Transcript: Zero rating what is it?

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EuroDIG 2016 BRUSSELS, BELGIUM 10 JUNE 2016 11:30 AM LOCAL TIME WORKSHOP 7 ZERO RATING WHAT IS IT?

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>> FREDERIC DONCK: Shall we start? Okay. So look, this is a very nice room. I suggest we try to get here we will have to speak in the mic because of the remote participation. So if we want people outside there to be able to listen to what we see I'm afraid we could have a nice conversation between us, we would need to use the mic. We have one mic on this table that I would suggest you use and another mic on this table. So let me introduce myself. My name is Frederic Donck. I am working with the Internet Society and I am happy to be here to discuss zero rating. We have some great work with our group that we have different angles but a limited panel. We have three panelists, which is great, because we want to have much interaction with you, the audience. We are a limited number of persons which is perfect. So it might give the occasions for everyone to introduce his or herself. So what do you think? Starting with this lady over there, could you please tell us who you are with the mic, please. Let me help you. Okay.

>> Hello? Hi. My name is Lisa Alkested. I am from the Swedish NRA.

>> I am Matt Allison. I am a policy analyst.

>> My name is Elisa Lindberg.

>> I am working for the Enrich Registry, Nordic.

>> I am Marta. I am from the European Telecom Network.

>> Hello. I am Lisa Fora. I am from the ETN, too.

>> I'm from the ccTLD Registry Association.

>> FREDERIC DONCK: Okay. Keep the mic. So we will continue with my panelists and I have the pleasure to introduce you to Frode Sorensen. He is here as the Norwegian. We value his participation to the BEREC group which is cosharing but he is here in his capacity of Norwegian. I have Guillermo Beltra from BEUC. It is a well known consumer organization. You represent 42 national consumer organizations. And last but not least I have Roslyn Layton, Ph.D., fellow from the Aalborg University in Denmark. And let's go with you, Konstantinos Komaitis.

>> KONSTANTINOS KOMAITIS: Hello. Konstantinos Komaitis with the Internet Society.

>> Thomas Grup from Deutsche Telecom.

>> Telefonica.

>> And Roberto from the European Broadcasting Union.

>> Eco, Information Society Development Institute, Republic of Moldova.

>> Thank you.

>> Hi. I am Jimmy. I work in the Government affairs department for Apple.

>> Mateo, I work in the Telecommunication and Information Society of Belgium, Ministry of Economic Affairs.

>> FREDERIC DONCK: Thank you. So if those two gentlemen there, if they may be willing to introduce themselves. Say who you are. And then we close the loop and we start.

>> I'm Stefan from Aalborg University.

>> I am Pulek from the UK Government.

>> FREDERIC DONCK: Thank you. And last but not least it is Krishna Kumar. You are a member of the ISOC chapter. You will be the voice of the remote participants. Let's start. We usually start by asking the audience what it is that they think about the topic of the day. Really there will be two sessions about the zero rating but this one is about what it is. Are you familiar with zero rating? By hands do you know what it is? Or do you know more exponential? Let's check. Everyone is aware of what zero rating is. But yet I think we might try to give it a definition to just make sure that we are on the same line. Who wants to try this? Has anybody, a kind of one line of what zero rating is or is not? If not, we go to the panel here. Don't worry. I will turn to them in a few seconds. But anyone wants to try, please?

>> Thank you. Well, from the ETNA perspective zero rating has nothing to do with Net Neutrality. It is a business model.

>> FREDERIC DONCK: Okay. Let's see whether it is part of the Net Neutrality family. Thank you for this. Anyone else, zero rating, a definition? Roslyn, do you have something about this? From what your perspective, what would it be? Just

>> ROSLYN LAYTON: So I think if we look at zero rating we got to go back to when was the first time it was used. Where do we find it in the dictionary and this is in the 1950s in the European common market and there was a practice going on of trying to after the war being able to get goods to people and making sure that certain items were not taxed. So wheelchairs, books, food and so on. It was very important that those items were called "zero rated", mean they didn't get taxed and this is how it got started.

>> FREDERIC DONCK: Guillermo Beltra, you want to say something?

>> GUILLERMO BELTRA: I would agree with Lisa. It is very linked to Net Neutrality because as it is a business model that allows the access provider to have an influence in to what the end user is using or not online and that's what I hope we can delve in to today. I think an important element to distinguish as well is between called zero rating and bundling. A distinction we make at least in our reasoning is that the access provider could bundle an online service in its price. So, for example, your mobile provider could give you for the price of the mobile access Spotify premium or Drop box Pro without that having to design its traffic management policy. Whereas zero rating would imply that there is a data cap, A, and I hope we can talk about that data caps because I think it is a very important element as well. And B, that one specific or several specific services do not count against that data cap, what that data cap has reached. So we make that distinction between bundling of services in one price and services which are zero rated, their traffic is zero rated. And I think that's important because we have heard the term zero rating confused with what I just described as bundling.

>> FREDERIC DONCK: Thank you, Guillermo. This is an interactive session. You can jump in whenever you feel you need and, of course, we and this is valid for you, my dear panelists. If you hear something that you don't agree with or agree with, jump on it. Do it as intimately as we could. It is not part of the Net Neutrality and the others one says it is. You have been working a lot of your time on Network Neutrality and the BEREC has issued some interesting guidelines recently which we will be called to comment until mid July something. So nice holidays in perspective. But I would like to hear from you. Maybe we will step back a little bit. Could you please tell us what it is that the BEREC came up with and, of course, my corollary question do the regulators within the BEREC have zero rating or did you leave it out or is it part of the family? Global view of Network Neutrality and then answer the question.

>> FRODE SORENSEN: I agree with what has been said so far with zero rating and the definition is that zero rating is defined by the that there is a price of zero when you transmit traffic. So in this case it is traffic on the Internet we speak about. But I understand the example of Roslyn is a similar example from another context. Within BEREC we have launched a public consultation of European guidelines on Net Neutrality as Frederic mentioned. These guidelines are based on the European regulation of Net Neutrality. There is a new regulation covering Net Neutrality and roaming which run in to force the 30th of April this year. And in that regulation BEREC was given the task to develop guidelines. These guidelines are explaining how regulators should implement these regulations. So it is not any new law that BEREC provides or any new regulation. It is an interpretation of the existing regulation. In these guidelines we also touch zero rating. So it is covered. But I expect we will go more in to these details later, or do you want me to already now dive in to that aspect?

