SEVENTH ANNUAL INTERNET GOVERNANCE FORUM
BAKU, AZERBAIJAN
SUSTAINABLE HUMAN, ECONOMIC AND SOCIAL DEVELOPMENT
7 NOVEMBER 2012
14:30 CET
WORKSHOP NO. 105
INTERNET REGULATION FOR IMPROVED ACCESS IN
EMERGING MARKETS
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This is being provided in a rough-draft format.
Communication Access Realtime Translation (CART) is provided in
order to facilitate communication accessibility and may not be a
totally verbatim record of the proceedings.
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>> BILL WOODCOCK: Okay. If people want to put on their
headsets, I think we will start. So this is going to be a
relatively informal session. We have here a number of experts
on Internet regulation and the ways in which it can go right and
go wrong. Bernadette Lewis it looks like is not going to be
with us on the panel today. My name is Bill Woodcock. I will
be moderating. I am the executive director of Packet Clearing
House. We are an international Internet operations
organisation. We support the operation of Internet critical
infrastructure, like Exchange Points and the core of Domain Name
System in more than 150 countries. We have policy and
Governmental work that we do in nearly all of these countries.
So I have worked with a lot of regulators on Internet issues
over the last 20 years.
Bevil Wooding is my colleague also at Packet Clearing House.
He is our Caribbean European specialist and he works with
Caribbean countries. Sam Paltridge is with the OECD, the
Organization for Economic Cooperation and Development and leads
their telecom unit. So he does a lot of economic and
quantitative analysis of the effects of different regulatory
policies. And Jane Coffin is now at the Internet Society doing
development strategy but until quite recently was at the NTIA in
the United States and before that with U.S. aid. She has also
dealt with Internet regulatory issues both within the U.S.
Government and in several countries in Eastern Europe.
So I think what we would like to do is -- so we are talking
today about whether regulation can improve access. And so first
let's define access so that we are sort of on the same page.
What we mean by access is the combination of affordable price,
availability; that is, it is actually something that people can
get in their location wherever their location may be and
functionality. If they get it, it will have some basic level of
working. It is not going to be completely useless.
So then the question is whether regulation can help achieve
these goals. And I am going to sit down and join the panel and
we are just going to talk about it based on our experiences, but
we would very much like your questions and involvement. As I
said this is going to be a very informal hour and a half. And
we really look forward to an interactive session in which we try
and address questions and points that you guys may bring up and
hear from each of you and your -- maybe not each of you but each
of you who are interested and what your experiences have been as
well. So I am going to sit down and put on the headset and -so perhaps just start with Jane maybe and maybe you can just
chat for a couple of minutes about sort of your experiences from
the different points of view that you have had and what you
think can make things better and, you know, maybe as I said
entertain questions fairly interactively.
>> JANE COFFIN: Good afternoon. Can you hear me? Okay.
Great. Thank you very much, Bill. I have spent some time as
Bill had indicated in two different countries, in Eastern Europe
and partially in this region. Several of the factors that I
found when working with regulators that was so critical and this
is something that I found interesting from a perspective of
coming from a very consultative environment back in the United
States you need to assess your environment and a lot of this is
practical and simple, but it is important to remind ourselves
that we are trying to help improve the infrastructure for the
country and for the people in the country and as Bill was saying
bring down prices and make things more affordable, assess your
environment and consult. This helps facilitate stakeholder
participation. And I know when we say stakeholders what do we
mean. We mean the people who are invested in using the
infrastructure or building the infrastructure, regulating that
infrastructure or providing policy guidance.
I think for a lot of regulators they feel that speaking to
companies or constituents in their environment might be a sign
of weakness and actually it is a sign of strength if you
consult. If you continuously understand your environment, and I
found that as a person in policy myself I found myself
consulting with Bill Woodcock. It was a very difficult issue
that was put in front of me when I was working with Internet
protocol when I was working for the U.S. Government and it was
important for me to find out more about the Internet
infrastructure. I turned to Bill and others to find out what
that infrastructure was that -- what I didn't know and what I
was missing. So it is very important to assess that
environment.
Recently the Internet Society has been engaged with many
different countries around the world and with companies like
Bill's to take a look at providing more Internet infrastructure
in the form of Internet Exchange Points. Again you assess your
environment and figure out how to bring stakeholders together,
understand the technical infrastructure and then from there
continue to consult so that you are not making mistakes that
harm that environment. You can disadvantage small companies and
disadvantage the companies that are already in the market. You
also need to talk to your incumbent, of course, to figure out
what's going on if you have an incumbent in that market in order
to help facilitate that environment. So I will just throw that
out. The importance of assessing environment from the physical
and technical and human because you are always wanting to
increase the technical infrastructure and the human capacity
development in your country which is so important and you can do
that as a regulator and a policymaker by consulting with
technical experts and/or other experts around the world. It is
important to just know what you are trying to regulate quite
frankly.
>> BILL WOODCOCK: Sam, do you want to just take a couple
minutes and ->> SAM PALTRIDGE: Okay. Thanks, Bill. So Bill asked me to
talk about a question of what regulators can do to help improve
access. And what are some of the things maybe that they get
wrong from time to time and the discourage or help to access to
development. Since I have got three minutes I will use one of
them to do a one minute history of telecoms. We started out
with monopolies and basically the Government did everything. It
was the regulator and operator and policymaker. We tried this
for a hundred years and most countries have less than 1%
telephone penetration. We are not doing this very well. And
one of the problems, of course, was where you get investment
from and having the Government as the owner and operator and
policymaker meant that any time revenue came in from whatever
source it would be really to go back in to telecoms. Quite
often go to very worthy causes. Would go to hospitals,
libraries, whatever. It often didn't go back in to developing
the network. So we made some changes. We split off regulation
from Governments. We split off operation from Governments. And
we said to the private sector you can have a role here since you
have got investment that we need. And part of that was having a
regulator to intervene where there was insufficient competition
and that quite often happens. We know that because we have
limitations. We have limitations, for example, in a spectrum
where you can't have free market access, free market exit even
because policymakers don't like it when people lose their
telephone numbers either. So often they keep inefficient
operators in the market. So there is various reasons that you
need to have regulators. I could talk forever on why you need
to have regulators.
