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Thursday, March 12, 2009

Solutions to net neutrality-investment conundrum

Further thoughts on incentives to invest - the reason why nobody believes the ISP claims on broadband speeds, and therefore they won't invest in NGA, is that the ISPs are promising more than they can deliver because of cheapskating backhaul costs - or overexpensive BT Wholesale charges, whichever you prefer. The EC in February 2008 approved Ofcom deregulation of backhaul charges in most urban locations (64.4% of the UK population) incidentally....

The answer to that is to stop deceptive advertising and enforce Quality of Service standards on ISPs, which Ofcom is still trying to avoid, preferring co-regulation and, soon to come - name and shame the worst performers. But if customers get what they pay for, then they might be happier with their ISP.

So, how else can ISPs squeeze out some NGA cash if they continue to over-promise and under-perform? Well, four options present themselves.
1. PHORM - behavioural advertising, screw some of Google's cash out of them. Stephen Carter approves.
2. Discriminate and offer consumers walled gardens of 'approved' (i.e. priorised) content - exclusive offers where possible, such as with Disney or the Premier League. That's what we might call the 'Mobile' option.
3. Stop wasting money on DPI and offer customers what they want, high-class QoS service - that's what we used to call the Demon strategy.
4. And let me throw in a joker - the Fixed strategy.

The UK is unique - we have an incumbent SMP operator, BT, which has no mobile (as opposed to wireless) network, and has the Openreach structural solution, for all its stodgy performance. We also have a reasonably strong tradition of regulating mobile networks, over a twenty-year siege laid by the most expensive lawyers in London. Yet still the Competition Commission slapped Ofcom's wrist for cocking up its latest attempts to regulate mobile termination.

So here's the 'Fixed' plan. Reduce mobile prices to cost - you can check Indian termination rates to see what cost is, yup a lot lower than here. Then the fixed operators stop losing market share and interconnection charges hand-over-fist and they can invest in broadband as their advantage over mobile. Oh, and enforce net neutrality against mobiles, too - if their mobile broadband is 14.4Mbps they can afford to give their customers the whole Internet.

What does this radical option do? It enforces a transparent cost-based technology-neutral settlement on the operators, and thus a transparent and open access solution for consumers. Will ofcom do it? Do oligopolists fly?

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