itu policy clinic masterclass

POLICY CLINIC MASTERCLASS ITU Telecom World Doha, 9th December 2014

MARTIN GEDDES FOUNDER & PRINCIPAL MARTIN GEDDES CONSULTING LTD

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04/01/2015 | ©2014 Martin Geddes Consulting Ltd

ABOUT THIS DOCUMENT

• This document is a readable version of a talk given at ITU Telecom World in Doha, Qatar in December 2014.

• Many of the themes are taken from a response to the UK’s Department for Culture, Media & Sport (DCMS) consultation on Digital Communications Infrastructure Strategy.

• For details of the full response, click here. • These are private opinions of Martin Geddes

Consulting Ltd; nothing in this document should be taken as ITU endorsement.

http://www.martingeddes.com/dcms-consultation-digital-communications-infrastructure-strategy/

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ABOUT US

• Martin Geddes Consulting Ltd is a boutique provider of innovation services, based in London, England.

• We work in collaboration with several industry partners, notably Predictable Network Solutions Ltd, also based in England.

• Together, we are the world’s first (and only) team of network performance scientists.

• We offer network measurement and optimisation services to fixed and mobile operators. We have also provided scientific advice to regulators.

• To get in touch email [email protected].

mailto:[email protected]?subject=ITU Policy Clinic presentation - follow-up

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MARTIN GEDDES

• Martin Geddes is a scholar of emerging telecoms business models and network technologies.

• He is co-founder and Executive Director of the Hypervoice Consortium, an new industry association.

• Geddes is formerly Strategy Director at BT's network division, and Chief Analyst at Telco 2.0.

• He previously worked at Sprint, where he was a named inventor on 9 patents, and at Oracle as a specialist in high-scalability database systems.

• He holds an MA in Mathematics & Computation from the University of Oxford.

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Immature industry

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BROADBAND IS AN IMMATURE INDUSTRY

• Broadband is affordable because the physical resources are statistically shared. • Internet Protocol (TCP/IP) is a 1970s prototype technology that we are

attempting to scale. – TCP/IP was the quickest way to exploit the statistical multiplexing gain from

sharing through packets. • We are now seeing struggles to scale performance, security, resilience.

– For example, there is a significant likelihood that IPv6 migration will not occur at mass scale.

– Why? IPv6 massively increases the attack surface, whilst introducing new performance issues for mobility and multi-homing.

• Alternatives are in development (e.g. RINA through various EU projects), but these are several years away from initial commercial use.

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SCIENCE GAP

Science gap

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THERE ARE GAPS IN THE BASIC SCIENCE

• For mature engineering disciplines, we understand the materials we work with, how they compose, and how to meet a user specification.

• This is lacking in broadband. • We therefore urge that a common and shared basis of scientific understanding be

developed. • The ITU is a logical place to hold these standards for the basic science, since there

is only one reality, and there can only be room for one model of it with the highest fidelity.

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ROLE OF GOVERNMENT

Government

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WHAT IS THE ROLE OF GOVERNMENT?

• The role of government is oversight of the risks and hazards in the complete supply chain.

• This includes continuity of performance, as well as the economic sustainability of all digital services.

• Your job as a regulator is to monitor these risk, and intervene when the market fails to deliver what society requires. – This implies a demand-led model. If you don’t understand what the needs of

society are, how can you know if they are being met?

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DEMAND

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THE FUTURE OF DEMAND

• When we look at models of demand, they often contain false assumptions. – For example, we see scenarios of ever-expanding consumption of audio-

visual content which are impossible, unless people watch streamed TV every waking hour on multiple screens.

• The real issues will not just be quantity, but also quality, consistency, and continuity.

• There is no “Moore’s Law” for network quality: for example, the speed of light is not changing.

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FITNESS-FOR-PURPOSE • Connectivity • Capacity • Continuity • Consistency

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A MODEL OF FITNESS-FOR-PURPOSE

• Supply and demand have to be aligned at all timescales • Connectivity is about creating the raw infrastructure. Is it being built where it is

needed? • Capacity is about having the load-carrying capability in terms of quantity. • Continuity is about the contiguous nature of the service, where there are no gaps

(cf xDSL, where there are constant small ‘outages’ as lines retrain). • Consistency is about the lack of variability in the service, since this impacts the

quality.

