New and emerging Internet services and business models – PL 01 2011
30 May 2011 | 17:00-18:00
Programme overview 2011
With an ever-increasing demand by customers to be always online, especially for video streaming/downloading, and noting the growth in mobile Internet access, this plenary will consider inter alia: revenue streams, traditional vs new media trends, new partnerships, Internet of things, cloud-computing and mobile services.
People
Key Participants
- Marko Carević, Telenor
- Stefan Hedelius, Ericsson
- Vladimir Knezević, Microsoft
- Luis Magalhães, Knowledge Society Agency (UMIC), Portugese Ministry of Science, Technology and Higher Education
- Giacomo Mazzone, European Broadcasting Union
- Marco Pancini, Google
- Michael Rotert, EuroISPA
- Christoph Steck, Telefonica
- Theresa Swinehart, Verizon
Co-moderators
- Olivier Crepin-Leblond, ALAC, ISOC England
- Patrik Fältström, Cisco
Session report
There is an ever-increasing demand for Internet services “everywhere and always on”, especially for mobile phones. Increasing Internet access necessitates investment in network infrastructures and rollout, as well as reflection on graduated (as opposed to flat) pricing models. It was testified that the costs of mobile services were diminishing in approximately 25 countries and thereby becoming more affordable. Advertising revenues were discussed. In this connection, consumer data is becoming more and more valuable for targeted marketing and for companies and the economy in general. As a considerable proportion of the targeted population feels annoyed by unwanted marketing campaigns, consumer protection discourse is encouraging a shift from “opt-out” to “opt-in” regulations and better respect and enforcement of self-regulation.
It was stated that different business models are needed for different communication services. It was suggested that consumers will increasingly prefer to choose different services from different providers as their needs to access the Internet vary with the offer of more flexible contractual arrangements by providers. In contrast, other speakers argue that, with the increasing integration of Internet services, users will find it more difficult to change service providers easily.
“Preserving openness, neutrality and decentralized architecture of the network in order to provide for more innovation, while encouraging roll-out of the new generation broadband infrastructures. Improving functioning of the government using openly available data and more involved interaction with the citizens. Ensuring the Internet stays the most Democratic medium, the means for giving everybody an equal voice and the possibility for creating and spreading information, particularly having in mind the recent events in the world.“
Jasna Matić, State Secretary for Digital Agenda, Republic of Serbia
The economics of “cloud” services (and the shifting capital expenses to operational expenses) are encouraging a process of dematerialisation of ownership. The development of these services was discussed as well as the coherence of their (global) regulation by governments. Related aspects like the portability of data, data protection standards, and the concern of being ‘locked-in’ were issues raised in this regard. Standard contracts were suggested as a means of harmonising security, privacy and openness afforded to users of ‘cloud’ services. This raised a discussion on the differences in standards and guarantees between Europe and the US. Reservation was expressed about inviting users to choose their legal jurisdiction because of the fear and uncertainty that might result.
Transcript
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>> OLIVER CREPIN-LEBLOND: Could the panelists please take their seats?
We’re going to start the session in about a minute. Maybe two minutes.
Good afternoon. This is the last session of the day, Plenary 1, PL 1 as they call it. Right now, the only two people and the panel that is standing between you and the gala dinner – gala event afterwards is us. So we will try to go as fast as we can on this. And we have a couple of panelists that need to leave at 6:00 sharp, which means that we do need to go quickly.
We are 15 minutes late, so we will only have I guess 45 minutes to do this. Quickly I’ll introduce our participants. In the wrong order so they will have to wave when I say the name. Stefan Hedelius, head of marketing and strategy at Ericssen.
Marko Carevic from Telenor.
Vladimir Knezevic from Microsoft.
Luis Magalhaes from the Portuguese Ministry of Science, Technology and Higher Education.
Theresa Swinehoff Swinehart at Verizon.
And Christoph Steck from and Giacomo Mazzone at the European Commission.
And – and – God, I got this wrong.
And Andrea Glorioso.
I’m Oliver Crepin-Leblond I’m with the committee of ICANN, but I’m with the e-Team of ISOC of England.
So this is about future services and where we’re going. And the first thing we speak about in a bit are the mobile services. Internet changed dramatically with the rise of new mobile services, always on everywhere, faster connection rates. And the majority of growth, traffic growth, on the Internet these days seems to happen from browsing the Net on mobile phones.
So the first question that we have – this is going to be a very interactive session. There is going to be questions from the floor. If you have any question, then raise your hand and we will try to get a microphone over to you, or you might have to walk over to a microphone if we find where the microphones are. We have a remote participation moderator, who is Matthias Fiechter from the New Media Summer School. Matthias will take questions from remote participants and I understand that you’ve got something that you can wave at us if you have questions.
Fantastic. Thank you.
Now, so the first question, as we said, was to deal with mobile phones. And of course there is an increasing demand for customers to be always online for video services, and also with new technologies, like LG and 4G that are coming up. And there is a constant need for investing – well, constant demand that is rising all the time.
So the question really is: Is this going to mean a change in the pricing scenarios? Are we going to have a flat pricing for always on Internet services? Is this likely to affect services in other – in wired services? And I think that Theresa might be the person who can answer some of the questions for us.
>> THERESA SWINEHART: Thank you. It’s a wonderful opportunity to be here and we have a very brief period of time, especially if we want to engage the audience.
I’ll touch on a few key points. We are seeing shifts around competition and choice and we are seeing a dynamic where no one company can do it on their own; or they can, but they are partnering with different entities. We see mix and match.
We see consumers choosing different applications from different providers, providing access, networking, particularly in the operating system they want to use.
