Conomics. The OTT competition in communication services. New rules for digital networks and services? Presented by: Nicolai van Gorp (e-conomics)

Transcription

1 The OTT competition in communication services New rules for digital networks and services? Presented by: Nicolai van Gorp (e-) WIK Conference, October 2016 Marriott Hotel Grand Place, 1000 Brussels

2 Background What was the topic of our research? 1. Policy questions about OTT gaining mass popularity, yet not subjected to telecom rules 2. Concerns about o User protection (privacy, security, lock-in, etc.) o User participation (exclusion of groups) o Level playing field = competition

3 Agenda Market developments OTT Telecom Consumers Conclusions on substitutability Differences in regulation Different rules Impact on consumer protection Impact on level playing field

4 Market developments Mass popularity of OTT Desktop OTT growing Mobile OTT (WhatsApp, FBM) second growth wave

5 Market developments Mass popularity of OTT Desktop OTT growing Mobile OTT (WhatsApp, FBM) second growth wave

6 Market developments Mass popularity of OTT Desktop OTT growing Mobile OTT (WhatsApp, FBM) second growth wave 2015 >50% subscribed

7 Market developments Mass popularity of OTT Desktop OTT growing Mobile OTT (WhatsApp, FBM) second growth wave 2015 >50% subscribed OTT =10x SMS

8 Market developments Shifts in traditional volumes Voice telephony constant (but fixed to mobile) SMS grew SMS stagnated/declined Million minutes of voice (EU) Global (Billion messages) 7 MS (Messages 2006=1) * Right axis

9 Market developments Pricing of traditional services Fixed prices Fixed minute prices declined (CPS competition?) VoIP competition bundling, flat-fees and bucket prices Eurostat idate

10 Market developments Pricing of traditional services Mobile prices experiment with flat-rate and bucket pricing flat-rate and bucket pricing widespread (OTTcompetition?) Percentage of subscribers with unlimited SMS tariffs, GSMA 2015

11 Market developments Impact on traditional revenues No impact on fixed revenues (in decline between ) Significant impact on mobile revenues 28 bil 8 bil regres regres model Dependant variables: EU GDP/cap, MTRs, Global Annual messages sent via WhatsApp

12 Market developments Shifts in value Compared to counterfactual EU mobile revenues 2014 * DOWN by 8-28 billion EU IM revenues 2014 ** Up by 1-2 billion Where did the value go? To Consumers! * Ecorys (2016) ** Global IM revenues in 2014 estimated at 6.42 bil dollars (= 4.8 bil euros) Technavai (2015)

13 Market developments Consumers Survey results Users can switch (not many barriers) - Hassle costs (only for 22%) - depends on the context: who (29%) and where (40%) Users want to switch: - more functionalities (+ 50%) - convenient and good quality (+ 55%) - lower prices (62%) Not everybody switches - bucket is large enough (36%) - concerns about privacy and security (33%) - Conservatism (+ 35%) Why use OTT communication? Why not use OTT communication?

14 Market developments Substitutability conclusions The main conclusions on substitutability Subscriptions Most people stay with t-com: everybody can be reached via the numbering plan Many people subscribe to OTT as well Multi-homing (not really switching) Communications Little/no major barriers to use OTT in stead of telecom besides o concerns about privacy o not always and everywhere online o not everyone can be reached via OCS voice Price and functionality are important factors; Context related & Less important as social networks grow and mobile broadband coverage increases; OTT = Telecom in the eyes of end-users. o Impact on mobile revenues confirms substitutability

15 Agenda Market developments OTT Telecom Consumers Conclusions on substitutability Differences in regulation Different rules Impact on consumer protection Impact on level playing field

16 Differences in rules Overview Consumer interests targeted by RF Freedom of choice and preventing lock-in effects; Portability, interoperability, interconnection No equivalent for OTT Quality and affordability Prices (monitoring, SMP, levy s and charges) No equivalent for OTT Quality (minimum QoS) No equivalent for OTT Transparency and contractual rights Price transparency (USD 21) horizontal obligations Contractual rights (USD 20) horizontal obligations Having access to emergency numbers 26 USD No equivalent for OTT Data, location, privacy and security; eprivacy DPD / GDPR for OTT

17 Differences in rules Impact on end-users Lock-in Network effects Under homogenous demand tipping markets o RF obligations to interoperate and interconnect Demand heterogeneous and multi-home (different homes for different peers) o OTT competition between ecosystems (not within) o Competition on usage, not on subscriptions Difference with telecom: o o people cannot multi-home within the numbering-plan Abolishing interoperability/connectivity may destroy the largest social network we have

18 Differences in rules Impact on end-users Prices, quality, transparency, and contracts Multi-homing allows end-user to vote with their feet when quality goes down or prices go up o Also constraints telecom prices and quality o No need for rules on quality and price (min/max, transparency monitoring) o No need to unsubscribe no need for rules on contract termination o Applies to of interpersonal communication services o But not to IAS services Horizontal rules on Contract duration, transparency,

19 Differences in rules Impact on end-users Access to emergency numbers Technological limitations for emergency numbers Access to emergency numbers is not always technologically feasible o Communicating of location data o Routing to the right PSAP (public safety answering point). o Call back when the line is dropped o Not always and everywhere online Need to find technological solutions o o Because, when the majority communicates through OTTs o PSAPs become de facto less reachable Once technological solutions are there. o OTTs cannot afford not to interconnect with PSAPs (reputation harm)

20 Differences in rules Impact on end-users Data protection and privacy Why different rules w.r.t. data protection and privacy? eprivacy requires consent and (temporarily) opt-out for. o listening, tapping, storage or other kinds of interception or surveillance o traffic and location data to be processed for commercial purposes o unsolicited communication for direct marketing (i.e. advertisements) eprivacy does not apply to OTTs o OTTs are subject to Data Protection Directive (soon to be GDPR) Different treatment is difficult to justify Same type of service Risk of excluding people who have concerns about privacy

21 Differences in rules Level Playing field Defined Terminology has been distracting the discussion Level playing field is about equal competition Discussion should be about same protection for same service Level playing and equal opportunities the only inequalities that are acceptable are such that those who get the short end of the stick could have become as well off as anyone else by pursuing a [different] course of action [that] would have been reasonable [ ] and not impossible for them to take [ ] Stanford Encyclopaedia of Philosophy Reasonability and possibility is determined by the match between options for business model with current assets

22 Differences in rules Level Playing field Defined Reasonability and possibility Becomes irrelevant after reviewing same protection for same service o Differences in interop/connect is justified o Regulation on Prices, QoS, transparency, etc. be abolished o Rules on data/privacy should be equal

23 Differences in rules The new code New code reflects some conclusions ECS not a workable definition New definition(s) recognise that o Difference between IAS and CS o Some differences are justified w.r.t. numbers (interop/connect/porting) o Some differences are not justified (data privacy security and emergency) o Need to deal with CS bundled with IAS New code does not reflect all conclusions for number based CS it is unclear whether rules still apply on o contract duration, transparency, information on quality of service, consumption monitoring tools, prices and quality comparison tools (should apply to IAS only according to me) Keeping options open for interop/connect for all OTTs o Not in the spirit of promoting innovations (according to me)

24 Contact Nicolai van Gorp e (0)