Net Neutrality Rules Threaten 5G, NFV – Telenor

BARCELONA -- Mobile World Congress 2016 -- European Union legislation on the thorny topic of net neutrality could undermine one of the business cases for investing in 5G and NFV technologies, according to Bjørn Taale Sandberg, the head of research for Telenor Group (Nasdaq: TELN).

The Norwegian incumbent is particularly interested in the business opportunities associated with network slicing, whereby services meeting specific performance requirements could be designed for particular vertical markets.

"Everyone is looking into NFV now to be able to do this network slicing," says Sandberg. "If regulation doesn't allow you to do that then you forego an opportunity."

Because 5G technology promises much faster and lower-latency connections than 4G, it could open up a considerable opportunity for operators to provide a variety of differentiated network services to their customers.

While the latest EU regulations on net neutrality offer scope for providing "specialized services," there is some disagreement in the industry over what this actually means in practice.

Germany's Deutsche Telekom AG (NYSE: DT) believes the legislation could allow it to charge so-called over-the-top players for an assured level of service. Telenor is more skeptical.

As a consequence, the operator is building a services strategy around two distinct scenarios. "One view is that we'll be able to launch end-to-end 5G services that are differentiated on latency and speed," says Sandberg. "If that becomes possible then telcos have an opportunity to have several tiers of pricing."

If regulation turns out to be a barrier to such moves, the Norwegian operator will be under greater pressure to succeed by slashing costs at its core access business, acknowledges Sandberg. "We will do this anyway but it will be more important," he says.

The Telenor executive reckons even smaller digital players and app developers would be willing to pay for service guarantees, citing his own frustrations as an app developer to support this view.

"I have no say over the network performance, which forces me to spend hours writing code to cater for bad network conditions," he complains. "If I could spend €4 [$4.40] a month extra on my subscription and know that I have at least 250 kbit/s of bandwidth to a customer at any time, I would save a lot of effort."

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Besides making the "optimization agenda" more important, adverse regulation could also increase pressure on Telenor to develop services outside its portfolio of access products.

The operator is already providing OTT-like services in some of its emerging markets, where Sandberg believes its existing local presence gives it a bigger opportunity to compete against the web giants than in more developed markets.

"Local content and solutions are going to be important," he says. "It might not be possible or profitable for OTTs to exploit that."

Telenor is already thinking about using machine-learning technologies so that it can offer more personalized services through WowBox, a lifestyle app it has developed in Bangladesh that currently boasts some 1.5 million users. "I believe a combination of machine learning and hardcore network engineering will be key in future because switches will have to be intelligent in a different way from today," says Sandberg.

Nevertheless, Telenor insists that it has moved beyond viewing OTT players as a threat. Instead, it is trying to learn from OTT players as it continues to work on the digital transformation of its own business.

"Our CEO said [to employees] yesterday if you look on OTT as a threat, there is the door; if you look on them as a partnering or learning opportunity then please stay in the room," says Sandberg.

Although Telenor is carrying out trials of virtualization technologies, none of its subsidiaries has yet announced any firm NFV commitments.

Sandberg says the operator remains concerned about some of the risks associated with NFV. "We had an incident last week in Norway because the signaling from a foreign operator brought the switches down and made it impossible for people to make calls," he says. "If the risk of that increases because of virtualization it makes this difficult, so we won't be committing until we're confident it delivers something like 99.999% reliability."

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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KBode 2/29/2016 | 1:55:29 PM
Re: What is the problem? "The 2015 Open Internet Order does that by effectivly saying that Basic Internet Access Service is Best Effort, while other, non-BIAS services can also be offered (with a few limitations) on the same access."

Yes I generally think there was a lot of misinformation out there regarding what the rules actually prohibit, with some carriers even going so far as to claim the rules ban prioritized delivery of sensitive medical machine data (they don't). 
brooks7 2/25/2016 | 12:32:09 PM
Re: Cycle... Except that the presumed ansswer is not going to work as a business.  This notion of "assursed service" as a mobile operator is absurd. No OTT vendor is going to pay more unless it is really assured.  Okay now back up to what that means.  It means that there is an enforceable SLA (which they will measure for as well).  By enforceable that means that it will be a correctable breach of contract (say with refunds/penalty payments). 

What people keep forgeting is that the better QoS involved will not be universally available.  So, if you are an OTT provider you have to build a business around the fact that it is not available.  The better quality network will only be useful as an upsell.  The upsell will only work if it ALWAYS works for any end customer of the OTT service.  So, do mobil operators want to supply maximum data rate to say 100% of the US (like say the Top of Mount Shasta)?  If not, then the service is of limited value to an OTT provider who is trying to serve a very broad audience on multiple providers.  

We need to stop taking an inside out view of the services (Hey we could do this and charge for it.) and take an outside in view of the services (How could we make Netflix's service better and Netflix make more money and move more customers to their service.).  Only then will we build a service that the OTT providers want to buy.


Duh! 2/25/2016 | 10:41:51 AM
Re: Cycle... I'm often reminded of the little boy who cried 'wolf'.  The problem is what will happen if the wolf actually shows up.
KBode 2/25/2016 | 8:10:00 AM
Cycle... We keep repeating this cycle in which carriers claim they can't upgrade their networks if (regulation X) is passed, yet that always winds up being a bluff, and networks are upgraded because it's necessary. I understand the worry that bad regulations can potential harm revenues, but not all regulations are bad, most net neutrality regulations have been too lenient if anything, and this is a cycle of bluffing and hysteria that I find exceptionally dull.
Joe Stanganelli 2/24/2016 | 11:39:10 PM
Re: What is the problem? But how can I possibly afford to binge-fly in first class every day if I have to pay first-class prices???  And is it fair that airlines reduce leg room in coach to accommodate large first-class seats that fold out into beds?  #AirNeutrality #CaviarNeutrality #WineNeutrality #DedicatedFlightAttendantNeutrality #LuggageLosslessAirCompression
Duh! 2/24/2016 | 1:21:03 PM
Re: What is the problem? The 2015 Open Internet Order does that by effectivly saying that Basic Internet Access Service is Best Effort, while other, non-BIAS services can also be offered (with a few limitations) on the same access. 
jediknight0 2/24/2016 | 10:53:19 AM
Re: Net neutrality doesn't apply to wireless internet While wireless services were exempt from some net neutrality regulations imposed by the FCC in 2010, the new regulations adopted in 2015 apply equally to wired and wireless broadband internet access services.
sanjaynavin01 2/24/2016 | 5:39:34 AM
Re: What is the problem? This should be the correct definition of Net Neutrality !!!
Mitch Wagner 2/23/2016 | 3:47:54 PM
What is the problem? This does not have to be a problem if net neutrality regulations are written wisely, to permit CSPs to offer different classes and levels of service so long as they make that service available to everyone at the same price. 

Airlines are free to offer first class seating, so long as they sell those seats to anyone able to pay the premium. 
TV Monitor 2/23/2016 | 2:37:46 PM
Net neutrality doesn't apply to wireless internet Wireless carriers are exempt from net neutrality, at least in the US.
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