Archive for the Opinion Category

Would you invest in a business that loses money? Probably not. Or, at least, you are more likely to invest in a business that makes money. That is why investors read the numbers reported in the press, and rely on auditors to check financial statements. What if you already own the business, and were considering investment in some new machinery? Again, you might buy the machinery if you thought it would generate profits, but not if the cost outweighs the returns. That is why accountants go to a lot of trouble to map costs to assets, and hence determine which assets are driving profits, and which are not worth keeping. So would you make a major investment decision, knowing you will be ignorant of the returns generated by the investment? That is exactly how most telcos are run, according to a new report from the TM Forum. Net global capex network investment is estimated to have cost USD354bn in 2014. In response, the TMF’s Network Asset Management team conducted a survey into how telcos track and manage their network assets and the returns they generate. The findings make for grim reading, including the fact that 57% of surveyed telcos had no data on whether existing assets were generating a positive return or not.

I found the survey results to be confusing in some respects. For example, 29% of telcos stated they do not bother to measure any returns generated by assets, after they have been deployed. But what are the other 71% measuring, if more than half of telcos have no data to determine if an asset is underperforming? Perhaps they are measuring returns across a class or category of assets, which may be some help but still fails to provide sufficient detail to improve future investment decisions.

The conclusions about data integrity were equally grim. On average, respondents believed their network inventory records and fixed asset registers were only 74% accurate. Their expectations were also low, believing that accuracy levels below 90% would still be ‘acceptable’.

Reading between the lines, I draw my own conclusions from the messages about poor data quality and scrappy methods for measuring returns. Determining the profitability of a network asset would involve a lot of hard work, so mostly we do not bother. This is understandable from the perspective of the poor schmo who is asked by his unreasonable boss to generate numbers without receiving the data, tools, and thanks that such a task demands. But from a collective, corporate perspective, this blind spot in decision-making is nothing less than insanity. How many of you have worked in a telco where the stationery cupboard was locked to prevent people using too many staples, or where your phone calls were scrutinized to determine they were all made for genuine business reasons? These things are controlled because they are easy to control, but the values involved are trivial. In contrast, the amounts spent on network capex are enormous, but hardly anyone can say where the money was best spent, or where the telco failed to generate the results it hoped for. If we do not gather the knowledge, we cannot learn from the past. In the case of network asset expenditure, that means we are doomed to repeat our most expensive mistakes.

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Some events are so memorable that people will always recall where they were, when they experienced them. I will never forget where I watched Germany’s 7-1 World Cup semi-final victory over Brazil. It was in a seafood restaurant in Portugal, accompanied by Tony Poulos, international telecoms personality extraordinaire, and Sérgio Silvestre, WeDo’s Chief Marketing Officer. We had spent the day at WeDo’s Braga office, discussing their product suite and development plans. At the end of our work, I commented that the semi-final was that night, so it would be good to eat somewhere with a TV. That evening, as the goals flew in, our jaws dropped, and I found myself applauding the Germans along with the other diners. Whilst the screen was filled by the shocked faces of Brazilian fans, my sympathies were mostly with Brazil’s goalkeeper, Júlio César. He had been a hero in earlier games, blocking penalties and keeping his team alive. But he was overwhelmed by the German tide. It was oddly appropriate to watch that game in the company of two of the best advocates for business assurance. That is because business assurance is to telecoms what the goalkeeper is to football.

In football, the goalkeeper is the last line of defence. When everything else has failed, he is tasked to make the save. And when the ball finds the back of the net, it is easy to blame the goalkeeper, saying he has not done his job. But when the ball finds the back of the net seven times, it becomes clear that the goalkeeper is only one player in the team. He can influence the result, but is not responsible for it. The same is true for business assurance, and leads to the greatest mistakes when setting targets for a revenue assurance or fraud management function, and the worst foolishness when measuring their performance. Was Júlio César responsible for Brazil’s defeat? No. A different goalkeeper might have made another one or two saves, but the Germans had so many chances they would still have won. So why measure a business assurance department according to how much the telco leaks, or by how much the department saves? When it comes to leakage, we are measuring the performance of the whole business, not of one section. And the business will most reliably win if it has a strategy to prevent leaks occurring, not by depending on an incredible goalkeeper and expecting him to make a series of miracle saves.

