The never-ending saga of net neutrality has taken a fresh twist with news that a number of Europe's biggest telcos have essentially threatened to withhold investment in new 5G networks unless rules are relaxed.
In a "manifesto" issued Thursday, major communications service providers including BT Group plc (NYSE: BT; London: BTA), Deutsche Telekom AG (NYSE: DT), Orange (NYSE: FTE), Telecom Italia (TIM) , Telefónica and Vodafone Group plc (NYSE: VOD) promised to launch a 5G network in a minimum of one major city per European Union (EU) country by 2020 and then invest further, but only if they get the net neutrality assurances they demand.
While operators have made similar threats before, this is the first time they have explicitly linked them to 5G technology, a standardized version of which is expected to appear in 2020 or thereabouts.
The manifesto states:
The EU and Member States must reconcile the need for Open Internet with pragmatic rules that foster innovation. The telecom Industry warns that the current Net Neutrality guidelines, as
put forward by BEREC [Body of European Regulators for Electronic Communications], create significant uncertainties around 5G return on investment. Investments are therefore likely to be delayed unless regulators take a positive stance on innovation and stick to it.
Telco and Industry Verticals concur that the implementation of Net Neutrality Laws should allow for both innovative specialised services required by industrial applications and the Internet Access quality expected by all consumers.
In this context we must highlight the danger of restrictive Net Neutrality rules, in the context of 5G technologies, business applications and beyond. 5G introduces the concept of "Network Slicing" to accommodate a wide-variety of industry verticals' business models on a common platform, at scale and with services guarantees.
Publicly, the European Commission has welcomed the manifesto. In a response issued as the manifesto was made public, Günther H. Oettinger, the Commissioner for Digital Economy and Society, noted that the document is "a valuable input for the 5G Action Plan that will be presented in September, together with the proposal for the review of the telecom regulatory framework."
But when it comes to net neutrality, EC officials are said to have reacted in their typically uncompromising way, arguing that strict rules are needed as services like VoIP and Internet messaging replace traditional telecom offerings. That obscures the complications that operators could encounter as they deploy 5G networks in a heavily regulated environment.
Arguably the chief attraction of 5G is that it should, in principle, allow operators to provide many different types of service over the same infrastructure. By combining a new radio technology with advances in software and virtualization, telcos hope to be able to divide their networks into slices that each cater to a specific need. One slice might provide the superfast speeds required for video services, for instance, while another addresses demand for low-latency, machine-based connections.
EU legislation allows operators to provide so-called "specialized services," guaranteeing subscribers a superior network experience, as long as these do not have an impact on customers using plain-vanilla offerings. But the ambiguity and lack of detail leaves this wide open to interpretation. Staunch supporters of net neutrality claim that offering more than one service tier is inherently discriminatory. Norway's Telenor Group (Nasdaq: TELN) has already voiced concern that existing net neutrality rules will prevent it from pursuing "network slicing" opportunities. (See Net Neutrality Rules Threaten 5G, NFV – Telenor and 5G: Hurdles on the Track.)
It is hard to feel sympathetic towards telcos issuing threats, especially when those companies increasingly resemble inflexible, unimaginative utilities to a number of observers. If operators want to be thought of as innovative technology companies, and admired by their customers, there is no doubt they must become far more like the web-scale players moving on to their turf.
Yet regulation also needs to adapt to the realities of the modern communications age. EU officials seem to have been largely oblivious to many of the changes sweeping the sector, as the lines separating telcos and web companies become blurred. Just as telcos are investing in web-scale technologies, and launching web-like services, so companies like Facebook and Google (Nasdaq: GOOG) are pioneering the development of next-generation network technologies. Microsoft Corp. (Nasdaq: MSFT) is emerging as a communications service provider in its own right. Telcos including Telefónica and Sky , a pay-TV and broadband player, have launched over-the-top offerings. Despite these developments, telcos remain on a much tighter regulatory leash. (See Facebook's 'OpenCellular' Aims to Make Mobile Networks Cheaper to Build, Facebook: TIP Will Open Telecom Hardware, Facebook Lauds Terragraph Cost Savings, Facebook Debuts Terragraph & ARIES to Extend Wireless and Microsoft Comms Threat to Carriers Is Growing.)
EC officials may feel that operators are making hollow threats. After all, service providers have continued to invest heavily in 4G and fiber networks while complaining for years about the regulatory framework. But this time could be different. Network slicing is absolutely critical to the business case for 5G, which will demand investments across the board, from IT systems to fiber backhaul. (See NFV Key to 5G Business Case, Says TeliaSonera.)
As Oettinger pointed out, EU telecom rules are set for another overhaul this autumn. Top of the agenda should be greater clarity on net neutrality, giving operators the confidence they need to plan ahead. EU authorities have talked a lot about the spur that 5G could provide to the region's economy. They need to act now to ensure this can happen.
— Iain Morris, , News Editor, Light Reading