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MEASURE QUALITY

Measure

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MEASUREMENT IS DE-FACTO REGULATION

• A key requirement on regulators is service measurement. They have to create metrics from which to regulate the market. – These metrics have to based on some form of network measurement. – Those measurements have to be strong proxies for fitness-for-purpose;

metrics should reflect the end-user experience of services they use. – So what are good metrics?

• Critically, averages are NOT good ones. – Consider a country where 50% of the population have gigabit service, and

50% have nothing. This would top the world rankings, but wouldn’t be a great place to live.

• What matters is the fraction of users who receive an unsatisfactory service. We need to focus on protecting the weakest, not over-helping the strongest.

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COST

Cost models

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THE COST MODELS WE USE ARE NOT GOOD ONES

• Regulators are being led into irrational policies because they lack good metrics of cost.

• So what is the cost of supply for broadband? • Think of a service like Netflix. Obviously there is a cost to delivery of this content.

– Adding this traffic has externalities: it causes the quality of experience of other applications to fall.

– When we use over-provisioning to reduce this contention, there is a cost. (It is also ineffective, as well as inefficient). This cost is not being properly accounted for.

• Current policies will tend to drive inequality, since they tend to reward the greediest network users with the fastest links. – There is a negative social impact from the race for ever more speed.

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COMPETITION POLICY: “TRANSFERABLE MONOPOLIES”

• In the UK we have adopted a competition policy of what might be called “transferable monopolies”. – A user has an initial choice, but is then locked-in to receive all services from

one supplier. • Much of the perceived value of major telecoms providers is in their ‘ownership’ of

those monopolies, transferable or not. • As we move from hardware assets to software, we now may have gigabits to a

point which can be distributed and shared. The current model means we can’t easily share it, as a single entity has all control over all levels of multiplexing.

• In the PSTN that was a good idea: it was a trust function. There was a natural monopoly to the end point. This disappears with broadband.

• We need to find an alternative market structure to overcome this downside, and support finer-grained sharing of the infrastructure.

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COMPETITION POLICY: “TRANSFERABLE MONOPOLIES”

• This requires network service providers to offer suitable fit-for-purpose performance guarantees to allow the monopoly on connectivity to be broken up.

• Maintaining both emergent performance and market confidence will require a different regulatory approach.

• This new kind of ‘equivalence of inputs’ (EoI) requires regulators to understand issues of schedulability of traffic, and the fungibility of connectivity (and pricing).

• Moving to a connectivity plus performance based pricing model would require a re-thinking of the EoI aspects.

Universal service


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UNIVERSAL SERVICE, OR PERFORMANCE?

• There is a need to create a ‘universal performance’ commitment, as the complement of ‘universal service’.

• This means putting in place a quality floor for broadband. • Current SLAs provide at best fiscal remedies; they do not mitigate the underlying

risks of failure. These remain with society at large.

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Innovation

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KEEP YOUR OPTIONS OPEN

• The UK approach to market regulation has a flexibility and openness to different technical and market approaches that some other regulatory frameworks lack.

• It contrasts with the US approach, which is highly compliance-based, and the rules can end up inhibiting experimentation.

• There is no certainty that current technical models or market approaches will be the dominant ones in future. Avoid lock-in if at all possible.

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State aid

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WHAT DESERVES STATE AID?

• We believe there is a role for state aid. • From a ‘connectivity + performance’ viewpoint, ‘connectivity’ could be seen as

something that should deserve state aid, whereas ‘performance’ (perhaps above some lower bound ‘obligation’) is something that should not.

• This helps to align supply and demand, and create appropriate incentives to use resources wisely.

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NET NEUTRALITY, WHAT’S THE ANSWER?

• There is only one thing you need to know about network ‘neutrality’: it DOESN’T TECHNICALLY EXIST.

• There are many false assumptions about the cost of end points being associated, and externalities of actual use.

• None of the textbooks or journal articles we have seen have an accurate understanding of network performance.

• The reality is that networks are resource trading platforms, more like futures platforms for commodities or foreign currency.

• The role of the regulator is to help the industry define the trades, and then offer fair, reasonable and non-discriminatory access to them.

