Ode to a louse

With apologies to Robert Burns for the English translation, his 1785(?) ode contains the following: 

“And would some Power the small gift give us
To see ourselves as others see us!
It would from many a blunder free us…” 

Anyone following this blog will know that I’ve never been a big fan of network unbundling.  Indeed, I’ve even shown some scepticism towards the argument that LLU might obviate some (most?) of the concerns regarding network neutrality.  This latter view was articulated as long ago as 2010, when Ed Richards  of Ofcom addressed that year’s Cable Congress: 

“In the US, limited competition, both at the network and at the ISP level, means that the potential for consumer detriment through traffic management is greater. In Europe, as recent research for the FCC indicates, the mixed model – investment in infrastructure complemented by unbundling of the local loop - has delivered a more competitive market structure from the exchange back into the network… Where competition thrives, the case for a highly interventionist net neutrality policy is harder to justify on the grounds of consumer protection.” 

It seems that this European view, which sounded rather complacent at the time, is gaining increasing acceptance in the US.  There, the debate over network neutrality has, if anything increased in intensity, several ‘experts’ arguing that the neutrality proponents have got it all wrong, while others contend that the ‘experts’ themselves have misunderstood the debate.  But the European argument, that regulatory intervention may be the answer, appears to be gaining ground. An op-ed in last week’s ars technica, admittedly by a British expat, explains the recent shenanigans between Netflix and Comcast/Verizon like this: 

“The reason that these ISP policies are so troublesome, and the concerns over network neutrality so grave, is that the ISP market in the US is remarkably uncompetitive… The solution is to attack the monopolies head on…” 

The article then goes on to rehearse the familiar arguments for service-based competition, even citing the UK as a good exemplar of its benefits: 

“This is a model for telecommunications regulation that works. It provides the safeguards against poor performance and ISPs trying to promote their own services (or punishing competing ones) that the net neutrality proponents want, and it uses market power to do so”.  

While I retain my scepticism, I have to admit that two recent findings have rather dented my confidence in the argument that deregulation encourages network investment.  First, Vox magazine has been looking at what appear to be declining levels of recent infrastructure spend by the US Cable operators.  Its findings are quite likely to be challenged by the industry trade body (NCTA) but Vox makes the following assertion: 

 “Now needless to say the fact that investment is falling doesn't prove that NCTA is wrong about net neutrality regulations. But if you think the light regulatory touch is working because it's leading to an investment boom, you are mistaken. The industry is acting like a low-competition industry, scaling back investment and plowing its profits into dividends and share buybacks and merger efforts”. 

The second piece of evidence concerns the level of congestion in the access network (the source of the original Netflix dispute), specifically whether this is related to the nature of the local ISP market.  Might not similar congestion problems arise in the UK, for example?  Some very enlightening data from Level3 suggest otherwise: 

“We have [only] six peers with congestion on almost all of the interconnect ports between us…where our peer refuses to augment capacity. They are deliberately harming the service they deliver to their paying customers… Five of those congested peers are in the United States and one is in Europe…All six are large broadband consumer networks with a dominant or exclusive market share in their local market. In countries or markets where consumers have multiple Broadband choices (like the UK) there are no congested peers”.  (Emphasis added) 

As the man said:

“O…to see oursels as ithers see us!”

Uncle Sam knows... or maybe not.

For reasons I don’t fully understand the US has often seemed unreasonably obsessed with its international broadband ‘performance’, the debate swinging between ‘the sky is falling’ rhetoric of the likes of Susan Crawford  and other, more Chauvinist voices.  I was therefore rather relieved when I saw that yet another academic - Christopher Yoo, a Professor at the University of Pennsylvania, had waded into the debate, promising to provide a definitive judgement.  His is a substantial report but, for what it’s worth, Professor Yoo believes that his data are incontrovertible and his analysis comes down firmly on the optimistic side regarding US performance, e.g. 

“The answer is clear and definitive: as of 2012, the U.S. was far ahead of Europe in terms of the availability of NGA. The U.S. advantage was even starker in terms of rural NGA coverage and with respect to key technologies such as FTTP and LTE”. 

A bit more controversial is Yoo’s analysis regarding transatlantic differences in regulatory policy.  He uses mapping data to correlate the degree of unbundling (measured by the DSL market share of non-incumbents) against NGA coverage in the USA and Europe.  The methodology (especially causality) looks suspect to me on a number of grounds and it appears as though the results have been driven largely by the historical dominance of the US cable industry.  But Yoo is nothing if not bullish: he concludes: 

“The evidence… is fairly definitive (sic), confirming that facilities-based competition is more effective in terms of driving broadband investment than service-based competition”. 

For a coup de grace, Yoo sums up with this linguistic triumph: 

“These data stand as a major landmark with which anyone asserting otherwise must come to grip”. 

