open, nondiscriminatory and able to contribute to national productivity, economic opportunity and innovation through “best efforts,” end-to-end connectivity.economic opportunity and innovation through “best efforts,” end-to-end connectivity.

Wireless net neutrality opponents frame the initiative as shameful government Wireless net neutrality opponents frame the initiative as shameful government intervention in a fully competitive, robustly innovative and properly self-regulating intervention in a fully competitive, robustly innovative and properly self-regulating industry.industry.

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How does this threat to Internet freedom affect you? Small businesses—The little guy will be left in the "slow lane" with inferior Internet service, unable to compete. Innovators with the next big idea—Startups and entrepreneurs will be muscled out of the marketplace by big corporations that pay Internet providers for the top spots on the Web. Bloggers—Costs will skyrocket to post and share video and audio clips—silencing citizen journalists and putting more power in the hands of a few corporate-owned media outlets. Google users—Another search engine could pay dominant Internet providers like AT&T to guarantee another search engine opens faster than Google on your computer. Ipod listeners—A company like Comcast could slow access to iTunes, steering you to a higher-priced music service it owns. Online shoppers—Companies could pay Internet providers to guarantee their online sales process faster than competitors with lower prices—distorting your choices as a consumer. Telecommuters—When Internet companies like AT&T favor their own services, you won't be able to choose more affordable providers for online video, teleconferencing, Internet phone calls, and software that connects your home computer to your office. Parents and retirees—Your choices as a consumer could be controlled by your Internet provider, steering you to their preferred services for online banking, health care information, sending photos, planning vacations, etc. Political groups—Political organizing could be slowed by a handful of dominant Internet providers who ask advocacy groups to pay "protection money" for their Web sites and online features to work correctly. Nonprofits—A charity's website could open at snail-like speeds, and online contributions could grind to a halt if nonprofits don't pay Internet providers for access to "the fast lane."

What They've Got Planned

The threat to an open internet isn't just speculation -- we've seen what happens when the Internet's gatekeepers get too much control. These companies, even, have said as much about their plans to discriminate online.

Ed Whitacre of AT&T told BusinessWeek in late 2005:

Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes?

It's Already Happening

Such corporate control of the Web would reduce your choices and stifle the spread of innovative and independent ideas that we've come to expect online. It would throw the digital revolution into reverse. Internet gatekeepers are already discriminating against Web sites and services they don't like:

In 2004, North Carolina ISP Madison River blocked their DSL customers from using any rival Web-based phone service. In 2005, Canada's telephone giant Telus blocked customers from visiting a Web site sympathetic to the Telecommunications Workers Union during a

contentious labor dispute. Shaw, a major Canadian cable, internet, and telephone service company, intentionally downgrades the "quality and reliability" of competing Internet-phone

services that their customers might choose -- driving customers to their own phone services not through better services, but by rigging the marketplace. In April, Time Warner's AOL blocked all emails that mentioned www.dearaol.com -- an advocacy campaign opposing the company's pay-to-send e-mail scheme.

This is just the beginning. Cable and telco giants want to eliminate the Internet's open road in favor of a tollway that protects their status quo while stifling new ideas and innovation. If they get their way, they'll shut down the free flow of information and dictate how you use the Internet.

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Wireless Net Neutrality Wireless Net Neutrality Reality for CarriersReality for Carriers

This debate is about wireless firms’ profit maximization and This debate is about wireless firms’ profit maximization and whether they can avoid becoming commodity providers with whether they can avoid becoming commodity providers with limited profitability even as they must commit to costly limited profitability even as they must commit to costly network upgrades. network upgrades.

Wireless carriers want to retain the ability to discriminate on Wireless carriers want to retain the ability to discriminate on price and quality of service, to lock handsets and lock-in price and quality of service, to lock handsets and lock-in subscribers and to offer walled garden access to content.subscribers and to offer walled garden access to content.

Such discrimination can customize service, but also reduce the Such discrimination can customize service, but also reduce the surplus accruing to heavy volume and peak time users on “all surplus accruing to heavy volume and peak time users on “all you can eat” plans.you can eat” plans.

The carriers claim that governments need to create incentives The carriers claim that governments need to create incentives for NGN investment, or at least eliminate disincentives.for NGN investment, or at least eliminate disincentives.

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Wireless Net Neutrality Wireless Net Neutrality Reality for Carriers (cont.)Reality for Carriers (cont.)

In reality the carriers want captive subscribers who In reality the carriers want captive subscribers who must pay for access to content and enhancements to must pay for access to content and enhancements to basic network access.basic network access.

