1. © Cullen International SA 2013 Why Net Neutrality Matters? Veronica Bocarova – Cullen International Protecting consumers and beyond Infofest, Montenegro - September 29, 2014

2. © Cullen International SA 2013 © Cullen International SA 2012 What is net neutrality?

3. © Cullen International SA 2013 All electronic communication passing through a network is treated equally – independent of  Content  Application  Service  Device  Sender address and  Receiver address Implies that the treatment is independent of end user and content / application / service provider (BEREC, September 2010) What is net neutrality?

4. © Cullen International SA 2013 … the scope is still being defined What is net neutrality?

5. © Cullen International SA 2013 From consumer perspective...

6. © Cullen International SA 2013 Is inequality always bad?

7. © Cullen International SA 2013 Restrictions and competition

8. © Cullen International SA 2013 Restrictions and competition

9. © Cullen International SA 2013 Restrictions and competition

10. © Cullen International SA 2013 Restrictions and competition

11. © Cullen International SA 2013 Restrictions and competition

12. © Cullen International SA 2013 Restrictions and competition

13. © Cullen International SA 2013 Restrictions and competition

14. © Cullen International SA 2013  What is the moral of this story?  Where some see a case for restrictions, others see a market failure and opportunity to do business Restrictions and competition

15. © Cullen International SA 2013 Underlying assumptions of the happy story  Competition  Transparency  Low switching costs or Restrictions and competition

16. © Cullen International SA 2013 2009 – 2012 Net neutrality in the EU  No proper debate during the review in 2007 – 2009  Binding regulation limited to  transparency and switching obligations on operators  possibility for NRAs to set minimum Quality of Service (QoS)  April 2011: Commission Communication on net neutrality No reason for regulatory intervention as long as there is:  competition  transparency  low switching cost: number portability + contract duration  "any lawful content, any lawful application, any lawful device, and any provider"  2008 auction of 700 MHz: “open devices and applications”  August 2008: FCC Comcast order  October 2009: FCC proposal on binding net neutrality rules  non-discrimination  transparency on network management practices  same rules for fixed and mobile networks  April 2010: Annulment of FCC Comcast order by the court  August 2010: Google-Verizon proposal excluding wireless ISPs

17. © Cullen International SA 2013 © Cullen International SA 2012 Competition

18. © Cullen International SA 2013 Competition – how?  Fixed networks  retail markets not susceptible of being regulated  increased focus on bundled offers (broadband/TV)  EOI, ERT and TRT...  Mobile networks  retail markets not susceptible of being regulated  mobile access only regulated in a few countries under SMP  mobile access regulated ex ante in recent M&A cases

19. © Cullen International SA 2013 © Cullen International SA 2012 Transparency

20. © Cullen International SA 2013 2009 EU Framework Transparency Providers should specify in their contracts: Limitations for access to and/or use of services and applications Applied traffic management techniques and their influence on service quality Inform subscribers about: Any change to conditions limiting access to and/or use of services and applications

21. © Cullen International SA 2013 Transparency – how? Whether you use the internet for daily browsing and sending emails, downloading movies and music or HD streaming and online gaming, Sky Broadband has something for everyone. If you’re not sure which of our broadband products is right for you, take a look at our comparison table to find the best option to suit your lifestyle. Compare Sky Broadband Data limits and prices

22. © Cullen International SA 2013 Transparency – how? Coverage map showing existing and planned deployment of 4G-coverage in Sweden Network coverage

23. © Cullen International SA 2013 Transparency – how? Network coverage guarantee – a free test of network coverage during 14 days Network coverage

24. © Cullen International SA 2013 Transparency – how? Increased demand for mobility  Increased demand for mobility and mobile coverage  Demand not always matched by infrastructure in place, even though strong roll out of LTE and enhanced 3G and 2G networks  Operators coverage maps not in conformity with reality  Code of conduct for fair and transparent coverage maps was adopted in April 2014 (initiative by PTS and Consumer Agency)

25. © Cullen International SA 2013 Switching

26. © Cullen International SA 2013 Switching EU level obligations Maximum contract duration: 24 months Minimum duration of 12 months should be available Withdrawal from contract without penalty if contractual conditions have changed Number portability: within one working day 2009 EU Framework

27. © Cullen International SA 2013 © Cullen International SA 2012 Minimum QoS

28. © Cullen International SA 2013 NRAs should be able to: Set minimum QoS levels on providers to prevent degradation of service or slowing down of traffic across networks Notification to the Commission and BEREC Commission can comment on internal market aspects (no explicit role for BEREC) NRAs should take Commission’s (non-binding) recommendations or comments into ‘utmost account’ before making a final decision © Cullen International SA 2012 Minimum QoS 2009 EU Framework

29. © Cullen International SA 2013 2013 “I want you to be able to say [to your constituents] that you saved their right to access the open internet, by guaranteeing net neutrality”. (May 30, 2013) “A safeguard for every European, on every device, on every network: a guarantee of access to the full and open internet, without any blocking or throttling of competing services.” (June 4, 2013) Net neutrality in the EU

30. © Cullen International SA 2013 Telecoms Single Market (proposal) Transparency Information to be included in contracts: Actually available broadband speeds Speed ranges, speed averages and peak hour speed Data volume limitations – e.g. download caps, fair use policies Available speed after limit has been reached, prices for topping up data volume, ways to monitor consumption at any time Impact on services of: Traffic management policies Simultaneous use of specialised services with an enhanced QoS on the use of basic applications and services Traffic management policies Prioritisation of certain traffic under certain circumstances

