By Yoon Ja-young
The infiltration of smart devices into our daily lives has greatly impacted how we navigate the world and the fallout is an explosive growth of data traffic. To deal with the increasing uploads and downloads, an investment in the network is necessary, but network operators ask why the responsibility should lie entirely on them when contents providers make huge profits free-riding on services.
This is the main issue of “network neutrality,” which recommends that network operators should equally treat all contents transmitted through their network. The principle has been questioned from an economic perspective recently as network operators are suffering snowballing costs due to surging data traffic.
At the international symposium on “Collaborative Use of Network Resources in Emerging Smart Media Markets,” hosted by the Korea Association for Telecommunications Policies in central Seoul, Thursday, industry experts and representatives from political parties elaborated on how difficult it would be for network operators and contents businesses to reach a compromise.
According to data presented by AT Kerney, Internet traffic in Europe is expected to mark a 35 percent year-on-year growth from 2009 to 2014, and that on mobiles by an annual 107 percent.
It cited increasing penetration of multimedia devices such as Web TV, increasing availability of new, bandwidth-heavy services and changing usage patterns in which people can access the Internet anywhere, anytime, as key traffic drivers.
If network companies continue the current level of investment without additional revenues, their turnover on capital expenditure will fall to 8.9 percent in 2014 for fixed lines, and to 9.4 percent for mobile.
Choi Nak-joong from Alcatel Lucent said that there has been remarkable consumer traffic growth in recent years, but the potential of even further intensifying is still to come, mostly due to video-related services. “The cost of building fixed-line and mobile networks will be prohibitive if the revenue model remains flat,” he said, adding that network operators have two choices: either limit the capacity expansion or raise revenues.
Jeffrey Eisenach, director of Navigant Economics, said that applications, content, devices and communications services are perfectly complementary in the form of platforms ― one cannot work without the other, and all of them must work together to provide consumer value.
The asymmetric regulation on network providers makes it difficult for them to compensate for the dramatic increases in volumes in Internet traffic. It lowers broadband innovation and investment as they question whether they will become direct beneficiaries of traffic growth.
There are limited answers for the growing data traffic question. According to AT Kerney, network operators in Europe need to pour in 28 billion euro every year until 2014 if they are to maintain the current quality of service.
Kim Hyeong-chan, vice president of SK Research Institute for SUPEX Management, said there are three methods: rebalancing consumer prices, adopting usage based tariff or tiered flat rates, for instance, or sharing costs with contents or application providers for traffic, or traffic management based on “collaborative effort,” “prioritization,” and “fair use policy.”
He pointed out that in this smart era where smart devices are continuously connected to the Internet constant investment is required for network innovation. However, network operators are being pressured by regulation over consumer pricing.
In response, the network operators suggest that contents providers and platform businesses, which benefit immensely thanks to the smart era realized by the network support, should shoulder the burden.
Kim mentioned that some applications reduce mobile network operators’ incentives to invest by undermining the revenue base, citing Internet phone services as an example. The worldwide mVoIP, or mobile Internet phone service, subscribers are expected to grow nearly 10-fold from 2010 to 2015.
Not-so-eager contents providers and platform businesses shirk at the idea. They cite technological development as the way to fix the problem. Park Joon-ho, a senior vice president of Samsung Electronics, producer of smartphones and smart TVs, said that traffic volume explosion can be solved through technological development. “Network neutrality should be observed.” He said that a lot of research shows that advances in technology can ease the need for investment in the network.