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Tuesday, 23 October 2012 10:43

OECD report highlights dangers of regulating the Internet

By

An OECD report on Internet traffic exchange says the current model based on voluntary contractual agreements has been hugely successful and could be seriously undermined by attempts - reported to be on the agenda of the ITU's global conference in December - to impose the type of regulation that has governed international voice telephony for decades.

The OECD report, Internet Traffic Exchange: Market Developments and Policy Challenges, says that since the Internet was commercialised in the early 1990s, it has developed an efficient market for connectivity based on voluntary contractual agreements. "Operating in a highly competitive environment, largely without regulation or central organisation, the Internet model of traffic exchange has produced low prices, promoted efficiency and innovation, and attracted the investment necessary to keep pace with demand."

It sets the success of this approach in stark contrast to the way international voice traffic is regulated. "If the price of Internet transit were stated in the form of an equivalent voice minute rate, it would be about $US0.0000008 per minute - five orders of magnitude lower than typical voice rates. This is a remarkable and under-recognised endorsement of the multi-stakeholder, market driven nature of the Internet."

The voice regulations to which it refers are those put in place by the ITU in 1988 that are to be reviewed at its upcoming World Telecommunications Conference in Dubai in December. Last month analyst firm Analysys Mason warned that there were moves afoot to extend this type of regulation to the Internet, with potentially dire consequences.

"We understand that some countries are seeking to impose this regime on Internet traffic, with the apparent purpose of providing additional revenues to increase the build-out of infrastructure in various types of markets," the research firm said. "The striking progress of the Internet, based on its inherent flexibility and perpetual adaptations, makes the possibility of revisions to the ITR treaty concerning..."

The picture painted by the OECD report of the Internet interconnection market is one of almost universal acceptance and harmony.

"A survey of 142,000 peering agreements conducted for this report shows that the terms and conditions of the Internet interconnection model are so generally agreed upon that 99.5 percent of interconnection agreements are concluded without a written contract," it said.

"That these rules of the game are so ubiquitous and serviceable indicates a degree of public unanimity that an external regulator would be hard-pressed to create.

"The parties to these agreements include not only Internet backbone, access, and content distribution networks, but also universities, NGOs, branches of government, individuals, businesses and enterprises of all sorts - a universality of the constituents of the Internet that extends far beyond the reach of any regulatory body's influence."

The report sees the move of traditional voice communications to IP as bringing with it the threat of voice service regulation being imposed on the Internet, and warns that it must be resisted.

"As incumbent networks adopt IP technology, there is a risk of conflict between legacy pricing and regulatory models and the more efficient Internet model of traffic exchange. By drawing a 'bright line' between the two models, regulatory authorities can ensure that the inefficiencies of traditional voice markets will not take hold on the Internet."

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