>> FREDERIC DONCK: Yes.

>> FRODE SORENSEN: Main guidelines are regarding technical traffic on Internet. And when BEREC has rated the technical traffic on Internet it is based on regulation. It is a more detailed description of what traffic management will consider legitimate under this legislation. When it comes to zero rating the regulation doesn't cover zero rating explicitly. It covers commercial practices. And it is under that Article that BEREC has interpreted zero rating. So it has also been mentioned by the commission, for example, in the fact sheet when the regulation was published, that zero rating would be an example of such a commercial practice. Since the regulation doesn't provide any clear understanding or clear interpretation of what kind of zero rating that would be allowed or what kind of zero rating would not be allowed under the regulation, BEREC has taken a similar approach. We haven't given any clear cut rules regarding zero rating. Instead we have provided a framework which can be used by regulators when investigating specific cases in the market.

>> FREDERIC DONCK: Okay. So that is interesting. I would like to hear from you why do you think, and I will be provocative, this is my job today, are there any compelling arguments to make zero rating part of the global discussion of Network Neutrality while I hear that even top regulators in Europe say this should be covered under commercial practice. Is this a competition issue or something that needs to be in this box or is it a global part of is it part of a global conversation on Network Neutrality? I am not convinced. I want to hear from you. Roslyn.

>> ROSLYN LAYTON: So in my work at the University what I have tried to do is to look at the examples where there have been so called Net Neutrality violations to be able to understand what was the issue and who made the complaint and why did it happen and what was resolved. So the kind of strange thing with zero ratings we find it is a practice that has been around a long time and used by half the world's mobile operators, but as an economic tool it is all over the place and for good reason. For example, when we go around the world medicines have flexible pricing. We have flexible pricing in everything we consume. Not just because of competition but for the most important reason we want to make products and services less expensive for the poor. And if you look at the first example of, you know, now there is a lot of controversy about this program with Facebook, with the free basics, but how it got started was in South Africa where there is an AIDS crisis and the South African Health Department refused to publish the AIDS treatment and prevention information. So Vodacom put this health information on their website and zero rated it. And overnight they got 2 million visitors because the people were absolutely clamoring to get this information. Now in my research I am looking at takeup of who uses zero rated in these context for health information because when you are reading health information you need to take a long time. So a session length may be something like two hours where you have got a pregnant woman is trying to get ready for a pregnancy, these kinds of things. They are extremely important. So there is an issue where having Frieda that for certain instances can be beneficial. I look at something here, this is put on by the I know this is important for the European Union this eGovernment initiative. I am proud in Denmark because we are considered No. 1 for eGovernment deployment. This is a great example of how you can use zero rating, particularly in a country like Italy where you have you have a challenge with people who don't adopt the Internet, something 20 to 30% of the population. And this is a win win because the Government could be able to digitalize their services and people could get them for free. The important thing to understand the idea of price flexibility and specific things to do to make products and services as low cost as possible for the poor, that is how to understand how to understand this kind of a service.

>> FREDERIC DONCK: Thank you, Roslyn. So you put an extremely good perspective here. And before I give the floor to some of the people who I already see moving in the audience, so yes, let's try to define zero rating by a different perspective. So I'm hearing you saying rightly users might see great benefits in using this in different countries. It is not about music. This is the ability for them to access eGovernment, to access a lot of different content that otherwise they would not be able to access. So Guillermo, from a user perspective I know you are talking about a European perspective. How do you see it actually?

>> GUILLERMO BELTRA: I will be provacative as well. We are a collective community of consumer organizations, we are against zero rating. I will try to explain why. The analogy is hard to follow. You buy individual medicines. And so I mean I understand why zero rating might have a sense in that context. But in the context of accessing a very special and valuable societal resource that is called the Internet, this has a fundamentally game changing impact. In the sense that the access provider, the company that is allowing you to access this resource suddenly has an additional tool now to become what we fear or what we call a gatekeeper and/or a king maker which from a consumer perspective we want to avoid. Not allowing discriminatory traffic zero rating which I think is very much linked and belongs to the Net Neutrality family which implies discriminatory traffic, allowing this type of zero rating can have a very perverse impact in A, first how consumers can choose what they decide to do online. A factor of what you do online is created and under the control of the company that is giving you access. And B, it can have a very perverse effect of innovation. So if zero rating becomes the norm and okay, I mean it might the fact that it has been a widespread practice in many mobile operators for the past few years doesn't mean it is not dangerous or risky in the long term, in a long term perspective. So if it becomes the norm that, for example, I speak of mobile because it is most common in mobile. But if mobile operators continue using zero rating and it becomes a standard practice, A, I leave these questions with you, what would what incentive do they have to increase data caps? Of course, bearing in mind that zero rating doesn't make sense without a data cap. So we are working under the assumption that you get an Internet service that is capped at a certain level that allows them to zero rate something, but if you have zero rating this continues to go ahead. And what incentive do they have to extend the data cap. Second, second, now in the EU and this where I would disagree further, that what BEREC is proposing is an interpretation of what Net Neutrality means. It is an interpretation of rules that the European institutions have adopted. So the EU regulation now, so called telecom single market establishes a direct right for all European citizens and users which includes businesses. And it is a right to freely choose what you do online. What kind of market practices impact that right or not, respected or not. And one of the things that BEREC has defined in this framework to analyze zero rating whether or not that consumer choice or end user choice sees itself affected by the zero rating commercial practice. And one of the things they say with which we fully agree if there is a specific or several specific apps that are being zero rated this amounts in reduction in consumer choice and would be an infringement of rules. We can talk about other examples of zero rating and I think it is very important that we have this rich debate because it is not just black and white and there is no single examples. But that's one angle. And the second angle that the European regulation also says is that we need to analyze the commercial practices always remembering that the purpose of the EU rules is to continue protecting the Internet as an ecosystem of innovation. That is at the right top of the pyramid of what that regulation is there for. So when we think about zero rating we need to ask ourselves are we protecting the Internet as an ecosystem of innovation or not.