Well, they may not be ‘asserting otherwise’ but a couple of independent voices have this month bemoaned the state of so-called infrastructure competition in the US, in particular the hegemony of the cable operators.  First, FIBEREVOLUTION  picked up on research by consulting group cg42, showing that ‘US Cable is reviled by its customers’.  Apparently, 73% of those questioned in a customer survey agree with the proposition that ‘I feel cable companies are predatory in their practices and take advantage of consumers’ lack of choice’.  Moreover, within the same survey, 53% said ‘I would leave my current cable company if I actually had a choice’. 

Putting a more satirical slant on the dissatisfaction story, ‘the Onion’ ran an article this week announcing that: 

“Offering no justification for the action aside from their own desire to do so, executives from the nation’s leading cable companies announced plans Wednesday to take $100 from every one of their subscribers”.

 

The European model of service competition may well have proved less effective in terms of promoting investment in broadband networks but there are times when it’s reassuring to know there is at least a regulator keeping an eye on quality-of-service issues.

End of term report

I’ve not always been a big fan of Neelie Kroes, largely because of her fondness for consumer-centric views on competition – see, for example, here  and here.  But as Neelie approaches the end of her term in office, even I was taken aback by the venom of Andrew Orlowski’s damning assessment in The Register.  The title of the piece  gives you the general idea: 

“So, farewell then Steelie Neelie: you were worse than useless”.   

Orlowski accuses Kroes of ‘a wide-eyed pandering to fads’ and, as a result of paying too much homage to Silicon Valley, a failure to establish ‘a distinctly European vision’.  There’s certainly some truth in that but I thought the following was unjustified: 

“”If anything Kroes has made progress more difficult by polarising debate and institutionalising stupidity”.

Whatever else she did, Neelie always had her eye on the need for new investment in network infrastructure and she regularly made attempts to understand the obstacles to that (such as her series of ‘round tables’ with European CEOs). Just this week, her Office drew attention to new rules on state aid, aimed at reducing red tape and easing the provision of public support for investment in broadband projects.

 

So, perhaps less effective than she wished but Neelie was consistently well-intentioned.

Waiting for Dido?

Typical! You wait years for a new fibre initiative, then two (three?) come along together.... OK, the old adage may be a bit overworked but I was genuinely pleased to discover this week that the prospect of widespread gigabit networks might have come just a little bit closer.

The exciting news in the UK was of course the announcement by TalkTalk that it wants to extend the fibre network planned for York to reach more than 10m homes.  When news of its York joint venture with Sky and City Fibre first emerged, TalkTalk said it would be followed by at least two other cities but the company now says it wants to enlarge the fibre network substantially.  It apparently plans to do this by launching a national city competition along the lines of the strategy adopted in the US by Google Fibre.  According to Dido Harding, the CEO: 

“We believe the economics of our approach to FTTP could prove highly attractive, with a combination of scale and low cost build technology delivering a significantly lower cost per home passed than for the current FTTC infrastructure.” 

Sceptics have been lining up to pour cold water on the announcement.  They point out that similar claims in the past by CityFibre have come to nothing, or that the trial is really just a negotiating tactic in TalkTalk’s continuing attempts to challenge BT’s wholesale charges.  But I for one refuse not to be encouraged by Ms. Harding’s bold assertion that ‘We have a long term vision to build infrastructure’. 

Elsewhere, the ‘fibre initiatives’ I’ve spotted are a little more obscure.  The first popped up amid the ongoing media consolidation in the US.  There, AT&T has offered a number of commitments to regulators to sweeten the pill of its proposed acquisition of DirecTV, and one of these is to provide broadband access to 15m new customers – including homes outside its existing footprint (partly using fixed wireless technology).  A pious hope, maybe, but perhaps the combination of this US initiative and TalkTalk’s fibre project here will persuade Liberty Global (Virgin Media) to consider new broadband coverage in the UK… 

Finally, I must acknowledge the Labour Party’s new on-line policy and discussion forum, Labour Digital.  Already, a loyal supporter has proposed a ‘national Scheme to deliver 1 Gbps broadband to all’.  Maybe he should speak to Google…

 

 

 

Postscript

I referred in the last posting to the FCC’s proposed new rules on network neutrality.  Predictably, there has been a huge amount of comment and criticism of the proposed new regime but by far the best analysis I’ve seen is quite a short article by Kevin Werbach and Philip Weiser. Its main conclusion is as follows: 

“How to defend and implement network neutrality is not as simple as banning all forms of paid prioritization… What really matters is ensuring that the broadband environment continues to provide space for tomorrow's innovators to develop new, disruptive offerings. When the FCC releases the proposed rules for comment, we should all focus on that criterion to evaluate whether they are sufficient and effective”. 

I thoroughly recommend reading the rest.

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.