Ofcom Describes Net Neutrality Policies

A new position paper by U.K. regulator Ofcom on network neutrality relies heavily on competition to maintain an open Internet access business, while at the same time generally allowing Internet service providers to use network management tools so long as they are transparent about such practices.

At the same time, Ofcom says it will watch for any signs that “best effort” Internet access, which does not allow any packet prioritization, does not coexist with any managed services ISPs may offer.

In fact, the Ofcom rules are less restrictive than current U.S. rules, which do not allow any packet prioritization on fixed networks, at all. What Ofcom does seem to warn against is forms of management that have the business result of favoring an ISP's own services, over competing services offered by other contestants.

Mobile and fixed network operators can meet new demand for high-speed Internet access either by investing in new capacity and partially by rationing existing capacity, in part by using traffic management tools,  Ofcom says in a new position paper explaining its thinking on network neutrality policy.

“The question is not whether traffic management is acceptable in principle, but whether
particular approaches to traffic management cause concern,” Ofcom says. The U.K. communications regulator rightly notes that just two broad forms of Internet traffic management exist, either a “best effort” approach that simply randomly slows down under load, or some form of “managed” access that could include priorities for delay-sensitive or higher value traffic.

Ofcom generally argues that access providers can do quite a lot where it comes to traffic management, so long as they are transparent about it and communicate those practices to end users. There is an expectation that users will have access to all lawful applications, of course.

While recognizing that best-effort and managed services will coexist, Ofcom says it would consider intervening if the amount of “managed” bandwidth jeopardized the amount of “best effort” access Ofcom considers key to continued innovation.

Likewise, Ofcom says it would be concerned if any particular management technique was applied in a way that harmed competitors to ISP-owned services. Ofcom network neutrality statement

Ofcom Warns of "Low Interest" in Super Fast Broadband

Ofcom chief Ed Richards has warned that cash-strapped U.K. consumers lack enough incentive from access providers to upgrade to "superfast" broadband packages. In other words, "prices are too high."


"For superfast broadband, subscriber numbers are still low, perhaps because the nearest thing we have found to a ‘killer app’ so far is the demands of the multi-user household," Richards said. "The fact that we cannot identify specific ‘killer apps’ beyond bandwidth hungry teenagers is in some ways beside the point." Ofcom boss warns of low interest in 'superfast' broadband

That argument illustrates an important, and sometimes overlooked, aspect of national broadband plans. Some supporters of faster broadband think the "problem" is availability. But there is a mounting amount of evidence that "availability" is not the problem.

For whatever reason, including compelling applications or prices, where super fast broadband is available, and a workable definition is access at 50 Mbps or 100 Mbps at the moment, demand has tended to be low, even in some markets, such as Singapore, where prices are low, by global standards.


Time Warner Cable in early 2010 had about nine million high-speed access customers. It had about 20,000 customers for its fastest DOCSIS 3.0 service, which depending on configuration can support speeds up to about 43 Mbps per 6 MHz channel in the downstream direction, or more, if more bandwidth is made available.


All that means is that few customers are willing to pay $100 a month or more to get really-fast broadband access running at speeds of about 50 Mbps maximum. Low demand for 50 Mbps?


Fiber access does not sell itself, BT has found. As it begins to market its new fiber-based access services, BT has found that consumer demand for 40 Mbps Internet access is less robust than some had anticipated.

"Cardiff has been given a head start by Openreach but some fiber-enabled parts of the city are proving to be a bit slow out of the blocks to take up the opportunities fibre presents," said Richard Hall,BT Openreach NGA Deployment Director for Wales. BT UK Frustrated by Lack of Superfast FTTC Broadband Uptake

"With the notable exception of Whitchurch, residents are proving slow to take advantage of the technology on their doorstep and so we are working with the local council to raise awareness and drive demand," he said.

In the U.S. market, service providers have not fared much better with sales of 50 Mbps or faster services, which largely remain products bought by business customers. Another typical U.S. market issue also could be a factor. Customers in these areas already can buy fast service from Virgin Media.

Net Neutrality is a Fight Over Ecosystem Revenue Share

The net neutrality debate is, at its heart, an argument about the distribution of future revenues in the broadband ecosystem. Sure, there are technical issues, such as how best to manage scarcity of bandwidth at times of congestion.

And there are legitimate concerns about potential anti-competitive behavior.

But at its heart the arguments are about gaining the best positioning with the new ecosystem. Were it not for mobile services, communication service providers would be in big financial trouble.

Broadband services have helped, but are a fraction of the voice revenue now dwindling away. To replace lost voice revenues, access provider broadband revenues would have to triple. To many observers, that must mean revenue shared with business partners, as it is hard to see end-user payments tripling.

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U.K. Regulator Not Initially Convinced Net Neutrality Rules Needed

Ofcom, the U.K. communications regulator, has opened an inquiry into network management and network neurality issues by suggesting it does not presently see evidence of anti-competitive behavior that requires "ex ante" (rules instituted before any obvious problems) regulation.