>> FREDERIC DONCK: I see some movement there.

>> FRODE SORENSEN: First I hear the argument that zero rating is a business model. And afterwards I hear this is something that we have to help the poor people and to me those two arguments seems to point in different directions. So I will not buy any simple argument regarding zero rating and use that as the overall approach for zero rating. Of course, you can find examples that are very good. You can find examples that are very bad for zero rating, but you can't base the discussion on that. If you want to have an overall process of zero rating you need discussion about the principles. And I also think that when you discuss zero rating it is a different discussion when you discuss zero rating for the Internet and whether you discuss zero rating as a similar methodology in other businesses, other markets. So taking us a step back to the question about whether zero rating is related to Net Neutrality or not, then I think we have to start with what is zero rating supposed to protect. And zero rating is related to the Internet. And the question is what value does the Internet have for people, for the society, for the economy. And the way I understand Net Neutrality is that it gives users control of access to the Internet. You are in control of how you use your own access to the Internet. That has two effects. First of all, you as a consumer, as a citizen have the possibility to use the Internet for different purposes for your own advantage and for the advantage of the society. But it also has an implication for the providers of applications and providers of content which provides a marketplace and open platform for distribution of content and for a possibility to reach out to your customers, or potential customers. And this is what Net Neutrality is supposed to protect. And when you discuss zero rating then the question becomes will zero rating influence this possibility to choose how to use your own access and possibility for application providers to reach out to their customers. And in my understanding from a technical point of view, of course, zero rating has nothing to do with Net Neutrality because at least in its basic implementation you don't prioritize traffic when you zero rate it. It is a question about how much you pay for the traffic you transmit and there is prioritization of the traffic necessarily. But on the other hand, it influences your choice as a consumer. If some content is not charged or is charged at the different price from other content, of course, this influences how you use your access. And this also influences the competition between the providers of content. And if you look at how the Internet works, as a content provider on the open Internet, you can connect to the Internet in one place with a simple server. And you can reach the whole world. You can reach any consumer if there is a neutral Internet. If there isn't a neutral Internet then you are blocked towards specific, specific consumers. And the same this model, this is also a kind of a business model. We'll also be influenced by zero rating because as a content provider if there is zero rating in the market, you have to negotiate with each and every ISP around the globe to provide your content under a zero rating umbrella. So that's a major change of how you can provide content on the Internet compared to a completely open Internet or you can access the Internet in one point without any further negotiation with individual ISPs. So in my understanding this really influences the business model of the content and application providers. And in the long run it also influences how you as a consumer and as a citizen and also as a society in the broader perspective has an advantage, has a benefit of the Internet. So therefore implicitly zero rating influences the neutrality of the internet.

>> FREDERIC DONCK: You opened so many avenues. I would like to in by the way thank you for doing this, to give again this regulatory global perspective. So I would like to stick to what we said, and Guillermo introduced it very nicely, a user perspective. I still I might need to get back to you in a few seconds because for me my understanding of Network Neutrality would not prevent operators to just have data caps anyway. So that's part of the offers we are in the competitive environment if any. But before we get back to this, Roslyn and then I go to this side and I finish with you. Thank you.

>> ROSLYN LAYTON: So I think it is valuable, we talked about user perspective and consumer perspective but even within those perspectives there is multitudes of views. There are many kinds of consumers. They are not a single consumer or user. Let's take an important perspective today for mobile prescription. At least 20% of the data is advertising. People are being forced to pay for advertising that they didn't want or asked for. That's the way it works. That's part of what we call the neutral Internet. When we look at video it is almost 40% of data is advertising within video. From the users we can see that about 400 million people have downloaded ad blockers and they have privacy and security concerns. There is something going on there. The advertising is playing an important role. But the users are also feeling violated. So I think there is something else going on with why people are so upset about zero rating and I don't think it is what is on the surface. What's happened today is that users are essentially subsidizing advertisers. It is to lower the cost to the end user and a company puts an ad in the newspaper or on television so that the end user doesn't have to pay, for example. Or there can be a combination of payments. So what really should be happening here is that the end user should have an opportunity to have different ways to experience advertising. So, for example, the advertisers paying today to be shown on a news website or what have you. They may pay Google or whatever. The advertiser is already paying to get this data there to get the information up. This advertisement could just as well be experienced from the end user side. So, for example, we have credit cards. We have loyalty programs and we visit certain websites so many times. We should get points from them as a means to get reimbursed as the data we use. There is an opportunity here to find a more customer centric, a better form of advertising, less invasive by changing what's now a status quo. The world's traffic is overwhelming, is driven to very few destinations and what zero rating can offer is a potential to break the status quo. You could have a situation where mobile operators could be able to offer a program but it doesn't have to be that way. It can also be on the end user side where the end user could be able to contract with the advertiser to get reimbursed for the data he uses. So in any case why people feel that why this reaction has come so quickly is because most of the Internet experiences that we have today we are going to generally one of Google's 200 apps and if you don't go to if you haven't experienced it don't involve Google advertising. Google is not collecting data on you. They can't show you an ad. So that's why they are very concerned about it because it means another competitor could enter the marketplace. But what you need to understand is even with zero rating it is comprises less than 1% of the offer and comprises less than 1% of the revenue. Many of them lose market share. Just because you make it free doesn't mean that people will take it up. And that's what I found in my research around the world is that the companies will try to do zero rating programs and they fall flat on their face. It is also an important means for smaller telecom operators around the world, that's where you have cases where the entrant operator needs to use a strategy. They need to use some kind of marketing or partnership. So in any case the important part is if everyone talks about they want competition, innovation and differentiation you have to allow different kinds of pricing models. If everything is all priced the same you tend to strengthen the largest providers because they are the ones who can offer things as a commodity and you only allow them to sell bulk data. That's going to tend to help the largest providers anyway. So you need to have this kind of flexibility in the market place to be able to create competition.

>> FREDERIC DONCK: Thank you very much, Roslyn. Please.

