• Future of the Internet

    The battle to oversee the Web

    Will large emerging countries manage to reshape internet governance around their national interests? One thing is sure: tomorrow's internet will not resemble today's. In recent years, global issues connected to the internet and its uses have vaulted into [read more]
    byJulien Nocetti | 03/Jul/20159 min read
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    Will large emerging countries manage to reshape internet governance around their national interests? One thing is sure: tomorrow’s internet will not resemble today’s.

    In recent years, global issues connected to the internet and its uses have vaulted into the highest realm of high politics. Among these issues internet governance is now one of the most lively and important topics in international relations.

    It has long been ignored and restricted to small silos of experts; however, the leaks disclosed by Edward Snowden on large-scale electronic surveillance implemented by US intelligence agencies triggered a massive response to the historical “stewardship” of the internet by the United States.

    Not surprisingly, the stakes are high: today 2.5 billion people are connected to the internet, and by 2030, the digital economy is likely to represent 20% of the world’s GDP. In emerging countries, the digital economy is growing from 15% to 25% every year.

    Studies evoke 50 even 80 billion connected “things” by 2020. Beyond mere figures, internet governance sharpens everyone’s appetite – from big corporations to governments – for the internet has taken up such a place in our lives and touches on so many issues, such as freedom of expression to privacy, intellectual property rights, and national security.

    It is worth underlining that the issue is particularly complex. For some, the governance of the internet should respect free market rules – a deregulated vision carried by the Clinton-Gore administration in the 1990s –, or remain self-regulated by techno-scientist communities as conceived of by libertarian internet pioneers.

    For others, the advent of the internet in the area of law-making implies a return to the old rules and instruments, but this would mean putting aside the mutations produced by its practices, most importantly the expansion of expression and participation. For others, again, the ultimate legitimization would consist in adopting a Constitution or a Treaty of the internet which would elevate its governance to the global level.


    De-Westernizing the internet?

    A number of countries have criticized American “hegemony” over the internet (infrastructure, “critical resources” such as protocols, the domain names system, normative influence, etc.). To a large extent, the internet is the ambivalent product of American culture and the expression of its universalist and expansionist ideology.

    As U.S. policymakers emphasized the importance of winning the battle of ideas both during the Cold War and in the post-2001 period, the ability to transmit America’s soft power via communications networks has been perceived as vital.

    Consequently, in recent years, particularly since the Arab uprisings, governments around the world have become more alert to the disruptive potential of access to digital communications. Demographic factors are also behind calls for change: over the next decade, the internet’s centre of gravity will have moved eastwards.

    Already in 2012, 66% of the world’s internet users lived in the non-Western world. However, the reasons for questioning the U.S.’s supremacy also lie in these countries’ defiance of the current internet governance system, which is accused of favoring the sole interests of the U.S.

    While critical of the status quo, large emerging countries do not constitute a homogeneous block. Back in December 2012 in Dubai, when the Treaty to revise the International Telecommunication Regulations (ITRs) was closely negotiated, some countries such as India, the Philippines and Kenya had rallied behind the U.S.

    The Dubai negotiations nevertheless showed that these “swing states” – countries that have not decided which vision for the future of the internet they will support – are increasingly asserting their vision in order to get things moving.

    Placed under the auspices of the United Nations-led International Telecommunications Union (ITU), the Dubai meeting therefore served as a powerful tribune to both contest American preeminence and call for multilateral internet governance.

    More fundamentally, these tensions reflect another conception of the internet, which lays on a double foundation: on the national level, the claim that states have sovereign power over the management of the internet; and on the international level, the preeminence of states over other stakeholders, and the notion of intergovernmental cooperation to debate internet governance.

    To this end, the arguments developed fit into a geostrategic context which has been reshaped by the emergence of new poles of influence. They are aimed at making the internet an instrument of both the domestic and foreign policies of one country. The preservation of state order, the fight against cybercrime, and the defense of commercial interests are several illustrations of elements that can be used to justify and advance the questioning of the current system.

    China, given its demographic, economic and technological weight, is emblematic of the current “game”. Overall, China has sought to adopt a pragmatic approach: if Beijing does not agree with the concept of the Internet Governance Forum (IGF) – the so-called “multi-stakeholder” principle would not guarantee an equal representation between the different stakeholders and regions of the world. It nevertheless integrated ICANN’s Governments Advisory Committee in 2009, and is now very active in promoting its own standards within the organizations where technical norms are negotiated.

