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HOME > GLOBAL REPORT > Regulation

:: [Analysis Report] Challenges to Open Internet: Issues on Net Neutrality ::

Published by Insight Plus
Category Regulation
Date 2012-08-07
Page 84
Price
첨부파일1   Executive Summary(ENG).pdf
첨부파일2   Executive Summary(KOR).pdf
첨부파일3   인터넷 개방성에 대한 새로운 도전_망 중립성 논란을 중심으로(Challenges to Open Internet_Issues on Net Neutrality)(KOR).pdf

With increased ISPs’ Capex (Capital Expenditure) and competitive service launches such as mVoIP (Mobile Voice over Internet Protocol) and MIM (Mobile Instant Messenger), conflicts between ISPs and CPs have expanded to net neutrality issue. In this report, two key issues raised by ISPs and CPs - i) Capex sharing claimed by ISPs, ii) Limiting or blocking services such as mVoIP or smart TV - were analyzed from the perspectives of CPs and end users.

 

Issue 1: Cost-sharing for Network Investment

ISPs claim that content providers should share the burden of Capex as they are currently getting a free ride by using the ISP’s network.

  • Network is incontestable and is strongly in the nature of public goods.
  • CPs already pay ISPs on access charges for traffic usage, as well as additional charges for IDC (Internet Data Center) and CDN (Contents Delivery Network).
  • ISPs’ revenue increase was mainly driven by smart phone subscribers, who pay ISPs to enjoy Internet contents created by CPs.
  • Growing mobile traffic helps ISPs - In 2011, when the mobile traffic increased explosively, Korea Telecom's wireless data revenue increased 49.1% vs. previous year. In case of data ARPU(average revenue per user), it increased 37.5% vs. the year before.

 

ISPs also argue that Capex has increased due to growing traffic, causing ISPs’ revenue to become stagnant, leading to fund starvation.

  • In 2011, Capex per revenue of ISPs was 16.8%, which was slightly higher than or similar to average of the past 6 years, 16.2%. For this year, it is expected to be stabilized at a 5% decrease compared to 2011.
  • It is estimated that Capex will be decreased, CAGR 4% by 2020. Therefore, it can be considered that Capex burden is temporary and controllable.
  • Telco industry has recorded 11.7% return on net sales. This is 2 times greater than that of domestic industries(average of 5.9%), and is 3.5% higher than that of the CP industry(average of 8.2%).

 

Issue 2: Blocking Latest Internet Services and Contents

ISPs say they need to manage traffic (i.e. limit or block contents) in order to solve network overloads and to guarantee service qualities, since new Internet services such as mVoIP and MIM induce excessive traffic.

  • According to the Allot’s research, mVoIP and MIM services occupied merely 5% of global mobile traffic in 2011.
  • Cisco reported that mVoIP service occupies only 1.2% out of the total mobile data traffic, and forecasts its share will be further reduced to 0.3% by 2016.

ISPs complain about mVoIP and MIM services will hurt their future profits, thus cannot accept new Internet services without any price.

  • According to the research by KISDI (Korea Information Society Development Institute), users' switch rate from regular voice call to mVoIP is very low.
  • Even with mVoIP services completely opened and allowed to users with any type of data plan, ISPs’ revenue will be impacted only by -0.74% of total revenue.

In February 2012, Korea Telecom cut off Internet access of Samsung’s smart TV. KT claimed that smart TVs are causing too much traffic overload, thus this action was in line with 'the Right for Reasonable Traffic Management' guaranteed by the net neutrality guideline (effective from Jan 2012).

  • As of today, there is no proven data showing traffic induced by smart TV, and there is no case around the world where a ISP has blocked smart TV by the reason of traffic induction.
  • KT’s action was not respecting the net neutrality guideline, but simply a violation of 'End-user Rights', 'No Blocking', and 'Transparent Internet Traffic Management' liabilities stated in the net neutrality guideline.

If net neutrality is not respected and ISPs limit/block new Internet services, innovation will be challenged, damage end users’ rights, and ultimately impact ISPs negatively.

 

* This research was supported by Open Internet Alliance (OIA).