But we are seeing the implications of having the Internet everywhere. And so the consumers access the Internet in a variety of ways. We have seen the rollout of ITE in the United States and broadband, and that has consumers being online all the time, through different smartphones and relying on different devices through that.
And in considering all of these things – and we are looking at the policy implications, we are seeing the approach of competitive dynamics and policy issues that we have to look at.
Cross-border data increase, and with the business model and flow, we have to look at flexibility of commercial arrangements and how to handle those.
In the areas of cloud, that is an important dynamic. But in the end the policies that we are looking at need to respect the consumer choice and encourage the private investment. With the mix and match and the changes in sort of the value chain versus the value circle, in a way, and consumers having direct contact and direct abilities to choose services they want, plus the mobile devices and the smartphones and high speed broadband, I think we’re seeing a different dynamic, where it’s hard to predict the future.
>> MODERATOR: Patrik, part of the question was addressing, also, the various pricing models. One of the things I see as a user of the cell phone is that, for example, inside Sweden where I live, I have unlimited mobile broadband. It’s like 2 MB a day for 10 Euros a month. But if I go just to Denmark, 40 kilometers away, I pay 6 Euros per day, which is like almost half of what I have to pay per month for 20 megabytes. And if I go to the US, I pay 14 Euros for a megabyte.
So one of the questions that I have is that we see that the prices for, for example, mobile broadband go down locally, but still – and someone is calling, darn.
(Cell phone ringing)
That is happening a number of times. It’s always the person who is speaking.
So the question is: Should not pricing in the future be more global? How comprising is this geographically locally – is there – do we see a change there?
>> MODERATOR: Well, who would like to answer that?
>> CRISTOPH STECK: I can volunteer. It’s a different question – I’m Christoph Steck from Telefonica.
So we are doing this pricing around the world in 25 countries. There is a tendency that prices are going down across the world for mobile, as you said. At the same time, I mean, prices are not on the same level and this is, I mean, due to market dynamics. Not all countries have the same comparative environment. Not all countries have the same geographies. Not all countries have the population, kind of, in the country, in the same way. So these are all factors involved in price making in the end. So I believe that there is the important thing that is – that we have a tendency of prices falling, of more or less services getting affordable virtually worldwide. And we have seen a fall of prices in the last year.
So this is the important factor. There is a tendency of the prices get down and get more similar.
>> Because it must be wrong for you to hear people when they go to the airport say I must remember to turn off my phone, which means stop using your services. You must be able to use the service, right? So there is a balance there.
>> We try to sell service of course. Yes.
>> MODERATOR: Any questions from the floor?
None for the time being? Okay. Let’s move on.
>> No. It’s interesting. We’re looking at new business models here and one of the new business models is this advertising revenue that we have. Certainly, a number of new services have come out on the Internet in the past ten years that made an enormous amount of money, and I was going to ask the question. How does Google make money?
>> MARCO PANCINI: I’m Marco Pancini from Google. Google provides the marketplace in order to meet – to create contact between advertisers, who want to make their message available online for a big audience, and the end user. The main service, the main business model of the Google search engine is Google words. So we match the key words searched by the user, using our Web search, with the messages of the advertiser, and the connection is just the key words. So the advertiser is better for key words, and then we create the match.
Also, the kind of approach that we are having to this is in order to foster the maximum level playing field between the different players in the market, from a pricing perspective, what is the main cause of this business model is that we truly believe that – that this is a great opportunity for a monumental prize. And the kind of – our final goal is not to just make Google more profitable, but also to create an engaging market online to push for e-commerce adoption and overall to enlarge the Internet economy.
Just to give you an idea, the Internet economy is still important in the UK. 7.2 percent of the government. France is 3.2. Italy, it’s 2 percent. And this is growing. This means a lot of new jobs, a lot of new opportunities, and therefore we – we truly think that that is from our perspective the right angle to see the – the different role the business models can play in the Internet economy.
>> MODERATOR: So what you’re saying, just to rephrase that, you’re moving over to create tools that also enables other businesses to do whatever they want to do, right?
>> Perfect.
>> MODERATOR: Anyone in the audience – so we have a person over here. Do we have a microphone?
Can you stretch up your hand again in the air? No. They are back. Two rows back.
>> AUDIENCE: Thank you.
I would like to address my question to this so-called traditional business model, companies. As a young girl and as a young person, I think that one of the biggest trends that is going on right now is the so-called social entrepreneurship model. And I feel like it’s still not considered seriously. And what is your position about that?
>> MODERATOR: Who wishes to answer this?
>> I think that was a question back to Google.
>> MODERATOR: Google. Marco?
>> MARCO PANCINI: You were thinking about the traditional business models. But I would say overall for all the different sectors of the economy, the Internet can represent a great opportunity. Because there is from a – for – let’s call it a decisional business model. It’s disrupting their actual business model. But this is a – actually positive. Because it allows them to reinvent themselves. For a small enterprise, it’s a big opportunity. I agree. But in terms of the contribution of a small/medium enterprise in the social economy, in the long-term in creating new markets, all these things are really going into the direction of creating a great opportunity for youngsters.
>> LEE HIBBARD: Hello. I’m just being checky, but maybe Marco Pancini can answer this question. But Google just bought Skype.
>> I think they haven’t – no, it’s Microsoft that purchased Skype, so wrong person, wrong question.
>> LEE HIBBARD: Sorry, we will do it later.
>> MODERATOR: We will have to move on. Sorry, Lee.
>> LEE HIBBARD: It’s getting late in the day.
>> MODERATOR: It’s a long day for you.
>> Maybe the question is still relevant.
>> LEE HIBBARD: From a business perspective, I’ll rephrase the question. I apologize.
