CONVERGING ON WASHINGTON DC

The IIC’s Communications Policy and Regulation Week – the major annual event for the institute – was held in Washington DC in two main locations. First the International Regulators’ Forum (IRF) was hosted by the Federal Communications Commission (FCC) at its headquarters – this, like all IRFs, is a ‘closed doors’ meeting for regulators only. After this two-day forum, the annual conference took place, also over two days, at the Ronald Reagan Building and International Trade Center – the first federal building in Washington designed for both governmental and private sector purposes.

A workshop meeting, hosted by the IIC and Microsoft, also took place at the end of the week on the role that ICT can play in the new Sustainable Development Goals and the contribution of the WSIS review (the World Summit on the Information Society and its vision beyond 2015). See also article on page 14 for a briefing on the issues.

The main theme of the conference – trends in converged communication, and fostering innovation, growth and societal benefit – marked a change in emphasis in the overarching topic of convergence. Debates have moved on from mainly how convergence is taking place, to an acceptance that indeed it is happening at a rapid pace – and how best all players – policymakers, regulators and industry – can adapt rules and strategies to maximise the potential of digital communications and the digital economy. One important announcement was made at the conference – that the current president of the IIC, Fabio Colasanti, will be succeeded in the presidency by Chris Chapman, who in turn is nearing the end of his spell as head of the ACMA, Australia’s communications regulator. And the 2016 IIC Communications and Regulation Week will take place in Bangkok, Thailand.

“Human capital – capacity building and technical assistance – are probably more important than the ‘transfer of cash’ for emerging countries.”

FCC’S CHAIR GIVES KEYNOTE

The opening keynote address was by Tom Wheeler, the FCC’s chairman, leading off a session on ‘connected the unconnected’. He started by picking up a theme he spoke about at the IRF the day before – “We all have the privilege of standing astride a development that has created the most powerful and pervasive platform in the history of the planet,” he said. “There’s never been a technology like the internet and high-speed broadband to reach so many people so fast.” He echoed points made by Colasanti that there are urgent problems facing the planet and technology can tackle the challenges. But 4 billion people are still not connected to the internet and in 49 least-developed countries, over 90% of the population is not online.

Wheeler highlighted the infrastructure goal in new Sustainable Development Goals, now ratified by the UN, which aims to provide universal and affordable access to the internet in least-developed countries by 2020, and to make ICT a development priority similar to more traditional types of national infrastructure. Human capital – capacity building, technical assistance and the exchange of experience – are probably more important than the “transfer of cold hard cash”, he said, adding that the FCC’s international bureau is active in this sphere.

He noted that the FCC’s activities coincide closely with the four subthemes of the IIC’s conference, and outlined how this is so, starting with competition, which is “the central tenet of the FCC’s policy agenda – I believe that competition is the most effective tool for advancing the public interest and promoting innovation and investment across the ICT sector,” he said. “Where competition exists, we must work to protect it and where greater competition can exist we will encourage it and where it cannot be expected to exist we will not hesitate to act to protect consumers,” he added. It’s what he describes as a ‘regulatory see-saw’ – as competition goes up regulation can go down and vice versa. As the best example, he cited the FCC’s much publicised open internet order, as it “empowers the market to pick winners and losers, not network gatekeepers”. The FCC believes that the internet’s open design is essential to its success, he said – preserving competition at the network’s edge is linked directly to competition between network operators. The simple truth is that fixed broadband competition is limited in most US markets and given their strategic importance to the economy should be “subject to fully effective oversight… No one, neither government nor private sector, should intervene with public access to lawful content, applications and services.”

He added that the open internet order is a new regulatory model for modern times, and is like a referee on the field of play, and if the rules are broken, “We will blow the whistle.” But there will be no micro-management – no rate regulation, network unbundling, and no tariffs. “No utility style regulation,” Wheeler said, and he believes the rules will both protect openness and foster massive private investment in broadband networks.

Turning again to the unconnected, he commented on the investment and take-up in the US, but local demand in some rural locations won’t support investment. Ten million Americans can’t get wired broadband at all, and there are still six million who can’t get 3G mobile. He described how the Connect America fund is giving $9 billion to private operators to help plug these gaps, but he also said there are further challenges on the demand side, as only 48% of low-income Americans have broadband (those earning less than $25,000 a year), and he stressed how technology must meet the needs of people with disabilities.