Put another way wireless carriers consider network Put another way wireless carriers consider network neutrality as limiting their ability to operate neutrality as limiting their ability to operate “intelligent” networks (instead of “dumb” pipes).“intelligent” networks (instead of “dumb” pipes).

Both wireline and wireless carriers want to find ways Both wireline and wireless carriers want to find ways to apply two-sided telephony pricing to Internet to apply two-sided telephony pricing to Internet access: end users pay for network access (preferably access: end users pay for network access (preferably metered), plus content and applications providers also metered), plus content and applications providers also pay for network access inside the Internet cloud. pay for network access inside the Internet cloud.

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Telephony

Cost Causation

The caller usually triggers a complete end-to-end network setup using facilities provided by the originating carrier and other carriers secured by the originating carrier.

Traffic measurement and tracking

Metering and tracking likely.

Parties

Agree on a multilateral basis to divide cost and share toll revenues based on ITU Recommended model.

Internet

Cost Causation

Traffic types and routing vary making it difficult to use traffic flows for determining who should pay; conduit and content merge.

Traffic measurement and tracking

Possible, but does not necessarily indicate which party initiated the link and who benefits. Upstream and downstream flows often asymmetrical.

Parties

A connectionless protocol where many carriers may be involved in switching and routing packets on “best efforts”model; evolved from zero cost peering to a commercial hierarchy of peers and clients.

Telephony and Internet Models

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Wireless Net Neutrality Wireless Net Neutrality Reality for Content/Application ProvidersReality for Content/Application Providers

Net Neutrality would foreclose, or limit the ability of carriers to accommodate the Net Neutrality would foreclose, or limit the ability of carriers to accommodate the need for “better than best efforts” traffic routing, a desirable feature for video need for “better than best efforts” traffic routing, a desirable feature for video streaming, P2P networking, real time gaming and VoIP. streaming, P2P networking, real time gaming and VoIP.

On the other hand, how carriers partition their networks and program NGN routers On the other hand, how carriers partition their networks and program NGN routers (through “packet sniffing” ostensibly to “shape” or “manage” traffic) for premium (through “packet sniffing” ostensibly to “shape” or “manage” traffic) for premium and regular service can degrade service for regular users even in the absence of and regular service can degrade service for regular users even in the absence of congestion, e.g., forged TCP reset packets. congestion, e.g., forged TCP reset packets.

Content and application providers have benefited from not having to pay a Content and application providers have benefited from not having to pay a surcharge to ride on networks, in addition to the peering or transit arrangement surcharge to ride on networks, in addition to the peering or transit arrangement secured by ISPs. secured by ISPs.

Access tiering favors established and ISP-affiliated ventures, able to afford Access tiering favors established and ISP-affiliated ventures, able to afford surcharges, and disadvantages small, new firms. surcharges, and disadvantages small, new firms.

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Wireless Net Neutrality in Spectrum Wireless Net Neutrality in Spectrum Allocation and Operating Rules Allocation and Operating Rules

NRAs also may implement wireless net neutrality principles when allocating spectrum NRAs also may implement wireless net neutrality principles when allocating spectrum and establishing operating rules.and establishing operating rules.

In the U.S. the FCC, in response to a campaign by Google and other content providers, In the U.S. the FCC, in response to a campaign by Google and other content providers, established an “Open Platform” requirement for a 22 MHz block of choice “beachfront” established an “Open Platform” requirement for a 22 MHz block of choice “beachfront” 700 MHz spectrum made available for auction in the conversion from analog to digital 700 MHz spectrum made available for auction in the conversion from analog to digital broadcast television, scheduled to occur by February 17, 2009.broadcast television, scheduled to occur by February 17, 2009.

The winning bidder must allow consumers to use the handset of their choice for The winning bidder must allow consumers to use the handset of their choice for downloading and using any applications, subject to certain reasonable network downloading and using any applications, subject to certain reasonable network management conditions that allow the licensee to protect the network from harm.management conditions that allow the licensee to protect the network from harm.

The FCC rules do not adopt Google’s suggestion that wireless carriers must offer The FCC rules do not adopt Google’s suggestion that wireless carriers must offer wholesale service rates to third party resellers, e.g., ISPs and content provides like wholesale service rates to third party resellers, e.g., ISPs and content provides like Google, and agree to interconnect with them at any technically feasible location.Google, and agree to interconnect with them at any technically feasible location.