    Russia, for its part, has put forward several initiatives at the U.N. over the last fifteen years – all of which have built upon a firm opposition to the U.S. and have defended a neo-Hobbesian vision in which security considerations and the legitimacy of states to ensure their digital/information sovereignty play a critical role. Moscow has thus been active within U.N. intergovernmental agencies such as ITU, and regional ones such as the Shanghai Cooperation Organization (SCO) and the BRICS forum.


    And then came Snowden

    The stances taken by emerging countries unsurprisingly found favorable echoes after Edward Snowden’s revelations in June 2013. If Russia opportunely stood out by granting asylum to Snowden, Brazil promptly expressed its dissatisfaction.

    President Dilma Rousseff, herself a victim of NSA wiretapping, took the lead of a virtuous crusade against the status quo: with the loss of the U.S.’s moral leadership, their stewardship over the agencies which manage the Internet is less tolerated. At the U.N. General Assembly, Rousseff somewhat aggressively criticized Washington, as such showing a will to federate emancipation towards the U.S. dependency.

    Brasilia then intensified its diplomatic offensive by announcing an international summit on Internet governance – called NETmundial – to take place in April 2014 in Sao Paulo. In the meantime, Brazilian authorities promulgated the Marco Civil bill, a sort of Internet Constitution which guarantees freedom of expression, protection of privacy and net neutrality. Is the Brazilian stance in a post-Snowden context purely opportunistic?

    Interestingly, Brazil appears to be taking the middle ground between the two governance “models” that have been under discussion so far – the multi-stakeholders and the multilateral – in a context where the Europeans have stepped aside.

    Since the first World Summit for Information Society (WSIS) in 2005 Brasilia has been promoting free software and advancing a global internet governance model based on its own domestic model. Rousseff’s words fit into a long-term perspective, which sees in the opening of a new international scene – the Web – an opportunity to take the international lead, after the relative failures of former President Lula to position Brazil on international security issues.

    The world is not flat

    Will large emerging countries manage to reshape internet governance around their national interests? In the shift that was the last ITU’s WCIT meeting in Dubai in December 2012, the excessively polarized debates between self-proclaimed partisans of an “open and free” internet and the supporters of a governance resting on territorial sovereignty sparked off a strained discourse over a “digital Cold War” preceding an “internet Yalta”.

    Since Snowden’s revelations emerged, the American reaction has particularly focused on storytelling: since states around the world question the U.S. oversight over the internet, it is because they want to fragment and “balkanize” the global internet – a discourse largely passed on by U.S. Net giants.

    Well, the commercial strategies of the major internet companies themselves tend to intensify the fragmentation of online public spaces by creating distortions in internet users’ access to information and content sharing, that is to say by reducing both the openness and pluralism that have made the internet a great social value.

    Here lies a powerful engine for contest, as it has been recently the case in Western Europe. Borders do reappear where they were not necessarily expected: Google, Apple or Amazon are building their own ecosystem, from which it is becoming hard to get out.

    One thing is sure: tomorrow’s internet will not resemble today’s. Already the power of search engines diminishes the importance of the domain names system; cloud computing, the Internet of things and the spread of mobile internet are starting to radically transform practices and produce new complexities with regards to the internet’s outline and governance.

    It is also certain that the situation will remain at a dead end if the two broad and opposed conceptions of the internet persist: a new space of freedom or a new instrument of control.


    Photo credit: Paul Downey


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  • Media

    Digital convergence in Europe: market trends and policy challenges

    In light of the sharp increase in video content and online entertainment the audiovisual market has changed dramatically over the past years, posing new complex challenges for European policy makers and regulators. The traditional approach based on distin [read more]
    byAugusto Preta | 24/Jun/20158 min read
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    In light of the sharp increase in video content and online entertainment the audiovisual market has changed dramatically over the past years, posing new complex challenges for European policy makers and regulators. The traditional approach based on distinctive markets seems to be inadequate to encompass this new competitive environment.


    The market trend

    The growth of internet-based video is mainly driven by two factors. The first one is the broadband deployment that allows video to be smoothly transmitted and widely distributed.

    The video, which represents already more than 50% of traffic on fixed networks in Western Europe, is expected to increase exponentially on mobile networks growing almost 20 times between 2011 and 2016, at an average annual rate of 80%.


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    The second factor is the increase in demand for quality services which provides a strong incentive in producing HD and Ultra HD (4K) contents, which are bandwidth hungry.