>> Thomas speaking for Deutsche Telecom. I have been a regulator for half my professional life and I have a few comments and also two questions back to the panel. Now I'm a bit perplexed when I hear that we are essentially talking about customer choice here. And zero rating is a problem because in my understanding we are not limiting customer choice by having those tariffs. And we as you all know as Deutsche Telecom have the Spotify single service zero rating offer in the market. We have had it for a while. And we adapted it to the new regulations which are enforced since April 30. We believe it is completely consistent. And as I see it the evidence in the market we have three mobile networks in Germany. Every network has a deal with an audio streaming service. And then I can assure you it is not the case that the majority of the Deutsche Telecom mobile users are using Spotify as their preferred audio streaming provider and vice versa. Not the majority of German Spotify customers are on Deutsche Telecom's networks. So first question back to the panel is, do you have any evidence that what you are stating is actually manifesting in real world market circumstances, saying that zero rating leads to a situation where there is a reduction of customer choice? And I can assure the reaction we got when adopting our offer and the adaptation we did was simply after a user reaches the volume cap also the Spotify services struggle didn't create much of applause from consumers. Quite to the contrary, consumers were very disappointed with this and that would be my question to Guillermo. Would you be okay if we forwarded those user complaints to you and you explain to them why the European regulation is in favor of the consumer? And maybe a question to Frode as well, I read in the BEREC guidelines that you will be working with competent other authorities on those questions. And I would expect this is going to be competition authorities. And you are going to express to look at real market evidence and maybe work with other competent authorities that are media regulators.

>> FREDERIC DONCK: I can continue or maybe one or more panelists want to take it. I can continue. So let's go with you Guillermo, but then I will get back to you.

>> I am Pablo. And I work for Telefonica. And I wanted to mention the fact that zero rating is a commercial proposition and it is impacting Net Neutrality because it affects how users approach and what they use on the Internet. That's a commercial proposition. And it is certainly as all the advertisement and commercial propositions that we have all around, don't users get affected when they see advertising on TV or on the Internet or certain websites or apps? Don't they have get affected when they go to a search engine and they get some promoted searches and also some searches in a different in a certain ranking? Don't users get affected when they go to an app store and they see different apps that are being either placed at the top of the position because the app store, whatever algorithm decides to do it or even because they might be able to pay and get placed at the top of the app store? Certainly every commercial action has an effect on users and that's the aim of it. The thing is that they are still free to choose and that's what is important. There is a competitive market and they have freedom to choose among all the different propositions that they have on the Internet. And just as an example going to a case that probably most of you know about in Holland. Vodafone was fine because reaching the neutrality rules because it was offering a zero service rating, offering access to TV content for it was a limited offer for I think it was about three months and they got fined because it was in breach of Net Neutrality rules because they were affecting the decisions of users on the Internet. And at the same time Google was including a new feature in their app store where basically they were allowing the app developers to pay and get ranked at the top of the list. So in fact, if HBO was to pay and get ranking at the top of list this would the same effect as the advertising or promotions by Vodafone in Holland. And nobody is really complaining and nobody is really concerned about that. It is okay to have that kind of commercial proposition in the app stores but it is not okay to have them on the telecom. So if we really think we cannot affect users or we cannot make any promotions then we will have to change the whole Internet model. We cannot have free services, no promotions and not promoted ads and that would be a complete change of the whole scheme which I think is not really that needed because we still have customer choice.

>> FREDERIC DONCK: Thank you. Before I get back to you, Frode and Guillermo, can you stick to this question?

>> Yes, I will provide some very quick comments. I work for the Center for Sight Foundation. Just a quick reaction to what Gonzalo was saying now. Just because there is concentration phenomena in various layers of the Internet, we have to think that is fine and do not regulate one just because there is another one. I think the proper way of dealing with things is foster openness at both layers and not just because there is concentration in one and say the other one is justified to concentrate and discriminate first comment. To keep on that first comment the Dutch case is a very good case. Vodafone was fined. They were the consequence was that the week after they had to double the data cap of their users so that in order to foster mobile data consumption and why I am saying that, because the zero rating model is very efficient as long as you have very tiny data caps. Data caps are not a problem. And if you have Deutsche Telecom in Germany you have very wide data caps. It is a market practice. If you have tiny data caps not to consume the data caps and there is a very important research by we consult made in 2015 and presented at IGF last year, and you were also there, I think, saying that consumers in various European countries and in the U.S., they find zero rating offering attractive only when data caps are low. If data caps are wide they do not find them attractive because they already have sufficient data allowance to choose whatever service they want. And the final remark regarding zero rating as what Roslyn was saying in the very beginning it is a way of providing access to information to poor people and disconnected communities. Otherwise wouldn't have access to information. I find it completely sorry, if I use this term absurd to say that just because there is a deficiency in public policy in providing access to the Internet then we have to Delegate the provision to a couple of service to private actors whose obvious main interest is commercial and not philanthropic if these communities have problem in Internet. The solution is proper public policies that foster Internet connectivity and not just access to a couple of activities.

>> FREDERIC DONCK: Thank you very much. Let's part this last item that you said and discuss that a little bit later because I would like to stick to the user shows an influence in user chose. Can we continue along this line? I see another panelist here. Sorry, speaker.

>> Barne, Tech Freedom. I agree not often with Pablo, but Luco. Sorry. Luca Pablo just re Tweeted me. I don't agree often with Luca but I agreed with most of what he said until the very last part and that is to say that we have an analytical framework for looking at zero rating in an antitrust analysis. You would ask the question is there an anticompetitive effect to what's being done. And I would agree that if the data cap is set in a particular way that it could be anticompetitive and you could analyze user choice in that framework, but in my opinion it is probably not generally going to be if you look at, for example, at the basic data tiers in the U.S. for wire line broadband. I think you would have a very hard time saying that 300 gigabytes for Comcast are now a terabyte because users are going to exceed that. It is a harder analysis in mobile, but you would look at the different factors that make mobile a different environment and ask why is the data plan being priced the way it is. If it is a competitive environment and you have multiple carriers competing and they are setting a basic data tier I think that antitrust analysis would say that's not being done to drive consumers towards preferred websites. But the point is to have an empirical analytical framework is we can look at this and make decisions about whether something is good for consumers not being driven by idealogical priors but real world affects in the marketplace. It would be helpful if we can talk about what that analysis looks like and if anybody disagrees.

>> FREDERIC DONCK: Thank you. I would like these antitrust issues to be addressed but I will turn to Roslyn but not now. There are so many questions hearing now. Krishna, I guess you had one remote participant who might just nicely squeeze in something.

