Wireless Network Neutrality Overview

1. Wireless Network NeutralityOverview A Presentation at the WIK Consult International Conference Network Neutrality – Implications for Europe Bonn , Germany 3 – 4 December 2007 ‘ Rob Frieden, Professor of TelecommunicationsPenn State Universityrmf5@psu.edu Web site : http://www.personal.psu.edu/faculty/r/m/rmf5/ Blog site: http://telefrieden.blogspot.com/

2. The Network Neutrality Debate Highlights the Stakes in Next Generation Network Development • NGNs will converge technologies and services probably relying on wired and wireless IP-centric conduits. • To recoup the cost of network upgrades and to exploit new NGN capabilities, network operators will seek to change terms and conditions relating to access, interconnection, pricing and service provisioning. • The crux of the Net Neutrality debate juxtaposes consumer protection (and accommodating users’ service expectations) with diversifying ISP business plans. • Ironically, the Apple iPhone highlights carrier limitations on handsets and network access even as this phone offers greater versatility.

3. The Network Neutrality Debate Highlights the Stakes in Next Generation Network Development (cont.) • ISPs need to diversify services without adversely impacting the Web’s accessibility, competitiveness, synergies and serendipity. • The wireless net neutrality stakes may exceed wireline, in light of increasing reliance on wireless networks and a regulatory classification closer to conventional telecommunications services than information and value added services. • Despite qualifying for more regulatory scrutiny, wireless network operators masterfully have avoided the kinds of regulatory obligations net neutrality would impose.

4. Two Wireless Neutrality Issues 1) What contractual rights can wireless carriers reserve regarding subscribers’ use of their handsets? (focus on the handset) 2) What nondiscrimination access requirements must wireless carriers satisfy? (focus on the wireless network)

5. Wireless Net Neutrality Hype • Advocates for and against net neutrality have overstated their cases: “curtains for the free world” vs. “a solution in search of a problem.” • The concept of wireless net neutrality has entered the debate belatedly, probably because most consumers remain enthralled by the benefits of mobile radiotelephone service, despite mediocre performance. • Net neutrality advocates want to apply longstanding wireline telephony policies that separate service from handset sales, and allow end users to use any device to access any carrier, service, content source and application. • These advocates tend to frame the issue as a referendum on whether the Internet will remain open, nondiscriminatory and able to contribute to national productivity, economic opportunity and innovation through “best efforts,” end-to-end connectivity. • Wireless net neutrality opponents frame the initiative as shameful government intervention in a fully competitive, robustly innovative and properly self-regulating industry.

8. Wireless Net Neutrality Reality for Carriers • This debate is about wireless firms’ profit maximization and whether they can avoid becoming commodity providers with limited profitability even as they must commit to costly network upgrades. • Wireless carriers want to retain the ability to discriminate on price and quality of service, to lock handsets and lock-in subscribers and to offer walled garden access to content. • Such discrimination can customize service, but also reduce the surplus accruing to heavy volume and peak time users on “all you can eat” plans. • The carriers claim that governments need to create incentives for NGN investment, or at least eliminate disincentives.

9. Wireless Net Neutrality Reality for Carriers (cont.) • In reality the carriers want captive subscribers who must pay for access to content and enhancements to basic network access. • Put another way wireless carriers consider network neutrality as limiting their ability to operate “intelligent” networks (instead of “dumb” pipes). • Both wireline and wireless carriers want to find ways to apply two-sided telephony pricing to Internet access: end users pay for network access (preferably metered), plus content and applications providers also pay for network access inside the Internet cloud.

10. Telephony and Internet Models Telephony Cost Causation The caller usually triggers a complete end-to-end network setup using facilities provided by the originating carrier and other carriers secured by the originating carrier. Traffic measurement and tracking Metering and tracking likely. Parties Agree on a multilateral basis to divide cost and share toll revenues based on ITU Recommended model. • Internet • Cost Causation • Traffic types and routing vary making it difficult to use traffic flows for determining who should pay; conduit and content merge. • Traffic measurement and tracking • Possible, but does not necessarily indicate which party initiated the link and who benefits. Upstream and downstream flows often asymmetrical. • Parties • A connectionless protocol where many carriers may be involved in switching and routing packets on “best efforts”model; evolved from zero cost peering to a commercial hierarchy of peers and clients.

