HomeTechnologyInternetSeismic Shifts In International Data Markets Demand Broadband Internet Policy Update

Seismic Shifts In International Data Markets Demand Broadband Internet Policy Update

The global policy movement to improve connectivity and close the digital divide has led to reports on international data markets and related regulatory policies. The articles sometimes contain confusing terminology: usage, throughput, peering, and interconnection. Each term has a specific meaning and practice. Policy makers could benefit from a summary of the policies and instruments proposed, as well as a thorough evaluation of their own country’s networks and practices. Here are some key findings from the reports.

The emergence of a parallel, proprietary and unregulated internet by platforms

The German Federal Network Agency commissioned a study on competition in transit and peering markets (141 pages), noting that the issue has not been investigated by European regulators for at least 5 years. The report notes that internet traffic in Europe is growing by 25 percent year over year, that 80 percent of this traffic is video, social media and games, and that only 5-6 players (e.g. the platforms Netflix, Amazon Prime, YouTube etc. ) accounts for more than half of all traffic. These players have more international backbone capacity than the world’s broadband providers and have jettisoned third-party transit instead of building their own backbones, submarine cables and data centers. As a result, transit activities have declined. The platforms largely avoid internet exchanges where prices are transparent, instead building tailor-made networks for their own content and maximizing the efficiency and profitability of their services.

The massive development and expansion of backbone and delivery infrastructures by these players has permanently changed the overall global architecture of the Internet, the structure of the interconnection and the relationship between platforms and broadband providers, creating competitive disadvantages for operators. The continued growth of internet traffic continues to shape the dynamics of internet architecture, with the continued disproportionate growth of video streaming and cloud services having the greatest impact. Despite the many advantages of privately offering networks, conflicts can arise when parties exchange data, given the relative market power between the misaligned entities. While the Internet architecture has changed dramatically over the past decade, the legal and regulatory framework for traffic flows has changed little and the largest platforms are essentially unregulated in these international data markets. The exception is South Korea with its unique approach to broadband policy and recognized global broadband leadership.

Network usage versus termination

South Korea has had a network usage compensation framework for nearly a decade. The policy ethos reflects the recognition of shared responsibility between broadband providers and content/application providers to ensure the quality of data delivery and user experience. In practice, the policy ensures cost recovery of the installation and maintenance of fiber from the content provider to the core router of the broadband provider. This provides dedicated bandwidth for the given content and protects against the degradation of the network experience for users who cannot access that particular content.

Importantly, this practice has nothing to do with terminating traffic to end users. It seems that Analysys Mason, internet society, and others network usage (which describes the relationship between broadband providers and content/application providers) with the “sender network pays” (SPNP) termination regime. In South Korea, SPNP is a historical regime that only applies between Tier 1 telecommunications companies if their exchange rate does not exceed 1:1.8.

While cost recovery is encouraged in South Korea, it is not mandatory, which is why major US players play the regime. For example, Netflix rejected cost recovery claims and sued a broadband provider because it was not required to pay for the broadband network upgrades needed to manage Netflix content, which grew 26 times its size almost overnight . netflix lost, and the case is on appeal.

Similarly, Facebook required South Korean broadband providers to install free Facebook servers in their networks. The broadband providers refused; after all, the servers have a cost and cannot be reused for other content, and are therefore inefficient and redundant if housed for free. To force the problem, Facebook turn of some of these servers and redirected traffic to other countries and operators. This degraded the end-user experience and the Korean telecoms regulator fined Facebook for what they considered to be deliberate damage. Facebook took the matter to court and won, but the abuse caught the attention of the Korean assembly.

In the future, the Assembly is considering updating of the Telecommunications Act to determine that companies negotiate in good faith with data and price transparency requirements. The bill has no fee mandates.

Datasets needed for verification

Policymakers have little data on international data markets. While useful information about international data traffic on an aggregated, global level is available from Cisco and Sandvine, it tells us little about the behavior of the actors within a traffic exchange and the microeconomics of individual networks.

Preparatory efforts are underway to provide more data, in particular from Consult beach which collects data on streaming video data on rural broadband networks and documents the advantages and disadvantages of different methodological approaches. Importantly, Congress has considered addressing this through the Funding Affordable Internet with Reliable Contributions Act or the FAIR Contributions Act that would allow the FCC to conduct the necessary investigation.

In any case, there is no data showing the damage of South Korea’s broadband policy. On the contrary, the country is praised for having the highest penetration rates for fiber to home (86 percent) and 5G (47 percent adoption). The country is considered a pioneer of network innovation and a global force in content development for local consumption and export. In addition, Google and Netflix have had record profits in the country for a year. It seems fair broadband cost recovery comes with a thriving ecosystem.

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