>> KRISHNA KUMAR: Yes, I have two questions from Mr. Florian Damas, policy and regulator director Nokia. Question one, do we have a choice for zero rating with 4K and 8K video on demand? Or do we expect that operators will offer much higher data caps and at which price? And question two, BEREC has excluded devices such as e book readers in the guidelines. Isn't it a perfect case of zero rating? Thank you.

>> FREDERIC DONCK: So we've got two questions. Thank you very much, Krishna. I guess this is being taken note of. Frode, you address some questions.

>> FRODE SORENSEN: I take note that Thomas and Gonzalo had questions for me. I'll address those first. Regulatory authorities, the guidelines don't provide a clear answer to that. And in the limited parts of the regulation that's relevant, I so therefore I can't provide you with a clear answer to that. And if you have as a stakeholder input in that regard, I recommend that you send something in the public consultation regarding that, because that is definitely something that could be clarified. To Gonzalo's question about affecting user's choice and you mention examples as search engines and app stores and I agree with you those affect user choice. In my understanding and I think in most people's understanding there is a fundamental difference that the Internet plays and a role that a search engine or an app store plays. Even though there are major providers, dominating providers or whatever economic term is used for those, in search engines and app stores, that would have to be addressed on the competition rules. As you know but as from an end user's point of view you can choose another search engine if you are not satisfied with the one that you are using currently or you can use parallel search engines and the same goes for app stores. You can choose from one platform to another one. For example, when you buy your new Smartphone, but when it comes to the Internet, you can't choose another Internet. So we have only one Internet. And that's the Internet that Net Neutrality is supposed to protect and we don't want to fragment the Internet to different parts with different rules, et cetera. We want to have an open platform so I can reach any information, I can reach any other end user over this Internet without buying a specific access product. I want to reach all of the Internet with my access product and I want the other users to do the same. So thereby we have one global common open communication platform. That's the fundamental difference between the Internet and a search engine and an app store. But, of course, there are competition concerns in the other areas as well. I don't disagree with that. But there is also a fundamental difference between those two. The two remote questions, I think the question about whether 4G and 5G provides so much capacity that there is no need for zero rating, I don't think that's anything that a regulator would have a specific view on. I think that depends on the development in the market. But there was another question about e book readers and whether that was a kind of zero rating. I think that was the question. And you are correct that there is a reference to e book readers in the guidelines. And the way it is described is that the limitation of the communication is due to the nature of the term equipment. So that's something different from doing something in the network. So when you have an application or you have a piece of equipment, you connect to the Internet, any throttling that is done in the application or in the device connected to the Internet is something fundamentally different than that provided by the service provider which connects the device or application to the network.

>> FREDERIC DONCK: Guillermo.

>> GUILLERMO BELTRA: Thank you. Where to start? I must admit I get confused when we start mixing with different analogies that don't necessarily I think in our view reflect what we are really talking about like I mentioned before about medicines. First of all, I would agree with Luca, absolutely. Let's talk about problems in different markets, different layers of the Internet. We are part of the formal investigation against Google shopping because we believe there is consumer detriment that is happening there and that is a very important conversation to be had. Paid for advertising online and so to speak free services online in exchange for advertising or exchange for personal data that is used for advertising is a very commonly used business model in the online environment and there are loads of consumer issues there. And it would be great to talk about those things. But establishing the link there I think is a bit tricky. The first question was asked by Frederic whether data caps is about Net Neutrality. As we have seen and Luca explained that very well. It is part of the conversation. We are not saying that using a data cap is actually against a Net Neutrality principle as such. It means using the data cap to discriminate against what the user can do with the Internet connection when it becomes a Net Neutrality issue. Data caps are continuously being researched. Research has found that data caps can be misused to negatively impact consumer choice. This is not me saying it. This is the U.S. open Internet rules and research. Maybe an analogy that would work would be the EU's system of highways where you pay a price to be able to access the EU system of highways and you are free to drive wherever you want. You can only drive for 200 hours a month. And when you get to those 200 hours you can only drive a Volkswagen or you can drive in the direction of Germany. It is not limiting consumer choice within the 200 hours. I can choose the car I want to drive on the European system of highways and I can choose the direction up until 200 hours. Afterwards I don't have a choice. Within the company zero rating does not necessarily limit materially consumer choice but it affects it in the sense that it gives a very powerful economic incentive to the user to use that in your case and since you mentioned allows me to pick on Deutsche Telecom example and Spotify, which a consumer who has not decided what music streaming service to use in Germany and is a happy customer of Deutsche Telecom would not use Spotify for music streaming and other parts of concern if tomorrow I want to go reach out to my German friends and say we build something that competes with Spotify. We have no chance of reaching Deutsche Telecom's customers. It was mentioned before, this is on the broader question of whether this can be solved with an antitrust approach. I would disagree that, how did you put it, this subject be any idealogical priors here. We are talking about an idealogical prior because we want to conserve what Frode was describing, the Internet and the innovation that happens within it. Competition law proves to be slow and harm might already be done. There were maybe other questions there is the of course, there is the assumption and also the Telefonica colleague mentioned as long as there is competition in markets and this becomes a smaller issue but then the question back is do we really have good competition in all European markets to the way in which you have very fast increases of data caps and is that the reality that we see today. It is not in our view. By the way to the complaints that Deutsche Telecom is receiving please forward them to Fabro in Thailand. I am sure they will be happy to learn about them. Thank you.

>> FREDERIC DONCK: Roslyn.