    Consequently, the market scenario exhibits the following features: viewers ask for more and more video quality content, manufacturers want to distribute such content on as many platforms as possible and the rights holders are finally conscious of the opportunities of the broadband delivery, also for valuable contents, once they are properly rewarded.

    Accordingly, new players enter the market and provide VOD services, implementing various business models: “advertising video on demand” (AVOD), which includes services such as Hulu or Dailymotion; “subscription video on demand” (SVOD), which includes services such as Netflix and Amazon Prime; “transactional video on demand” (TVOD), which has a “pay as you go” pricing scheme (iTunes); and Freemium VOD model, which allows all users to have a limited free tier, and pay service offerings on higher tiers (Hulu Plus).


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    All this will require more and more performing networks, able to deliver such contents on many platforms, and leaves open questions on issues related to traffic management and quality of services, which are a primary component of the current debate on net neutrality.

    In the US, the first two video entertainment services occupy 50 % of the bandwidth in peak time, and Netflix alone exceeds 30%.

    For this reason, in the US SVOD providers are expected to benefit even more from this migration. Such services have indeed gained in popularity at the expenses of pay TV, whose subscribers have declined over the past two years. Consumers are abandoning traditional pay TV subscriptions, subject to cord-cutting, while SVOD services try to impose themselves as premium channels, with original and exclusive content.

    In Europe, the industry witnesses a more complex competitive structure. The global market leader Netflix is trying to extend its dominance launching services in 13 countries in the last 3 years. At the end of 2014 Netflix reached 14 million subscribers, with a higher penetration in UK and North of Europe, the countries where it initially started. Other international OTT services like Amazon Prime are also popular in some of the main EU countries (UK and Germany).

    Telcos and broadcasters also invest in this market. Telcos, especially in countries where IPTV is more developed (France above all), have begun to extend their OTT VOD offer. For example, SFR (FR) launched a VOD service for mobile and tablet, Deutsch Telekom (DE) the multiscreen service EntertainToGo, KPN (NL) a multiscreen TV service on its own 4G network.

    The broadcasters, especially after the economic crisis and the saturation of their core business, are now investing in this sector and pay-TV operators in particular have all their established VOD service, ready to compete with that of OTT players.

    All this considered, in Western Europe, according to ITMedia Consulting last report “Video on Demand in Europe: 2015-2018“, total revenues coming from VOD services are expected to reach €3.58 billion at the end of 2018, from €2.14 billion estimated at the end of 2015, with an average annual growth of 22%.


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    Above all, the revenues of the SVOD model are the one expected to grow most: in 2018, SVOD will count more than 50% of the total VOD revenues, with an average annual growth of 34%, thanks also to the expected Netfilx’s expansion in the rest of Europe (e.g. in Italy and Spain from October 2015) and the increasing competition coming from payTv broadcasters. 


    Policy challenges

    As shown above, the audiovisual market has thus changed dramatically over the past years, posing new complex challenges for policy makers and authorities.

    First of all, the trade-off between more competition or more concentration has to be taken into account. If, on the one hand, the existence of network effects, economies of scale and sunk costs (programming, rights) increases barriers to entry against “native” internet operators; on the other hand this seems no longer sufficient to ensure competitive advantages to former analogue incumbents.

    This trade-off refers in particular to the ability of established industries, such as telcos and media, to keep their acquired positions based on natural monopolies or oligopolies.

    The question here is whether the evolution itself driven by the internet economy generates a greater level of competition, providing the maximum efficiency of the market in terms of consumer welfare, or if it is only a transfer of revenues and market power from the former incumbents to the succeeding ones.

    All suggest, however, that the traditional approach based on distinctive markets seems to be inadequate to encompass this new competitive environment.

    As a consequence, the traditional antitrust market definition should be reviewed in the light of the great changes of the competitive framework, starting from the distinction between free TV and pay TV markets.

    In this view, economic theory on two-sided markets may be useful to explain how platforms interact simultaneously with different groups of agents, exploiting the cross-group externalities and thereby correlating previously separated markets.

    As of ex-ante interventions, the quest for balance between the highly regulated TV (and audiovisual) sector and the internet is highly debated. A possible solution might be to adopt symmetric regulation between the two (level playing field).

    On the other hand this proposition is not easy to pursue. For example, must carry/ must offer obligations, pluralism requirements, quotas on audiovisual EU and national production and so on may be hard to extend to the new environment.

    A “light touch” regulation instead might be more effective in order not to lose the high levels of innovation that has fostered competition in the internet economy, thereby enhancing consumer welfare.

