Time to revisit telecom policy

If there's an idea that lingers from last month's broadband conference in Beijing, it's that broadband resembles the world geopolitical map of the mid-20th century, where small bands of independence fighters took on long-established colonial regimes.

Anette Schaefer, a director of consumer research at Yankee Group, says the broadband battle is being fought between the guerillas - the Googles, Skypes and Vonages - and the imperialists - AT&T, NTT and BT et al.

It conjures up the image of the powerful with feet of clay, under attack from teams of highly-motivated rebels with the ability, as Mao put it, to swim like fish among the sea of people.  

I don't want to take this analogy too far, as it is pretty unflattering to both groups.

Yet both imperialists and modern telcos share a common complaint: that their challengers have made, or are making, use of the tools that they had provided them - education, in the case of the colonies, and broadband infrastructure in the eyes of the carriers.

From the telco perspective, the threat from asset-light application and media companies is today just one among many.

But if fixed-line network players have a future, it is in broadband, and the "guerillas" challenge them at their most sensitive points - voice and VAS revenue, content and even incumbency itself.

Schaefer rightly notes that the jury is still out on this contest. Last year the imperialists defeated the guerillas in the initial skirmish over net neutrality.

The incumbents and the challengers are playing out a similar scenario in Asia. As delegates heard at last month's Broadband World Forum Asia in Beijing, the vulnerability of the broadband carriers is very much an issue in China. 

P2P file sharing amounts to 35%-50% of all Chinese network traffic, increasing at peak times to 90%.  By comparison, it takes up just 12% of the US load. Executives from both China Telecom and Netcom said that growth in traffic was outstripping revenue growth.

Self-interested

We all know the skeins of this discussion, the Chinese version of the net neutrality dispute. It's a complex issue made even more so by the self-interested arguments of both infrastructure owners and the service companies.

We could debate it for a long time, but we'd be better off heeding the advice of Eli Noam, a professor at Columbia University's business school, who suggests it's time to revisit public telecom policy as it's been practiced for the past 20 years.

Noam believes it's inherent in the nature of network-effect industries like telecom to have a small number of large firms surrounded by a host of small players using the incumbent infrastructure.

The result is increasing regulation of access to these networks. This is particularly acute when you combine networks, where the economies of scale are rising, and content, where they are falling.

"Thousands of independent producers and tens of millions of users are generating content," says Noam. "All seek unhampered and affordable access to the networks. When these producers and consumers of content face a network with substantial market power, the arguments of non-discriminatory cheap access, known as "˜net neutrality', start to resonate politically. This results in regulatory rules on access, quality and pricing."

That's pretty much today's ballgame, isn't it, made up of layers of complexity unheard of when the Ofcom, OFTA and other regulators were set up two decades ago.

It will be years before we see wholesale regulatory reform, though.

That functionality is held in deep suspicion in the challenger camp, which sees it as a path to tiered services by incumbents.  Expect a lot more debate, and fresh waves of assaults on telecom's citadels.

Robert Clark is editor of Comms China newsletter  --[email protected]