But where we have got to in the last especially last 10, 15
years we have managed to transform access in telecoms to where
we have over 100% penetration in many countries and if they are
not there yet they will be soon. And, of course, the Internet
came along and in many ways helped develop that access further
because there was more demand for that access. But also it
helped in many other ways. It helped drive demand but it also
helped regulators. It helped the sharing of information about
regulation. And so one of the things that we do at the OECD is
share best practice and we talk about what the issues are and
how we share best practice. And I was in a session yesterday
with the former regulator from Sri Lanka and one of the problems
and challenges he had going from United States back to Sri Lanka
he can't access the information that he needed and the Internet
has helped him to do that.
On the other side there is many things that regulators can do
to make that better. One of the primary ways is how to make an
efficient market and how to make it work efficiently and how to
increase competition in that market because that helps drive
access. And on the downside we see many bad practices. And we
see how that can deter growth in network access. We see in many
places the market throwing out very surprising developments.
Sometimes I am a little embarrassed to say that many of the
leading developments are often not in the developed countries,
not in the OECD countries. They are in the developing
countries. And I cite international roaming as one example
where often you can go across borders in Africa and not pay
roaming charges the way we do in developed countries and that's
a tremendous outcome of market developments. But regulators
have to be careful that they don't intervene in a way that may
stop such a development which has tremendous benefits for
consumers. And there is some things that I can talk probably at
length about what they do and give you many examples but I will
come back to that. I hope there is lots of questions anyway.
>> BILL WOODCOCK: Bevil, do you want to give us your
thoughts for a few minutes?
>> BEVIL WOODING: Yes, just a few thoughts. Looking at the
question, can regulation help and I think the answer is yes, but
it can also hurt access to the Internet and to critical
services. So just to repeat something that Jane said,
objectives must be clear. I think it is simple but an important
reminder for regulators to always keep in mind what are we
trying to accomplish as regulators. I am functioning largely in
a region in the Caribbean that is coming out of a monopoly mind
set and that severely impedes the decision making at the
regulatory level. So a big part of my function is simply
explaining how things connect. How decisions that might have
been acceptable a decade or two decades ago can now inhibit
market growth and development. And bringing that kind of
information to regulators is an important part of the process of
them making the correct decisions.
There are a couple of important points that I wanted to
just throw out there. One is commercial priorities versus the
social development priorities. That continues I think to be a
challenge for a number of regulators, particularly in some of
the Emerging Markets where you have the income from telecoms in
particular playing such a significant part in Government
revenues. And that puts Government in a sometimes conflicting
position where there is a priority to secure these predictable
revenues and what they, providers, would do is to say well, if
we were to make the markets more open or encourage more
competition, then we can't guarantee you these revenues will
always be there for you and that presents challenges relating to
infrastructure development and opening up markets to different
kinds of competition and, of course, rule out of infrastructure
to enable the technology that we all have.
So I think developing a holistic understanding of the
implications of regulatory decisions is one of the key points
that factor in to how decisions are made, that ultimately have a
direct bearing on the kind of benefits that are derived from
regulatory practice. The other thing is hard data or scientific
data is very important to decision making. I have seen cases
where decisions are made on the basis of what the providers say
are not necessarily on the basis of what is factually true. And
this is an important consideration, particularly when you have
regulators who are dealing with severe human resource
constraints.
And that really severely comprises their ability to do the
kind of research and due diligence that is necessary to make
progressive regulatory decisions. So just to throw those things
out there and see what kind of discussion we can generate.
>> BILL WOODCOCK: So are there any points that any of you in
the audience would like to bring up or any questions yet? Or
shall I -- okay. So I think one of the things that I use as a
test is whether a regulatory environment allows a teenager, a
student in a high school say that can start a business that can
compete on an equal footing with the incumbent. In a lot of
places that seems like a ridiculous question or people think
that shouldn't be a goal but then there are other places where
there are very healthy competitive markets like, for instance,
New Zealand where the same license is available to everyone at
the same price and it is quite affordable and there is no real
barrier to somebody starting a new business as a teenager that
competes on an equal footing with the incumbent that is not
subject to any structural disadvantage. And I think that that's
a really important point. I think that regulators -- the main
duty of a regulator in my opinion is to preserve opportunities
for new market entrance, right? That you can't look at a market
and say this market is already as good as it will ever need to
be and all we need to do is preserve the status quo and you
can't count on current participants in a market to provide all
the innovation that will ever be needed for the future. The
frustration that your current market participants occasion and
their customers should be allowed to drive those customers
towards innovation, towards providing competitive alternatives.
Before I came to this I ran an Internet service provider. And
that was what I wanted. So I had to cobble it together myself.
You know, later I saw people who were competing against the
incumbent because they didn't think the quality of the service
was high enough or they didn't think the price was low enough or
they didn't think that the services were innovative enough. And
all of those things were true.
And anything that prevents those people from turning that
frustration in to entrepreneurial energy and making the market
better by providing new services is an impediment to the growth
of the market and an impediment to the raising of the quality of
people's lives. And so honestly I think the main goal of a
regulator should be to enable kids to go out and do something
better. And there are far too many regulators that think that
their job is to have meetings with the incumbent and talk about
what the incumbent's goals are and that just doesn't seem very
interesting to me. Most regulators I think would be far better
to pretty much just ignore incumbents and focus on, you know,
new market entrance and the little guys and the folks who are
doing something new and interesting that hasn't been done
before.
Let's see, so -- sorry.
>> JANE COFFIN: I wanted to throw out the idea for many of
you and I think this is something that if you are a regulator
you know inherently, but if you regulate to facilitate
stakeholder participation you are only increasing your
knowledge. The infrastructure development across your country
and you are again training yourselves. It is the human capacity
development angle. It is important that your own teams as Bevil
said are trained and that's very difficult in small countries or
in countries where you have resource issues. I wanted to give
you a snapshot of a story I heard in Lesotho. I was in
Johannesburg and the regulator from Lesotho was at the meeting.