You know, when you buy a company for that much money, where does the service go? What happens to it? How does it change? And what is the intention with this speculative economy of the Internet and how you invest in it and how companies are being bought and sold? From your perspective, what does that mean?
>> MARCO PANCINI: I can answer it for what concerns us and we went through some very important acquisitions, in particular, YouTube. I think it’s a great opportunity.
Especially when you’re buying a company, you respect the culture of the company that you are buying. And it is creating a lot of synergy and vibrant energy in both companies.
So, that is really my personal experience. I’ve been at eBay when we bought Skype and it was a great experience for us. To meet colleagues with different backgrounds, and be able also to open our minds to new business models, new innovative projects. So that’s always very positive if a company can embrace these changes in an open way.
>> MODERATOR: Thank you.
This leads us to the changing business model, the new revenue streams, advertising revenue. Stefan, you have to few things to tell us about this?
>> STEFAN HEDELIUS: Yes. First we talk about models. We talk about Internet access business models. And I kind of agree with you when you say it’s getting expensive. I’m from Sweden so I enjoy the low prices, but what we see in other parts of the world is that one size does not fit all: And we have some services and some operators with different chains, the pricing or consumption of bandwidth is based on location and time of the day. So you can as a consumer shift your behavior and then get a discounted rate and flexible models. So that is just one thing when it comes to a business model for access part.
But, there are so many other business models coming in as well. And when we talk about future, we say that everything is going to be connected or everything that would benefit from a connection will actually have a connection.
And then, of course, the business model would be very different. And I think we are going to see so many different business models where the consumer will not always pay for the services. It’s going to be maybe the manufacturer of the camera or the TV is going to pay for the service.
>> MODERATOR: You think the content provider would be paying for part of the service?
>> STEFAN HEDELIUS: It could be as well. Security has a value. And in talking to others, consumer data has a value for sure. And there is a lot of value then if you see the information about the consumers.
And, I mean, we did one example, we did it in Sweden, we have a vending machine from a company called Selector. And we put in G mol models and connected the vepding machines. And the vending machine company has the relationship with the person buying from the machine that they didn’t have before. And they can offer you bundles and discounts and so on based on your behavior. But not only that, for them, it was a fantastic service as they were willing to pay for this connectivity and they could actually lower the cost of operations. They didn’t need to go out and empty the machines per schedule.
They could go out when it was close to empty. They didn’t have to have the cash. And for the operator and us as a vendor, it was part of the value chain.
So we will see such a big evolving of the business models in the economy, more than just the access business model, actually.
>> MODERATOR: And let me explain what this service is. You actually – I think you sent an SMS message to the phone number on the machine that includes the name of whatever product you want to buy.
>> STEFAN HEDELIUS: Yes.
>> MODERATOR: And plop, there it is, it charges your cell phone. So that is the service.
I think you’re right, when I think about it at my home, I think the alarm system that I have has the simcard in it. But I don’t pay for that subscription.
>> STEFAN HEDELIUS: You’ll not pay for the subscription or data consumption. Hopefully it’s not consuming –
>> MODERATOR: I don’t know and I don’t have a problem.
>> STEFAN HEDELIUS: But you pay for it in insurance. That is something that is not happening.
>> ANDREA GLORIOSO: I would like to just to jump in on a point. So we have been discussing here our certain points of view, mostly related to change of business models in communication services and IT services, information technology services. As a matter of fact, I believe we are on the verge of having quite disruptive developments regarding model services in other areas where IT is applied, like areas related to distribution, like areas related to transportation, to health and to environment applications.
So, so we have quite the paradoxical situation presently, wherein many of these areas there are wonderful pilots and applications that demonstrate the value, the solutions based on IT for those purposes: Smart grids, smart mobility, smart transportation and so on.
But the fact is that we are mostly dealing with a market of pilots and not a market of applications, in the sense that the market itself can grow, become large scale and sustain that sort of application.
My conviction is that we need very different business models on these areas, which as a matter of fact have to do with costing things in a much more detailed way.
For example, in the distribution, depending on the time of day and the cost of electricity at that time. Because – and that is interesting to think about the fact that this is possible because of IT. And also IT applications in those situations are not possible without disrupting the business model. So I think this is another point I’d like to raise. Something happens for applications based on sensors, environmental applications based on sensors. Who is going to pay the bill if it’s not distributed? And then the markets – the market is leveraged through a different system that requires in many cases certain regulatory new frameworks in terms of how you cost these things.
>> MODERATOR: I think Andrea – okay.
Okay. This actually takes us to cloud computing. Because that’s a total transformation of the system from having a server client system, where you have a cloud and you can have services that are paid for in a totally different way way. The business models that go around there – the first thing, what is cloud computing? There are so many definitions of it. I thought the first question I’d ask is what is it? And maybe...
>> VLADIMIR KNEZEVIC: So, Vladimir from Microsoft. Actually, we are the guys who bought Skype.
Regarding cloud computing, so there is a vast number of definitions about cloud computing. But the simple one is that it’s on demand service, customers were asking for some service from some computer resource, whether it’s servers, applications, operating systems. So, basically, there are a lot of technical terms. But the most important thing is that it’s not a new phenomena. The thing that is different is economics of the cloud. And maybe we should address a little bit more what are the drivers for landing the cloud and why is the cloud such an interesting topic? And I hope we will discuss this, this topic, today.
So, from Microsoft’s point of view, the basic driver for cloud computing is economics and power. Since we are living in consumer oriented markets, we are consumers. We are consuming energy for cooling and heating systems for our gadgets. We need energy and energy is pretty expensive. Some studies say that 20 percent goes to electricity costs. So we compare, for example, a small or medium sized business, and electricity costs, consuming to large scale cloud computing companies that utilize data centers environment, where electricity is kind of like one-fourth of the national rate for electricity, it’s obvious that these rates are pretty large. So consumer energy is one driver for cloud computing.
