Demystifying Net Neutrality: A vendor’s view point
December 22, 2010 - Openet
Policy vendor Openet, which has been very vocal on Net Neutrality issues, is speaking up again following some controversy surrounding its congestion management partner Allot Communications (see: Analysis: Industry needs to tell own side of Net Neutrality story) – not to mention yesterday’s Net Neutrality ruling by the FCC.
We checked in with Mike Manzo, Openet’s chief marketing officer, for his thoughts. According to Manzo, “In the end, this is similar to the privacy conversation around addressable advertising and targeted promotions. It’s easy to go ‘anti-establishment’ and to lash out against operators, which rank very low in terms of trust (ahead of only government and financial services).”
Whether the “bad rap” CSPs get is deserved or not, Manzo believes lobbying efforts by OTT players have made it difficult for customers to get a true sense of what is really best for customers.
According to Manzo, the point is “fairness.”
“Other than the heavy bandwidth hogs and the [over-the-top] players, who is it that decided everyone has a ‘right’ to unlimited broadband access at a fixed price? This would never fly in utilities and energy, or TV, or phone services or airlines, or any other industry?” he asked. “So how is it that CSPs are supposed to maintain a business model that is sustainable if they cannot engage in the same practices that helps all other industries survive and thrive in the name of innovation?”
Overall, the point the company wants to make is that just because there is the ‘potential’ to use a technology (like DPI, like policy, like SDM) a certain way, does not mean it should or will be used in that manner.
In our discussion with Manzo, he addressed four key ideas regarding Net Neutrality (his responses are presented below in summary form, based on our conversation):
- Operators will charge customers for the ability to use certain applications and content (pay-per-service). False.
The reality is that the Pareto principle (80/20 rule) applies to network traffic, meaning about 10% of broadband users consume about 80% of the bandwidth, so operators and their suppliers are interested in protecting the broadband experience for the majority of the public (the 80% of subscribers that use less than 10% of bandwidth). The fact is most users just need to check email and surf Internet sites. It is the larger portion of the overall population whose experience will be negatively impacted by the smaller percentage whose use continues unabated at times of congestion. For that reason, operators want to create buckets or tiers for users based on the monthly volume of usage, because they know that, say, 1% of users use 40% of the network, or that 5% use 65%.
Operators need to maintain profit margins by offering certain volumes and speeds for certain price points. Because most broadband users are chatting, emailing or surfing, they don’t need unlimited guarantees for P2P or streaming movies. Those users’ prices could come down if operators didn’t have to continue to plan to provide enough bandwidth for unlimited use for all. If disintermediation prevents carriers from making enough profit on services that they can continue to invest in 4G and buildouts for future services, then they will only be able to roll out in metropolitan areas and the greater whole of the population will lose out on innovation.
That said, CSPs and their suppliers recognize there are heavy users that really need certain bandwidth guarantees during times of network congestion (i.e. hospitals, law enforcement, financial institutions, government entities, or individual companies an users with mission-critical needs), and therefore packages that offer guarantees of performance and quality for those with critical needs will ensure the necessary bandwidth (that currently goes to users who do not really need it—like a high school kid streaming a movie after school) is available during peak usage times. If a local police department is willing to pay for bandwidth that would otherwise go to a high schooler at critical times, then why should a carrier not be able to offer that guarantee? The goal is to make the overall experience better for the majority of users during times of congestion, as inevitably, a portion of the heavy users will be dissuaded (if they have to pay a premium for using bandwidth at times of congestion) from using bandwidth at times they don’t really need it.
- Operators need to reduce their overall network build out costs if they are to charge less to the majority of users while maintaining profits. True.
The ability for operators, for example, to create a “surfers only” package (no video,VoIP, P2P, etc) means “basic” service packages could be available to the greater whole of customers for far less money. And, the users can still opt for a pay-per-use option for services that fall outside of their package.
Currently, price plans are based around the average user rather than the low-end user. So with policy control, operators can better create packages targeted at any level of user. For example, the net effect of policies in terms of keeping network costs means savings are passed to the majority of customers. Even with just basic fair usage caps, tens of millions of dollars are saved for further innovations in services and future build outs.
- Operators are not receiving a fair portion of the revenue in the value chain for the value they deliver within it. True.
Operators believe they should be compensated for the value they deliver to users (i.e., increased revenue for increased value). If an OTT player like Apple (or any application or content provider) can charge for an iTune sone, or Skype for a phone call, why should the provider of the pipe over which that music or video conference travels not reimbursed for the billions of dollars invested to make those applications and services work?
And, if a Google has a right to realize incremental revenue from advertising as usage increases (more eyeballs equals more revenue, which in turn drives newer and better services from Google), why should the operators not have the same ability if they are the ones expected to invest in network builds on which Google traffic depends?
If the OTT providers lash out against any extra fees by consumers, then, why should they not be forced to step up an offer a piece of their profits as payment for the guarantees of quality they expect from the network operators? In other words, OTT providers should share revenue with operators in order to have traffic prioritized and bandwidth shaped in order to guarantee high-quality delivery of their applications and services.
- Operators should treat traffic from OTT application and content providers in the same manner in which they treat traffic from their own internally offered applications and content. True.
For example, Hulu and YouTube must receive the same traffic management as that from content aggregated and delivered by the operator themselves. Operators should NOT be allowed to discriminate against competitive over the top content and applications.