• There is a solution, just not one that is being promoted by the many warring factions.

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Public service

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HUGE EFFICIENCY GAINS ARE POSSIBLE

• We have been working with KPSN (Kent Public Service Network). • The KPSN has created an outcome-focussed, collaboratively-managed “right-

scaled” approach in which the public of Kent capture the benefits of the inherent statistical multiplexing.

• The benefits in both efficiency and effectiveness are large. • This model could be replicated in other territories (with some modification

required to scale it).

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HOW TO MANAGE THE DIGITAL SUPPLY CHAIN?

• We foresee that the main source of highly-innovative technological change will not be in the area of physical equipment, but in the coordination of the 'supply chain' of elements to deliver services.

• The value will be in providing appropriate performance, rather than higher speed as a (weak and sometimes costly) proxy for performance.

• We are seeing wrong behaviours across the whole industry that are defeating attempts to create attractive price and performance structures.

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WE’RE IN THE DISTRIBUTED COMPUTING BUSINESS

• Distinctions between telecoms and IT are becoming unhelpful, especially in a ‘software telco’ world. It’s all just distributed computing.

• For example, the movement of CDNs into the network has significant regulatory repercussions.

• The location of the CDNs, and its relation to other network elements and boundaries, affects the possible structure of the broadband market.

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Cloud

Cloud

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HOW TO SERVICE THE NEED FOR CLOUD?

• One example of this structural change is cloud services. • We accept that cloud systems will have symmetric connectivity, we also accept

that content will be cached closer to the user. – This caching is likely to be in home or the immediate locality in order to keep

the latency low. • There affects what kinds of unbundling regimes are possible. What happens

when key compute resources are embedded into operator-supplied home hubs, for example?

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Safety

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SAFETY AND SECURITY SHOULD NOT BE ASSUMED

• We see a number of unaddressed safety, integrity and reliability issues. • For example, current technical and market structures appear to be poor fit to the

performance and security needs of Internet of Things. • We also see hazards to the corporate sector around resilience, such as the lack of

true route diversity. • Regulators are not adequately addressing the ‘tail risk’ of major failures with

wider social and economic impact.

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Complexity

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COMPLEXITY IS A MAJOR RISK

• Existing IP-centric approaches have created a plethora of disparate solutions for what are effectively common problems: privacy, authentication, integrity and service adaption.

• This complexity is reflected in high and rising maintenance costs, and hence a risk to the long-term sustainability of internet-based systems (including the Internet itself).

• We see a growing operational complexity (and hence cost) in maintaining existing services, which, when combined with a lower rate of return on wholesale service, makes for undesirable retail provider behaviours.

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MONOPOLISATION VIA CONTENT

• For example, to hide the underlying cost problems, dominant retail providers may direct a growing proportion of revenue and investment into retail marketing activities and content acquisition.

• They may attempt to re-create market monopolies in this way, or by using other pinch-points in the ecosystem.

• Regulators should be very wary of technical excuses as to the necessity of vertical integration and/or monopoly.

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PERFORMANCE COULD TRIGGER A CRISIS

• In dense urban environments, WiFi performance is already degrading significantly.

• We do not see deployment of the appropriate precursors of the appropriate service isolation in the common infrastructure.

• Users have come to expect a certain level of performance. Losing it may trigger a legitimacy crisis for regulators, who are seen to have failed to anticipate problems and act.

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Spectrum

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HOW TO SHARE THE AIRWAVES?

• Small cell technology has challenging economics for its deployment and in-life management costs.

• There is a need to move to more fine-grained sharing of resources in both space and time.

• This means allowing national spectrum monopolies to be broken up, especially in “not spots” for small cell deployment.

• Achieving this may require new market structures. The contracts and boundaries established for retail competition get in way of new business models and make it difficult for new market entrants.

• Unless regulators act, it may become increasingly easy to leverage spectrum monopolies to control the entire digital distribution chain.

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Sustainability

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A TIME BOMB FOR REGULATORS?

• A ‘quality arbitrage’ exists in abundance in the current infrastructure deployments and charging structures.

• If this were to be exploited, many major incumbents could collapse. • We know how to do it, so it’s likely a question of when, not if. • Basic issues of sustainable pricing remain to be addressed.

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