Even the worst goalkeeper will make saves, if his team allows enough shots on goal. At the same time, no goalkeeper is good enough to save every shot. So the best defensive policy is to not allow the opposition any opportunity to shoot. By the same token, the best policy in telecoms is to prevent the mistakes that lead to leakages. However, this requires something more than a goalkeeper. It demands a strategy for how to defend, and for the whole team to play their part in executing that strategy.

A goalkeeper is expected to react to whatever comes his way, whichever direction it comes from. I have often said that assurance is the goalkeeper of telcos, and the metaphor reflects the realities of how most telcos approach assurance. However, the problem with the analogy is that it emphasizes the passive aspects of assurance. It suggests that business assurance is there to make saves at the last moment, by leaping this way and that, without having any plan or design. Goalkeepers respond to events on the field of play. As the Brazilian team showed against Germany, energy and passion are not substitutes for organization. Brazilian players ran around without discipline. They had no sense of what their defensive responsibilities were, or how to work together to impede the Germans and win the ball back. The German team, in contrast, showed how effective a team can be when everybody understands what they are meant to do, and how they will work towards their common goal. Good defence requires more than the individual brilliance of the goalkeeper or the desire of outfield players to make as many tackles as possible. Defence requires leadership. The same is true for business assurance.

Goalkeepers can be leaders on the field of play. A good goalkeeper will talk to his teammates, telling them what they should be doing. If he needs to rapidly bark instructions to a fellow player, it is understandable that he may sometimes be loud and abrasive, and might temporarily upset his colleague. But that is better than having a goalkeeper who is too timid, and who leaves the outfield player unaware of the risks around him, leading to a goal being conceded. Assurance functions need to be respected, when they give directions to others. If nobody else can see the gaps in the defensive line, it is vital that business assurance speaks up, and is heard. Sometimes it needs to shout. Being in a unique position thanks to the data they receive, business assurance must tell others what they see, and how this should be translated into definitive steps that will improve the company’s defences.

Whilst goalkeepers give instruction during a game, even this form of proactive intervention is not enough to organize a reliable defence. Before the game begins, each player needs to know their defensive duties. The coach must have an effective strategy, and he must be able to communicate it to his players using language that they understand. And after the strategy is communicated, it will need to be reinforced through training. It is not enough to speak to people in abstract and theoretical terms. Asking people to be good is pointless, if they do not know how to be good. You have to show people what you want them to do. That involves making them deal with specific scenarios during their training. It also means their real-life performance should be analysed and critiqued. This is also true of telcos, where we understand that the role of the coaching team is fulfilled by the telco’s executives.

Whilst the head coach is responsible for all aspects of attack and defence, there may be other coaches with more specific focus on aspects of defence, and on how the goalkeeper plays. At the same time, the coaches should be harmonious, and work from a common understanding of how the team will play. Neither the attacking nor defending strategies will succeed, if they contradict each other. So if an executive team fails to devise a defensive strategy, or if they make demands which are contradictory, then the goalkeeper cannot be responsible for the losses that will inevitably follow. This is true even though the goalkeeper is the one who recovers the ball from the back of the net, and hence becomes the easiest person to blame.

Continuing our metaphor, business assurance increasingly needs to step up to a coaching role. Diving around and making flashy saves is not a long-term strategy for the success of the individual, or of the team. We also need to advise on the company’s strategy, as well as its tactics and operations. That is the only way to properly identify and address the defensive risks that are the root cause of leakages.

The strategic voice of assurance will never be the loudest one in the corporate team. The head coach – the CEO – needs to listen to many voices, and to determine the balance between attack and defence. The CEO needs to find ways to win games, in addition to avoiding defeat, and that will always mean taking risks in order to win new revenues, as well as taking sensible precautions to secure existing revenues. When listening to many voices, the CEO cannot avoid being influenced by the quality of the advice he receives from different quarters. If an attacking coach gives very good advice, and a defensive coach gives mediocre advice, then it is right that the attacking coach should have more influence over the team’s overall strategy.

Business assurance often has a uniquely advantageous view of how the whole team is performing. The data collected should be turned to strategic advantage, not just used to identify and fix operational faults. Like a goalkeeper, we see things that others might not. But it is not enough to have good information; we must also give good advice. That means synthesizing the information we have into realistic proposals for improving the teams’s defensive strategy, whilst understanding these improvements should not compromise the other objectives of the team. If we do that, we deserve to be coaches, and will need to make fewer saves. Otherwise, we will only influence results whilst standing between the posts, during those moments when we are the last line of defence.