The second thing in a way of dealing with management, I can say that cloud computing and this kind of services are giving much in a way of easing the way of managing the infrastructure. So, we are dealing with a pay as you go model. You are paying for services you are using, the way you are using and when you are using it. On a monthly based subscription. So you will not pay anything else.
And also, lack of knowledge.
>> MODERATOR: If I can stop you here. Is there an issue with sort of the dematerialization of ownership and moving into a licensing model?
>> VLADIMIR KNEZEVIC: That’s a totally good question. In the cloud computing, we are going from capital expenses to operational expenses. And definitely we are going to the materialization. And as I said, the main goal of cloud computing is to reduce the energy consumption. And I can agree that it’s – we’re in the process of materialization. Yes.
>> MODERATOR: Andrea?
>> ANDREA; I’m not talking about business model, because the last thing that you want is an officer of the Commission talking about business, yes. It’s not a good idea.
But I would like to piggyback on what the gentleman from Microsoft said about cloud computing being a new phenomenon. I came to think, in particular after reading a paper by the Aspen Institute, that most of the issues that we had to deal with, with cloud computing, are actually issues that we had and we did answer, we had and we had to deal with, with the Internet in general. Cloud computing simply tends to exascerbate many of these issues. And I fully agree that there are opportunities in cloud computing.
But since again I’m a bureaucrat, I’ll focus on the challenges and on the issues with cloud computing, because that’s what we have to deal with unfortunately.
And we don’t have a particular point of view on which particular business model should be the right one for cloud computing. But one thing is clear, which is that what is not acceptable – and I’m not saying it’s happening today – but what is not acceptable is that cloud providers do not put in place very – cloud providers and governments and States, because also the law has evolved here, do not put in place the public safeguards that we need to ensure security, privacy, consumer protection, proper jurisdiction of challenges.
Frankly, when I put my data on a cloud and I cannot name any particular cloud provider, when I put my data on the cloud, which kind of assurances do I have either as a citizen or as a public administration that my data is going to be kept secure? That my personal data in there is not going to be used for some other purpose? That if I have some – something to lament as a consumer, I can actually go and lament, for example, in a European jurisdiction as opposed to a U.S.
ar Asia jurisdiction and so on? We don’t see at the moment these issues being handled in a very coherent way. And this is problematic because the cloud computing is by definition an area where you need coherent approaches between different regions of the world.
I’d like to mention, and I’ll close my brief points on the matter, that the European Commission and the Vice President in particular has announced some months ago that she was going to develop a European strategy on cloud computing. We have opened on May 23 a public consultation on what should be the main elements of this cloud strategy. And you are all invited to participate in that. And participation is not limited to EU players and we usually do. We are happy to hear the views of everybody. And it’s available on the Web site. Go to the Web site of the European Commission. There is a meeting there, your voice in Europe, and you can find the consultation on there.
>> So we talk about two problems here. One is the – one is the lack of coherence. It’s is one of the issues. The other one is that in general we are also lacking thinking and rules for these kind of new – new splits from responsibility of the data. So you talk about both of them, right?
>> ANDREA: I do not think they are separate. One of the reasons why we don’t have coherence is because the traditional responsibility is not clear. But yes, you can approach them from two different sides.
Coherence in the framework across different regions of the world are a matter that public authorities have to deal with involving obviously the private sector and how this thing works. The responsibility is something that if the market is able to correctly attribute responsibilities between, for example, service level agreements or contractual arrangements, we don’t see a need to intervene there. So we want to provide the right framework and we hope that this framework will be globally – I don’t like to say globally harmonized. That’s a stretch. But globally coherent. But then we would like to see all the various players in the private sector to make sure that they get their acts together and ensure that all the responsibilities are contributed, which is not the case nowadays in our view.
>> MODERATOR: Thank you. So we heard from remote participants a question.
>> Exactly. It’s not exactly on what Andrea was talking about, but I still think it’s important to ask. It’s a question from the hub in the Ukraine. And it’s to Marco and to Vladimir. Are you planning to offer softwares and service and other outsourcing technologies to educational institutions and universities, whether they will be accessible and cheap solutions for students and teachers?
>> VLADIMIR KNEZEVIC: So, actually, Microsoft is dealing with the academics for a while. And we are presenting softwares as a service. We are giving students ability to use e-mail as a service, which is actually software as a service, portal, sky drive, all the hard drive disk through the University channel. So we are ready to deliver. This is sort of a consumerization of the service through the University channel. So we can discuss it a bit further if you want details on how to activate it. So please feel free to ask.
>> MODERATOR: And the question from the audience back there.
>> AUDIENCE: Thank you. Jose from IGF Spain. I will raise two questions. The first one is related to different business model through the network and through the worldwide networks. Do you think that with the convergence there will be the convergence of the model?
And the second question is, every time we – with the IP services on the clouds, the service providers of the cloud services will offer services through IP. I understand that the relationship introduced a balance between the services through the traditional networks and the services through IP services.
Don’t you believe that there will be necessary updating of the relationship? Because in my understanding, the present regulation is not consistent for the Internet.
>> MODERATOR: Thank you. Who wishes to answer? Do you want to comment on that?
Andrea?
>> ANDREA: I’ll take the second question. But if by “regulation,” you refer to the European electronic communication regulatory framework, which is our telecommunication law, let’s put it this way, I’m not aware that we have differences between the way the different services are regulating, depending on the underlying technology. Because, in fact, in the framework we define electronic communication network in a broad manner, including IP based networks. So, I – I would be happy to hear more about that, because if there is something that we did wrong on that framework, in which it took us four years, we would be happy to know if it – if we have to restart again. Maybe offline bilaterally we can discuss more about that.
