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Without Net Neutrality, Additional Access Charges Could Reach $25 Billion by 2019

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Revenues from mobile broadband access charges that violate so called Net Neutrality rules could reach USD25 billion by 2019 although that would represent just 6% of the total market.

Disruptive Analysis, a UK-based research firm, has looked at over 20 different styles of mobile broadband, including concepts such as application-based pricing, "zero-rating" and "sponsored data" for particular content/app traffic, or higher-quality "specialised services" - sometimes known as "fast lanes".

Many of these approaches are controversial, with regulators and law-makers under pressure from technology companies, telecoms operators, lobbyists, activists and even political parties. The USA's FCC, European Commission and other authorities are all considering future Internet regulation, against a backdrop of emotive language on both sides of the argument.

While much of the media furore has centred on fixed/cable broadband ISPs, where huge demand for streaming TV and movie content dominates discussion, the mobile industry has very different dynamics. Millions of mobile apps and websites act as gateways not just to content, but for communications, social media and business communications. The emerging "Internet of Things" is expected to be mobile-centric, again changing the landscape.

Yet cellular operators fear congestion will drive expensive capacity upgrades, while so-called OTT (over the top) messaging and voice apps undermine traditional non-data revenue streams. As smartphone penetration heads towards saturation in developed markets, they want to differentiate on metrics other than raw speed and data-volumes. In the developing world, the priority is getting lower-spending users onto the first rungs of the mobile Internet, in the hope of future growth.

In response, the industry has invented new ways to price or segment mobile data usage - some of which conflict with Net Neutrality principles, which mandate that all Internet traffic is treated and priced equally, without undue discrimination.

But actually making these business models work is much harder than many suggest.

Disruptive Analysis' report suggests that intractable problems with technology, commercial models and user behaviour make much of the Neutrality debate merely an academic exercise. They note that a lot of "sounds-good-on-paper" ideas simply won't work in the real world - especially trying to sell mobile Internet access "application by application", or getting media or application providers to pay extra money to "sponsor" data, or get "priority" delivery of traffic.

The report notes that paid-peering arrangements, such as the Comcast/Netflix deal, are unrelated to these concepts - that is essentially a "fast junction", not a "fast lane", and much less controversial.

Dean Bubley, director of Disruptive Analysis and author of the report said, "The complexities of wireless networks and rapid evolution of mobile apps make many 'non-neutral' ideas unworkable, irrespective of possible law changes. Much of the Net Neutrality debate may turn out to be a storm in a teacup, with telecom companies spending more on software, lawyers and lobbyists than they stand to gain from the outcome".

Despite economists' rhetoric being repeated by some regulators, so-called "two-sided business models" are unlikely to generate more than 2% of mobile data revenues in the next five years. Content or application players are not loudly demanding the right to pay for "QoS" (quality of service) or to pick up the bills for users' data charges. The silence speaks volumes.

In developed markets, regulators are likely to prohibit outright blocking of legal services and applications, such as VoIP and 3rd-party messaging. In developing econoomies, there will likely be a strong push beyond the lowest-tier "single-app" plans, as proliferating free Wi-Fi gives users a taste of the "real Internet".

Mr Bubley added, "Nobody who can afford access to the whole Internet is going to be happy just being given parts of it".

There is one bright spot for mobile operators however: despite some concerns about the impact on competition, the practice of "zero-rating" some mobile traffic for users (i.e. free access to certain apps or sites) will proliferate, with more than 1.5bn users exploiting the concept in some fashion by 2019. While some perceive this as a neutrality "violation", it is likely to continue to gain momentum, although with increased regulatory oversight, to ensure it is not abused. Free access to non-commercial data sources such as education and healthcare material should prove especially non-controversial.

On the web: Disruptive Analysis

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Tags: net neutrality