I had to regulate in order to facilitate infrastructure
development and I first thought what did he do. In order for
the Internet Exchange Point to exist in Lesotho the laws of his
country mandated that the infrastructure surrounding the group
of stakeholders that wanted to run the IXP, technical experts
and other Internet community experts he needed to pass a
regulation that allowed for the Internet Exchange Point to
exist. So that's what I mean when I say regulate to facilitate
Internet infrastructure. And some people think you are trying
to regulate the Internet.
What we were trying to do is promote positive infrastructure
development through regulation where stakeholders were
recognized in that country because you do as Bill is saying
about a strong incumbent, if that incumbent is not happy with
the idea of an Internet Exchange Point because they don't quite
trust that model yet, you don't want any legal uncertainty with
respect to the viability of that entity, the IXP. So in any
event that was one example where it was a positive stakeholder
collaboration but also a positive regulation to facilitate that
infrastructure being developed. And I think as we all know that
the more infrastructure you have the more economic development
you are going to have.
We have seen that absolute tie with infrastructure, Internet
infrastructure development and economic development, and if you
are a regulator, your objective should be to help facilitate
economic development and not hinder that development and
innovation. If a 15-year-old is allowed to go in to the market,
are you helping to facilitate that child's innovation? And he
could be the next Isha Ida. But we have seen lots of different
examples and I know that many of you have different
environments. You have different legal systems. You have
different regulatory systems. We are not suggesting that all
countries are the same. But we are just saying know your market
and know your people and know the companies in your space.
>> BILL WOODCOCK: I think it is really important as a
regulator to use a very light touch. And so there are a lot of
regulators who think well, we are going to liberalize. So that
means that we are going to issue a second license. Right? And
then suddenly the hunt is on for who can pay the most for the
second license. And you know that's not going to be a
15-year-old and you know it is not going to be anybody who has
any innovative ideas. It is going to be somebody outside the
country who has a big pot of money. Alternatively regulators
can do class licenses. A class license is one that applies to
anyone who chooses to do something. So class license says not
that there are going to be three licenses for ISPs issued and
you can bid for them. If you want to be an ISP, you can be an
ISP, but this set of regulations is going to apply to you and
you need to conform to them. And that's a perfectly reasonable
thing to do. Because it applies to everyone equally. And it
doesn't disadvantage any one competitor relative to any other as
long as there is reasonable requirements.
You know, that can be done poorly also. So to give an
example from the United States, there essentially is a class
license on access to telephone poles to put new fiber on to
poles that says if you are going to touch any pole you have to
put up a bond and you have to rent the pole for a period of 30
years paid for upfront. And so that's all okay if you are a
huge company. But if you are just some kid who wanted to rent
three poles in order to run some fiber down the block, it is not
helpful to have to pay for 30 years upfront and not helpful to
put up a multi-million dollar bond. There is other ways to
achieving those goals.
Yeah, I think the -- the really classic example of a useful
class license requirement is instead of saying well, we need an
Exchange Point. Therefore we are going to rule in law that one
must exist or we need an Exchange Point; therefore we are going
to require that everyone peer. These can be really problematic
ways of approaching it. Instead if you have an ISP class
license that says domestic traffic should not be passed across
the national border, a nice simple way of getting to where you
want to be, it means that all the ISPs need a way of
interconnecting with each other domestically.
>> SAM PALTRIDGE: On that I have a question for you. But
first a little history on Internet Exchange Points. We realised
in the OECD in the middle of the '90s that these are incredibly
important and we were learning of something new because we came
from the telecom world. Packet Clearing House has been great in
helping us with that. We did a report, one of the first reports
we did on and we said to all OECD you should encourage the
development of Internet Exchange Points. And the first use of
that report was actually Kenya because the Kenyan Internet
Exchange Point that today everyone says what a tremendous
success it had a really rocky first year where the incumbent
went to the regulator and complained about and the regulator
shot down the Internet Exchange Point and that's because people
didn't have the right information that a role of an Exchange
Point plays and the benefits that it can bring to developing the
Internet in that economy.
Now come back to my question, we still have one OECD
country that doesn't have an Internet Exchange Point. And I
don't know if there is anybody here from Mexico but basically my
best understanding of the Mexican Internet market is that there
is no Internet Exchange Point and I figure that reflects a lack
of sufficient competition in that market. And I wonder how
Bill's proposal would either help that market develop or hinder
that market because, you know, are our Mexican ISPs benefitting
from taking the traffic across the border and getting a better
price or is it because they have got no choice in exchanging
that traffic domestically?
>> BILL WOODCOCK: Yeah, Mexico is kind of a unique case. It
is by far the most largest and technologically developed country
in the world that does not have a Internet Exchange Point. It
has a company that is incredibly strong. That incredibly strong
protectionist regime wrapped around it that it perpetuates.
That prevents competitors from gaining equal access to the
market.
So there hasn't been an Exchange Point started in Mexico
because they have essentially successfully argued that there
would be no point because they would refuse to participate and
if they refuse to participate, then everyone still has to get
traffic to them in Texas. So -- or New York or Washington D.C.
or Los Angeles or Chicago.
So the mechanism -- let's just say hypothetically that the
Mexican Government issued as a condition of an ISP class license
that domestic traffic could not be passed across the national
border. In practice what a small competitive ISP would do is
they would offer peering to Telmex and Telmex would laugh at
them and they would go to the regulator and say we are
attempting to comply with this regulatory requirement and we
have offered an interconnect to Telmex and Telmex has refused.
And we know we are out of compliance with the regulation but we
are doing our best to comply. And we also know that Telmex is
out of compliance with the regulation and they are doing so
willfully with an aim to quash competition. So that is
essentially the mechanism by which you use that phrase in a
regulation to encourage domestic peering. Yeah.