>> ROSLYN LAYTON: So let's I think both Frode and Guillermo, they have outlined a particular view of the Internet. And I would like to say that's one view and there is a dynamos view of the Internet which would understand it in terms of convergence. We have had over 50 years now, a coming together of communication and content and computing and that exactly one part needs to be a certain way as opposed it will keep evolving if we allow it to evolve and the Internet is not the end of the innovation and something else will come out at the end of the Internet. That's an important view to take in to account. We had some questions about what is going on around on the ground and what the evidence of zero rating is. If you go to social science research network and you enter my name I have a paper of looking in to zero rating incidents. And I would like to give you an example today of how this is playing out and this is what I am going to call the regulatory nightmare. Proposed rules by BEREC outline, a case by case approach which I like to call death by one thousand cuts because they have so many ways to interpret. And the Slovenian regulator they are being sued for all operators in Slovenia. And this may come to Brussels to give you a sense of how difficult it is to adjudicate these issues. You have a case where Slovenian Telecom they zero rated the football championships. Take a step back. In terms of understanding what happened in Slovenia a year or two ago, a complaint was made by the consumer organization that mobile prices were too low and the complaint was both to the competition authority as well as to the telecom regulator. The competition authority said to really understand this instance of zero rating we need to look at the market for data transfer. They said in this case it is amounting to a few cents on a monthly mobile subscription. They did not see there was a problem but willing to look further. The telecom regulator never responded to the gentleman because it was extremely political. Over time with some pressure and so forth by journalists a few months later the regulator had issued a decision about what zero rating was allowed and not. And this generated lawsuits. The incumbent telecom authority had bought rights to the football championships and the regulator didn't touch this. Zero rating of the French music service was deemed illegal and it wasn't popular anyway. And they could just get rid of was the reasoning. At the same time you had a case where the smallest operator had a customer service application which is zero rated. The point of that was so people to top up the mobile balance by going to this zero rated app. That was deemed illegal and that operator experienced a five fold increase of voice traffic to his call center and had to hire staff to work in the call center to answer the phones so the people could top up the mobile balance. Another case where a small cloud provider, it is not putting Drop Box out of business any day. That cloud provider service by the smallest telecom operator was deemed illegal. But the Slovenian telecom was incumbent was allowed to be zero rated. Because you are going to say case by case it doesn't mean it is going to get easier. It is not going away. Any time you have certain kinds of things like media pluralism, this kind of stuff, there may be a Supreme Court case in the United States on this issue precisely because the people in the metro PCS who wanted to have a zero rated service of Youtube, they will claim this is their free speech rights to be able to offer that to a particular customer base. So the sad part here is that I would like to say that I think the idea somehow more regulation is going to make it clearer and it will be easier, but when you look at the particular proposed rules I will say it is going to make it worse because there is so many parameters, so many ways it will be interpreted. And we are leaving the realm of the antitrust world which would look at the numbers. It would look at what's the market for data transfer. So, you know, the fact that, you know, T Mobile in the United States they have zero rated a number of music services and they have 40 or 50 music services. Is that hurting the market from music streaming? In fact, apparently Youtube and Netflix have experienced an increase of traffic. So some of the people who were not liking zero rating before now they do like it. So this is not a cut and dry issue.

>> FREDERIC DONCK: Thank you. Yeah, I have so many questions actually that come to my mind. But Frode.

>> FRODE SORENSEN: I just wanted to give a very brief short comment to Roslyn. In general I agree with you actually. This case by case approach doesn't make things easier. So the question then is should the law makers instead provide a clear cut rule regarding this and then we would avoid the need for such a case by case approach which we know having in the future.

>> FREDERIC DONCK: Okay.

>> GUILLERMO BELTRA: One of the first things that Roslyn said, which I think is the underlying question that we are talking about here, whether are we happy with what the Internet is and how it has functioned until now or do we want to like you said forget about this idea that there is an access layer and then there is the application online and start coming up with different ways of going about this. For example, when this started getting intertwined, and this is a very fundamental conversation and there are definitely pros and cons in each of the scenarios. Just on the example you mentioned in U.S., T Mobile, zero rating, 30 to 40 music service apps I would agree with Roslyn that is not a cut and dry issue. Now suddenly it is not just one single app or two maybe single apps that are being zero rated but an entire or hopefully what it should be an entire service area of the Internet. And now I could still see some issues that would need to be discussed there. But that's not exactly the same as just zero rating one single app which is why in a way within the context, back to the EU, within the context of what BEREC has had to do it is right to start making distinctions between those different scenarios.

>> FREDERIC DONCK: Okay. So I will give you the floor in a few seconds. But I would like to make up my mind. So yes, zero rating might be seen as a discrimination, but does this discrimination destroy market competition? Preserving an open Internet does the consumer have a choice? You are being bombarded by Pepsi to have a two second ad on the screen. Does it permit people to stand up and have a Coke? Do people have to choose within the open Internet? Where is the clash here? How does it influence the way open Internet is being driven? That would be my question. I see some move there, there and maybe Luca. Yes. You got the mic.

>> Thank you very much. Marta. I actually have a question that goes much in the direction of what you just asked and goes back to the evidence issue that was already raised here today. So there was also a reference to the risks of consumer choice if this becomes a trend. Do we have any data that it is a danger? From a European perspective this is a commercial offer among others. Is this representative? Is this an issue for European consumers or and I also didn't understand that, Mr. Frode Sorensen, there is only one Internet. Yes, of course, but I can choose another commercial offer if I am not happy with that or I can switch operators which is something in Europe that we are really, really proud, this competitive market that allows us to switch service providers if we want to. Thank you very much.

>> FREDERIC DONCK: We will take that but next one, please.