On the internet of things (IoT), he cited Cisco’s projection of 50 billion such devices by 2020, and a huge $8 trillion in economic value over the next decade. McKinsey gives a spread of $4–11 trillion, but whatever it turns out to be, seizing this value will need tackling a new set of challenges. Cybersecurity is one, given that there are potentially billions of ‘attack vectors’, and Wheeler mentioned a framework developed by the US National Institute of Standards and Technology (NIST) for cyber-risk management, and the FCC has been meeting with companies to assess how effectively such risk is being managed according to the framework. “The key question is, are the cybersecurity protocols that we’re all agreed on working,” he said.

On spectrum, Wheeler said new approaches are needed for ubiquitous connectivity, and the FCC has been working on expanding unlicensed spectrum, flexible use policies, sharing, new bands for mobile, and the upcoming incentive auction. The FCC has also embarked on a 5G strategy, and he said: “Global harmonisation is critical.”

Finally, Wheeler touched on over the top (OTT), where 40% of US consumers already subscribe to services such as Netflix. And it’s about spectrum and mobile too – a wireless operator has said 60% of its traffic is now video, he noted. The OTT movement is also a major factor in merger review. Competition between OTT and traditional video distribution models is central to any merger analysis, and access to programming on competitive terms is crucial for OTT entrance to be successful. “There’s a line of new OTT providers queuing up to expand video choice and demand for broadband,” Wheeler said, adding that supporting the growth of local content is also important.

“The open internet order is a new regulatory model for modern times, and is like a referee on the field of play.”

TARGETING THE UNCONNECTED

Mauricio Ramos, CEO of Millicom, kicked off a detailed session on connecting the unconnected in both mature and emerging markets. Millicom is an operator in Latin America and Africa, and Ramos described how the supply and demand side can be approached in his markets (see Q&A, page 12). Kemal Huseinović, head of the ITU’s infrastructure department, said regulators have a crucial role in bridging the digital divide, although there is no ‘silver bullet’ in boosting the ICT sector. He put up a slide that showed how different regulatory priorities have shaped the ICT sector over time, with clear moves towards more infrastructure sharing, broadband plans, allowing people to use voice over the internet, and adoption of class/ general licensing. He highlighted the gender gap as a big issue in tackling digital divides. Infrastructure alone is not sufficient – new services and local content are vital, he added.

Huseinović outlined four generations of regulation – regulated monopolies, opening up competition, an enabling environment to boost investment, and finally what he terms integrated regulation, where regulators and policymakers are now under pressure to ensure they stay relevant in the digital world to meet social goals. The fourth generation involves integration with other sectors such as financial regulation for social inclusion. Europe is ahead in ‘4G’ regulation he noted.

Google’s Ross LaJeunesse, head of international relations, spoke first about the demand side of the search giant’s activities, noting that it caters for 180 languages, and its translate tool is also growing in scope. The supply side though is a new part of Google’s business and is looking at electricity supplies, reducing the cost of accessing the internet, and also at backbone infrastructure. LaJeunesse highlighted a solar energy project in South Africa, the continent where Google is focusing much of its efforts, he said, and kites that generate electricity from the wind (a project called Makani) that cuts a lot of the cost of using wind turbines.

“A lot of people laughed at our Loon balloon internet project that can provide internet access in remote areas,” he added, “but they’re not laughing now.” A stationary internet drone project called Titan is also underway, and Google is pushing to lay fibre, and a ring is now in place around Kampala, Uganda. In South Africa, LaJeunesse says the company has worked with the regulator to release unused spectrum for wireless, and he noted investments in undersea cables and data centres.

Carlos López Blanco, Telefónica’s global policy and regulatory affairs head, first described the way telecoms is now competing with internet players as part of a ‘single universe’, but the internet is also changing, from north to south, fixed to mobile, and open to closed, the latter meaning the rise of Facebook, Google and others. It means too a new agenda for telcos, including net neutrality, a level playing field, ‘digital confidence’ in privacy, and access. The key challenge in developing countries is internet access, not quality, reliability and speed.

Taking Brazil as an example, López Blanco showed how strong investment in telecoms infrastructure can lead the way in emerging economies, as the country now ranks much higher in mobile and fixed infrastructure compared with other countries than it does in sectors such as roads and railways. Stable and equal regulation that promotes investment is critical, with private-public partnerships where private only is not feasible. He also highlighted spectrum policies that are not just revenue raisers, and government broadband plans that are non-discriminatory. “Universal service is a common challenge for governments and companies,” he said. Finally, innovative commercial services are needed to reach more people.