>> SAM PALTRIDGE: So my follow-up question -- for those of
you that don't know me I am Australian. The Australian
regulator about 12 years ago decided because the strongest
incumbent would not peer with the next three largest ISPs
decided to mandate interconnection between them and force them
to peer basically as best I can tell from a telecoms -traditional telecoms perspective. That's the way telecoms
regulators think. But what happened in the next -- at least the
next five or six years was because you took the next largest
three players out of the market who would have eventually
figured out that if they peered in an exchange traffic with
smaller ISPs they would have developed more alternative
infrastructure.
But because the regulator intervened and forced the three
largest players to exchange traffic I think Australia delayed
the competition that it otherwise would have had which came
later. So ->> BILL WOODCOCK: Yeah. Exactly. So I think this is
another instance of the sort of simpler case that I showed of a
regulator going from a single monopoly license to two licenses.
In Australia they went from having one market dominate player
and a whole bunch of medium size and small guys to wow, now we
are going to have an ogolopoly of four. They created a static
market of four participants who were then able to de facto price
fix. That's not a useful accusation to make in the absence of
specific information. The net effect is that the market
stagnated. All of whom were protected against competition from
smaller guys and, you know, they were able to find a what the
market will bear sort of price that they all charged. And yeah,
as Sam said it put quite a crimp in the Australian Internet
development. At the same time, you know, the little guys in
Australia were not very strategic about what they did and they
did not work with the regulator in a sort of open give and take
kind of way. It was a very combative thing it seemed. They did
a multilateral peering agreement which essentially meant that
the big guys were precluded from participating unless they were
willing to peer equally with everyone there which is not a
requirement that's reasonable and not a requirement that obtains
in very many other places.
Yeah. So let's go back to the audience. We have got
plenty of people here. Marco, can we get a microphone? Can we
get a microphone for Marco there? The gentleman with his hand
up. Thank you. Please introduce yourself.
>> AUDIENCE: I am Marco. I make this comment in my role as
a concerned citizen. On your suggestion of having a law that
states domestic traffic must not pass the border, a couple of
observations. We already noted that at some point you suggested
like okay, so in Mexico they asked for peering and then came
back with oh, yeah, we tried to comply with regulation. I am
not sure whether it is smart to stare at regulation that you
already know that people are going to drag. They are not going
to be compliant. I mean if you introduce a law and essentially
part of regulation is that sort of -- is sort of law, you might
want to make sure that it is enforceable. Now with that you
also have the option of people saying well, if they deny
peering, you must buy their transit from them. That's the
difficult risk if you phrase it like that. Maybe as a startup
business I might be better off. It might be cheaper for me to
touch my package over the border and give it to somebody else.
So as far as encouraging small startups, it might even be better
to say no. Okay. If taking the detour of 2 milliseconds makes
it cheaper maybe it is. Maybe we should encourage people to
look around.
>> BILL WOODCOCK: So you have made about 15 different points
there. No. I will try to address a couple of them and try and
get my fellow panelists to address a couple of them. First of
all, I would say there is a national interest in not having
domestic traffic subjected to other countries' packet inspection
regimes, for instance. That was one of the things that drove
Sweden in the, you know, 2000 era to overhaul their Internet
Exchange Point system to keep Swedish domestic traffic out of
the London Internet Exchange. And that's quite a reasonable
domestic policy, and it is reasonable for the regulator to
regulate in the public interest for purposes like that.
Purposes that involve privacy, for instance, of domestic
traffic. I think price is not the only consideration here,
right? Routing traffic across a national border in order to get
price down indicates that there is some really significant
domestic problem that should probably be fixed. And saying that
you shouldn't pass a regulation that you know that there will be
people who will choose not to comply with, I mean what's the
purpose of regulation then if you only regulate the things that
the regulated entities want to do? You are not again working in
the public interest. You are working in the interest of the
regulated entity. So I would say that having such a regulation,
I mean just not to focus over much on this particular
possibility but having that regulation too small ISPs would
happily peer with each other and happily demonstrate compliance.
You would quickly see which entity was noncompliant. It
wouldn't be that you would be passing a law that no one could
comply with. You would be passing a law that one entity that
didn't want to comply with.
>> JANE COFFIN: I am going to take it back to a less
developed market because if I am paying long haul traffic costs
to another country to exchange my traffic which is what happens
if you don't have an IXP in a small country, again Kenya is a
great example of where they came up with a better submarine
cable model which was competitive because there were several
cables coming in. And until they came up with a better model
for competition, competition from the backhaul from the cable
landing station as well with that IXP being put in to place, you
cut down that long haul traffic cost for locally exchanged
traffic. Some people just have a hard time believing that if
Bill and I are sitting in -- he is in an Internet cafe in one
part of Nairobi and I am in another part of -- it is going up to
London and up to Berlin and back to me. It is not going to
encourage me as a local participant in that market to use the
infrastructure which is exactly what you want if you are the
companies in that market. And if you are a regulator that may
be where we are saying don't let it go over the border, but it
is a different type of border. So we have to specify what we
mean by border.
>> AUDIENCE: I totally agree with you in terms of you must
have an Internet exchange before you can regulate peering. And
we partly touched on that yesterday as well, like you said you
need enough diversity in the infrastructure to actually reach
the Exchange Point in order to have an Exchange Point. That
becomes a success. Once you have the Exchange Point there you
can look in to basically what will always be the incumbent.
That has become a law of nature.
>> BILL WOODCOCK: I think you are looking at it as sort of a
chicken and an egg thing. And a regulator is looking at it I
can pass a law and make this happen. You don't have to have an
Exchange Point in advance of regulating a requirement that
people interconnect, right? If you regulate a requirement that
people interconnect, then you let them find a way and maybe
that's not an Exchange Point. Maybe it is a bunch of bilateral
circuits. The regulator's interest should not be in advancing
any one technology. It may be that there are places where an
Exchange Point isn't the best solution. We don't know what they
are. But ->> AUDIENCE: But my point is I think you should take it from
a broader scope and not be too specific. If you pass regulation
you have to look at the full package and look at what the issue
is. Kenya was lucky enough to have multiple landing stations
and multiple sea cables available and not everyone is in that
comfortable position and that brings on a whole new game. I
agree with you. I wouldn't make it too specific but that's my
point. And I leave now to the rest of the audience before we go
deep in to this. Thanks.
