Deutsche Telekom: Jochen Homann Saves German Consumers 500M by Reducing MTR

Termination charges drive up prices and generally a bad idea.
Deutsche Telekom is hopping mad because BnetzA dropped their take on mobile calls in half to 0.0185 euros a minute. But their arguments against the slash seem unlikely to persuade any regulator who cares about consumers. DT tells Reuters that telco profits will go down 500 million with the benefit passing to consumers. Sounds great to me, but DT and rival Vodafone tell Reuters reducing prices is bad policy. As Reuters reports

“A Deutsche Telekom spokesman said the decision would cost the German telecom operators about 500 million euros ($635.28 million) annually, adding that the cuts didn’t bode well for future investments in fast internet. “With this decision the Bundesnetzagentur follows the complete erroneous European policy of the past 10 years, which has cost the European telecom sector its global leading role,” a Deutsche Telekom spokesman said. Vodafone said the decision was a “dramatic cut”, which will drag money away from much needed investment in faster networks.”

Jochen Homann is a public servant. I don’t understand why DT thinks a complaint their profits aren’t high enough would persuade BNetzA to change the decision. The German carriers have had years’ notice these cuts were coming; Homann’s predecessor, Mathias Kurth, disclosed the plan several years ago. All the carriers should have been pricing for the new MTRs.

Terminating monopolies considered harmful. Deutsche Telekom has a “terminating monopoly” on 12M German homes, enormous market power. If Canal+ or Amazon wants to sell TV over the net in Germany, they are virtually forced to pay whatever DT asks. Broadband customers tend to stay with one provider for 5-10 years, so DT has an effective monopoly. Only a small portion of what DT collects will go to consumers in lower prices or increased investment and most will go to DT shareholders.

The reduction in European mobile termination rates has provided strong evidence of the “terminating monopoly” effect. Deutsche Telekom and others argued that basic rates would go up as much as the roaming rates go down, so the reductions wouldn’t help consumers. There’s substantial economic literature on access monopolies. With perfect competition, the two-sided market theory suggests consumers wouldn’t be aided. But with market power the opposite is true.

In reality, telco after telco has explained that MTR reductions have reduced their profits significantly. Shareholders rather than consumer cover most of the fall. Deutsche Telekom has just complained that Germany’s recent MTR cut shifted 500M from telco profits to consumers. That means Homann is doing his job. 

DT has to explain why it needs “monopoly-like” prices and can’t price competitively and still make a fair profit. 


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First Looks

11/23 Ericsson predicts mobile data growth
will fall by half. Still high, but no spectrum crisis

11/22 Google calls out WCIT as “governments only,” but 4 Googlers on US delegation. Hysteria
and fear reign, but totally unrealistic. UN not
taking over, expanding censorship, or sending black helicopters. Say hello to Dave in Dubai.
11/22 Almost all WCIT docs leaked at .nxt
by Kieran McCarthy

Truth: First Casualty of the War For the Internet

Burj NPN is back, after only minimal updates since it first came together as we reported WCIT in Dubai. The future of the Net was not changed there and will not be changed in Busan. Infinite talk, but no meaningful action. Don’t believe the hype — or the anti-hype.

We’ll report about the friends of the Internet with joy and the enemies with gusto. I have a strong bias in favor of a great Internet, affordable to all. But my job as a journalist is to overcome my bias and report as closely to the truth as possible.


Kenya’s 100 MHz Gigabit LTE: By 2015, Potentially the Most Advanced Network in the World

Update 2014 Kenya has been held back by politics around the analog shutoff but Rwanda has pressed ahead, allocating 140 MHz of prime spectrum to KT as a single operator.

Rwanda’s Patrick Nyirishema sees major savings
Only the best engineers believe mobile will reach a gigabit (shared) in the next few years, with individual speeds often 100 megabits and caps 50 times as high as today. Ericsson drove around Stockholm connected at 900 megabits/second in this video. Even seeing isn’t believing. Urban areas in the developed world will rarely see those speeds in early years because most spectrum is restricted and only available in 20 MHz bands.  But Africa, Pakistan and some in Latin America are seizing the opportunity.

   Kenya is the most advanced. They plan to leapfrog Europe to the gigabit by extracting 100 MHz bands from the digital dividend and other empty spectrum.  The politics is murky: one regulator was recently displaced, another overruled by the President when he tried to reduce Safaricom’s termination rates. The funding and cost of the analog switchoff are making headlines that suggest some very bad planning or worse.

  But the logic of building a single advanced network is so strong that Rwanda is considering following what’s now being called the “Kenyan model.” Jennie Bourne and I spoke with Patrick Nyirishema of the Rwanda Development Board at the Broadband Commission. Nyirishema acknowledged the technical advantages of the single network and pointed to crucial cost advantages as well. Much of the country is too poor or sparsely settled to be attractive to mobile operators. The government will have to find the resources to extend coverage. Building a single network requires less subsidy than helping two or three operators. The network is cheaper to build if it has more spectrum.

insert video

   The “Kenyan model” selects a single operator to build and manage the 100 MHz network. That operator would have to “unbundle” the offering, allowing other carriers to resell the service and compete on features and at the retail level. France and Britain proved unbundling works well for consumers when backed by a strong regulator that keeps prices down. Building three to five overlapping networks certainly makes competition sharper, but is extremely costly.

