Money flow in Net Neutrality

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Money flow in Net Neutrality

• Slide show
• (c) Teleplanning A. Wirzenius Ltd. 2006May be
  copied freely in unmodified form. For
  modifications, contact author www.iki.fi/arno.w/

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Players in this scenario

• This is a possible worst case scenario if
  priority transmission is introduced in internet
  for video transmission
• The players are
• Video Bros, a giant video producer
• Veribig, a giant ISP, large enough to get an
  agreement with Video Bros for distribution of
  Video Bros videos with priority transmission,
  and Video Bros pays Veribig for priority
• Veribig is located in any large country, e.g.
  China, Germany, India, USA
• Verismall, any other ISP whose customers also
  want to see videos of Video Brothers

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Money flows

• Transmission of a video with priority (before
  other internet contents) involves three money
  flows (including interconnection)
• Basic transmission (best effort), the broadband
  user pays his broadband access ISP who then pays
  for upstream capacity, all on a monthly basis
• Priority fee, a new money flow, either
• (i) part of the video content fee, on a
  pay-per-view basis to the video content provider,
  or
• (ii) part of the broadband access fee on a
  monthly basis,
• in both cases payment for the priority as an
  enhancement attribute to basic transmission
• Video content fee, on a pay-per view basis
  payable to the video content provider

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The scenario

• Veribig agrees to transmit the videos of Video
  Bros over the internet using priority
  transmission, country-wide or world-wide
• Video Bros charge the customers for priority as
  part of the pay-per-view fee and pays Veribig for
  priority
• Cache greatly reduces the cost of transmission
  except for the last mile, see the following
  slides

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Technical video transmission
Veribig
Video Bros
Verismall
cache(s)
cache(s)
....
....
Lesson most costs in the last mile
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Money flow for basic transmission
Veribig
Video Bros
Verismall
....
....
Money flow for basic transmission, payments on a
monthly basis for capacity
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Money flow for priority
Veribig
Video Bros
Verismall
No revenue!
....
....
Money flow for video and priority, payment by
credit card or similar This appears to be the
proposed arrangement for priority fees
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Lessons learnt

• Veribig and Verismall both receive revenue from
  their broadband customers for transmitting video
  at best effort level
• Both transmit the video with priority, both do
  the work (last mile transmission), but only
  Veribig receives revenue for priority
• The situation looks like monopolising the
  priority revenue

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Paying basic transmission and priority
Does the present internet interconnection payment
mechanism work properly for basic transmission
and priority?
Video Bros
Verismall
Veribig
Present payment principle for basic transmission
(best effort) you pay (part of broadband fee,
per Mbit/s per month) if you receive a video
?
Video Bros
Verismall
Veribig

The worst case scenario for priority fees you
pay (per view) if you send a video
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Conclusion

• The worst case scenario would be that Verismall
  does the bulk of the work for its customers
  without any share of the corresponding revenue
• If the priority fee would be shared between
  participating ISPs, the two money flows, for
  basic transmission (best effort) and for
  priority, are in opposite direction and based on
  different charging principles (bandwidth per
  month, and pay-per-view)
• It is difficult to verify deliverables and agree
  on interconnection in such a situation
• The user cannot decide on priority which may not
  be acceptable
• The main regulatory options are
• Ban priority
• Hands off, do not regulate internet
• Create a method for sharing revenue from priority
  between ISP's (incl. transit)
• Users buy priority separately as part of their
  broadband connection

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Possible solution

• The following slide shows one possible solution
  for the fourth regulatory option, in which
• the user decides on priority for any contents or
  service at his choice, and pays for priority as
  part of the broadband connection, and
• every ISP participating receives some part of the
  priority revenue
• Regulatory intervention is not required if ISPs
  can agree
• The solution even provides an option for the
  broadband access ISP acting as a sales and
  billing channel for video and other contents
  (using a non-walled garden approach)

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Alternative money flow for basic transmission and
priority
Veribig
Video Bros
Verismall

....
....
Everybody gets something
Finland has a billing convention in use in
telephony which could be further developed as a
sales channel for video and other content. See
http//www.mintc.fi/oliver/upl686-31_2004.pdf
page 19
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Thank you