Regulator speak

I’m always hesitant to raise the subject of net neutrality here, not because I doubt its huge importance but simply because of the yawns it tends to evoke on this side of the Atlantic. Ofcom has long argued that this lower priority stems from the relatively high levels of retail competition for internet access in European markets – a questionable defence.  But sometimes the subject just can’t be avoided, and Ed Richards felt obliged to tackle it when, in early April, he addressed the (newly-formed) US Chapter of the International Institute of Communications in Washington DC.  Trying hard not to patronise his American audience, he explained the gist of Ofcom’s policy as follows:

“After due consideration, we concluded that there were benefits associated with both the ‘best-efforts’ internet and the provision of managed services… and that one key aim was for a framework which enabled both of these simple concepts to be accommodated… In a sense that does amount to a form of discrimination, but one that is normally efficiency enhancing and ultimately better for consumers.” 

After more warm words about the value of the internet, he ended on this, less than resolute note:

“The internet is an enormously complex and dynamic ecosystem, where the law of unintended consequences looms very large indeed… as we finally move towards a collective view on the matter, it may be that the most apposite adage is “more haste less speed”. 

Speedily or not, the FCC came up with a further modification to its own regulatory prescription on 24^th April and, guess what, it looks remarkably like the Ofcom compromise solution.  Here’s how FCC Chairman, Tom Wheeler, describes the latest proposal (which goes to a vote on 15^th May):

 

“The proposed rule is built to ensure that everyone has access to an Internet that is sufficiently robust to enable consumers to access the content, services and applications they demand, as well as an Internet that offers innovators and edge providers the ability to offer new products and services… If anyone acts to degrade the service for all for the benefit of a few, I intend to use every available power to stop it.” 

So, both regulators envisage a possibly two-speed internet, a ‘form of discrimination’ in Ed Richards’ words, but the best efforts version to be afforded some regulatory protection (and related competition issues to be decided on a case-by-case basis).  Predictably, the net neutrality camp in the US has been howling in protest at the FCC’s intentions.  One of the more articulate critics is Tim Wu, a professor at Columbia Law School.  I happen not to agree with him but this comment of his directly challenges the UK/US regulatory consensus:  

“The new rule gives broadband providers what they’ve wanted for about a decade now: the right to speed up some traffic and degrade others. (With broadband, there is no such thing as accelerating some traffic without degrading other traffic.) … This is what one might call a net-discrimination rule, and, if enacted, it will profoundly change the Internet as a platform for free speech and small-scale innovation.” 

As Ed Richards almost said: “There may be trouble ahead…”

Downwardly mobile

I was foolish enough in my last post to take comfort from the UK’s lofty position in Ofcom’s latest ‘European Broadband Scorecard’. Sadly, however, Ofcom’s apparent national confidence has been widely criticised, not least because of the sampling techniques used to derive the regulator’s data.  As a statistical dunce, I won’t attempt to enter that particular debate: I feel much more at home with the straightforward critique of Ofcom’s analysis put forward in a recent blog by mobiThinking 

In common with many others, the blog criticises Ofcom for limiting its main comparisons to the 5 major European economies, rather than the totality of Europe.  Results for the latter, contained in an annex to the Ofcom report, show the UK in a much less flattering light.  But as the name of the website suggests, mobithinking’s primary interest is in the data for mobile broadband.  In particular, it addresses two key questions: what is the rural coverage for mobile broadband (since this probably offers a more important assessment of useful internet access), and what type of mobile access is available (3G or 4G).  Again, using these criteria, the UK ‘score’ is very much second division – indeed, the UK’s relative diffusion of 4G looks woeful. 

It’s not difficult to criticise a statistical report of this kind, and Ofcom has an almost impossible task in trying to assess whether the UK can aspire to “the best broadband network in Europe”.  Nonetheless, in just the four years or so since Jeremy Hunt made that pledge, the shift in importance from fixed to mobile broadband internet has been inescapable and, to that extent at least, the criticism of Ofcom’s complacency seems entirely justified.