11. Wireless Net Neutrality Reality for Content/Application Providers • Net Neutrality would foreclose, or limit the ability of carriers to accommodate the need for “better than best efforts” traffic routing, a desirable feature for video streaming, P2P networking, real time gaming and VoIP. • On the other hand, how carriers partition their networks and program NGN routers (through “packet sniffing” ostensibly to “shape” or “manage” traffic) for premium and regular service can degrade service for regular users even in the absence of congestion, e.g., forged TCP reset packets. • Content and application providers have benefited from not having to pay a surcharge to ride on networks, in addition to the peering or transit arrangement secured by ISPs. • Access tiering favors established and ISP-affiliated ventures, able to afford surcharges, and disadvantages small, new firms.

12. Wireless Net Neutrality in Spectrum Allocation and Operating Rules • NRAs also may implement wireless net neutrality principles when allocating spectrum and establishing operating rules. • In the U.S. the FCC, in response to a campaign by Google and other content providers, established an “Open Platform” requirement for a 22 MHz block of choice “beachfront” 700 MHz spectrum made available for auction in the conversion from analog to digital broadcast television, scheduled to occur by February 17, 2009. • The winning bidder must allow consumers to use the handset of their choice for downloading and using any applications, subject to certain reasonable network management conditions that allow the licensee to protect the network from harm. • The FCC rules do not adopt Google’s suggestion that wireless carriers must offer wholesale service rates to third party resellers, e.g., ISPs and content provides like Google, and agree to interconnect with them at any technically feasible location. • The complex FCC rules also appear to abandon even the limited network neutrality rules if bidding does not exceed a specific multi-billion dollar reserve price.

13. Wireless Net Neutrality Issues • Locking handsets by blocking access to competitors (by frequency, transmission format, firmware or software); in the U.S. carriers lock even GSM handsets, so changing SIM cards will not work. • Carriers can use firmware “upgrades” to “brick” (render inoperative) third party firmware and software; at the very least the warranty evaporates. • Carriers disable handset functions, e.g., bluetooth, Wi-Fi access, Internet browsers, GPS services, email clients. • Carriers block specify format for accessing memory, e.g., music, ringtones, photos. • Carriers block or attempt to thwart access to third party content and applications (software). • Walled garden access favors videocontent of affiliates and partners. • Proprietary, non-standard interfaces make it difficult for third parties to develop compatible applications and content.

14. Wireless Net Neutrality in Practice • National regulatory authorities may implement some wireless network neutrality principles, based on successful wireline experience, e.g., separating service from handset sales. • However, wireless carriers have effectively lobbied for the status quo based on assertions that the market is robustly competitive, lock-ins protect subscriber privacy and make it possible to offer subsidized handsets and net neutrality would stifle innovation and investment. • Consumer protection laws may require wireless carriers to pro-rate early service termination charges. • Wireless carriers may not be able to continue foreclosing used handset markets if one carrier or reseller offers a lower month-to-month plan for subscribers who bring their own handset. • Consumers may grow less tolerant of carrier-imposed handset restrictions in light of increasing appreciation that lock-ins typically only serve carrier profit maximization goals.

15. Implications for Europe • European Community concerns about consumer protection and carrier market power may trigger consideration of wireless network neutrality “safeguards.” Already it appears that NRAs will not permit all of Apple’s iPhone restrictions that apply in the U.S. • Handset manufacturers may show greater reluctance to capitulate to carrier demands, e.g., disabling handset features and exclusive distribution arrangements, particularly in markets where consumers expect to pay higher prices for feature rich, unlocked phones. • Google’s handset and service models may disrupt the status quo. • Maturing core service markets and slower than anticipated demand for 3G services will force carriers to adopt new pricing and service models, including bundling wireless with other services. • Europe’s comparatively robust Mobile Virtual Network Operator sector amplifies the need for innovation and the likelihood of lower ARPU.