CONTENT – FROM THE US TO INDIA

The conference moved on to content and applications and the tension between OTT and legacy players. Consumers can now ‘gorge’ on video content, said Rebecca Arbogast, VP of global public policy at cable firm Comcast, and she quoted a media commentator, David Carr, who had said that the excellence of new TV shows threatens to consume people’s waking moments. In 2015, there were 400 original series shown in the US, double from a few years ago. “And we are only beginning to scratch the surface of user-generated content.”

It still feels radical, she noted, that users are in control of where and when media are consumed. This is changing the shape of bundles, with smaller ‘skinny’ offerings now on the market. Makers of devices, such as Tivo and Apple, are going head to head in media delivery and lines are blurring between networks, programmers, distributors and equipment providers, “which is exciting but calls into question existing regulatory structures”.

The further tension between global, regional and local content impacts trade, jobs and cultural values, said Arbogast. “At Comcast we create both global and hyper-local programming”, such as in Hispanic areas, she added, mentioning the debate in Europe about territorial licensing and protecting local cultural and language content.

In the US, much of what the FCC wants to achieve in video is happening, such as rapid growth in choice, and there is no need to intervene. When cable TV was first regulated in 1992, it owned 98% of pay TV – now that’s 53% – “Don’t regulate for regulation’s sake but recognise the market is in extreme flux… focus on modernising the regulatory approach,” she concluded.

Pulak Bagchi, VP legal and regulatory at Star India, the country’s largest TV company, painted a contrasting picture about his country where, despite being number one or two in the world TV market and the world’s largest film producer, economic value is small. He said media sectors with the most regulation are doing worse than those with lighter regulation, such as film and print. The rise of millennials in India is driving smartphone and mobile internet adoption, and new edge providers are dominated by Indian music-based players, although YouTube is doing well, and Star’s own Hotstar video service achieved 10 million users in just 40 days.

The ambitious Digital India plan for a national broadband network is running well behind schedule and it is a challenge for operators to monetise data traffic, and the rise of OTT players such as Facebook is under close scrutiny by the Indian regulator and government, said Bagchi, who asked whether the internet will tread the same path as traditional media in huge numbers but poor monetisation. There is no shortage of new content offers, and there is much business activity, he added, but a danger of legacy linear TV regulation being carried over into the new converged world.

Concluding, he said that the internet in India can break the monetisation ‘jinx’ if OTT is allowed to have full market dynamics in play.

FRESH THINKING ON SPECTRUM

In a keynote, Craig Silliman, Verizon’s general counsel, said his company will keep on delivering the promises of the digital future but policymakers need to also deliver the right environment in three main areas, spectrum, access to backhaul and global coordination. On spectrum, he said a pipeline of new capacity is needed but in the US it takes on average ten years to redeploy spectrum and the ‘low hanging fruit’ is already picked – after the incentive auction, no more is planned, he said. “Human factors in getting folks to relinquish spectrum may be as significant as the technical ones,” he added.

Sharing is a key approach and may be more important when moving to higher frequency bands, but it can lock in inefficient use of federal spectrum. Flexible use terms, such as in the AWS bands now used for 4G, have also proved important, as is a thriving secondary market governed by rules. Silliman also highlighted improving utilisation through WiFi and unlicensed LTE, which he says “interacts with WiFi better than WiFi does with itself”. As for 5G, there are new challenges for policymakers as it may need higher frequencies, so they need to work early with industry – “We can’t afford to wait ten years,” he said.

Silliman then made the point that wireless also needs wired backhaul, which in the future may be from many IoT devices not just cell towers, which will be a further policy challenge. And coordinating global spectrum is also key for many reasons.

Julius Fritz, from One Media, a new TV broadcast platform, asked how you would judge what has more value – a one to many broadcast service or a one to one mobile experience. He showed how if the US incentive auction succeeds, a remarkable 65% of broadcasting channels will have been reallocated, but from his perspective the future of free to air TV could not be brighter thanks to a new IP standard that will support high definition and mobile screens, and ‘deep building penetration’, and will also allow innovation without ongoing regulation.

AT&T’s Carl Povelites said that the mobile industry needs new licensed and unlicensed spectrum. On the licensed front he said there needs to be a large band size to accommodate multiple competitors, large block sizes for broadband, adjacency to existing bands, international harmonisation for economies of scale, and auctions without restrictions on who can bid. On unlicensed, there’s activity in the 5 GHz band in the US. He added that temporal sharing is not well understood, unlike geographic models.