>> Thanks. So two points. So first of all, Roslyn said very well that the what we want is a dynamist approach, meaning that the Internet is going to change. You heard the other perspective is the static perspective. Has the Internet worked in the past and should we preserve it the way it is and it doesn't work for a lot of people who are not online. This is worth repeating in case people are not familiar with it. Metro PCS back in 2010 was the No. 5 carrier in U.S. It had a tiny market share. And what it was trying to do was help connect disconnected Americans, mostly African Americans in urban areas by offering them a $40 a month plan where they offered unlimited Youtube streaming. Now that was not covered by the FCC's open Internet order at the time because it didn't cover mobile. Nonetheless the fanatics in the United States managed to demonize that company and they ended up giving the market entirely and they sold themselves to T Mobile. We lost a player in the market and a tool that could have connected people who are not online. When we talk about a dynamist approach that's what we are talking experiencing with new business models and it is true in the United States and true around the world. So the question is, my second point is how do you deal with that. What's the legal approach? So I'm a telecom lawyer. I may be the only American telecom lawyer in the room. I spent the last eight years on the details of the open Internet order. And what was said earlier about the open Internet order is not accurate. In 2010 the FCC said and I will quote, "prohibiting tiered or usage based pricing to subsidize Internet users. Having tiered pricing is a better alternative than management." If you are concerned about the providers deciding what goes on the Internet you want usage based pricing. You fast forward to the 2015 open Internet order. It describes all harms that could occur. There is text in that summarizes what was said in the comments. Given the unresolved debate concerning the benefits and drawbacks of data analysis and usage plan we declined to make blanket findings and address concerns under the no reasonable interference on a case by case basis. Even the United States has been driven by zealots and taken an approach that I find anti consumer. You can't make blanket generalizations about these plans because they vary. The plans are different. The market circumstances are different. And the approach that I am describing, there is a spectrum of approaches of case by case approaches. You have the FCC's approach, which I think is a very open ended standard that gives them too much discretion. I would prefer a more traditional antitrust standard, but I don't think anybody here wants a standard where Metro PCS again zero market power, the No. 5 player in the market can't help consumers, get them online nor do you want a standard that says if a company is offering like T Mobile is today to zero rate any video provider, is that a Net Neutrality problem. It depends and your answer might be that what you are objecting to is not zero rating. It is picking allies of the broadband provider, affiliates, right? Or situations where the user doesn't have a choice. Right? But that's what we need the legal standard to focus on. The sooner we stop talking about the ideology and zero rating as a single thing and talk about specific fact patterns and the regulator does not have discretion, the better off we will be because we will get the good zero rating. And we will still have a tool to make sure that the bad zero rating which is truly anticompetitive doesn't happen in the market.

>> FREDERIC DONCK: Luca, yeah. The mic, please.

>> Just two very quick comments. The first one, one thing that we also have to think is the reasons why zero rating has been proposed. The reasons I mean if we want to have a European perspective we can easily see that I mean the tendency in the market of telecom operators is the growth of the market is tending towards flatness. So if they do not diversify with new product, the tendency of their market will be flatness. So they need to diversify with new offering. Buying Internet access is not increasing any work. If they do not diversify with zero rating they will not have growth. If you check the last report of Ovalm (phonetic) consulting it explains it extremely well. They need zero rating in order to diversify their offer. I agree with BEREC, there are very different flavors of zero rating but the problem is does is the rating in the general interest or is it in the interest of specific reduced number of stakeholders. So I think this is it was very explicit to check the contributions of all the wide range of stakeholders in the Brazilian consultation, that has one of the fundamental pillars. And the only stakeholders that we are advocating for zero rating was major telecom operators and Facebook. All the others were contributing in against, writing contributions against zero rating. So the point is it is obvious that zero rating will be extremely efficient and extremely lucrative for telecom operators and for dominate market players. The question is will it be efficient. Will it be lucrative or in the public interest or in the interest of a reduced group of stakeholders. And I think that I totally agree with Roslyn in what she was saying that approach, for instance, has been taken by the FCC is not really going to solve the problem because it is going to add a further layer of complexity to what is already a very complex debate. What one needs at this moment is a political vision and clear choice in which kind of public policy you want to adopt to expand Internet connectivity. Vision is not really abandoned amongst policymakers, but the real debate we should have here is not about what is zero rating and what is the impact of zero rating but what are the alternatives to zero rating in order to foster Internet connectivity and open Internet access for everyone.

>> FREDERIC DONCK: Thank you, Luca. We will take some of your points. I see someone else there. And then I will get back to the panel. That's another issue.

>> Well, thank you very much. My name is Masar. I am from the Ministry of Telecommunications in the Kingdom of Bahrain. Next week I have a meeting with one of the operators who have raised some concerns specifically about zero rating and the where we we haven't picked a position or posed a position on this yet but the thoughts I have so far is that, first of all, the example of Super Bowl with the ads by Coca Cola is not directly analogous to this. Because at the end of the day the consumer is going to pay for a Coca Cola or a Bud. So the ad informs them of choice. But when you have zero rating and particularly when you have exclusive zero rating it forces the hand of the consumer or the operators. If it is exclusive then the consumer figures why should I pay $10 for something when I can pay zero dollars for it. It forces their hand if they are a noncasual user or a once in awhile user of such service. And from an operator standpoint the problem is that a lot of these things, if they pick up steam tends to become the de facto form. And one issue that we faced in Bahrain is that the operators tend to compete on a price basis offering unlimited data caps and reduced price. They have gotten to a point where we fear the market is not sustainable and that to us is the biggest concern all when it comes to things like zero rating. Operators need to invest in the infrastructure and technology is coming out two to three years and they need to do new investment in to the market. And the revenues are getting hit left, right and center. While we are not trying to protect outdated business models, we do need to protect the market as a whole because we do want competition. We do not want the market to come down to one or two players that then has a duopoly. Our real concern what's the alternative to zero rating. Because we do want them to innovate but don't want to push themselves in to a corner where we have to step in and heavy deregulating a regulated market again. These our thoughts. Thank you.

>> FREDERIC DONCK: Thank you. Please.

>> Can I briefly comment? I mean coming in after 15 or 20 other speakers is always a fear of repeating some of the ideas but I would like to reiterate that there is some value in taking a step back and not only talk about zero rating as such because when I hear a lot of the arguments that the telecoms industry is raising in terms of we want partnerships and we want the flexibility and exploit the opportunities for bringing advertising for at the service of the end user, all that is possible in Europe. And in the BEREC text it clearly safeguards that freedom. That freedom can take the shape of bundling that we see increasingly also in the markets and not bundling is bundling is containing offers on audiovisual media. And a reason why we need that extra tier of checks and balances beyond the competition, application of competition rules because it concerns the Internet, the platform that offers access to a wide range of opinion and plurality and so on. I would also like to say that the fact that there is this looming risk always of case law and complaints I think as such should not deter us from actually looking at the case closely. I mean I am quite well placed, as involved in the media sector for a number of years. Anything that touches on freedom of expression or diversity of plurality will create that risk of having a huge range of complaints in case law and it shows the importance that we need to strike the right balance.

>> FREDERIC DONCK: Thank you. We got so many avenues and hopefully we will be able to investigate some of them this afternoon. So Maser, between you and I the Super Bowl example yes, this is a valid garden. And I give Luca, I thought you would take it. It is something for you to take. But just a private joke.

>> (Off microphone).

