• OTT services are a “threat” to telcos
• OTT services are completely unregulated
HOW LEGACY TELCO REGULATION EVOLVED
• Focus on division of markets and quarantining power
• Mitigating market concentration and power in discrete market
• Pubic service regulations imposed as a result (in addition to
• Layers of regulation as new technologies and
distribution methods developed
THE NEW DIGITAL COMMUNICATIONS ECOSYSTEM
• Untethering of networks and services
• Realm of digital communications services now includes both
broadband Internet access services as well as all communications
services offered on a broadband network
• Requires a new paradigm for crafting a 21st century regulatory
framework for communications services
PRINCIPLES FOR A NEW COMMUNICATIONS
• Regulation must be fit for purpose. For any given service, regulation is necessary and appropriate only
• As a result of a market failure,
• regulation is necessary to achieve
• specifically identified societal objectives
• Regulation should not be imposed merely to transpose legacy regulations to new services
• Communications policy should promote innovation and investment across the entire digital services
ecosystem—including both network and access services as well as online content and services
Talk about challenge in defining “OTT services.” Generally, communications services provided independent of and agnostic to any single network and network operator; accessible and usable over multiple networks. Online communications and content services and applications.
OTT services and connectivity services are interdependent and symbiotic. Services and content depend on robust connectivity services for customer access and consumption; and network connectivity services depend on content and communications services to drive demand for more and better connectivity. Economic studies show that broadband networks benefit significantly from increased bandwidth demand driven by incremental use of online applications, services and content. It’s not a zero sum game between telco services and OTT services. Even if telcos lose some revenue from their legacy services, OTT services increase the size of the overall pie of the entire digital communications ecosystem.
Also, OTT services drive telcos to innovate, both in their own interpersonal communications services and in their broadband Internet access services.
OTT services should not be feared or demonized. They are part and parcel of our interdependent digital communications ecosystem.
Regulatory question is not whether OTT services should be regulated or unregulated. OTTs are subject to applicable horizontal regulation, e.g., broad consumer protection rules and regulations that apply to all services. The question is whether OTT services should be subject to ex ante, sector specific regulation, e.g., specific telecom consumer protection regulations. Even more specifically, the question is whether OTT services should be subject to the legacy telecom regulations that have been in place for decades.
Traditional regulation of constraining market power is outgrowth of high entry barriers to deploying and operating a network.
Traditional model = define the technology and then define the regulations that apply to that technology. Going back even farther than telco regulation to common carriage roots: posts, railroads, telegraph, landline voice telephony, broadcast radio and television, wireless telephony, cable TV
Generally true worldwide, but not necessarily true in every country, particularly where all communications services nationalized. Even in those countries though, different modes of communications separated.
Contrast: for decades, there was largely no distinction between the owner/operator of a network and the provider of services on that network. Today, largely because of the development of IP and proliferation of broadband networks, that tight association of networks and services is disintegrating. The network provider is no longer the only provider of services on its network. It is one of a multitude.
Fundamental separation of network and application layers
New application layer does not have high entry barriers—and thus potential for market concentration—of legacy telco operations. Thus, no rationale for applying the historic rationale for regulating telcos to regulating OTT services. No need to follow tradition model of regulating to control market power, which also means no need to impose to impose public service regulations as part and parcel of that regulation.
Strong bias in favor of market forces as regulator and ex post enforcement rather than ex ante regulation
Starting with blank slate, need to enumerate all the societal objectives, then determine which services need to be regulated (as a result of market failure) to achieve each objective (needs to be granular—failure of EU Directive), and how regulation should apply to each of those services in order to achieve each objective
Harder exercise than traditional model (define technology, then regulate) but more intellectually and economically sound
Applies to all services. Access/connectivity, traditional/legacy, OTT. Because of market bottlenecks, access services still subject to level of ex ante competition regulation, but other services largely free of competition regulation and subject to only minimal other regulatory burdens
Regulation never proceeds at same velocity as technological innovation. Transposing legacy regulations to new services merely perpetuates that lag.
Level playing field is not a valid first principle for regulation. Fit for purpose and necessary to achieve societal objective = only valid first principles. Level playing field, as we all as deregulation could be results of the regulatory exercise but should not drive the exercise.
OTT services should not be subject to legacy telco regulation merely because they bear some resemblance to legacy services. Also should not regulate OTT services merely because they are provided over a telco broadband network.
Some examples of potentially appropriate ex ante sector specific regulation:
--public safety and welfare: communication with emergency services --management of the numbering system (access to numbers; portability) --competition and universal availability—application layer only as a result of market bottlenecks --open internet—application layer only as a result of market bottlenecks
Need a mindset that recognizes value across the entire digital communications landscape. Not an “us vs. them” or “legacy vs. OTT services” mindset.