What ‘good’ looks like?

I recently let slip that I had been warming to the view that ‘the UK’s broadband experiment has been going pretty well’.  This unnatural show of confidence seemed fully justified when Ofcom subsequently published its European Broadband Scorecard which cheerily claims that: 

“the UK leads the EU’s five biggest economies on most measures of coverage, take-up, usage and choice for both mobile and fixed broadband, and performs well on price”. 

But I should have recognized all this this euphoria as my moment of springtime madness, and I’m grateful to Ian Grant for restoring my sanity by flagging up the highly critical report by Digital Business First (DBF) on ‘The UK’s Enduring Broadband Deficit.  The conclusions of this analysis are indeed pretty damning, for example: 

 “Although the urge to rank the UK as highly as possible is understandable, it appears as though the manner in which Ofcom ranks UK broadband coverage is not credible, nor indeed realistic”. 

Ouch!  On its own terms, the report undoubtedly has much to deride in the UK government’s handling of broadband diffusion but, like the Ofcom report before it, those conclusions depend crucially on the authors’ chosen benchmarks of performance.  For Ofcom, it is the other four major European economies; for DBF, the more relevant metrics lie among Asian economies such as Hong Kong and Korea.  But if international benchmarks are so obviously treacherous, is there a better way of gauging the success of broadband policy? 

That was essentially the question posed to Blair Levin, the eminence grise of the American National Broadband Plan, in an interview last week with the Washington Post.  Levin concurred that international rankings are problematic ‘because they both cherry pick data and are backwards-looking’.  He suggested instead a 4-part test, expressed in typically folksy terms like this: 

“Are you driving fiber deeper?”

“Are you using spectrum more effectively?”

“Are you getting everybody on?”

“And are you using the platforms to deliver public goods more effectively?” 

Through this lens, the Scorecard for UK policy begins to look very different.  It fails miserably on 1 and 2; it does better on 3 but these people are evidently spending most of their time in social networking or home shopping because on 4, expressed in Ofcom’s terms as the ‘Percentage of population who interacted online with public authorities within the last 12 months’, the UK comes a lowly fourth out of five. 

Scepticism fully restored…

Voice from the grave

Who says ‘voice is dead’??  I admit I thought myself that the advent of video conferencing, even at the modest level of Skype video calls to far-flung relatives, had largely undermined the demand for plain old voice telephony.  No doubt it will one day but it seems we’re not there yet.  (I have to admit that the poor quality of most of those Skype calls would be a material issue if they were not free). 

The origin of the technical challenge was really the quality of voice reproduction on mobile phones – poor at the best of times.  Like me, you may have seen that downside as the inevitable cost of mobility but the increasing bandwidth available on modern networks has allowed the handset makers to address the problem.  4G-capable smartphones (and a few 3G handsets) are increasingly being equipped with so-called HD Voice calling, which extends the audio frequency range to something closer to that of the human voice (and also helps to suppress background noise).  The implementation of HD Voice has been frustrated by the obvious compatibility problems:  essentially, both handsets (calling and receiving) and the connecting base station all need to be enabled for HD.  Nonetheless, most of the mobile networks have now introduced this functionality. 

While the mobile networks were the initial focus of HD, I was surprised to see that the technology has also been applied in the fixed sector.  Is that necessary?  Well, if you’ve ever tried to conduct a conference call through a conventional ‘squawk box’, you’ll understand the need for a better solution – particularly if one or more participants is using a mobile phone.  The trick here has been to introduce Dolby noise suppression techniques to improve audio reception.  Dolby also claim that their audio separation technology makes it much easier to distinguish between the voices of speakers at the other end of the call.  Still not convinced?  Then let me refer you to the news that BT is now incorporating this Dolby-enhanced HD technology in its latest generation of conferencing hardware.  