    In addition, the geographic market definition of audio visual services is typically at the national level. However such boundaries between nations might soon be questioned by the global nature of the Internet players.

    In this view the market definition, which is at the moment different between regulation and competition regime (see figure 5), should hopefully be harmonized in order to be coherent and avoid conflicting decisions in the new sector.


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    In conclusion, in this changing environment, regulators and antitrust authorities are likely to play a substantial role. Their determination, through ex ante and ex post interventions, will have a great influence on the sector development and will significantly affect in Europe the speed of the transition process to the convergence.



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  • Digital Single Market

    A glance at the DSM strategy: the good and the not-so-good

    Much of what the Commission proposes goes in the right direction although some actions, such as plans to harmonize copyright, could stir controversy. Even US tech giants might be less worried than expected. On May 6th, more quickly than expected, the Eur [read more]
    byAlicia Richart | 29/May/20155 min read
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    Much of what the Commission proposes goes in the right direction although some actions, such as plans to harmonize copyright, could stir controversy. Even US tech giants might be less worried than expected.

    On May 6th, more quickly than expected, the European Commission released its much anticipated “Digital Single Market Strategy” (DSM).

    The Juncker Commission has made the DSM the top priority of its five-year term, claiming €340 billion in potential economic gains, an exciting figure that should be supported by quantitative research analysis.

    Much of what the Commission proposes in the 20-page document seems to go in the right direction, setting out three main areas to be addressed:

    – Better access to digital goods and services. The Commission claims that delivery costs for physical goods impede e-commerce, pointing the finger to parcel delivery companies; that many sellers use unjustified geo-blocking to avoid serving customers outside their home market; that copyright needs to be modernized; and that VAT compliance for SMEs should be simplified.

    – Creating the right conditions for digital networks and services to flourish by, encouraging investment in infrastructure; replacing national-level management of spectrum with greater coordination at EU level; looking into the behavior of online platforms, including consumer trust and the swift removal of illegal content and personal data management.

    – Maximising the growth potential of our European Digital Economy by, encouraging manufacturing to become smarter; fostering standards for interoperability; making the most of cloud computing and of big data, said to be “the goose that laid the golden eggs”; fostering e-services, including those in the public sector; developing digital skills.

    It is understandable that the Internet provides a channel for businesses to reach consumers more widely than traditional media, both in their own markets and abroad, and for consumers to have a wider choice and bargain-hunt more effectively.

    In a truly single digital market there are opportunities to scale up that are not present in the much smaller national markets.

    More controversial are the commission’s plans to harmonize copyright law, in particular its plan to ban “geo-blocking”, the practice of restricting access to online services based upon the user’s geographical location.

    However, the most problematic point concerns “platforms”: the digital services, such as Amazon, Google, Facebook, Netflix and iTunes on which all sorts of other services can be built upon and which have come to dominate the internet.

    Worried that the mainly American-owned platforms could abuse their market power, the Commission will launch by the end of this year an assessment of their role.

    However the fact that most of the 32 internet platforms identified for assessment by the Commission are American and only one (Spotify) is European, hints more towards the fact that it is harder for new firms to scale up rapidly rather than abuse of market power.

    What it is interesting is that Mark Zuckerberg doesn’t seem to consider a Digital Single Market a disadvantage for Facebook.

    Instead, he supports the idea. Facebook has to deal with different laws in every country and a single set of regulation for the whole European continent would actually make things easier for Facebook.

    The digital economy also depends on the availability of reliable, high-speed and affordable fixed and mobile broadband networks throughout Europe. There are no good reasons to still have national telecom laws in this field.

    How will Europe successfully deploy 5G without enhanced coordination of spectrum assignments between Member States?

    Let us not forget that these networks do not only have an economic value; they are increasingly important for public access to information, freedom of expression, media pluralism, cultural and linguistic diversity.

    The following two pieces of legislation are related to the DSM:

    – The General Data Protection Regulation (GDPR), replacing the 1998 Directive that generated the data protection regimes of 28 Member States, with a single one, was proposed by the Commission in 2012, has undergone amendments by both the EP and the Council of Ministers and could be adopted in 2015 or 2016.

    – The Telecoms Regulation, reviewing the 2002 Telecoms Regulation to cover net neutrality and roaming fees, was proposed by the Commission in 2012, was amended by the EP and is currently with the Council, which has scaled back the EP’s amendments.

    The upcoming negotiations on the Telecoms Single Market will give a hint of the challenges to come in creating a Digital Single Market over the next years.



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