The complex FCC rules also appear to abandon even the limited network neutrality rules The complex FCC rules also appear to abandon even the limited network neutrality rules if bidding does not exceed a specific multi-billion dollar reserve price. if bidding does not exceed a specific multi-billion dollar reserve price.

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Wireless Net Neutrality Issues Wireless Net Neutrality Issues

Locking handsets by blocking access to competitors (by frequency, transmission format, Locking handsets by blocking access to competitors (by frequency, transmission format, firmware or software); in the U.S. carriers lock even GSM handsets, so changing SIM cards firmware or software); in the U.S. carriers lock even GSM handsets, so changing SIM cards will not work.will not work.

Carriers can use firmware “upgrades” to “brick” (render inoperative) third party firmware and Carriers can use firmware “upgrades” to “brick” (render inoperative) third party firmware and software; at the very least the warranty evaporates.software; at the very least the warranty evaporates.

Carriers disable handset functions, e.g., bluetooth, Wi-Fi access, Internet browsers, GPS Carriers disable handset functions, e.g., bluetooth, Wi-Fi access, Internet browsers, GPS services, email clients.services, email clients.

Carriers block specify format for accessing memory, e.g., music, ringtones, photos.Carriers block specify format for accessing memory, e.g., music, ringtones, photos.

Carriers block or attempt to thwart access to third party content and applications (software).Carriers block or attempt to thwart access to third party content and applications (software).

Walled garden access favors videoWalled garden access favors video content of affiliates and partners. content of affiliates and partners.

Proprietary, non-standard interfaces make it difficult for third parties to develop compatible Proprietary, non-standard interfaces make it difficult for third parties to develop compatible applications and content. applications and content.

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Wireless Net Neutrality in Practice Wireless Net Neutrality in Practice

National regulatory authorities may implement some wireless network neutrality National regulatory authorities may implement some wireless network neutrality principles, based on successful wireline experience, e.g., separating service from handset principles, based on successful wireline experience, e.g., separating service from handset sales.sales.

However, wireless carriers have effectively lobbied for the status quo based on assertions However, wireless carriers have effectively lobbied for the status quo based on assertions that the market is robustly competitive, lock-ins protect subscriber privacy and make it that the market is robustly competitive, lock-ins protect subscriber privacy and make it possible to offer subsidized handsets and net neutrality would stifle innovation and possible to offer subsidized handsets and net neutrality would stifle innovation and investment.investment.

Consumer protection laws may require wireless carriers to pro-rate early service Consumer protection laws may require wireless carriers to pro-rate early service termination charges. termination charges.

Wireless carriers may not be able to continue foreclosing used handset markets if one Wireless carriers may not be able to continue foreclosing used handset markets if one carrier or reseller offers a lower month-to-month plan for subscribers who bring their own carrier or reseller offers a lower month-to-month plan for subscribers who bring their own handset.handset.

Consumers may grow less tolerant of carrier-imposed handset restrictions in light of Consumers may grow less tolerant of carrier-imposed handset restrictions in light of increasing appreciation that lock-ins typically only serve carrier profit maximization increasing appreciation that lock-ins typically only serve carrier profit maximization goals. goals.

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Implications for Europe Implications for Europe

European Community concerns about consumer protection and carrier market European Community concerns about consumer protection and carrier market power may trigger consideration of wireless network neutrality “safeguards.” power may trigger consideration of wireless network neutrality “safeguards.” Already it appears that NRAs will not permit all of Apple’s iPhone restrictions that Already it appears that NRAs will not permit all of Apple’s iPhone restrictions that apply in the U.S. apply in the U.S.

Handset manufacturers may show greater reluctance to capitulate to carrier Handset manufacturers may show greater reluctance to capitulate to carrier demands, e.g., disabling handset features and exclusive distribution arrangements, demands, e.g., disabling handset features and exclusive distribution arrangements, particularly in markets where consumers expect to pay higher prices for feature particularly in markets where consumers expect to pay higher prices for feature rich, unlocked phones. rich, unlocked phones.

Google’s handset and service models may disrupt the status quo. Google’s handset and service models may disrupt the status quo.

Maturing core service markets and slower than anticipated demand for 3G services Maturing core service markets and slower than anticipated demand for 3G services will force carriers to adopt new pricing and service models, including bundling will force carriers to adopt new pricing and service models, including bundling wireless with other services.wireless with other services.

Europe’s comparatively robust Mobile Virtual Network Operator sector amplifies Europe’s comparatively robust Mobile Virtual Network Operator sector amplifies the need for innovation and the likelihood of lower ARPU. the need for innovation and the likelihood of lower ARPU.