>> MODERATOR: Other issues with regards to data privacy with cloud computing? Luis perhaps?
>> LUIS MAGALHAES: I could add a few more things on cloud computing. Well, one of the underlying issues was pointed out here, but I emphasize, it’s the fact that for cloud computing services, the compatibility of the way these services are dealt with in different jurisdictions is actually essential.
Another point regarding privacy and confidential is security. And on top of that there is another question. That is the guarantee of portability. It runs data, and it’s a shift from service provider at the will of the customer, which is also not solved at the moment. And it requires also a very serious look and the guarantee that actually one does not get locked in to one service provider.
Well, there is – this point is related to another one quite serious. Well, there is a tendency for the source of global services that are provided through the Internet somehow to approach monopolistic situations in search, in selling books, and so on. So, we know that markets cannot be left to themselves. history shows that. We have seen recent examples on the financial market very recently. And the antitrust laws are not dealing with this area the way that I think has to be assured especially for cloud services. So this is also some very difficult challenges, but the question that I’d like to put on the table. Thank you.
>> MODERATOR: Andrea.
>> ANDREA: Thanks, Luis, for the very, very important point. Just one reflection and I would very much love to hear the views of the audience as well on the issue of monopolies, and I’m not in a position whether such monopolies exist or not. We have antitrust laws, in Europe we call them competition laws. We all know that they tend to be, to put it politely, they tend to be not the quickest solutions to competition problems. And, in fact, the Commission frankly tries to avoid having to intervene, but rather tries to promote the creation as much as possible for the Commission, of course, the creation of market, so that the problem doesn’t arise.
And therefore the question for me is what do we need to have in order – and speaking specifically about cloud computing now – what do we have to put in place in terms of policy framework to ensure that we do not end up in a monopolistic position?
And the points that were mentioned, particularly interoperability or data portability, are essential. If we don’t have that, then you can be absolutely sure that because of the nature of the Internet technology, of the network industries in general, there will be a shift, there will be the creation of a monopoly or any way of opposition. And frankly I don’t think it’s in the interest of industry and we have seen this in the past, it’s not in the interest of industry to arrive at that situation, because that will simply lead to protracted legal battles. Possibly fine, possibly not. But this is just energy and resources that we could use somewhere else. So we really encourage industry to be a leader without having to ask it to produce interoperability directly off the shelf and other services. Some of the places in the industry already do, but not all of them.
>> MODERATOR: Thank you. Patrik, any other questions or audience members have questions?
>> MODERATOR: We have two people. Please stand up so we see the microphone.
>> PATRIK: I’d like to comment on that. I think you’re doing, from Cisco’s side, I think you’re doing a good job on the Commission with your work on encouraging development of standards in this matter.
But on the other hand, I think that, for example, public sector as a procurer and buyer also has an important role in sort of buying the right thing. As a commercial entity, if you want to develop, you want to have customers that actually ask for these things. So we get the wheel rolling again.
But we had a question from there in the back, please.
>> AUDIENCE: Maybe a comment. On the common monopoly, thank you for saying this. I think it’s important for consumers. We are being told all the time if you don’t like our service, go somewhere else, which is true only as long as we have these other places to go. So if we look at Internet services being more and more integrated, it is becoming a fiction that we can go somewhere else if we don’t like, for example, the data protection standards.
Second fault maybe on a previous topic about business models. I would like to hear opinions of the panelists on whether the companies consider creating new models where consumers can choose whether they pay or they have service for free in order to – for example, protect the privacy and say we don’t want profiling or other things done to our data because this is not the currency that we want to pay with our services.
Thank you.
>> I think that it’s not – it’s not 100 percent the point of view of the industry, that there is a gain between data and service for free. There is a business model that I described before, where putting advertisers and users interested can result in a win/win situation for both the parties and also for managing the system.
So frankly speaking for us, our business model is to have the advertiser paying for their advertisement, not the user paying for their privacy.
Saying that, I agree that transparency or user control is the way forward. So Internet Service Providers should provide tools to empower the users’ full control over their data and avoid a lock in. What you described for the Society of finding themselves with no choice is also a big risk for the companies who are – maybe can think that they are big, and big enough to not consider the risk of locking in the user and without giving them the choice every morning to use their services.
>> MODERATOR: I was going to ask Vladimir, services for free or a per use basis or one time purchase fee?
>> VLADIMIR KNEZEVIC: Actually, if you talk about services, it’s the customer that decides what kind of services they want. So, a lot of different cloud vendors provide different services, Google, Microsoft as well. We are delivering free services for customers, so it’s maybe developing – this question is developing to a question of data privacy. What type of data privacy you want with the free service and what kind of obligation from a vendor that provides cloud services actually you want in your environment. So but this is – this is a huge topic and we have to focus more.
Actually yes, we are providing all three models, service models, for free. Pay as you go service. And if you want to have it on premises, you can just do it.
>> MODERATOR: You touched on the idea of payment services and we can have a quick demonstration from Marco who will show us on the screen this authentication through – well, it’s mobile authentication through the phone number. That is a service which I believe is available now.
>> MARKO CAREVIC: I’ll try to be as short as possible. When it comes to mobile payment, we talk about two mainstreams, proximity payment. And this is where technology jumps in.
Google launched a Google wallet system but since they don’t want to talk about it, I won’t, either.
And the other thing is remote payment. For that, you need authentication. And two years ago, when Telenor service started to develop this remote payment services, of course naturally we started to think as our colleagues in Norway and Sweden. So we tried to deploy the same solution as they did.
