Internet model to change regardless of ITU

James Robinson/Ovum
13 Dec 2012

During December 2012, International Telecommunications Union (ITU) member states are meeting to debate the future regulation of the Internet. Members are discussing proposals by the ITU to amend the International Telecommunications Regulations (ITRs), which have provided rules for global telecom for over two decades.

The ITU feels that the existing regulatory framework is ill-equipped to deal with the challenges stemming from increasing data volumes and the risk of an investment shortfall. It believes that the ITRs need updating to help encourage broadband rollout and to address the current disconnect between revenues and costs. Its opponents, however, fear that the proposed revisions may impact the freedom of information and expression on the internet.

The ITU has proposed that operators adopt a “sending party network pays” system in order to fairly compensate those that carry internet traffic. Under this regime companies such as Google will have to pay operators more to carry their traffic.

The plans have faced fierce opposition in countries such as the US, where commentators have likened them to a “toll for the internet superhighway.” Eventually, however, there will need to be some change to the internet model, change that recognizes the two-sided nature of the market. We have already witnessed this on occasion, which suggests that the ITU’s involvement may not be required. And with such proposals unlikely to receive unanimous backing, it is doubtful that we will see any change to the model as a result of this year’s congress.

The economics of interconnection is the primary issue at stake

On December 3, 2012 members of the ITU convened in Dubai at the 18th annual World Conference on International Telecommunications (WCIT) for a fortnight of negotiations. The talks will provide an opportunity for ITU members to collaboratively review the ITRs, which have governed the development of the telecom industry for over 20 years.

It has been claimed that the WCIT will serve as a forum for some countries to advance their own political agendas and for others to attempt to censor the information available online. In the US, the House of Representatives believes that it is the duty of the US to promote a global internet free of government control. It is slightly ironic, therefore, that the bodies that oversee the internet, including the Internet Corporation for Assigned Names and Numbers (ICANN), operate under the umbrella of the US Department of Commerce.

Ultimately, the issues up for debate are interconnection, how upgrades to infrastructure are going to be made, and who should pay for them. While the ITRs have provided a general framework that has facilitated the development of international telecom services, the ITU believes that a revision is needed in order to encourage future growth and technological innovation. As such, it has proposed an amendment to Article 3 that aims to ensure an adequate return on investment in high-bandwidth infrastructures. Under the plan, operators will be able to negotiate commercial agreements to achieve a sustainable system of compensation for telecom services. This is based on the principle of sending party network pays, which is commonly used for mobile voice call termination.

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