Voice lives on…

A sad reflection

One of my few claims to fame is that I briefly knew Colette Bowe in a previous life – when she was, perhaps, rather less of the ‘grande dame’ of regulation that we know today.  I’ve therefore followed her subsequent career with interest and, now that that she has elected to leave the chairmanship of Ofcom, I wondered whether she might offer us some indiscrete remarks or other obiter dicta about her 5 years with the UK regulator.  No such luck of course but, courtesy of a recent blog by Roger Darlington, I did notice some interesting remarks she made in an interview at the close of the Oxford Media Convention.  In particular, she was asked about the public perception of Ofcom’s role – in the wake of David Cameron’s famous “Bonfire of the Quangos” speech in 2009 (announcing his intention that Ofcom would be stripped of its policy-making function). Colette apparently insisted that: 

  “Policy making is not our job” and that “Ofcom is the keeper of the facts”. 

Oh dear. The first statement may be the unfortunate reality but I didn’t realize that Ofcom’s emasculation had gone as far as the second. Doesn’t bode well for regulatory policy…

Seconds out, the internet gloves are finally off

Well, after many years of fretting about the net neutrality debate, I see that the combatants have now begun the move into battle formation.  Presumably encouraged by the FCC’s recent set-back in its attempt to enforce net neutrality principles, and the FCC chairman’s rather limp response,  Comcast has exploited the virtual vacuum by establishing something like ‘most favoured nation’ commercial terms with Netflix. 

There is no shortage of doom-mongers to proclaim that the (internet) sky is falling but, however controversially, I’d like to put forward a contrary, albeit rather simplistic hypothesis.  Another recent Washington Post article by Timothy Lee is right to focus on competitive dynamics in its analysis of how Comcast and Netflix reached this new negotiation but I would argue that an ISPs’ exercise of market power needs to be regarded in the same light.  Why does Comcast have market power over Netflix – and other content providers?  Simply because Comcast has chosen to invest in the – hitherto – least rewarding segment of the value chain, the local access network.  There is, in principle, nothing to prevent another player - or Netflix itself – exploiting these economic rents if it is prepared to make a similar long-term investment in infrastructure.  It won’t, of course, and the chances are that the wounded FCC will still find some way to minimise rent-seeking by the ISPs but the clash between these leading internet players may yet prove to have been a useful reminder of basic economics.

 

Steady as she goes?

After a good deal of reflection, I’ve slowly been coming round to the view that the UK’s ‘broadband experiment’ has been going pretty well – always assuming we’re content with the limited FTTC architecture mandated by BT. It came as little surprise, therefore, that a recent report led by Richard Cadman’s SPC Network on the future of regulation in EU telecoms markets was highly complimentary, e.g. 

“The European broadband story, like that of European telecommunications, is generally one of success.  Consumers have benefited materially from increasing broadband competition over the past ten years: access speeds have increased, retail prices have fallen, while choice has expanded and European consumers enjoy faster access speeds and lower prices than their American counterparts.….. The picture for investors and for investment in the industry in the EU is also a positive one”. 

Where I felt less comfortable with the report was in its affirmation of existing regulatory policy.  In particular:

 

“From our evidence-based review of the performance of the market to date we conclude that there is no case for an extensive overhaul of the current regulatory framework…. It is also our view that the ladder of investment remains a valid concept and is critical to the continued development of the market”. 

OK, I think we all accept that LLU has played a vital part in the diffusion of consumer broadband, and the report is careful to stress the importance of developing new forms of unbundling in an NGN environment, but I always thought the ladder of investment concept was about more than access to incumbent infrastructure…

Sure enough, digging around in Martin Cave’s original papers, I came across this:

“The ladder of investment approach articulated by Martin Cave in 2006 suggests that access regulation is not only pro-competitive per se as it reduces barriers to entry but also is an indirect device to promote facility-based competition” 

Happily, we’re seeing more and more examples of new network being developed, most of it fibre-based, but I’ve seen very little evidence that these new networks owe their origin to the report’s acclaimed ‘ladder of investment’ philosophy..