>> SAM PALTRIDGE: So if there is not any questions from the
floor I have another one for Bill. Let's take a hypothetical
country and we set up the Internet Exchange Point and we say to
all the ISPs you must exchange traffic either here or somewhere
else but domestically. If the regulator has a different set of
incentives that aren't the incentives that they want a more
efficient market and that might be pressure from one source or
another to raise revenue or impose constraints on how
competitors can interact in the market, do you see any dangers
from that sort of solution?
>> BILL WOODCOCK: This is probably a trap because Sam is
much smarter than me. Offhand, I mean I am sure that really
smart people with a big economic incentive can always find some
sort of loophole or something. I think keeping things really
simple tends to make for fewer loopholes. The more specific a
regulation gets the easier it is for people to find ways around
it. I think there are a lot of regulators that are pressured to
preserve business models for Government owned incumbents or
incumbents that are still partially owned. Something came up in
an earlier session today that there is often a problem in
developing countries where they are coming out of a Government
owned incumbent situation. And it is very easy for the
Government to extract revenue from the incumbent because they
own it and take a profit from it. And when they switch to a
competitive marketplace where there are other companies that
they don't own, then suddenly they don't have an easy way of
getting money out of those companies. They have to turn to an
income taxation and they may not be good at actually collecting
that. But that's not fundamentally the fault of the Internet or
the fault of those companies. That's the Government's
responsibility to be able to raise their own revenue and they
can't send out the revenue collection folks to get the taxes and
that's the Government's problem.
That confusion, that mistake has a detrimental effect in the
Internet on a lot of places because the Government has this
pressure to preserve a business model for an incumbent and that
means voice minutes revenue and that means that VoiceOver IP
gets illegal and are forced through regulation to purchase
services they don't want from an incumbent. There are a huge
number of problems that fall out of that situation that are all
avoidable.
>> BEVIL WOODING: I just want to give the real world example
of Belize where two years ago the Government took over the
incumbent operator. At that time and still some degree today
Belize had made VoiceOver IP illegal. So using VoiceOver IP
services was actively blocked on the Internet. And even the
regulators said the providers are free to interconnect. And the
only landing point in the country was within the compound of the
incumbent. And then they also were responsible in large part
for the regulations that were in effect. The incumbent was the
primary architect of the regulations, not the regulator.
So you had the situation where the Government took over and
everyone thought well, finally Belize is going to be brought in
to the 21st century and that didn't happen. And it didn't
happen for the simple reason it was one of the few predictable
streams for the Government. Every advisor to the Government if
you trouble this, if you open up competition, if you do these
esoteric things like create Internet Exchange Points, it is
going to be a terrible, terrible thing for your revenue
collection. You have a scenario now where Belize has the second
highest Internet service rates in the hemisphere. Two, recently
the incumbent made a statement well, we have Internet access and
we are doing our best to make it available to a wider portion of
the population as possible. In fact, it is cheaper than the
price of a tin or can of Coke, the drink. And what they were
talking about in giving that reference was true. They did have
a very low entry point for their services but that service was
essentially 56K being offered to schools and school children.
And then being told now you can do all the things that your
foreign counterparts are doing on the Internet which wasn't
true. So this is a very real situation that is taking place now
to want the Government to have the regulators' hands untied
because the pressure is being brought by the Government in terms
of overarching policy. When we have these discussions how big a
deal is it for citizens in territories for access between the
connection between regulatory policy, Internet access and real
economic opportunity is not always obvious or not always as
obvious as it should be.
>> BILL WOODCOCK: I have got a question for folks on the
panel which is are there instances in which you think it is
appropriate for a regulator to regulate either the price or the
quality of Internet service?
>> JANE COFFIN: I will give you an example. I won't name
the country because I have great respect for it. But the
incumbent came in and said they would offer Internet service for
to cost. It was going to be free. What it did to the other
ISPs in the country it would have gutted their ability to
compete. You can regulate and say we want a competitive market
but we can't let the incumbent come in and offer service free in
a market where there are entities trying to compete. You don't
know exactly I would say that you would have to do a cost
analysis at some point there and see where the cost may come
out. But I would say that if the incumbent comes in and offers
service free that is a problem.
>> BILL WOODCOCK: Does that prohibit cost subsidy?
>> JANE COFFIN: To prohibit cost subsidy.
>> SAM PALTRIDGE: (Off microphone). The instance that Jane
is talking about is predatory pricing and it is easy to see but
hard to prove. Generally it is better for the regulator to very
much focus on the inputs. So things like long prices or how
other people can enter the market to make it more competitive.
Generally it is a bad thing to try and focus on retail pricing.
And if I was critical, for example, of the European Union's
regulation of international mobile within the EU area, they have
controls over retail prices as well as wholesale prices. And I
can well see the justification for wholesale regulation because
it has just turned out to be a completely inefficient market.
Total market failure with international mobile roaming in OECD
countries. I can see what has driven them to do it and the
political pressure to have an immediate response to the action
you are taking. If you look at the retail prices, they sit just
below the regulated retail level where nothing ever happens.
And nothing ever will happen because you have got no competitive
dynamics going on there. So that's about what I can say on
pricing.
On quality, again you have to be very careful. Ron likes to
talk about the budget model in some countries for communication
services and he says what is the most important and he used to
be the regulator in Sri Lanka, what is the most important thing
for many people in these countries is price. And so if you are
providing a service that they otherwise wouldn't have, maybe you
can't go straight in and apply the same standards that you would
in more developed countries. So there is a tradeoff there.
>> BILL WOODCOCK: One of the things that I often think about
in sort of the price performance tradeoff I analogize to a
ladder and I think that if someone is just using the Internet
recreationally, that it is nice for them to have good quality.
They have some amount of money that they are willing to spend on
their web browsing but this is not ultimately what drives the
growth of the Internet. Ultimately what drives the growth of
the Internet and the reduction in prices and more services and
so forth is when people are able to base their business somehow
on the Internet as a utility. And they use the Internet to make
things more efficient or provide a better or a new service that
wasn't possible before. And so again lowering the barrier to
entry means having a very inexpensive service. So people say
well, we want to have a very inexpensive, really good service
but all that really means is that they are poorly calibrated.
