‘The enemy of my enemy is my friend.’ This is one way to read ETNO’s (European Telecommunications Network Operators’ Association) most recent proposal to the ITU (International Telecommunication Union) to regulate the possibility of creating a multi-tiered Internet. Were not the telecom operators against more regulation, especially within a global framework such as the ITU? The stakes are higher now – mandating the ITU to allow exceptions to net neutrality may prevent national regulators imposing the opposite!

In his interview with CNET, Luigi Gambardella, chairman of ETNO’s executive board, explains clearly the idea behind the proposed principle of ‘sender-party-pays’ for Internet traffic. In a nutshell Gambardella explains: ‘...the operators are free to negotiate commercial agreements beyond best effort. These commercial agreements are based on the value of the information, not the bits.’

A multi-tiered Internet concept, net neutrality, and pricing issues

In order to make big content providers like Google, Facebook, or Hollywood pay the fee for using the telecom infrastructure to reach their customers (and earning fortunes), the operators propose introducing ‘the business tier’ of the Internet, i.e. special services with a quality of service beyond best effort which is today’s Internet standard. To maintain an open Internet, they argue, the business tier would run in parallel with the ‘economic tier’, i.e. the Internet as we know it, which would remain unchanged and based on the principle of best efforts.

Proposals on a multi-tier Internet have been at the heart of discussions on net neutrality for years. ETNO has been pushing this idea together with other major operators around the world. The business tier has also been proposed, in the form of ‘additional online services’, by Verizon and Google in their Legislative Framework Proposal for an Open Internet in 2010.

Opposition from the Internet communities has always been loud and clear. The Electronic Frontier Foundation (EFF), in its analysis of the Google-Verizon proposal, pointed that the proposed ‘additional online services ... could be the exception that swallows the nondiscrimination rule’.

Gambardella argues that the multitier Internet can bring more choice:

In the end, the customer will have more choice. It's like if you travel in economy. But why don't you also allow business class, a premium class, to differentiate the service? There is more choice. The customer decides what is better for him.

However, by having both business and economic tiers run through same network and share the same total available bandwidth, it is likely that the economic tier will be the one to suffer in the event of congestion. Or, to continue with Gambardella’s airplane analogy: there is a limited number of economic and business seats on a plane, and no business seats will be given to economy class if there is a greater demand for them compared to the demand for business seats; ergo, the economy class will suffer. Besides, the argument of ‘more choice’ is becoming vague in the digital age, as I argued in one of my previous blogs: can most users really make informed and meaningful choices and decide what’s best for them? 

Not least, the Internet community is asking operators to be more creative and innovative in constructing new business models instead of finding simple ways to take pieces of the content providers’ revenue pie. In his excellent post on Carriage vs Content, Geoff Huston explains the decades-long dispute between carriers (telecom operators) and content providers on who owes money to whom: from ‘You owe us money!’  to ‘No, it’s you who owe us money’ and back again.

ETNO’s proposal, beyond asking for a multi-tiered Internet, also suggests a fundamental change in the Internet’s economic model through the principle of ‘sending party network pays’, explaining how the gigantic revenues of the content industry could be distributed to the operators as well. This new ‘you owe us money!’ outcry has provoked strong opposition from the leading Internet business in the USA,  including ETNO’s  fellow operator Verizon, and also the US government. A separate post is needed to discuss the economic aspects of the proposal, so I will not go into detail here.

To regulate not to regulate

Back to the even more interesting bit: ETNO’s proposal is put forward as an amendment to the International Telecommunication Regulations (ITR), the treaty that determines how international telecommunications services operate across borders. This ITU ‘mandate’ document is to be updated at the World Conference on International Telecommunications (WCIT) in Dubai this December for the first time since it was developed back in 1988.

The controversies around the forthcoming WCIT and the modifications of the ITR have been hovering around the global diplomatic and policy fora for several years, gaining intensity as we approach the Dubai meeting. The position varies from the most developed countries opposing the ITU extending its mandate over the Internet, to most of the global south which is searching for more influence on the regulation of the Internet under the ITU umbrella. The Internet businesses – especially the dominant US and European content providers and telecom operators – have almost unanimously been against greater regulation both at local and at global level; for them, giving more say to the ITU would mean the globalisation of the governance of their business models and markets.

Now, it is the European association of telecom operators proposing that the ITU extends its mandate to allow the operators to negotiate commercial agreements beyond best effort – i.e. to introduce a business tier to the Internet. In effect, as user communities would argue, ETNO proposes that the new global telecom regulations allow exceptions to the net neutrality principle.

This move, in fact, is quite logical and even smart: if the global treaty would allow a multi-tier Internet, national regulators would have much less space for maneuvering to protect the network neutrality principle. Due to pressure from Internet communities on their governments and line regulators to protect the open Internet,  a number of states have already incorporated the principle of no discrimination into their policy acts – including the USA, Norway, the Netherlands, and others (as I have reported earlier); for ETNO, this may be a means to an end of this trend.