Ofcom's proceeding is noteworthy for its refreshing honesty about the "network neutrality" debate; namely that the stakes include the utlimate division of revenue and profit in the developing broadband ecosystem.


"As the telecommunications market, content sector and online sector change, points of friction will inevitably arise over who controls customer relationships and the rate of innovation," Ofcom said. "Firms across these sectors are also competing for a share of advertising revenues and consumers’ expenditure at a time when there are concerns about the sustainability of many of the existing business models, not just for traditional telco and content distribution businesses but also a surprisingly large number of online businesses."

"As the value chain is taking shape, network operators and content providers are bargaining over how future rents will be divided and technical measures such as DPI and DRM are being deployed in part to strengthen relative negotiating positions," Ofcom noted.

The situation is especially acute in the mobile space, where bandwidth consumed, and hence network cost, is growing far faster than revenue.


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Ofcom Wants Better Consumer Information About Broadband Access Speeds

Ofcom, the U.K. communications regulator, is not happy with the accuracy of information provided consumers about their real-world broadband access services, and wants to revise the reporting process so better information is provided.

Mystery shoppers commissioned by Ofcom have found that 15 percent of the time, "potential customers" were not given an estimate of their access line speed, and 42 percent were only given one after prompting the sales agent near the end of the sales process.

The accuracy of the information proved to vary. In some cases, users were given double the line speed of another provider for the same line and technology, and sometimes received different answers over the phone when compared with the website of the same service provider. The majority of line speeds also did not match (within 1Mbps) the speeds given by the BT Wholesale line checker.

There is no question but that "best effort" broadband services are difficult to accurately predict or describe. It is true that users will sometimes experience bursts that correspond with the advertised "up to" speed. Most of the time, actual experienced sustained rates are lower, because of contention ratios and actual end user volume.

So Ofcom proposes that ISP's provide speed estimates based on line length, line capacitance and line attenuation, all measures that will provide a better approximation of typical download speeds.

Ofcom also wants to ensure that shoppers are given this information early in the sale process, particularly before payment information or a request for service is made.

Ofcom also seek to ensure that factors that affect broadband speed are explained. Specifically, Ofcom wants to ensure that shoppers are told how network capacity, congestion on the Internet and traffic management policies could affect performance. Consumers also should be told that actual throughput speeds will be lower than advertised or theoretical line speeds.

U.K. consumers already have the right to be moved to a cheaper, lower speed option when the plan they bought does not measure up. In cases where their is but one tier of service, Ofcom wants to allow consumers to leave their contracts without penalty.

Ofcom apparently will try to get such changes made voluntary. If changes aren't agreed to, or implemented, a regulatory review may occur, which could lead to formal regulation.

Such policies are not unreasonable consumer protection efforts. The problem is that formal guarantees are next to impossible so long as connections operate on a "best effort" basis.

Even on a quality-assured connection, which would have to be based on packet prioritization policies, throughput will vary throughout the day, based on overall contention for network resources, though far less than is the case on a "best effort" connection.

To closely match expected routine performance with an advertised top speed will require packet prioritization.

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Lower European Mobile Data, Texting Prices

Ofcom Chief Executive Ed Richards is lobbying European Commission telecom regulators to slash the allowed prices of international text messaging and mobile Internet access, says Jonathan Prynn, Evening Standard reporter. It appears Richards has in mind prices lower than currently offered by mobile operator O2. O2 charges £3 for one megabyte of data transferred.

So it appears Richards seeks prices significantly lower than the £4.11 per megabyte level that tends to be the average now. European mobile carriers probably will hope to stave off such regulation by voluntarily dropping their tariffs in time for an announcement at Mobile World Congress meeting in February.

The moves would be good for consumers, and obviously financially damaging for carriers. As always is the case, the lower tariffs also would make it harder for upstart competitors to grow their companies by undercutting the high tariffs.

FTTH: No Business Case or No Investment Case?

British Telecom has to this point been unwilling to spend heavily on a new fiber to the home network for the UK. Even UK regulators have agreed with the thesis that clear evidence of demand, sufficient to provide a payback, is lacking.

"No one would be more delighted if a commercial incentive emerged that enabled us to fiber the nation," says Peter McCarthy-Ward, BT director. "We are not facing large numbers of people today who are constrained by their bandwidth."

BT also faces intense investor resistance. Everywhere service providers have pondered widesparead FTTH, investors have made their displeasure clear by hammering equity prices of the companies that have done so.

What does seem clear is that in cases where a national, or other units of government, do not subsidize FTTH programs heavily, the investment case is questionable, even if the strategic value might outweigh even the near-term pro forma. Investors might not appreciate the replacement of copper access networks with optical fiber networks, when the immediate outcome is simply a replacement of lost voice revenues with new service revenues made possible by the existence of the fiber.

But that's a better outcome than sustained decline, which might be the outcome if the upgrades are not made.

FTTH makes clear business sense, even if it does not always seem to make immediate investment sense, in markets where a national government is not heavily subsidizing the program.