They don't know really what inexpensive means or really good. A
really good service is going to be a really expensive and a poor
quality one can't be an inexpensive one. There are people who
have very little money to spend, but if there is some low
quality service that they can buy that will enable to build a
business to make more money that enables them to buy a higher
quality service to work up the ladder and that enables a lot of
economic. You are also putting a floor on the price.
Effectively nobody is going to be able to provide that service
at a quality price. And no one who can't afford that price is
going to be able to use the Internet either to educate
themselves or to start some new business. So I see a big danger
in regulating quality and regulating price because you wind up
with these floors that are not low enough in my experience.
Any other -- yeah. Troy.
>> AUDIENCE: Troy from the states. I just have sort of a
beginner's question. When you were thinking about various
potential policy approaches for increasing the speed by which
traffic travels intra one country, are there any assumptions
that are being made by -- about the character of content or
about content itself? Are you saying well, we want people to be
communicating directly or like if -- if for their content
someone is in any case going to have to ping a server outside of
the country, then is the IXP then providing actually that much
of a savings in cost or speed, or are there sort of content
assumption driven policy approaches that are being made? It
seems like the discussion so far has been -- it hasn't really
discussed about the character of content.
>> BILL WOODCOCK: One of the important things about content
is that people are often very oblivious to that there are
certain kinds of content in which users exercise no choice. And
there are other kinds of content in which users exercise a huge
degree of choice. And so when you see people choosing to have a
Hotmail e-mail account or a Google e-mail account, that's an end
user choosing to get a service. If this is a Mozambican
customer, as long as there is a market open to provide free
e-mail they have a choice of using a huge U.S. company that has
no local content provision or a little local company that is
going to provide service and customer support in Portuguese and
can send a guy running down the street to help you configure
your web browser or whatever. And so the consumer is making a
choice there and one choice benefits the local economy and the
other choice benefits the economy of a completely different
country and represents an export of capital.
So I think that in the absence of an Internet Exchange
Point the cheapest place to host content is next to the Exchange
Point that people are actually using overseas. And that's
really expensive. Right? Because hosting content domestically
would mean sending a query out overseas and back and then the
response back and back. And the alternative if you have an
Exchange Point is to encourage domestic content hosting,
production and the formation of a colocation market, right? So
hosting services adjacent to the local exchange and at that
point you have a whole new sector of your economy going and
generates lots of revenues in developed countries, but a lot of
developing countries don't have a colocation and hosting market
yet because they haven't reached that level of maturity in their
Internet market. Yeah.
>> SAM PALTRIDGE: Very interesting question and this is
going back a bit in history with what used to happen in New
Zealand where Telecom New Zealand, the main incumbent was not
receptive to appearing with other New Zealand ISPs, one of which
was Radio New Zealand which does the broadcasting of rugby
games. And this goes back to our discussion about whether you
should take traffic internationally. What some of New Zealand
ISPs would do is go across to the U.S. and then back to New
Zealand. And if you peered with Radio New Zealand you could get
the direct coverage straight away but the traffic they sent to
the U.S. they kind of could control the speed of that traffic
and so ->> (Off microphone).
>> SAM PALTRIDGE: But telecom, it penalized their own
customers because they were not exchanging that traffic locally.
It meant that you were getting the match -- the report of the
match, however much delayed than the other people across the
road.
>> BILL WOODCOCK: And Radio New Zealand because they had to
pay to move that traffic to California. In sort of the early
days of hard ball peering negotiation in these national markets,
there were a lot of people who did some very aggressive tricks
in order to make their case for direct peering and that was one
of the better ones. Sir.
>> AUDIENCE: Okay. Do you hear me? Okay. So my name is
Rastis. I am from National Georgian Communication. I represent
regulatory authority. I have a question regarding IXP and
namely the remedy, what you propose that domestic traffic should
stay inside country and it may make operators to set up Internet
Exchange Points. In Georgia we don't have Internet Exchange
Point. So I don't understand, to be honest, how will it work.
Because situation is the following, we have two big operators.
One of them is incumbent. They don't want IXP because it will
promote small operators to grow up and it will increase
competition.
So if we say to our market that, you know, all domestic
traffic should stay inside country, what will happen? And other
small ISPs will have responsibility to interconnect with each
other. They don't have infrastructure. They should go to those
big operators, incumbent and another one and ask, you know, now
we have access to all 30 other operators. And I think that
these big operators will be quite happy because these small
operators should pay for transit. They should hire lines and
this remedy may kill some of them. And I don't understand
clearly how can this remedy make big operators and all operators
make to set up IXP.
>> BILL WOODCOCK: So the little operators then have the
choice, right? The little operators have the choice of
purchasing transit and -- so I think your question to simplify
it as much as I can is if you require everyone to interconnect
domestically but you don't specify how, why won't everyone just
go buy transit from the two big operators and the two big
operators are happy with that and no Exchange Point gets formed?
If someone wants to buy transit from a transit provider in order
to meet that requirement, then that's fine. It meets the
requirement for them and the transit provider and they are both
happy. If they don't want to purchase transit, you shouldn't
force one of your new market entrants to be a customer of one of
their competitors even if they don't want to be. The incumbents
are trying to create a situation where everyone is forced to be
their customer. So what you want is a situation where one of
the little guys can refuse to purchase transit and say instead
we are offering peering to the incumbent and the incumbent may
say no but then it is clear that the incumbent is willfully
violating the term of their contract. The little guy is not
violating it on purpose and are trying to comply. It may not
work perfectly everywhere but this is one way it can be done.
>> AUDIENCE: Hello. Dimitri from Ukraine. I want to add
that speaking on changes in Ukraine the big IXP was supported by
small operators who love to interconnect between themselves and
they have motivated the large operators in the exchange.
