A new report released today by Analysys Mason finds that recent proposals to regulate the global Internet will harm growth and innovation worldwide. After assessing the current state of the Internet in under-served and developing regions worldwide, the report provides recommendations for governments on developing a robust Internet ecosystem without imposing any form of rate regimes on the modern Internet.f
The report, 'Internet global growth: lessons for the future', authored by Michael Kende, co-head of Regulation at Analysys Mason, examines the impact of proposals that seek to apply the antiquated settlement system for terminating international voice calls over the legacy telecommunications network to Internet traffic.
The proposals addressed in the paper are to the International Telecommunications Regulations (ITRs), which are being readied for the World Conference on International Telecommunications (WCIT) to be held in Dubai this December by the United Nations' International Telecommunication Union (ITU).
In the report, Kende assesses the proposals by focusing on the following areas:
- the success and growth of the Internet under the current model
- the negative impact of applying rate models developed for an obsolete telecoms system to the modern Internet.
Kende concludes with recommendations for governments in developing countries on fostering a robust Internet while avoiding rate regulations.
The report highlights the Internet as a driver for growth and opportunity, noting its increasingly central role to consumers, businesses and governments alike.
Kende argues that the Internet has successfully evolved based on commercial considerations as opposed to regulatory dictates, noting that: "Content has transformed from largely text-based to multimedia delivery, global demand and usage has exploded, and access has moved toward wireless over wired. Significant investments must continue to occur in response to these patterns, as current projections show that the number of Internet users worldwide will increase from 2.2 billion today to 3.5 billion in 2020".
The report confirms the continuing increase in Internet deployment using mobile broadband throughout the entire world, especially in Africa, Asia and Latin America, and that such investments are best achieved without internationally sanctioned regulatory intervention.
Multimedia content requires high bandwidth and can be expensive to deliver, but it is estimated that up to 98% of Internet traffic now consists of content that can be stored on servers, such as streaming video or web pages. These servers can be located in multiple locations around the world, and then delivered to users faster and at lower cost. The result is a shift in usage patterns and global Internet traffic flows. For example, 70% of international Internet bandwidth originating in Africa went to the USA in 1999, but by 2011 this figure had plunged to less than 5% as bandwidth shifted to Europe. Now, content is increasingly being stored on servers in Africa, where it can be accessed domestically or regionally.1
These changes in content flows highlight significant differences between the Internet and traditional telecoms as it existed when the ITR treaty was last updated in 1988. Applying unwarranted static voice regulations to the dynamic Internet would negatively impact users across the globe and slow or reverse current growth trends. Furthermore, the rate regime system would be difficult to design and expensive to implement, and even then would increase the cost of content delivery and hinder network investment at the expense of end users.
Lastly, the report offers recommendations for governments in developing countries on cultivating a robust Internet ecosystem without imposing any form of accounting rates on the Internet. Specific suggestions include removing roadblocks to investment while stimulating demand, as well as full liberalisation of the sector while removing barriers to foreign investment and ownership.
"Spurring access and adoption of the Internet has the ability to transform and improve entire economies, and no one stands to gain more than those in developing nations," added Kende. "Applying a settlement regime as some countries are proposing is a solution in search of a problem, which would ultimately slow Internet penetration and the availability of content."
Download the report: Internet global growth: lessons for the future
1 Source: TeleGeography’s Global Internet Geography, 2012: http://www.telegeography.com/research-services/global-internet-geography/index.html