And just to mention, Sweden, more than 75 percent of all authentication is done by a mobile phone. So we actually deployed the same, the same tool, the certificates stored on the simcard, and this is the security on the highest level.
Right now, I want to show you the authentication in Serbia. E-Government portal, which can be done in three different manners. Pardon me for this Serbian site, because authentication is not available on the English site.
So, we can see – I’ll try to translate as simple as possible. So, you have here this to sign in, when you want to sign in, you have three choices. You can sign in via Smart Card, mobile phone or just use your e-mail and password, but then you can just see what the services are. You cannot use it really.
So, if you choose to sign in via mobile phone, you need to enter your mobile phone number. So now you are online via phone.
>> I gather this is switched off.
>> MARKO CAREVIC: So what is happening right now? The Web site generates a one-time password. It’s 4186. And on my mobile I receive a pop up asking me to enter this one time password.
When I enter it, now the certificate comes to stage, and rises the pop-up saying digitally sign this one time password. Now I use my personal secure PIN code to sign this. After this, the digitally signed request is sent to the e-Government portal and after that they do the check if the certificate is valid, if it’s out of date or this signature is corrupted somehow. And after all the checks here were done, they pull the information they need, what are the information for e-Government? It’s my personal name and you can see it here on the top.
So it also has my personal ID and my address. So if you compared this to going – I don’t know, in your country, in Serbia this is a time consuming process. You have to go to a municipality to wait in line to have a number. For some services you have to wait for a few days.
If you compare that to this, less than 15 seconds is what is needed for me to authenticate myself to the e-Government portal. After that, I can do any e-Government services available on the Web site.
>> MODERATOR: You can use this for payment services?
>> MARKO CAREVIC: Of course. On top of this comes payment. Actually, about payment, I invite you to go to the Telenor booth in front. You have one big service started this year. It’s about socioeconomic impact of mobile financial services, where you can see how mobile financial services can drive GDP or social inclusion and bank inclusion in general. So you will have more details there.
Because of this short time, I will not speak about this service anymore. And then when it comes to authentication, of course Estonia is the best example. I want just to mention that. It is planned for this year for their election to be conducted via mobile phone. So just think about that.
>> I have a follow-up question. We didn’t see what happened on your phone. Did you see on the phone that it was this e-Port or the one that had to be signed? Or how do you know that you signed up and you didn’t sell your house?
>> MARKO CAREVIC: You always have authentication of the merchant. The merchant has to be registered in the system. It has its own certificates. So you see “please sign the authentication request” from e-Government portal.
>> AUDIENCE: Thank you.
>> MODERATOR: At this stage, Stefan needs to take a flight at some point. Is it Serbian time or...
>> STEFAN HEDELIUS: I should be in a taxi right now in order to make a flight.
>> MODERATOR: You might have to leave us. I just wanted to go further on this. So you’re authenticated, but what impact does this have on privacy? Because ultimately, so you can be tracked around and if you’re going to vote, can your vote be tracked as who you voted for?
>> STEFAN HEDELIUS: Yes. This is rather a question for government, because we give the tool.
But, about tranparency, about security, et cetera, so it’s up to government. Transparency. Government needs to use this certificate and use the authentication tool.
>> You don’t have an opinion on that?
>> I have an opinion.
>> MODERATOR: The question is – I’ll just repeat because there was no microphone. So the question was don’t you have an opinion on that?
>> I have my own opinion. This is why we don’t do that in Serbia because we don’t have the good business model. We want to guarantee the security for our customers. We don’t know this. I explained to Oliver, this business model is complex. So you have operators just as an infrastructure provider. We offer secure SMSs, some portals or similar stuff.
On the other hand, you have certificate agencies who guarantees for certificates, for signature, et cetera. And they are obliged by our Serbian law. If any misuse happens, penalties are up to one million Euros, per each misuse. So they are really strictly obeyed, the laws and security mechanisms which are deployed across all Europe. So it’s the same in Serbia.
>> MODERATOR: I need to have a corporate opinion on it as well.
>> AUDIENCE: I’m Ludo. My name is Ludo. That’s my introduction. I’m with the New Media School as well. You can find me at Twitter. But you need to have some sort of a business model for that, right, like an opinion as a corporate, you know, on deck. Because –
>> No. No. No. Here you are mistaken. Because we offer infrastructure and it’s open to everybody to use it in the best possible way.
So we as a mobile operator will not develop this election via mobile phones. We just gave the authentication tool and it’s up to government to deploy the business model in the best possible manner. So we only deal with –
>> LUDO – Ah. Isn’t that easy? Because then you just want to make money and you don’t give a shit about privacy.
>> And this is wrong. We don’t make money. This is free of charge.
>> Yes. Okay.
>> MODERATOR: So the privacy question still exists. But it’s free of charge.
What I think is important is what I heard from the panel. There is a bit of disconnect. What you tried to explain is that just because the data or the various pieces of the data, one at a time, does not imply as much privacy instrution as if you had everything in one place. That’s what you’re say, right? And what you’re saying is that some of the data that would be intrusion on privacy is data that you don’t have because you only do the authentication
>> Yes. This is a comples system. Each part deals with separate parts. Certificate agency deals with certificates and with customer identity. Mobile operator deals only with infrastructure, with secure SMS providing the secure as possible solution.
>> MODERATOR: We have something that we have to talk about next year in Sweden. I’m happy to hear that and hope that you will come.
>> Just one note, in Sweden and Norway, you have the service from 2001. And when we ask to provide us with fraud details, and some statistics, they just said we don’t have any misuse from the early beginning. So you can maybe ask them.
>> MODERATOR: Sounds safer than credit cards.