Another thing that have happened since last year we had a
decline of traffic due to technical issue. It was not able to
go with the traffic and that led to the competition to another
change. So this other change was competing with the original
and that at the end first was upgraded and now they are
competing again. The condition between exchange is also
healthy. And No. 3 is that now, for example, Google is trying
to get in to the exchange. So existence of an exchange is one
of the motivating factor for the big providers to come to the
country because it lowers the cost and they have to interconnect
with big operators. Ukraine is not that large.
>> BILL WOODCOCK: Bevil, you have an example of an Exchange
Point in the Caribbean that were going to require licenses for
participation which would have precluded a lot of that. Can you
talk a little bit about that?
>> BEVIL WOODING: There were a couple of examples. The
Government minister responsible for telecom in one case
understood how Internet Exchange Points worked and very
intrigued about, one, not having domestic traffic. And two, it
would result in tangible economic savings for an exchange being
kept in country. And he initiated a process through the
regulator for the operators to establish an Internet Exchange
Point and they resisted quite strongly. And the regulator had
to -- I was part of the process to facilitate the discussions.
And one of the operators actually told me say we prefer not to
deal with this between ourselves as ISPs, but we prefer that the
regulator comes in and deals with it. And so they actually
wanted regulatory intervention in the process because they felt
that would have been the fairest process to establish the
Exchange Point. And in that case they -- the regulator had to
adjust the Telecom Act to what Bill said earlier mandate that
local traffic remains local. That local traffic remains local
and once that Act was updated the fight stopped. And they
proceeded toward getting things in place. It took a year to get
that Act updated though. It took four months to get the
Exchange Point off the ground.
>> BILL WOODCOCK: Some we were looking at today.
>> BEVIL WOODING: That's still in progress.
>> BILL WOODCOCK: Sorry. So we are actually just looking at
this draft policy document for the Exchange Point in Barbados
that was regulatory driven and it is about five pages whereas
most Exchange Point policy documents would be like half a page
and a lot boilerplate.
>> BEVIL WOODING: It was regulatory facilitated and service
provider driven. And the incumbent basically approached the
exercise in that case as if it were an interconnect agreement in
the traditional telecom model. And so the reason it got to so
many pages they wanted to cover the base on all the things that
you would normally cover on the interconnect for voice services
and because the regulator was not aware of the distinction
between interconnecting for purpose of traffic exchange and
traditional voice and they allowed the process to get to the
point if it were to be adopted would ensure the nonsuccess of
that Exchange Point, but we still are at a point where it can be
debated. But what happened in that case and I have seen that
also in a couple of the other countries in the region where the
incumbent has a history of defining regulatory policy on behalf
of the regulator. And so they have a lot of latitude as it
relates to setting things in their interests, setting things in
place in their interest. And the big way to counteract that is
for the regulator to have their ears open and their minds
inclined toward practices and successful better practices in
other jurisdictions that allow them to see beyond the advisor is
coming from one source and incumbent dominate provider.
>> BILL WOODCOCK: The reason Dimitri's comment made me think
of that for those of you who don't know the Ukraine is a huge
success story in terms of Internet economy. They have been
growing at a very fast rate for quite a few years now. And so
this path of development that their Exchange Point have been on
is a very good, very reasonable one and may look like there are
sort of struggle and conflict, but that's a competitive market
at work. Now they have got content providers like Google who
want to bring content to them from other places and the policy
document that Barbados has would prohibit that because Google is
not a licensed telecom provider in the country of Barbados and
never would be. Shouldn't have to be and we see the same
mistake happening in other Exchange Points. It is not a hugely
common one, but there are other countries where to participate
in the Exchange Point you have to be a licensed provider in the
country. Hong Kong was like that for awhile and then they got
rid of that and it helped a lot. Another example of where light
touch is hugely beneficial. Not having an extra rule just
because you can. Yeah. And in the meantime Jane has something
to say.
>> JANE COFFIN: This point that I am going to make is more
of an access point separate and apart but would facilitate
Internet Exchange Point robustness I think. There is the
concept for many landlocked countries of trying to get the
cross-border connectivity that you need. This is a key access
issue. So I am going to throw out a term there is or a phrase
collective strength and collaboration. If you are two countries
that are neighbors and can work with each other to try and
facilitate that cross-border connectivity, this is extremely
important. We recently had an example where Zimbabwe and South
Africa were trying to bring a cable across the river, the bridge
that the cable had to go over was a historical bridge. Customs
officials and border patrol and regulators and historical
society were involved. If you have the ability and you want to
facilitate cross-border connectivity, there are some practical,
collaborative steps you can take and as companies you can
educate the regulator and the ministry about the time to market.
And if you are a company trying to do business and build your
network, it is expensive to have your fiber sitting on the
board. We are talking about a short distance the fiber had to
travel and be interconnected.
East Africa where there is a collaborative regulatory process
going on right now among the regulators, this is where they are
coming up creative ideas for connectivity and that's where we
can look at good practices from a regulatory perspective to
increase the access and bring down the prices and have a
redundant network in and out. If you only have one line in and
it is a little tricky, complicated, it is also nice to have that
second redundant line, but again you are facilitating
connectivity and building your national infrastructure and are
helping your neighbor if you have that ability to help your
neighbor out.
>> BILL WOODCOCK: We have been finishing up a paper. They
have fiber across the border to Argentina and fiber across the
border to Brazil and you think it would help to get a
competitive marketplace going and it turns out not. They
allowed the two largest providers in Paraguay, they now have an
exclusive Duopsony. There are only two customers in the country
that can be customers of that fiber. And those two customers in
term price fixed the wholesale rates between themselves. And
now this is a new bottleneck that didn't exist before. And so,
of course, prices have just stayed exactly where they are and
things don't get better and so forth. Yeah.
>> AUDIENCE: The case in Barbados was interesting for me and
I have a couple of questions regarding it. So regulatory
authority established an Internet Exchange Point and question ->> BILL WOODCOCK: In process.
>> AUDIENCE: In process. Okay. And owner of this Internet
Exchange Point will be a regulator. It will be part of
regulator or you made association ->> AUDIENCE: That's part of what is being discussed right
now.
>> AUDIENCE: So this is first my -- my first question. The
second question about financing this Internet Exchange Point.
