Emerging Frameworks for Regulation of Over-the-Top Services on Mobile Networks: An International Comparison

16 Pages Posted: 1 Apr 2014 Last revised: 16 Aug 2014

See all articles by Krishna Jayakar

Krishna Jayakar

Pennsylvania State University

Eun-A Park

Western State Colorado University

Date Written: March 31, 2014

Abstract

This paper is a comparative analysis of national regulations proposed for Over-The-Top (OTT) services provided over mobile networks. Specifically, the paper will examine the terms of access, interconnection and pricing for OTT services, where they are delivered to end-customers over unaffiliated mobile networks. The objective would be to evaluate alternative national regulations for the degree to which they offer fair compensation to mobile network operators while ensuring competitive neutrality between platforms and providers, and thus suggest best practices for OTT regulation.

OTT services such as Skype, WeChat, KakaoTalk and WhatsApp have dramatically proliferated in the past two years, and are increasingly drawing voice and SMS traffic away from mobile operators. Mobile revenues have stagnated or declined in many major markets, leading many mobile operators to propose to slow or block OTT traffic, or deploy their own OTT services in competition with the third-party providers, or ask for regulatory relief in the form of termination charges for OTT traffic. These attempts raise troubling questions about access, interconnection, and discrimination. Such debates have previously occurred regarding access for video content providers over ISPs, or for interconnection of competitive local exchange carriers with incumbents’ networks.

In this paper, we will compare regulations in different national jurisdictions dealing with OTT services on mobile networks. These proposals have ranged from an outright ban on OTT services in Vietnam, to the European Telecommunications Network Operators’ (ETNO) proposal in 2012 to request payment for termination of OTT traffic, to the unrestricted markets currently obtaining in most countries. Specifically, we compare the provisions relevant to OTT-mobile network interconnection in selected national regulations: (1) the Korea Communications Commission’s 2011 Guidelines for Network Neutrality and Internet Traffic Management; (2) the Chinese Ministry of Industry and Information Technology’s 2013 proposal to require WeChat to pay mobile carriers for the use of their facilities; and (3) the European Commission’s 2009 regulatory framework on net neutrality.

Comparative analysis suggests that asking OTTs to pay for having their content delivered to consumers – as WeChat was asked to do in China – may be a form of “double dipping” since consumers already pay for their subscriptions. Jurisdictions have taken specific steps to prevent the use of pricing as a form of barrier to entry against competing OTTs, by ISPs that provide substitute services. Also, regulations have generally avoided restrictions or asymmetric pricing only on some OTTs as impractical since OTT service markets have low barriers to entry and consumers can switch easily to “free” OTT services. Finally, regulations have considered OTT-mobile network access generally in the context of legal requirements for net neutrality, though no jurisdiction currently has an unequivocal stand for or against net neutrality.

Though interconnection and pricing issues for OTT services on mobile networks have not been satisfactorily resolved in any jurisdiction, comparative analysis identifies the contours of emerging “best practices” in terms of access, interconnection and pricing for OTT services. However, a sustainable pricing plan has to be competitively neutral between competing OTTs; cannot be used to favor of the ISP’s own vertically integrated services; has to be reflective of the mobile networks’ costs of providing access and network services; and cannot “double dip” – that is, collect payments for the same traffic from content provider and consumer. Potentially, only a pricing model based on usage based pricing, in which consumers are subject to a two-part tariff, inclusive of a basic access fee and a usage charge indexed to user’s data usage, might fulfill all these requirements.

Keywords: Over-The-Top services; net neutrality; mobile networks

Suggested Citation

Jayakar, Krishna and Park, Eun-A, Emerging Frameworks for Regulation of Over-the-Top Services on Mobile Networks: An International Comparison (March 31, 2014). 2014 TPRC Conference Paper. Available at SSRN: https://ssrn.com/abstract=2418792 or http://dx.doi.org/10.2139/ssrn.2418792

Krishna Jayakar (Contact Author)

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

Eun-A Park

Western State Colorado University ( email )

600 N Adams St.
Gunnison, CO 81230
United States
203-214-6822 (Phone)

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