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 markets for data and associated regulatory policies. The documents present sometimes confusing terminology: use, transit, peering, and interconnection. Each term has a specific meaning and practice. Policy makers may benefit from a summary of the proposed policies and instruments—in addition to a thorough review of their own country’s networks and practices. Here are some key findings from the reports.

The Rise of a Parallel, Proprietary, and Unregulated Internet by Platforms

Germany’s Federal Network Agency commissioned a study on competition in the transit and peering markets (141 pages), noting that the issue has not been examined by European regulators for at least 5 years . The report observes that internet traffic in Europe is growing by 25 percent year on year, with 80 percent of this video, social media, and gaming traffic , and that only 5-6 players (eg the platforms Netflix, Amazon Prime, YouTube etc.) account for more than half of all traffic. These players have more international backbone capacity than the world’s broadband providers and have ditched third-party transit instead building their own backbones, submarine cables and data centers – The transit business declined as a result. Platforms largely avoid internet exchanges where prices are transparent, instead building custom networks for their proprietary content and maximizing the efficiency and profitability of their services.

The development and massive expansion of backbone and delivery infrastructures by these actors have permanently changed the overall global internet architecture, interconnection structure, and the relationship between the -platforms and broadband providers, and created competitive disadvantages for operators. The sustained 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 to the private provision of networks, conflicts can arise when parties exchange data, due to the relative market power between entities that do not agree with each other. While the architecture of the internet has changed drastically in the last decade or so, the legal and regulatory framework for traffic flows has changed little, and the largest platforms are essentially unregulated in these marketplaces. international data. The exception is South Korea with its unique approach to broadband policy and recognized global leadership in broadband.

Network Usage vs. Termination

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

Importantly, this practice has nothing to do with end-user traffic termination. Analysys Mason, Internet Society, and others seem to confuse network usage (which describes the relationship between broadband providers and content/application providers) with the “network” termination regime of the sending party pays” (SPNP). In South Korea, SPNP is a historical regime that only applies between Tier 1 telecom operators if their traffic exchange rate does not exceed 1:1.8.

While cost recovery is encouraged in South Korea, it is not mandatory, so big US players game the regime. For example, Netflix rejected claims for cost recovery and took a broadband provider to court, saying it had no obligation to pay for the broadband network upgrades needed to handle Netflix content. which increased by 26 times almost overnight. Netflix lost, and the case is on appeal.

Similarly Facebook asked South Korean broadband providers to install Facebook servers in their networks for free. Broadband providers have backed off; after all, servers have costs and cannot be reused for other content, so they are inefficient and redundant if maintained for free. To force the issue, Facebook shut down some of these servers and redirected traffic to other countries and operators. This degraded the end-user experience, and Korea’s telecoms regulator fined Facebook for what it deemed intentional harm. Facebook took the matter to court and won, but the abuse drew the attention of the Korean Assembly.

Moving forward, the Assembly will consider updating the Telecommunications Business Act to stipulate that companies enter into good faith negotiations with requirements for data and pricing transparency. The account has no payment mandates.

Data sets required for verification

Policy makers have little data on international data markets. While useful information on international data traffic is available at the global level, aggregated by Cisco and Sandvine, it tells us very little about the behavior of actors in a traffic exchange and the microeconomics of individual networks.

Preliminary efforts are underway to provide more data, notably by Strand Consult which collects data on streaming video data on rural broadband networks and documents the pros and cons of different methodological approaches. It is important that Congress considered addressing this through the Affordable Internet Financing with Reliable Contributions Act or the FAIR Contributions Act which empowers the FCC to conduct the necessary study.

In any case, there is no data to show harm from South Korea’s broadband policy. On the contrary, the country is celebrated for the highest penetration rates for fiber to the home (86 percent) and 5G (47 percent adoption). The country is considered a leader in network innovation and a global force in content development for local consumption and export. In addition Google and Netflix enjoyed a year of record profits in the country. It seems that fair broadband cost recovery goes hand in hand with a thriving ecosystem.


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