>> It is, because with credit cards you give the credit card number, you give certain details. You only put your mobile phone number and then everything happens on the mobile. If somebody steals your mobile, then enters the wrong SPN, then the application is locked. If you enter the code, then the private key stored in the simcard will be burned and the application will not be able to be used anymore.
>> MODERATOR: We have a question from here in the front.
>> AUDIENCE: Hi. I’m one of the New Media Summer School members, and I’m Slovenian. I want to comment. Have you ever thought about actually what is the result of the developing all those fancy services online? I mean, what the reality is in Estonia is that you can leave all of your life online. Estonians are becoming cavemen, in my opinion. Sorry, I don’t live in Estonia at the moment.
What about the right to disconnect? People are basically obliged to be online.
>> I can only say that you are a lucky girl living in Estonia. In Serbia, you have to travel for a long distance to pay for something. You have to wait in queues for hours to pay any bill, to pay online or something like that. You have only 60 merchants online in Serbia, which is the smallest in Europe. So we are providing the alternative. So they will be lucky to have that – that problem as you.
>> AUDIENCE: Okay. What about the fact that it has on the social life, especially taking into consideration the contact from face-to-face? Because this is at the moment lacking in Estonia.
>> Believe me when I go to my bank and wait one hour to pay for some bill, the girl in front of me is not so happy to see me. You know? So, my social life is better. Much better.
(Laughter)
>> MODERATOR: I think you’d be worrying if your social life is in a bank. Right. Not to say anything against bankers.
The next person, please.
(LAUGHTER)
>> PETER: I’m one of the BCS team here that is presenting tomorrow. Plenary 4. My question really winds back to before the – the very neat presentation of mobile phone usage to what the EU was saying, thinking in terms about security.
In my work, the way people have been outsourcing, they are not addressing security properly in their outsource contracts. Likewise, now we are moving to this shall we say on-demand world, certainly having a look at some of the, shall should we say, terms and conditions of some of the services. I won’t mention the company, but if you use their services you – some of the services are on the Delaware law. Some of the services are under California law. And I think I saw one service coming under Arizona law. And that was to get a reasonable Suite of services for, shall we say, an SME.
Now, one of the things that was in those Ts and Cs, it took me a while to pull them altogether to look at services that you are effectively giving up quite large chunks of your intellectual property to the company. And as we had in one of the other workshops this afternoon, people are somewhat scared of being part of a grand jury investigation when they live in Europe.
So, one thing I think the EU could do is to think about mobile contracts that we can use for the online world that properly addresses and consistently addresses across all the services the kinds of issues that we’re looking for: Data protection, privacy, that kind of thing.
So, what does the panel think about that? Can we get to that sort of consistent contract so we know where we stand?
The other thing about standards is that the Internet has been around for a while and the Internet has developed over the years. So we have FTP. We have HTTP, et cetera. And so some of the things like moving data around, why don’t we have a standard for a cloud drive, so that it’s consistent across the thing, so that we can move things if we want to.
Could I have your views, please?
>> MODERATOR: Andrea, perhaps?
>> ANDREA: Thank you.
For what concerns the standard contracts or standard model contracts or clause, you’ll be happy to know that yes, we’re thinking about it in at least one area, which is data protection and privacy. We actually already have that. Because every one of the ways that you can transfer personal data from the EU to jurisdictions outside of the EU is that there is criteria, one of which is whether the jurisdiction that the data goes to provides adequate protection, and the U.S. does not provide adequate protection. US law does not provide adequate protection. And, therefore, there is something called the business corporate tools so in data protection we already have that.
Now, the challenge there is of course cloud computing or the Internet in general, but cloud computing specifically covers so many different areas of law that it will be challenging to cover, to build standard contracts for every single area.
I would also like to caution that standard contracts or standard service level agreements does not mean and should not mean that we have one single contract for everything. What we have to do is to have clauses, parts of the contract which are standardized, so that everybody knows precisely what they mean. We should not be naive and think that consumers are going to anyway read those contracts. I’m sorry to be blunt here, but that is the reality to life. So we have to take that into account as well.
Here again, and on the point of jurisdiction that you made, I think that here what we – and this is again not a request, but an invitation to industry – if industry wants us to take up, really wants it to be built with the kind of growth that they are aiming at, I do not think it’s a smart thing to do to put in contracts a choice of court of law or choice of jurisdiction that will just scare consumers off.
So strategically I tend to that. I think if you want to get European consumers onboard, it’s better if you offer the choice of having whatever problem you might have solved in a European jurisdiction rather than in Arizona or California or in the Togo island or wherever else. But this is really up to industry to take up.
Again, as I said before, we – no matter what people may think, we do not like to legislate. We do not like to regulate. And it’s not only because frankly it’s a pain in the neck for us officers to do that, but it’s also because we believe that the market can, if there was a proper framework, can provide the solutions. Now, if the market doesn’t want for whatever reason to provide the solution, then we have to step in. And therefore I believe it’s in the best interests of industry to provide, in this particular choice for the jurisdiction, to provide trust for consumers that are not going to have to go to California or Arizona to solve their own issues.
And I wanted to direct also to the point made by the lady from the Youth Forum, but I don’t know if the moderators want me to do it now or later.
>> MODERATOR: Do it now.
>> ANDREA: I will do it. I want to add to Triin, I think, the lady – yes. Well, as an officer of the Commission, I’m not allowed to pass judgments on Estonians or any other citizens of the European Union. But I think that you made an interesting point, which is not so much related on whether you had to go to the bank or not – and here I tend to agree with my colleague that I prefer not to spend one hour in a bank and go somewhere else. The fact is that it’s true that our lives are becoming more and more independent. And it’s true that our lives are spent more and more online. And this is true for slightly older people like me, certainly true for younger people like you.