31. © Cullen International SA 2013 Telecoms Single Market (proposal) Switching Reinforced switching provisions Termination of contract after six months without penalty (Art 28) Only reimbursement of handset subsidies, promotions Email forwarding (Art 30) Forward email to new address + Autoreply Free for the first 12 months, option to extend at a charge Tacit extension of a contract (Art 28) End users to have one month to oppose AND One-month notice period (if contract turned permanent) Compensation if service parameters are not met Also applies to actually available speeds Compensation according to national law

32. © Cullen International SA 2013 Blocking Permitted as long as you are transparent: Blocking applications ✔ Slowing down applications ✔ Charging a premium for running applications ✔ Charging for different bandwidths or data limits ✔ Charging for premium services with enhanced Quality of Service (QoS) ✔ 2009 EU Framework

33. © Cullen International SA 2013 Blocking  2-3 years ago: increased share of flat rate subscriptions with unlimited data – on all or premium rate packages  Blockings and throttling increasingly becoming an issue  Now: offers formulated to meet demand in data volume, and calls are often free  26% of Swedish end users have used Skype or similar service in their mobile  60% uses video services in their mobile

34. © Cullen International SA 2013 Blocking Permitted and not permitted: Blocking applications ⊘ Slowing down applications ⊘ Charging a premium for applications ⊘ Charging for different bandwidths or data limits ✔ Charging for specialised services with an enhanced QoS ✔ Telecoms Single Market (proposal)

35. © Cullen International SA 2013 Exceptions Exceptions to net neutrality: Congestion management (but the same types of traffic have to be treated equally) Network integrity and security, including the service of the provider involved and the terminal equipment of end user Combat spam Follow a court order or other legal obligation or to combat serious crime Telecoms Single Market (proposal)

36. © Cullen International SA 2013 © Cullen International SA 2012 Is there a need for more regulation?

37. © Cullen International SA 2013 Other consumer topics Is it Net Neutrality or not?

38. © Cullen International SA 2013 Sponsored data link Access to specific content outside data caps

39. © Cullen International SA 2013 Facebook access outside data cap Free access to Facebook on mobile

40. © Cullen International SA 2013 Schengen zone for Internet data

41. © Cullen International SA 2013 AT&T internet preferences Click herehere

42. © Cullen International SA 2013 Austin, Texas AT&T internet preferences When you select AT&T Internet Preferences, we can offer you our best pricing on U-verse with GigaPower because you let us use your individual web browsing information, like the search terms you enter and the web pages you visit, to tailor ads and offers to your interests. You won't necessarily receive more ads when you are online, but those you do see may be more suited to your interests. For example: If you search for concert tickets, you may receive offers and ads related to restaurants near the concert venue. After you browse hotels in Miami, you may be offered discounts for rental cars there.

43. © Cullen International SA 2013 iPhone 4G - exclusivity agreement Apple – Mobistar Belgium

44. © Cullen International SA 2013 Belgian government reaction Apple - Mobistar Belgian government Bill – Jan 24, 2014 A manufacturer… cannot prevent or make difficult without legitimate technical reasons the connection of this equipment [to all networks] ….

45. © Cullen International SA 2013 © Cullen International SA 2012 Telcos versus OTTs...

46. © Cullen International SA 2013 © Cullen International SA 2012 Telcos versus OTTs

47. © Cullen International SA 2013 Telcos vs OTTs  Are content providers such as Google and YouTube... free riders?

48. © Cullen International SA 2013 New kind of economics Two-sided markets Two-sided markets are economic platforms having two distinct user groups that provide each other with network benefits  Credit cards: holder/shopkeepers  Newspapers: subscribers/advertisers  Operating systems: end-users/developers  Video game consoles: gamers/developers

49. © Cullen International SA 2013 Two-sided markets Broadband networks can be seen as two- sided platforms € € ISP

50. © Cullen International SA 2013 Net neutrality and peering

51. © Cullen International SA 2013 Transit vs. peering Peering Interconnection of two ISPs aiming at exchanging traffic between users of each network. Usually settlement free. Transit A data service provided against remuneration by an ISP to another ISP (or sometimes to an end-user) to gain access to the global Internet.

52. © Cullen International SA 2013 Transit vs. peering TIER 1 TIER 2 TIER 3 = transit = peering

53. © Cullen International SA 2013 © Cullen International SA 2012 versus Requiring compensation for the provision of extra bandwidth capacity in peering agreements where there is a significant traffic imbalance is not to be considered as anti-competitive behaviour France: paying for peering

54. © Cullen International SA 2013 Comcast and Verizon US: Netflix Deal April 2014 Deal February 2014 Paid peering agreements: to increase the speed of delivery of Netflix services

55. © Cullen International SA 2013 Three ways of taking the heat off Netflix and ISPs Netflix offers three possibilities to ISPs to reduce the international traffic load:  public peering at 24 public internet exchanges around the world  private peering at 35 locations around the world  ’Open Connect appliance’ boxes

56. © Cullen International SA 2013 Open Connect appliance Netflix Open Connect is a single-purpose Content Distribution Network, and by shifting to Open Connect, from using third-party commercial CDNs, we are able to save money and keep consumer prices low.

57. © Cullen International SA 2013 veronica@cullen-international.com

58. © Cullen International SA 2013 © Cullen International SA 2012 Conclusions Initially addressed by regulators in the US and Norway Chile, The Netherlands and Slovenia are the only countries which have imposed net neutrality by law Net neutrality has not been mandated at EU level: retail competition should suffice to deal with problems. EU focus has been on empowering consumers: transparency and switching New plans to put measures on blocking ad throttling into “hard law” Emerging issue – who pays for data delivery: Over-the-top (OTT) players versus network operators