P2P

FCC net neutrality proposal confuses the issue

Reviewing FCC Chairman Genachowski’s comments on the net neutrality process, we find that there are a number of interesting points.

• First, the FCC is indeed proposing to apply net neutrality to wireless, which is something that’s already caused concerns among wireless providers. Wireless is the last bastion of profitability for the operators, after all.
• Second, the FCC is making it very clear that net neutrality rights will apply only to lawful content, and in fact Genachowski specifically said it would not apply to P2P that infringes on copyright. That means that the ISPs would be free to interfere with “non-lawful” traffic.
• Third, and perhaps most significantly, the FCC is saying that while it is important to offer managed services, which we assume means services with managed QoS, in parallel with the Internet, these can’t be allowed to compromise Internet service capacity and quality growth. This could pose the risk that the FCC might reverse its long-standing position on IPTV.

We don’t know exactly what the FCC has in mind (nor does anyone else (which likely includes the FCC!), but this announcement could create more uncertainty than clarity, which could influence U.S. providers’ investment in broadband. A Senate bill to block the order has been introduced, but it has no chance of passing. The House net neutrality bill will, according to sponsors, move forward.

Internet piracy regulation: The Industrial Revolution evolution

The UK’s regulatory arm, Ofcom, is considering a set of procedures aimed at reducing online piracy, and these include shutting off the Internet services of offenders who ignore repeated warnings.

The move is the latest in a series of European initiatives, some of which have stalled (France comes to mind), and it represents in our view a combination of new pressure from content producers to protect their legitimate rights and concerns that loss of intellectual property protection could be a major threat to evolved economies that can’t rely on industrial production any longer.

How much actual lobbying people like the RIAA have done here is hard to say, but whatever is happening is working—in part because P2P sharing is a major traffic source and financial burden to operators.

Telco-versus-cable: An upload/download competition?

Cox is moving its DOCSIS 3.0 50 Mbps service into two areas where FiOS is available, creating another face-off between fast cable and FiOS. The two are priced similarly (cable is a bit cheaper), but FiOS has four times the upload speed. This creates an interesting dynamic. Verizon might find itself a promoter of the “no-caps” position simply because P2P hurts it far less than it does cable.

There is even some talk that telcos in general will be talking up unlimited access because it favors their architecture, just as higher download speeds favor cable over DSL. The question now is whether both parties will play chicken on capital infrastructure issues, hoping to force the other side into a costly investment they’d just as soon not make, or whether there is actually a longer-term division of customers ahead, where upload-centric users migrate to telcos and traditional downloaders move to cable.

BT sends signal on future voice services

A securities analyst has reported that BT may be slow-rolling 21CN and may in particular be rethinking its notion of migrating from TDM/PSTN voice to VoIP, at least in the near term. The information came out as it related to the impact that a VoIP cutback might have on Sonus. Obviously it could be significant.

What could be more significant is why this might happen. On one hand, the TDM plant is more depreciated than ever, and so barriers to replacement are falling. Yet there’s nothing as cheap as something you own that has no residual value to write off against your top line. Balanced against this is that operating costs for aging equipment typically grow. So at some point, you must assume BT would have to change.

The most logical starting point here is that it makes no sense to do something that involves TDM-to-IP conversion; you are forced to invest in the gateways. But if you have any TDM circuits, you can’t avoid that. Thus, we think that the likely issue here is a migration to packet voice for wireline and wireless, eliminating circuit technology in one sweep.

That would imply, in our view, that BT might synchronize three things before moving forward: 4G/LTE, FMC/femtocells and wireline migration to VoIP in some form. The question is what form. There are indicators that a P2P voice model, or at any rate something other than a SIP model, might be cheaper to deploy. Given Skype would likely offer voice services on any OTT-ready smartphone and over all home broadband, it makes no sense to spend a lot on your own voice program; you will have to match the Skype price or lose.