>> FREDERIC DONCK: Yeah, yeah. So yes, we will address freedom of expression because yes, there has been criticism, including in the developing world about zero rating and about the capacity for people to use platforms and is it harming freedom of expression. One of those has been as a criticism but we won't get there. We won't have the time. I was having plenty of questions along those different lines, the economic models, the different criticisms, again business about that that I wish I could actually investigate. We won't have time. I want you, Roslyn, to interact with some of the questions we have. I will ask the same to my two other colleagues and then we will wrap up.

>> ROSLYN LAYTON: Checking time here. Let me first just say I want to thank all of the audience for such great comments. I enjoyed hearing from all of you and seeing some familiar faces. I would like to give my kind of global perspective, what I see as an academic which I have a concern as going forward with Net Neutrality rule making. We have now 50 countries with Net Neutrality. At the same time we have more concentration of Internet traffic and even at the same time we are supposedly making open Internet the traffic goes to fewer destinations and so this is very interesting. Because when I read Tim Wu he is talking about a neutral platform and it sounds that the traffic should be randomly distributed. So I am trying to understand this. And what I have done is I have looked at two countries that are very similar in terms of broadband development and so on. And I take the example of Netherlands in Denmark that are alike in almost every way except for Network Neutrality rules. They wanted to the operators wanted to demonstrate that they were ahead of the regulation. They agreed to quality standards and a number of things that regulations did not at the time. And then you have the case of Netherlands which imposed a hard rule in 2012. And what I have studied is the emergence of apps made by developers from those particular countries. Since 2012 the Netherlands, the rate of apps of Dutch going on the Internet has declined. In Denmark however the rate of apps developed by the Danes has increased and they are exported. The largest Danish apps have more than all the traffic than the largest Dutch. There is something very strange about that because supposedly the least what I am told the countries with the harder Net Neutrality rules will get more innovation and what I see that's not the case. It turns out that soft rules do the job. So I want to bring someone had brought up a point of Spotify. When you are looking at a converged marketplace you want to be able to have the partners and the actors to come together as however they can with their complimentary assets. Spotify today is the only European success story. They partnered with telecom operators but there was something really important. There is no problem for Spotify to get free users and that's fine but Spotify has to get money to pay support developers and operations. Because there was a premium subscription offered between the mobile environment. People would automatically upgrade because they didn't have to enter credentials in the business. There is nothing that means of course, they work with car companies but that was the actor at the time that made sense. So my concern about these rules that the EU has adopted is they are unwittingly going to work against the European innovation that Europeans say they want because it deters the two parts of the system that actually need to work together, the content part and the telecom part. And it gives the priority to the computing I am American. Sorry to say. It makes it easier for the U.S. part which has the market share because they don't have to face any competition. What I would like to say after now ten years of Net Neutrality rule making we need to look back to see have the policies really been delivering the results that they have said they would. And what my analysis shows is the soft rules do the job.

>> FREDERIC DONCK: Okay. I am happy to see if anyone wants to add something at this juncture. I hope, I feel a sense of frustration because we were not able to go in many, many other directions than we have. Stay tuned. There will be a follow up session to this one where I hope from my perspective that we will be talking open Internet and whether or not zero rating increased usage and whether or not zero rating is a threat to the open Internet and many more to be said about that. But I believe we already covered so many issues right now. I don't see any movement. So I will go panelist by panelist and ask them to give us two lines of what they want people to leave this room with. Starting with you, Frode. And it might be again read the BEREC guidelines if you want.

>> FRODE SORENSEN: I think I want to use the first line to answer the question about the one Internet because I think that was a very good question. And the answer to that is if you are connecting to the Internet with one service provider, one access provider you are not interested in communicating with yourself. You are interested in communicating with the rest of the world. The other end which you are communicating with is blocked. You yourself can't change that fact. So therefore the whole platform has to be open. It is not sufficient for one user to switch to another access provider in order to get an open access in case the others don't switch. So therefore, we have to have this platform view of the Internet. The second line I think I will use to respond to the often heard concern that we are blocking Internet access for poor people. For me it seems strange that the zero rating is used as an argument for that because if the ISP was very concerned about Internet access for poor people, they would give them an open access to the Internet. Instead of instead of not posing them but making them use specific applications. They should make them use the Internet as open access.

>> FREDERIC DONCK: Guillermo.

>> GUILLERMO BELTRA: In two lines. The first thing I would like to say is to the colleague who spoke, I think it was Tech Freedom, I didn't really get, Tech Freedom, yeah. Of course, we are talking about ideological issues. Talking about whether a free market will deliver societal benefit is an ideological question. And we can believe in competition law and free markets and competition is an ideological choice. I am not making a case for fully intervened economy. And like Luca said this is questions of political vision. So it is very simple to say let's take the ideology and the funnism and look at facts but sorry, that's an ideological choice. So what we are trying to say here, and this I will respond to something that Marta said from our perspective, what we are trying to say is that we need the right rules that define and also the right economic incentives in the access markets and in online markets. If there is a problem in online markets we have to address them. And there are many problems and there are many problems in access markets. While we are not against data caps they can be misused in combination or without but also particularly in combination with zero rating to affect the online market. And that's where we have a problem. In Europe you can just switch a telecom provider if you don't like the offer. It is not so simple. Because as you well know switching is not always so simple and we don't have so much competition all over the place but that's maybe a telecom conversation that we can have some other time. Just to thank you Frederic and the whole EuroDIG team. It is a very interesting conversation.

>> FREDERIC DONCK: Roslyn, your two lines. Two.

>> ROSLYN LAYTON: Two lines.

 (Laughter). 

>> ROSLYN LAYTON: So zero rating it is about one less than 1% of the market today. It is negligible. We are fighting a big debate over a small part. So I just can sum it up and say don't bann what you don't understand.

>> FREDERIC DONCK: Wow, thank you. Okay. So please help me clapping this wonderful panel. Thank you. Good job. Thank you, Krishna and thank you, Konstantinos Komaitis. So I hope I see you later in the afternoon. Thank you.

(Session concluded at 12:57 CET)

This is being provided in rough draft format. Communication Access Realtime Translation (CART) is provided in order to facilitate communication accessibility and may not be a totally verbatim record of the proceedings.