Who financed it? Operators or regulatory body or some Internet
organisation or who? And regarding who should switch to this
Internet Exchange Point just big operators or all operators or
what is obligations?
>> BEVIL WOODING: First question in terms of who owns it,
that's part of what is being debated right now and how does it
function. They are looking at association model and MOU between
participants. Part of what was wrong with the document that
Bill referred to in the way it was written it made it difficult
for others to come in to participating in the exchange, but the
idea and the intention is that it will be available or
accessible to operators and content providers and anyone who has
an autonomous system network. That's an idea from an ownership
standpoint governed by the participants of the exchange. In
terms of the cost, part of the process in guiding them toward an
Internet Exchange Point involved giving examples of the
different models for building out an exchange. And one of the
agreements in that process was that this would be built out on a
cost neutral basis. Participants have decided amongst
themselves that any equipment brought in to the exchange will be
given to the exchange. Government is playing its part. It sees
its role as facilitating national development. And so the
parties all agreed to the exchange being hosted at a cost
neutral Government facility. I think they are looking at an
office space that was set up for what was it? Export
development. Recent building proper connectivity. Properly
outfitted and the agreement between the parties is that they
trust Government facilities more than they trust each other's
facilities. Trust being a part of the exchange. It was one of
the hot topics or points of debate inside of the process. So
the understanding is that we are going to keep our cost down and
we are going to do that to find a gracious host and that's how
they are proceeding with it. The last point was -- one more?
>> AUDIENCE: Okay. So obligation to -- for example.
>> BILL WOODCOCK: Obligated to participate.
>> BEVIL WOODING: In principle in the Barbados case the
discussion went along the lines that everyone should be able to
participate in the future. The initial participants are all the
local Internet service providers who have their own transit.
That's the initial participant, but the intention is the
exchange point will be a welcoming place for foreign content
providers as well as local content providers that invest in
their own Networks as well. Documents as written will not get
them but still early in the process that can be adjusted.
>> BILL WOODCOCK: Question from the gentleman in the back
row.
>> AUDIENCE: My name is Sandy. I am from Tanzania. I want
to go back to the issue of the content. See, most of these
developing countries they are creating a network, a properly
designed network, but that network at the moment is working
fine. But the problem is there is no original local content
that is residing in the network. Do you have any suggestions,
any mechanism you can advise the regulator and the Government so
as to increase local content production in those countries?
>> BILL WOODCOCK: So one obvious thing is if you have local
television, national television, radio, newspapers, right, all
of these things should be available locally. So national
television might be broadcasting rugby or it might be
broadcasting whatever. Local jobs. It is content that is going
to be of most interest to people in your locality. All of those
are desirable properties. Other thing is peer to peer file
sharing. It is one of the big bandwidth users, and it is
interestingly something where user preference doesn't really
enter in to the question, right? So if someone starts
downloading a file from a peer to peer system, their client will
try several different sources and will choose whichever one
gives the best performance. If they are able to reach that seed
through a local Internet Exchange Point, that will be preferred.
Peer to peer file sharing is one of the things that hugely
advantages locations that have their own Exchange Points and
sufficient bandwidth to them. You might want to be careful
about as a regulator to not preclude peer to peer file sharing
and local content curation let's say.
>> JANE COFFIN: I would actually urge you to hold a public
consultation. I know this is one of those -- can be difficult
to do. And not give up if you have done it once but try it a
couple of times with stakeholders that you wouldn't potentially
normally reach out to. Also any of us, I mean the Internet
Society, OECD and UNESCO did a study on local content and the
purpose of local content for economic development. There is a
direct relationship between local content growth to let the
content travel over the network and economic development. You
do start to have the cycle of once the network -- when the
network is developed and your users are more confident in the
network there will be more local business started and they will
have more faith in the infrastructure. Don't give up. Keep
having them. You can start to spur some of the local business
community and this is where a regulator can broaden its base
constituents. If there are young people who are trying to
develop their own company or don't, there is a fellow in Nigeria
who is king of Nollywood. Soap operas, excited family drama.
It has become extraordinarily popular. This fellow just
received a 2 million joint venture grant. This is content that
is produced locally and consumed within the continent and it is
driving up the desire for the bandwidth, the increased
connectivity within the countries themselves and infrastructure
quality of service, if you will. But people are using the
infrastructure in a way that they wouldn't have before. So you
are going to find there are some creative solutions as a
regulator. You have whole different models that are coming at
you but it could be an interesting public consultation. You
might have to do a little refereeing with the constituents but
give it a try.
>> SAM PALTRIDGE: Just very quickly because Jane said most
of what I said. Don't underestimate popular content. But the
key other part I think is public sector information. So get
Government information whether it be agriculture, health,
whatever. Because it is that local information that people
really want.
>> BEVIL WOODING: That's where I was going with it. There
is a natural relationship between the regulator and the
Government and Government in most of these countries is the
largest holder of local content, already available content and
there are some interesting possibilities as it relates to
bringing it on to the local network. One example we like to use
is digitizing Government archives. Maybe not the most exciting
content. It creates some connection between the Internet and
content development. And it is very easy to take photo
archives, video archives that already exist in Government
information service departments and convert those to the Web and
make that process of conversion not a public sector exercise but
actually a wonderful collaboration between public sector and
Civil Society or public sector and educational institutions and
that creates some wonderful opportunities for sparking interest
in public content beyond that initial repository. So it is a
very easy way to get in to immediate content to the local
Networks using existing material from Government archives.
>> BILL WOODCOCK: Digital content of library of Alexandra in
Egypt is the single largest bandwidth source in Africa to 300
megabits. So yeah, there is all kinds of great content and some
of it is produced locally. Some of it is just a local cache.
Whatever. It doesn't really matter as long as people can get at
it.
We have got about three minutes left. I don't think that any
of us have any prepared closing remarks. So we can take one
more question. Anybody have one more thing you would like us to
address? All right. Well, in that case thank you all very,
very much. I think we all remain available to you to answer any
questions you may have later. And hope you have a good rest of
your meeting. Thank you.
(Session concluded)
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