Tweeting about the initiative, Gambardella (@lgambardella) confirms that through this proposal ETNO wants to avoid any further internet regulation. In his interview with CNET, he justifies ETNO’s approach to the ITU process by acknowledging the ITR as a high level principle, a kind of a global ‘constitution’, and explains the motives:

Because what could happen is that in one year’s time, or two year’s time, some member states would perhaps ask to introduce some new limitation on the Internet. So, basically, the paradox is that our proposal is to impede some member state to regulate further the Internet.

Needless to say, this proposal raised lots of opposition not only from the USA but also from the EU, which has clearly announced that its position for WCIT will be to oppose any attempt to extend ITU regulations to the routing of Internet traffic and Internet content. More importantly, ETNO’s fellow operators from the USA, such as Verizon and AT&T, have also raised strong concerns over this proposal – both because they are in principle against extending the ITU’s mandate over the Internet, and because they are against the new economic models suggested by ETNO which would likely hurt the dominant US businesses.

‘The enemy of my enemy is my friend.’ ETNO has decided to fight against national/regional regulation (incarnated in European governments and regulators) through the enemy’s enemy – the global regulation (incarnated in the ITU); this is a U-turn in the complex multistakeholder relations within the global ICT policy process. With its myriad of influential actors, contemporary diplomacy is becoming increasingly complex and unpredictable, isn’t it?

Comments

Hisham Aboulyazed (not verified)
For better or for worse, the ETNO proposal projects a deeper problem that have developed and presided for some time...WCIT is just the weak spot in the lithosphere where things are finally allowed to erupt. There have always been tensions inside ITU between interests of the 'global south' and of the west-sponsored businesses (ITU-T Recommendation D-156 on Network Externalities is a clear very relevant example--ended up adopted in Johannesburg in 2008 with Reservations of 28 mostly western countries). But ETNO is not actually part of that global south, it is the European operators organization, not the African or Arab. Nor is it a regulation-loving government that wants to get more influence or leverage. I think the ETNO proposal has some good prospects being supported at the WCIT (in whole or in part) for it offers for the first time a business approach that also reflects the concerns of several countries...let's hope there is enough innovation at OTTs and Telcos to come up with new business models that would still preserve the integrity of the network.
Adela Danciu (not verified)
I think the key issue here is the one you identified: new business model. As Huston also argued in the article referred to by Vlada, it all comes down to how to ensure the business sustainability and ultimately the profit. And it is not the role of state(s) and regulation to endorse business models, but rather to create the economic and social environment to allow for innovation, including in the way a company conducts its business, while safeguarding public interest (and not a particular economic interest).
Vladimir Radunovic's picture
Vladimir Radunovic
Sergio, very good point. ETNO is not a delegate and as such can not submit a proposal for ITR amendment. Yet, they can search for support of other countries. I tweeted your question to Mr. Gambardella of ETNO, and he responded: "We are promoting our proposal and we believe that a lot of countries will support us". Why are they confident? Net neutrality is just the part of the proposal; its much wider effect is a change in the internet economic model: a change from "peering" and "end users pay" (which thus far benefited to the US/west companies mostly and unfair for developing markets) to a more balanced system of "sending party pays" asking content providers to pay instead (that would benefit developing markets more). The proposed model certainly also has lots of drawbacks, but we can expect number of developing countries can support this substantial change - and thereby possibly the model of "multi-tier Internet" as well. And if they do, the opposition from US or EU would not mean much in their international agreements with countries that accept such a model! As I said, contemporary diplomacy is becoming very interesting! One other thing in this proposal is worth exploring more: economic model based on "value of bits" rather than "quantity of bits". Asks for a comprehensive analysis!
Jefsey MORFIN (not verified)
The internet has already several ways to build formal and informal "externets" (i.e. "open closed garden" if you want to keep using the IETF language). The target of its commercial sponsors (cf. RFC 3869) is to keep it under their control, so multiples legal externets is something they oppose. The IUse (Intelligent Use) of the digital resources does not oppose global externets (i.e. specific terms of quality/price), but oppose local barriers within global externets (or the internet, if there is only one externet as in the case of the today internet). This is because globality is an internet services (plural) feature. In deciding that the Internet technology was to be "market accepted" and not "people centered" (as per the WSIS) ISOC, IAB, IETF, W3C and IEEE have not left us with any other altenative that to use ITU to impose democracy in quality grades. The problem is the resulting pricing on quality rather than on best effort: the developped countries will make less money in poor countries (permitting them to invest). As everywhere it is short term corporates' against long term people's (and corporates'?) interest .
Sérgio Alves Jr. (not verified)
Dear Vlada, Thanks for the text. It's very useful for those who are concentrated for WCIT. The idea of a business layer is a good sum of the proposal. One observation, to the extent of my knowledge, no country has supported ETNO's proposal until now, and Europe is opposed to it, as you mentioned. Don't you think it's stillborn? It seems to me that the chances of it being reflected in the ITRs are really low. Abraços, Sérgio

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