By using the analogy of a football goalkeeper, I hope I have communicated some complicated points using a language that is easy to understand. In that respect, I am also trying to be a coach. Coaches succeed if players intuitively comprehend what they have been asked to do. The coach should choose his words to best suit the language understood by his players; the coach should not expect the players to learn difficult terminology or strange ideas just because that is how the coach likes to talk. The history of business assurance shows we can be very good at coaching. The word ‘leakage’ is a great example of how we have used intuitive language to express complicated ideas, and hence to successfully influence how others think and behave.

Business assurance has grown from nothing to a mainstay in telcos worldwide. The phrase ‘business assurance’ shows we are expanding well beyond the founding scope of revenue assurance and fraud management. At the same time, we can do more. If we do not keep pressing forward, we will become increasingly irrelevant, and deserve to be relegated to obscurity. It is not enough to complain that others do not understand, or that execs spend too much time talking to their marketing people. If we use the information we have, and speak to people in a language they are comfortable with, we will persuade.

We are more than a safe pair of hands, fit only to dive around and catch the ball. We also have brains, and voices, and we can help the business to organize itself and adopt winning strategies. Any CEO can imagine himself the coach of the Brazilian football team, and being in a situation where scoring a goal is meaningless, because his team is already seven goals behind. They understand that attack will not bring victories, if there is inadequate defence. But they may never have received good advice, that quantifies some of the risks faced by the business, and offers pragmatic solutions to its worst defensive frailties. We can help them. If we are good coaches, we not only succeed as goalkeepers. We will succeed as goalkeepers because we will need to make fewer saves, but we will also become more important to the whole team.

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Today’s guest blog is by Justin White, Head of Information Technology at BEE Mobile in South Africa. Justin has extensive experience as a developer, consultant and product manager, particularly with CSG International and Intec. During that time, Justin formed his own opinions on how to improve the reconciliation of interconnect bills. He encourages the industry to rethink how we bill each other, and what we do to ensure the accuracy of those bills.

Any process that is performed regularly with consistent outputs should be automated. In cases where the process is resource intensive, the expected results are in the same format and interim data is similar there is no reason why technology cannot be leveraged to better solve the problem in an automated fashion. Reconciliation, in support of the settlement of interconnect invoices, is one of these processes.

As part of the reconciliation process, operators load, translate, map, aggregate and compare data. The end to end reconciliation process consists of multiple smaller tasks, each needing to be completed prior to the next, and the flow is based on sometimes complex rules decided on by the operator, or the environment in which the franchise is operating (e.g.: Codifi). After reconciliation, decisions can be made on the financial settlement applied between the wholesale interconnect partners.

This piece discusses some of the challenges of reconciliation in the wholesale billing sector and how a small change could improve efficiencies in the settlement of these large interconnect invoices.

Context

Each billing cycle, network operators issue invoices, or declarations in the case of certain agreement types, to partners. This exchange of commercial documents is completed in order to settle the interconnect charges relating to calls terminating in their network, or that have been terminated by the partner network. In the case of bilateral agreements, where the operators both terminate traffic for their partner as well as route their own traffic to the partner network, they may elect to exchange invoices and offset any charges for the traffic that was exchanged by them (a form of netting).

These invoices amount to the largest operating cost of an operator, and for this reason the payment of these invoices needs to be based on an understanding that firstly the partner did in fact terminate, or route the traffic that the invoice relates to, is basing the invoice on valid up to date rating information and is operating out of the correct billing cycle. These are just some of the factors that could lead to a discrepancy between what an operator has calculated for an invoice and what a partner feels is actually owed.

One of the biggest disruptors over the last two decades in this market has been the upward drive of traffic from over the top players such as the App Stores as well as the ubiquity of firstly feature phones and then smart phones. This not only drives up the volume of traffic, but also the number of partnerships that are required to be in place for an operator to be fully vested in the market and to take advantage of this growth in traffic, and therefore potential revenue.

Invoice level reconciliation

Invoice level reconciliation is the comparison of invoice level data exchanged by partners during the regular billing intervals they share. This process involves the parsing of invoices received from partners, mapping the data to a common key of sorts, aggregating the data if necessary to a higher level and then comparing the data in order to achieve a result.

The format of the invoices that are exchanged between operators often differs across partners and the loading, transforming and mapping of this data and then comparing to Franchise data of the same form is time consuming and error prone. This time consuming process of reconciliation can lead to disputes being raised by either parties in the agreement.

