Seismic Changes in International Data Markets Require Broadband Internet Policy Update

The global political movement to improve connectivity and bridge the digital divide has resulted in reports on international data markets and associated regulatory policies. The articles present sometimes confusing terminology: usage, transit, peering and interconnection. Each term has a specific meaning and practice. Decision-makers could benefit from a summary of the policies and instruments offered, in addition to an in-depth examination of their own country’s networks and practices. Here are some key findings from the reports.

The rise of a parallel Internet, proprietary and not regulated by platforms

The German Federal Network Agency commissioned a study on competition in the transit and peering markets (141 pages), noting that the issue has not been considered by European regulators for at least 5 years. The report observes that internet traffic in Europe is growing by 25% year-on-year, that 80% of this video, social media and gaming traffic, and that only 5-6 gamers (e.g. Netflix, Amazon Prime, YouTube, etc.) account for more than half of total traffic. These players have greater international backbone capacity than global broadband providers and have abandoned third-party transit instead of building their own backbones, undersea cables and data centers. Transit activity has therefore decreased. Platforms largely eschew Internet exchanges where prices are transparent, instead building bespoke networks for their proprietary content and maximizing the efficiency and profitability of their services.

The massive development and expansion of backbone and delivery infrastructure by these players has permanently altered the overall global internet architecture, the structure of interconnection and the relationship between platforms and high-end providers. throughput, creating competitive disadvantages for operators. Steady growth in Internet traffic continues to shape the dynamics of Internet architecture, with the continued disproportionate growth of video streaming and cloud services having the greatest impact. Notwithstanding the many advantages of private network provision, conflicts can arise when parties exchange data, given the relative market power between incompatible entities. While the Internet architecture has changed dramatically over the past decade, the legal and regulatory framework for traffic flows has changed little, and the largest platforms are largely unregulated in these international data markets. The exception is South Korea with its unique approach to broadband policy and recognized global leadership in broadband.

Network utilization vs termination

South Korea has had a network usage compensation framework for nearly a decade. The ethics policy reflects a recognition of the shared responsibility between broadband providers and content/application providers to ensure the quality of data delivery and user experience. In practice, the policy guarantees the recovery of fiber installation and maintenance costs from the content provider to the broadband provider’s central router. This provides dedicated bandwidth for given content and protects against network experience degradation for users who are not accessing that particular content.

It is important to note that this practice has nothing to do with stopping traffic to end users. It seems that Analysys Mason, Internet Society and others are confusing network usage (which describes the relationship between a broadband provider and content/application providers) with the “network payer” termination regime of the sender” (SPNP). In South Korea, SPNP is a historical regime that only applies between Tier 1 telecom operators if their traffic exchange ratio does not exceed 1:1.8.

While cost recovery is encouraged in South Korea, it is not mandatory, and so big US players are playing with the scheme. For example, Netflix rejected cost recovery claims and took a broadband provider to court, saying it had no obligation to pay for broadband network upgrades needed to handle Netflix content. which was multiplied by 26 almost overnight. Netflix lost and the case is on appeal.

Similarly, Facebook has asked South Korean broadband providers to install Facebook servers in their networks for free. Broadband providers hesitated; after all, servers come at a cost and cannot be reused for other content, and are therefore inefficient and redundant if hosted for free. To force the issue, Facebook shut down some of these servers and redirected traffic to other countries and carriers. This degraded the end-user experience, and Korea’s telecommunications regulator fined Facebook for what it considered intentional harm. Facebook took the case to court and won, but the abuse caught the attention of the Korean Assembly.

Going forward, the Assembly is considering updating the Telecommunications Companies Act to stipulate that companies engage in good faith negotiation with data and price transparency requirements. Bill has no warrants of costs.

Data sets needed for verification

Policy makers have little data on international data markets. While useful information on international data traffic is available at the aggregate global level from Cisco and Sandvine, it tells us little about the behavior of actors within a traffic exchange and the microeconomics of individual networks.

Preliminary efforts are underway to provide more data, including from Strand Consult which collects data on streaming video data on rural broadband networks and documents the advantages and disadvantages of different methodological approaches. It is important to note that Congress considered addressing this issue through the Funding Affordable Internet with Trusted Contributions Act or the FAIR Contributions Act. that would empower the FCC to conduct the necessary study.

However, there is no data showing the harm caused by South Korea’s broadband policy. On the contrary, the country is celebrated for the highest fiber-to-the-home (86%) and 5G (47% adoption) penetration rates. The country is considered a pioneer in network innovation and a global force in developing content for local consumption and export. Additionally, Google and Netflix had a year of record profits in the country. Fair broadband cost recovery seems to go hand in hand with a thriving ecosystem.