Carrier DT Targets Startups After Europe Agrees Net Neutrality Rules

Well that was quick. Europe’s controversial new net neutrality rules haven’t even come into force yet and German mobile carrier Deutsche Telekom is suggesting it intends to charge startups to boost the quality of their services under the new rules — as many in the tech industry had feared.

One of the problems with the incoming rules, which will come into force on April 30, 2016, is their provision to allow for preferential treatment of Internet traffic for so called “specialized services”.

The EC has been couching these as “services like IPTV, high-definition videoconferencing or healthcare services like telesurgery” — which it says use the Internet protocol and the same access network but “require a significant improvement in quality or the possibility to guarantee some technical requirements to their end-users”.

Ergo it’s been trying to claim they are not the same as ‘normal’ Internet access services, whatever those might be.

Writing an explainer on this aspect of the rules back in June, it said: “The possibility to provide innovative services with enhanced quality of service is crucial for European start-ups and will boost online innovation in Europe. However, such services must not be a sold as substitute for the open Internet access, they come on top of it.”

The actual wording of the now agreed net neutrality rules — as pertains to these specialized services — states (emphasis mine):

There is demand on the part of providers of content, applications and services to be able to provide electronic communication services other than internet access services, for which specific levels of quality, that are not assured by internet access services, are necessary. Such specific levels of quality are, for instance, required by some services responding to a public interest or by some new machine-to-machine communications services. Providers of electronic communications to the public, including providers of internet access services, and providers of content, applications and services should therefore be free to offer services which are not internet access services and which are optimised for specific content, applications or services, or a combination thereof, where the optimisation is necessary in order to meet the requirements of the content, applications or services for a specific level of quality.

Critics of the net neutrality rules have dubbed this provision a loophole for the creation of a two tier Internet in Europe, as well as being critical of other aspects of the rules — such as the lack of a ban on the practice of zero-rating services (whereby carriers can, for instance, offer certain apps to users without data charges for accessing them), and other exceptions for certain types of congestion management.

The EC continually rebutted such criticism, with Günther Oettinger, the Commissioner for Digital Economy and Society, arguing the rules allow flexibility for “innovation and investments”, and going on to claim that specialized services “have to be in the public interest” (although the wording of the law indicates that public interest is not, in fact, a legal requirement, but merely a “for instance” example).

It looks like we’re now getting a glimpse of what the new rules will mean in practice. And specifically how these ‘specialized services’ are going to manifest themselves: as a route for carriers to open up new revenue streams by tapping into startup coffers. (Critics of the new rules have suggested ‘specialized services’ were the concession demanded by carriers for giving up roaming fees — the other key plank of the legislation. Bottom line: carriers’ revenues have been declining for years and they have to find alternatives.)

Writing in a blog post yesterday DT CEO Timotheus Höttges suggests the carrier is preparing to use the provision of specialized services to charge startups for “guaranteed good transmission quality” — arguing this will offer them a way to compete with better resourced rivals, such as large tech platforms like Google.

Höttges first likens specialized services to quality differentiation on the Internet — such as users of cloud storage services paying more for more storage or to view HD instead of SD quality videos — and then goes on to write (emphasis mine):

Opponents of special services claim that small providers can’t afford this. The opposite is true: Start-ups need special services more than anyone in order to have a chance of keeping up with large Internet providers. Google and co. can afford server parks all around the world, to bring content nearer to their customers and thus improve the quality of their services. Small companies cannot afford this. If they want to bring services to market which require guaranteed good transmission quality, it is precisely these companies that need special services. By our reckoning, they would pay a couple of percent for this in the form of revenue-sharing. This would be a fair contribution for the use of the infrastructure. And it ensures more competition on the Internet.

Carriers have long complained they are being turned into dumb pipes by the apps sitting atop their network and running data services that allow users to circumvent the likes of SMS via messaging apps, for instance. So you can just imagine how they are salivating over the prospect of leverage over startups via the ability to pit one Internet business against the other by selling “guaranteed good transmission quality”.

The phrase “guaranteed good transmission quality” implies those businesses not paying a couple of per cent revenue-share to the carrier can expect less reliable transmission quality over DT’s network — albeit the EC continually stated that “paid prioritisation” is explicitly not allowed under the new net neutrality rules.

So it will presumably be up to national regulatory authorities to determine whether “guaranteed good transmission quality” amounts to “paid prioritisation” or not.

Well you can’t say people didn’t see this coming…