In discussion, it was said that spectrum reallocations are very hard policy decisions to make, and if governments could ‘internalise’ the value of spectrum it could make such decisions easier.

“Sharing is a key approach and may be more important when moving to higher frequency bands, but it can lock in inefficient use of federal spectrum.”

INTERNET OF THINGS

Panelists on the IoT session chipped in with a number of introductory thoughts. Ericsson’s Bruce Gustafson noted there are two camps – a communications mindset that focuses on interconnection of billions of devices, and an IT bias that sees IoT as an expansion of the internet and is more interested in data flows. His view though is that IoT is a more complex issue, and he used the example of the Sim City game to show that it is analogous to having a software simulation of a virtual city to control a real city. “IoT is Sim City applied to real cities using real data in real time – a much bigger challengethan just connecting billions of devices.”

“An important issue is automation – as connected devices become more prevalent, people may lose essential skills.”

There are three steps to IoT, he said: mobile phones, apps and sensors are first; shared economy assets are in step two; and in step three everything talks to everything else.

The discussion moved quickly to possible regulatory issues, as Gustafson said lack of trust and privacy are the biggest threats to IoT. Matthew Jennings from Bosch said his company makes several million sensors a day and there is already a lot of data being generated so there is a need for policy, standards and security, but issues vary according to industries, such as in healthcare.

There was debate too on how the value of connectivity can be measured as data flows across various networks, and the way forward is likely to be experimentation with business and socially beneficial applications such as in farming. For manufacturers, IoT can change business models from a business to a service mentality, said Jennings, as they can be in touch with products in the field.

The role of telecoms and network providers becomes more important in adding value to companies that conduct much of their business by exchanging data, such as with Uber, he said. “There’s a new generation looking at sharing rather than owning assets.” For IoT, there will be questions about whether cellular networks can accommodate traffic, and perhaps private networks will spring up to fill gaps for certain applications in cities. An important issue is deskilling and automation – as connected devices become more prevalent, people may lose skills.

Aaron Burstein, an advisor at the US Federal Trade Commission, said the FTC has looked broadly at IoT and taken the view that basic consumer protection principles apply to the new technologies involved. As examples, he said consumers should still know about what sorts of data are being collected and should give consent, and under the agency’s unfairness authority if a company fails to take reasonable data protection steps, it can still be acted against even if it hasn’t published protection provisions. There was discussion about whether privacy rules could be too restrictive for IoT and Burstein said the FTC’s view is that companies should think about what is meaningful and the context in which consumers use devices.

RS Sharma, chairman of India’s regulator, TRAI, gave a detailed account of initiatives such as smart cities and public-private industrial policy that will affect the development of IoT in his country.

DIGITAL TRENDS

This session was about how regulators and policymakers can respond to changes in use of digital media. Robert Pepper, Cisco’s technology policy expert, spoke on video usage, noting that his company’s visual network index, which now goes back ten years, and projects traffic growth, was within 10% of its 2010 projection for 2014. Looking ahead, internet traffic will be growing at a 23% compound annual growth rate until 2019, driven by more users and devices, faster broadband speeds and of course, more video, which will be about 80% of traffic by 2019, and over 70% of traffic on mobile operators’ networks will be video, Pepper added.

As an aside he said: “There’s no such thing as a mobile network – the network doesn’t move, I do,” noting that wireless traffic has to go to base stations and to a core network, and that TRAI’s chairman, RS Sharma, had earlier spoken of the need for fibre backhaul as a vital plank of the Digital India initiative. “India gets it,” Pepper said.

Further, even if people don’t spend more time with video, the step up to high definition and ultra high definition will drive more data traffic. As for devices, by 2019 43% of connections will be machine to machine (M2M) but will be only 3% of traffic, with a wide range of requirements in terms of factors such as latency. And Pepper added that countries such as Korea and Japan will have a much higher percentage of devices that are M2M than those at the other end of the scale, mainly emerging countries. “This is a third wave of the digital divide that I think is unacceptable,” he said (the first wave was phone, the second connecting to the internet).