What I think is missing at the moment is a serious reflection, which should be more disciplinary on what this means for us. I tend to be optimistic so I think that this doesn’t mean that we will turn into cavemen, but it doesn’t mean that we can just let these changes happen and see what happens.
In terms of – I saw many studies that say that the Internet, that over usage of the Internet kills social relationships. I saw other studies that say they tend to increase. So we need more study there. And I believe that the experience of the young people – and you are the really digital native, we are digital migrants – but you are the natives. Your perspective on what you do and what affect this technology has on your lives are what we need in this moment.
>> MODERATOR: I was going to ask Cristoph a question, coming from what you were speaking about before, regulation with regard to privacy and these things.
As far as Telefonica is concerned, how do you see this threat of regulation?
Well, you were saying that if you don’t do it, if you don’t sort it out, we will have to look at it and come up with a solution ourselves, rather than you, within the industry.
>> CRISTOPH STECK: Regarding privacy, you mean that? Well, we have a lot of regulation happening on privacy. And we are a telecommunication operator and we have specific data protection laws just applying to us. So, we are I think, if I may say so, quite regulated in that regard.
This might not be true for all players on the Internet, but for the telecommunication operators in Europe –
>> But Telefonica is international. There are different restrictions for telefonica in Mexico or Spain or elsewhere. How are clients now, with the whole interconnected system, how are clients able to know what jurisdiction they fall under, where they are?
>> CRISTOPH STECK: That is a complicated question, of course. I don’t have the answer to that here, but I think we have – we have of course, in all these restrictions, different laws applying to data protection. But they exist everywhere. I mean, this is not that there is a wide spot. But as was said earlier, maybe the coherent standards as was said earlier are missing. So we might have a chance there for international cooperation and for minimum standards. I totally agree.
>> MODERATOR: Thank you.
>> Yes, I think that yes, the jurisdiction is an issue. But again, the focus should be always on the Internet Service Provider, on the single operator, and the kind of trust that they can offer to the users. I agree with Andrea on this point.
I don’t think that a price solution or logistic solution or self regulation solution could be the only way forward, because existing laws already are regulating these kinds of problems.
Let’s think if we are going for obligation to the Internet service provider offering cloud computing services to every jurisdiction in the Europe, this makes a lot of difference for me as a citizen to have as a forum in Madrid but in the end it’s not so much, it’s not so much, Madrid or Dublin instead of LA. But the big difference in terms of regulation is for –
>> MODERATOR: You have to speed up a bit. So please finish your intervention.
>> I have to react on this. There is a huge difference between having your forum in Dublin or in Madrid, which are part of the European Union, and in Los Angeles, which is not. For European citizenS, this is a huge difference.
>> MODERATOR: Thank you. And I’d like to respond to part of the question about standards. I’ve been working on Internet standards all of my Internet life, which started to become quite name of years. And regarding cloud storage, there is a separate association which developed a couple of cloud storage standards. And the first test was done in the spring this year, where many manufacturers were doing interpolated tasks. So this is happening. So all of us should be careful saying this is not happening and maybe go do some Googling. Things are happening, but maybe it’s not enough.
>> MODERATOR: Thank you Patrik. I realize that we are running way over time. First, I was going to say that there are cartoons which you can see or drawings on the wall you can see throughout the day. An artist has been drawing the sessions and drawing the discussions that were taking place. So I invite everyone to take a look and see if it really reflected what the discussions were about.
Before we close off, perhaps we have two announcements. One is to do with I believe what is happening next.
>> MODERATOR: Thanks. Before we close our today’s programme, we dare to bother you with a couple of other announcements. First of the announcements concerns dinner. And for the details of the dinner invitation for tonight, I hand the microphone over to Vlada, who can explain all in detail.
>> VLADA: Thank you. Very brief comments. As you’ve seen in the programme, dinner as we call it the gala evening. It’s 7 o’clock in a very nearby venue. So, we are not going to arrange any transport, because the legs are the best transport. It’s about 7 to 10 minutes slow walk if you want. When you get out of the center, just go right and you’ll see a big tower and you can’t miss it. It’s the business center, 25th floor, great view over Belgrade. I hope you like the jazz that you’ll see there.
I don’t want to tell you when the speeches are going to be, because if I tell you, you’ll try to skip them. So just try to be there at 7 o’clock. I guess we will organize the walk to there in a couple of groups. But you can do it on your own if you prefer. You can take a cab.
7 o’clock. 25th floor of the Tower Uchce. If you have questions, you can grab any one of us.
>> MODERATOR: Thanks a lot, Vlada. The second announcement is that after the closing of the session, there will be two video – two new services from Ericsson introduced in Serbia. Also, people who are interested to have a look on this video on two services are welcome to stay in this room.
>> Stay here.
>> MODERATOR: So the third announcement regards our tomorrow’s programme. After a nice gala evening, we all invite you to be here back again in the Sava center tomorrow morning at 9 o’clock for the plenary 2 on cybersecurity in this room.
I wish you all a pleasant evening. Thanks a lot.
>> But we’re not done. We are not done.
>> One more announcement regarding a session that is not on the programme tomorrow.
>> One more announcement and I hope related to the topic today, sort of future challenges. That is on IPv6. So IPv6 adoption, IPv4 exhaustion, and some of issues that that raises. We are holding that as a side event from 11 to 12:30. I’m not sure what room, but we will make sure there is signage around. So if you are interested, we hope to have you there for the discussion.
Thank you.
>> It just remains to thank the panel.
(Applause)
Thanks to Patrik and thanks to the interpreters as well who were working very hard today.
(Applause)
See you tomorrow and enjoy yourself tonight.