Net neutrality offers operators more opportunities than threats

Monday 6 June 2011 | 15:14 CET | Author: Tim Poulus | Market Commentary
Net neutrality (NN), to date mainly an American discussion, has suddenly appeared on the political agenda in the Netherlands. What's notable is the discussion originated in the mobile world, in contrast to the US. As NN is all about OTT (over-the-top: offering services over a data connection), one can conclude that in the US it's mainly about video services (over fixed networks) and in the Netherlands it's about communications services (over mobile networks). But NN isn't just about OTT, it's also about a technology switch: existing services (video/TV, voice/SMS) that no longer necessarily

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This article is an opinion of Telecompaper.

Categories: Internet / Mobile & Wireless
Companies: Dailymotion / Deezer / France Telecom / KPN / Skype / Telefonica- Movistar / Vodafone Nederland
Countries: World
::: add a comment


Instead of whining that Internet access is not profitable enough, why not go on the offensive and offer OTT services to the whole world ? If you really want to supply entertainment and communication services, why limit yourself to your captive market ? Go play on your competitor's turf ! And free your users - they'll perceive it as value added and it won't cost you a dime in infrastructure.
Jean-Marc Liotier @ 10/6/2011 - 10:20

Good analysis. I have a few (sub)points to add. 1. The cost argument is indeed flawed. Operators seem to have forgotten that for about 8 years mobile broadband didn't take off - after spending billions. Only after 'flat fee' and the introduction of the iPhone did Mobile BB started to show. Flat fee was (and still is) a significant contributing factor. And this revenue model makes sense as the marginal costs for BB is null (a byte transported doesn't cost anything), the costs are in the capacity (radio and backhaul) required and maintenance. In Fixed BB the growth rates (throughput at peak hour) where steady and predictable (doubling every 1-2 years). The additional useres paid effectively for the network built-out. With Mobile BB since 2008 the growth rates (in thoughput at peak hours) are much higher than operators experienced with Fixed BB, which leads to higher costs (less bargaining power, investment cycle higher, etc). The 'flat fee' doesn't, therefore, adequately cover both costs (investment, maintenance) and typical telco operator margins (Ebitda of between 30-40%). So, either the flat fee price are too low or operators have to settle for a lower margin for 'dumb pipe' services. 2. Operators should reconsider how they offer BB services with the advent of tablets, smartphones and 'cloud' servies. These trends require more and ubiqituous BB access. Whetehr at home, at work or on the move, these devices require BB access to be usefull. Operators, should be able to leverage their fixed and mobile BB and wireless offerings to create both a "ubqituous BB access" service -at a premium- as well as controlling, if not lowering, costs by offloading traffic (eg to wifi). This would address the revenue and the costs aspects. 3. Operators should also redefine their business models and seperate 'services' from 'networks'. Traditionally operator services included a purpose-built infrstructure and service.. With ULL regulation and DSL operators were forced to seperate internal costs between "service" and "network", but the pricing for telephony still assumed both. For mobile networks an unbundled "local" loop has never been mandated (there are some technical challanges exists)but this would allow appropiate cost allocation. Operators should create their own "OTT"-like service (eg 1 Voice service for mobile and fixed access). MTA/roaming tariff regulation would benefit too. This is the time to tell shareholders it's time to implement a new business model.
Colin Pons @ 7/6/2011 - 13:14

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