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A Modest Proposal to Open ITU to All Civil Society

A Modest Proposal 1729 CoverHamadoun Touré at Columbia made clear he wants more involvement at ITU, but it’s an international organization that moves slowly. The Internet Society can easily speed things up if they had the courage.
 I wrote to the ISOC list


    Allowing all ISOC members active in civil society to join the ISOC delegation to WCIT and other ITU events would quickly and effectively resolve the issue of limited civil society involvement. ITU members, including ISOC, have total discretion about who is on their delegation. Hamadoun Touré has actively encouraged members such as the U.S. to include in their delegation civil society. Speaking to Touré, I believe he sees a political advantage to expanding civil society. 

   The U.S. delegation currently numbers 115. The Nigerians are sending 70. ISOC only is sending 8. There’s no reason not to expand the delegation. Only a limited number of civil society representatives will have the money and time. I’d bet we could include just about all of them and still have a modest sized delegation. 

   I suggest ISOC immediately put out word that “any civil society representative who has been personally active supporting the causes of the ISOC mission” is welcome to be included in the delegation. Current non-members can simply and instantly join. Those active in ISOC like Veni, Alejandro, and Joly would also be a strong addition. 

   Of course it’s more cumbersome to coordinate a larger mission. But it establishes an important principle of how meetings like WCIT should be inclusive. The main objection I foresee is “that’s not the way we do things.” It could be. 

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Follow the Money From Africa to AT&T

True-size-of-Africa“Commercial agreements” with giant companies not always fair.
African governments are losing tax revenue as communications shifts from telephone to Internet. The gain is mostly going to giants like France Telecom and AT&T, huge corporations that in “commercial agreements” have enormous power. Some of what the telcos save is returned to consumers in lower prices; some becomes higher profits.

At ITU/WCIT, the Africans are trying to recover that revenue by a (presumably modest) “boundary tax” on termination. The U.S. is fighting back, demanding our companies not pay. That’s an ordinary mercantile fight over national interest that the State Department is portraying as a battle of principle. B______ . It’s part of a century-long battle between North and South over “terms of trade.”

Other things being equal, terminating charges are anti-consumer. Reducing mobile termination rates is saving European consumers billions. So the ETNO proposal for their telcos to tax the net is a very bad idea. Deutsche Telekom has a “terminating monopoly” on 12M German homes, enormous market power.

If Canal+ or Amazon wants to sell TV over the net in Germany, they are virtually forced to pay whatever DT asks.

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Who’s Who Among the 100 on U.S. 2014 Plenipot

State department5 or 6 public delegates in 100. Update Oct 15 New list has ~7 public delegates out of about 140. The public advocates were outnumbered something like 10-1 at WCIT, as usual. Some of the top lobbyists aren’t even bothering to come. Verizon, Cisco and Google have cut back. The top people probably believe the even may have some loud talk but nothing important is going to happen. The U.S. is likely to be able to block anything we don’t like. We essentially don’t like the ITU doing anything of substance other than giving us some satellite slots. Hardly anything will get through. 

    The rest are from government, including some from DOD and other three letter agencies. On a similar article for WCIT, I wrote “Multi-stakeholder” is worthless if the only stakeholders are corporate.

   I know most of the top U.S. government people. I believe Danny, Larry, Julie and most of the rest genuinely are working to keep the Internet open and democratic. U.S. Ambassador Danny Sepulveda is hard driving and very capable. He was close to both John Kerry and Barack Obama. I expected very different choices from an Obama person respected by several mutual friends.

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Who’s Who Among the 100 on U.S. WCIT Delegation

State departmentPublic advocates find a place in a mostly corporate group.

Harold Feld and Rashmi Rangnath of Public Knowledge as well as Gene Kimmelman have long battled government but suddenly find themselves representing the U.S. Terry Kramer has received very valuable support – and credibility – from Greenpeace, labor and other public interest groups. “Multi-stakeholder” is worthless if the only stakeholders are corporate, so this is a smart move. 

    The five or so public advocates are outnumbered something like 10-1 by corporate reps, as usual. Google surprises by sending four people, even more than Verizon or AT&T. Several “U.S.” reps work for foreign companies, including NTT, Sony and Ericsson.
    The remainder are government, led by State. The next largest group are the five from DOD, emphasizing the behind the scenes but dominant role they play. Here’s the complete list, with some annotations that might prove useful. 11/20 FCC Commissioner Rob McDowell and 14 more have joined and I will add.

Here’s the complete list, with a few details you might not find on Google

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Editorial: U.S. Should Be More Than Dr. No

Dr No“We Seek to Bring Internet to All” far more attractive
Hamadoun Touré is winning hearts and minds for the ITU by focusing on helping connect the four billion people totally unserved. The world is responding, with Carlos Slim just one of the strong supporters of the Broadband Commission. ITU actually has very little money or power so most of what he urges is symbolic. It’s an attractive message even if some of his specifics are unfortunate.

