Analysys Mason Warns New ITU Regulation Could Break the Internet

Consultancy firm Analysys Mason has warned that plans to adapt the telephone settlement system, which established how phone operators compensate each other for terminating international voice calls (i.e. settlement payments), to the internet through the International Telecommunication Regulations (ITR) could “halt growth and find users cut off“.

The International Telecommunication Union (ITU) is expected to debate a series of the new proposals, including an equally controversial idea for a Net Neutrality breaking internet tax, at the World Conference on International Telecommunications (WCIT) in December 2012.

Analysys Mason argues there is “significant evidence” that the current multi-stakeholder model with only very limited global regulation works just fine and does not need a fundamental regulatory overhaul. Furthermore the firm points out that the Internet and the international voice network are “fundamentally different” (this should be obvious).

Voice traffic between two countries must originate with a caller in one country and terminate with a caller in the other country. By comparison many Internet services do not have to originate from a fixed location, with up to 98% of Internet traffic consisting of portable data traffic (e.g. file sharing, video streaming or web pages). Such content can be stored in servers located in multiple locations around the world, and from there traffic can be delivered to users faster and at lower cost.

Michael Kende, Co-Head of Regulation at Analysys Mason, said:

“For example, 70% of international Internet bandwidth originating in Africa went to the USA in 1999, but by 2011 this figure had plunged to less than 5% as bandwidth shifted to Europe. Now, content is increasingly being stored on servers in Africa, where it can be accessed domestically or regionally.

These changes in content flows highlight significant differences between the Internet and traditional telecoms as it existed when the ITR treaty was last updated in 1988. Applying unwarranted static voice regulations to the dynamic Internet would negatively impact users across the globe and slow or reverse current growth trends.

Furthermore, the rate regime system would be difficult to design and expensive to implement, and even then would increase the cost of content delivery and hinder network investment at the expense of end users.”

Instead the firm suggests that policies should focus on “developing a robust Internet ecosystem“, such as by ensuring widespread broadband access, further liberalization of telecom markets and removing roadblocks to foreign investment.

It’s worth pointing out that this report was “supported” by major internet content and some telecoms giants including Amazon, Cisco, Telefonica, Google, Intel, Comcast, Verizon and more.

Internet global growth: lessons for the future (PDF)
http://www.analysysmason.com/PageFiles/33549/Internet_global_growth_Analysys_Mason_Sept2012.pdf