Over the past several years, the International Telecommunication Union, a United Nations agency specializing in information and communication technologies, has been discussing new ways to regulate internet services and applications. These apps include favorites like Skype, Signal, Line, Telegram, and Vimeo — essentially most popular “over-the-top” (OTT) and streaming applications. These discussions will have serious consequences for both how you use the internet and your internet freedom. How we govern streaming services closely affects how we govern the internet itself. Expect this transformative internet governance conversation to escalate in the ITU and other arenas as we approach the ITU’s 2018 Plenipotentiary Conference, or “Plenipot.”
Recently, the ITU Council Working Group on International Internet-related Public Policy Issues (CWG-Internet) held an open consultation on OTTs. It was one of the most popular open consultations in the history of the organization. Public Knowledge, together with our friends from IDEC of Brazil, submitted comments to the consultation.
In addition, Public Knowledge President and CEO Gene Kimmelman spoke at an ITU event last month in Geneva, Switzerland to represent civil society in a discussion about different contributions to the open consultation. Gene’s message was simple and straightforward. First, he questioned the ITU’s role in discussing internet governance related issues, as the ITU does not have the mandate or the technical capacity to do so. Second, he tackled the three questions that dominate the OTT governance conversations: the “level playing field” question, the “free rider” question, and the “same service, same rules” question. Let’s address each of these three questions in turn to examine why we shouldn’t treat OTT services the same as legacy network services.
1) Is there a level playing field between legacy video and OTT services?
One of the most frequently asked questions in OTT governance debates is whether there is a “level playing field” between OTTs and the legacy voice, SMS, and especially video services provided by network operators and broadcasters.
We believe the question is fundamentally misguided. There cannot be, and there should not be, a “level playing field” between OTTs and network operators simply because OTTs and network operators are in two distinctly separate markets that ought to be regulated in very different ways. On the one hand, network operators are often a monopoly (natural or not) that owns the network, or are granted exclusive control of a scarce public resource (through spectrum licensing, access to public rights-of-way, and so on). Regulation should guarantee those network operators are not allowed to unfairly abuse their privileged position, for example, by restricting the ability of consumers to use the OTT services of their choice, like Netflix.
On the other hand, OTTs operate in what can be a more competitive environment, and rely on the network access to expand the opportunities and offers for consumers. Consumers freely access their choice of OTTs through the access they purchase from network operators. Here is the “level playing field” fallacy: The legacy services that network operators provide have the advantage of policies and economic conditions that produce monopolies and promote monopoly dominance over all services that are accessed through their network. OTTs are successful not because of existing market conditions, but despite them, thanks to the innovation allowed by the end-to-end principle that governs the internet. OTT markets can become concentrated and may pose regulatory and competition challenges of their own, but these challenges cannot be answered through facile comparisons to last-mile network operators.
2) Should OTTs contribute to sustaining network infrastructure?
The “free rider” question refers to the idea that edge providers — the OTTs — should contribute to sustaining the infrastructure of the network, essentially allowing network operators to charge OTTs to reach consumers, which establishes a paid prioritization of internet traffic. This is also a misguided question. First, it omits the role of users, who pay network operators specifically to access OTT applications. It also ignores what open networks create — including new content, applications, services, and devices for consumers. This leads to increased end-user demand for broadband, which drives network improvements, which in turn lead to further innovative network uses. This “virtuous cycle” depends on edge providers like the next Hulu being able to easily enter the market, driving end-user demand and increasing innovation. Absent a ban on paid prioritization and other harmful behaviors from network operators, edge providers will not be able to freely enter the market in the same way. Instead, they will have to use their scarce resources simply to have access to the “fast lanes” to remain competitive against incumbent businesses.
The best way to guarantee that all stakeholders in the internet ecosystem prosper and thrive is to dismiss the “free-riding” fallacy, ban paid prioritization, and encourage an environment in which consumer choice and innovation drive up the demand for internet services.
3) Should we apply the same rules to similar services?
Regarding the “same service, same rules” proposition, we warn against false equivalences. Most OTTs complement rather than replace legacy services. For example, the most successful video-on-demand OTTs do not offer linear programming, and therefore should not be subject to the same rules as cable or air TV channels. In addition, OTTs do not benefit from the structural advantages of vertical integration that the services provided by network operators enjoy.
Let’s look at the Public Switched Telephone Network (PTSN) as an example. Right now, PSTN service is part of the mobile phone plan that most subscribers purchase, which is itself a distinct advantage. PSTN traffic, too, is treated differently than data traffic on mobile carriers’ networks. But even if one day the PTSN might transform into an application that runs over the internet, that does not mean it would become “just another” application like Viber, FaceTime, or Skype. The PSTN has its own numbering system and phone numbers that require international cooperation between governments and many private entities. Emergency calling depends on the PSTN. Businesses can give out phone numbers without worrying about whether their customers have some special app or particular level of expertise to contact them. The PSTN is useful because it is a decentralized, international, nonproprietary, universal means to establish voice calls between any two places on earth. Although instant messaging, email, video streaming, and non-PSTN voice communication are all important applications, none of them are as clearly “affected with the public interest” as the PSTN, and this is true whether or not the PSTN corresponds to a separate physical network.
Consumers don’t have the luxury of choosing exactly what goes into their telecommunications package because network operators benefit from vertical integration. In contrast, OTTs are simply not universal, are not automatically integrated into the network, are not by default available in the devices that connect to the network, and are not encouraged, supported, and mandated by public policies and regulations. This means that OTTs miss out on the advantages of vertical integration — the very advantages network operators get. And some network operators are even offering their own OTT services: In Mexico, Televisa launched its new over-the-top service, Blim, which centers on streaming original and archival video content to Mexico and the rest of Spanish-speaking Latin America. Claro (America Movil) provides both music streaming and video through Claro Música and Claro Video. OTT services are so different from legacy network services that we shouldn't apply the same rules to both.
Conclusion
The discussion over the regulation of OTTs is fundamentally a discussion of how to regulate the internet, which directly impacts net neutrality, freedom of expression, consumer rights, and innovation. Furthermore, we believe that there are public interest reasons to consider obligations on OTT providers, like accessibility, freedom of expression, and affordability.
But we don’t think that OTT services should be regulated as network operators, as they are different actors in a very different market. We support the Open Internet values that have allowed OTTs to thrive and consumer choices to be multiplied. We believe that policymakers should seek to guarantee an enabling framework that perpetuates that the internet remains as an open space for innovation and entrepreneurship, for which advancing the values of net neutrality and permissionless innovation is fundamental.
The ITU isn’t the only forum where the OTT governance debate is taking place. From Argentina to Colombia, Brazil and India, various regulators and legislators are debating the three misguided OTT governance questions. This poses a real danger to the future of a free and open internet.
At Public Knowledge, we are tracking the OTT governance debate closely. This month we will be going to Argentina for the ITU’s World Telecommunication Development Conference. We are not alone in this fight, but we are counting on public engagement to keep the internet open and neutral for all.