“I really hope our forecast is wrong on this as it is avoidable,” he added. Countries could miss out on the economic benefits of IoT in sectors such as manufacturing, energy, healthcare and more.
“It’s a tale of two networks – capacity driven by video and number of devices by IoT/M2M,” said Pepper, “and it’s leading to incredible complexity that we will need to manage,” such as with different types of spectrum. He mentioned the Industrial Internet Consortium, which now has more than 200 members, as one of bodies addressing the question.

Nuala O’Connor, president of the Center for Democracy and Technology, spoke about the attacks on free speech, such as by the hackers who brokeinto Sony in response to the film about North Korea, and of course the attack on Charlie Hebdo in Paris. “But the response from governments around the world is to clamp down further,” she said, noting that 20,000 Twitter accounts were taken down.
“The internet is not the cause of terrorism – I come from Belfast in the 1960s and there were terrorists before the internet,” she said. Further, there are individuals, especially men, who misuse the internet and reinforce existing power structures, she added, asking delegates to think about how ‘digital dignity’ can be maintained.

Sky’s David Wheeldon described how empowering users with linear TV tools such as watershed protection can be applied to OTT products and broadband, and Facebook’s Kevin Martin showed how users in emerging markets can be brought into the digital age through the Free Basics app.

COMPETITION CONUMDRUM

IIC president, Fabio Colasanti, introduced the closing plenary, on competition, which he said is proving to be one of the most intractable issues, in particular whether European approaches to opening up networks are sufficient. Mirko Bibic, chief legal and regulatory officer at Canada’s Bell, showed how services such as broadband have grown from 56% to 81% of revenues in ten years at Bell, and legacy phone is now only 9%, and echoed earlier points about the benefits of broadband. He noted that regulators – in the US, Canada and Europe – are stating publicly that competition is an underlying theme. “But how do we get there? Too often, policymakers and regulators can lean towards the short-term, with an emphasis on lowering price, but that invariably comes at the expense of durable, long-term facilities-based competition.” Creating incentives for companies to lay next generation technology and using ex-post competition policy is the way forward, Bibic said, referencing points made by FCC chairman Tom Wheeler in the opening address.

Steve Unger, from Ofcom in the UK, described the regulator’s strategic review, which is taking place ten years after network unbundling was undertaken. He highlighted availability of fibre networks, noting that the regulator’s main job is to ensure people don’t get left behind, and not to rule on technology or price. “At present about 8% of UK homes don’t have 10 Mbps broadband – for me that’s one of the biggest issues in the review.” On competition, Unger said Ofcom is as concerned about mobile as fixed, and is keen to focus on end to end competition, rather than remedies that promote virtual operators.

“Countries could miss out on the economic benefits of IoT in sectors such as manufacturing, energy and healthcare.”

In fixed networks, he said the question again is whether access-based competition is still the best model, rather than end to end. There is also debate on access to passive infrastructure. Unger set out options for changes to the Openreach wholesale operation, noting that separation from BT is the most controversial. In discussion, Unger said he doesn’t see major tension between competition and investment for network availability – but service innovation to drive social and economic benefits is key.

WHAT ELSE HAPPENED DURING THE IIC’S WEEK?

The International Regulators’ Forum (IRF), which took place at the FCC, focused on the following themes:

• Regulatory innovation – this session asked the question, ‘What do citizens want from their regulator?’ There was comment that telecoms is looking more like other markets such as energy in terms of regulation.
• Competition market failure – wide- ranging discussion covered topics such as tackling bottlenecks, licensing and consolidation.
• Consumer protection – this session looked at the rapid multiplication of content, protection vs free speech, ‘must carry’ rules , cultural identity, and linear vs non-linear.
• Digital divide – regulators shared plans that address supply and demand, ideas such as a digital inclusion fund to help access public services, and an overall point was made that technology alone can’t solve all problems.
• The unregulated – here the regulators focused on OTT and VoIP, raising issues such as licensing, plurality, advertising and convergence.
• Spectrum – the US incentive auction was described, and general subjects included the challenges of refarming, new uses of spectrum and higher frequencies for 5G. Sharing is seen as ‘key to the future’.

Breakout groups

In the annual conference there were also a set of lively breakout groups on topics such as the sharing economy, next-generation networks, net neutrality (in the light of the FCC’s open internet order), internet governance, and ‘digital kids’– how to protect children, where the point was made that there needs to be more interaction between parties such as search engines, payment processors, domain name registrars etc. to raise the protection bar.

SDGs and the WSIS Review

A workshop hosted by the IIC and Microsoft (see page 14).