    The U.S. WCIT position is essentially to say no to any change or active effort. In one case – U.N. involvement in security – I think we’re right. Too many at the U.N. understand security as protecting governments from their own citizens, particularly by eliminating anonymity. But the U.S. needs to embrace the development agenda and urge action.

   Africa, the Arab countries and most of Asia do not believe we live in the best of all possible worlds.

“We Seek to Bring Internet to All” is the title of Hamadoun Touré’s article

Daring to Admit Rules of the Net are “U.S. Centered”

New America DC event starts with the truth
Jim Cicconi of AT&T, Tim Wu of Columbia, Susan Crawford of Harvard, and Rebecca MacKinnon lead a firstrate event at New America D.C. about “the relative merits of the current decentralized, U.S.-centered governance of the Internet, versus a more equitable, multinational (but possibly more restrictive) system.” Most of the world believes the U.S. runs the Internet, although “U.S. centered” is more accurate.

Brilliant propaganda has imprinted in many people’s minds an almost meaningless concept of “multi-stakeholder” governance, presumably international. Led by Larry Strickling, we framed the debate as “multi-stakeholder” versus government. Unfortunately, the meaning of multi-stakeholder was so ambiguous that ITU is not inaccurate proclaiming itself one of the best examples of a “multi-stakeholder” organization. A repressive Saudi Arabian proposal for WCIT is offered in the name of “multi-stakeholderism.” When you actually look what that means, you discover most of the participants are corporate, dominated by U.S. giants. Groups like ISOC and ICANN are under U.S. law, have mostly U.S./Western European leaders, and we control the DNS. As U.S. NTIA chief Larry Strickling notes “The NTIA has long been integral in the operation of the Internet Corporation of Assigned Names and Numbers (ICANN), which regulates global domain name policy. While NTIA, on behalf of the US Department of Commerce, reached an agreement with ICANN in 2009 to transition the technical coordination of the DNS to a new setting in ICANN under conditions that protect the interests of global Internet users, NTIA represents the US government on ICANN’s Governmental Advisory Committee and it is still an influential force.”

Africa, India, Brazil, Russia and China feel they’re being left out and want change.
Personally, I think that’s fair but also fear a heavy hand of government. Cicconi of AT&T is a good choice to present the government opinion. Even FCC Commissioners have told me he runs the FCC and policy, although that’s not always true. Most of the other speakers are not part of the current DC hive mind of these topics and have a much deeper commitment to the net than the former telco lobbyists dominating State.

The corporate hand is strong at State.Ambassador Verveer is a former Bell lobbyist via CTIA. Ambassador Kramer is out of Verizon Wireless. Ambassador Gross is being paid by big companies, presumably including the Bells. I believe all are making a good faith effort to serve the public, not the corporate interest. But their worldview was shaped where Internet Freedom is not central.

Very strong program and important to bring the discussion closer to the truth.

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Euro Parliament’s Marietje Schaake Requests Comments

Marietje SchaakeMs. Schaake: Don’t blindly follow the U.S. (my opinion)
Tuesday 20 November members of the Euro Parliament will meet to draft a resolution on WCIT. Marietje Schaake has posted a draft from the ALDE group at (below) and included her email. It seems a serious request for comments.
     She calls for free speech and net neutrality and many other good things. But nowhere does she make concrete proposals for a development agenda. There are no proposals for change, as though we are living in the best of all possible worlds. The current Internet system is miserably failing 2/3rds of the people of the world, who have no connection. Her beloved “free markets” are great when they work, but even in rich countries the corporate system is doing a poor job of reaching the rural and poor. Most of Africa and India are rural and poor; competition works some places but has failed in others.

   It’s Western arrogance to ignore the urgency of expanding the net. It’s also a terrible way to win hearts and minds. Good to see a politician working in the open.

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Terry Kramer’s Remarkable Opening of the U.S. State Department

Multi-Stakeholder meaningless if stakeholders all corporate
By joining ITAC – free and open to all – you can be a meaningful part of the process and have impact on U.S. policy. All the big tech companies – Microsoft, Cisco, Google, AT&T, Verizon and two dozen more – use the ITAC meetings and mailings to have a say. Over 100 independents are getting the once secret documents of the ITU, regular briefings from Ambassador Terry Kramer and top State officials (Dick Brainerd included) and questions answered.

   With Kramer’s encouragement, I and Mike Masnick at Techdirt publicized how to join and the response was remarkable. Three prominent professors, a former board member of ICANN and many more signed up. ITU Secretary-General Hamadoun Touré at Columbia pointed out ITAC as an ideal example of how governments can get all ITU documents to their citizens.

   Terry’s likely to move on after December and the State Department staff will take back control. These include the same people who a few years ago set a firm U.S. opinion that civil society not play a role at ITU. Far too often, I found myself in discussions where I was the only voice outside government that was not corporate. With luck, the success of Kramer’s actions has changed their opinions and they will stay effectively open going forward.

For the record, I sent the below to the WCIT list at State.

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