Dissimilar file processing

As part of this reconciliation process Network Operators may exchange data in order to justify the invoice they submit to a partner, or perhaps to justify the dispute of an invoice received. The format of this data varies considerably and outside the context of a standard such as Codifi in Spain, PISA in Mexico or DETRAF in Brazil, partners are left with the time, and resource consuming task of processing large volumes of data in different formats, covering multiple periods and often not the exact data set required for the reconciliation purposes. Any system that is required to process this data is required to parse, transform and load the data, and only once that has occurred can it execute the necessary aggregation and comparison processes used to support this vital revenue assurance procedure. These dissimilar file formats are a hindrance to any attempt at automating the full process and inevitably leads to interim stages where data needs to be ‘cleansed’ prior to loading.

While there are many tools available that can support the loading of complex file types, the complexity of the configuration of these tools is an inhibiting factor in the maintenance and support of these systems. While powerful, these tools often require technical expertise to configure and maintain them, not necessarily a skill-set that is found in the team responsible for revenue assurance in a network operator. Reconciliation tools also often require that partner data be provided to it in a specific format, or aggregated to a certain level prior to processing. This places further strain on the revenue assurance team who then need to create the required data set out of whatever is provided by the partner.

While the results of this process are often required soon after the invoices are exchanged, factors not always in the control of the Franchise can obstruct speedy conciliation and this can lead to lengthy delays in settlements.

Increasing data volumes

Most conventional reconciliation tools were originally designed and built against manageable volumes and were able to quickly process low to medium volumes. As call and data volumes have grown over the last decade, at times exponentially, these tools have either not been able to keep up, or have been required to be modified to such an extent that the cost of maintenance of these tools outweighs the benefits gained by them, for vendor and operator alike.

A large operator in South America, or the Middle East can process over a billion transactions per day. These volumes are not easily processed in a revenue assurance system where those billion records need to be compared to a partners record set of the same magnitude. During reconciliation, not only does the franchise need to process their own data in order to transform it into a state that it can be reconciled, but also the partner data. The partner, on the other hand also needs to provide this data to the franchise and therefore also is required to extract and process this volume of data. This is required to be completed for each interconnect agreement where detailed reconciliation is required.

Data solution

The solution to the issue around disparate, constantly changing file formats is to remove the files altogether. Removing the files and providing access to the data directly, or indirectly would not only simplify the extraction of data, but would assist in providing partners with the most up to date data as well as in a format that is defined by the partner, for the partner. It is then very feasible for partners to be provided with secure access to billing data related to agreements with the billing data holder.

There are a host of different options available to operators in order to offer up information to partners including direct database access. A database has an array of options in this regard and it is merely a matter of configuring this for each partner agreement. Direct database access is however but one manner in which data can be exchanged, and other options include the implementation of a type of Enterprise Service Bus (ESB) where a variety of protocols can be implemented to provide an interface into a partners billing area such as RESTful web services. This provides an easily accessible mechanism for partners to exchange data in a manner that is not only based on industry standard principles, but also provides a layer of abstraction that is easily managed and controlled by the franchise owner.

Operations

The billing operations running within a network operator, regardless of the size of the operator, are typically supported by a database of some sort. This database, or database set form the backbone of the storage of rated events, or CDRs as well as the aggregation of these CDRs into summaries of some form or another to be used as part of invoicing. A high performance billing engine, with scalable capabilities should allow for periods of inactivity where data can be fed into a staging area of sorts, making it available for extraction by partners.

The issue around processing windows becomes far more prudent given the fact that partners will now need to spend quite some time to extract the necessary data. Discussions around when this can occur, and on what data will be paramount for the success of the process.

Billing updates, rerating and late traffic

A staging area is necessary in cases where a billing cut-off is decided on and rated data at a particular point in time is to be made available to partners. In cases where more up to date, or near real-time data is required, direct access to the data can be provided through more complex database mechanisms that will then take into account updates to rated traffic based on rate changes, or corrections, the rerating, or re-pricing of traffic due to some other network change or even the inclusion of traffic that has been excluded previously for some reason (late traffic).

Resistance to change

While the concept discussed in this text is simple, the implications are far reaching and the processes currently employed within operators would undoubtedly need to change. From the perspective of the debtor, or the operator owing the money, the onus would be on them to extract the necessary data to validate the invoice that is owed by them. For the creditor, or the operator being owed the money, they would need only to make the information available by way of the relevant interface.

Operators may be wary of this methodology as they may feel partners could hold back, or hide information from them in the interface or only provide limited data for processing. Since partners may already be holding this information back as they decide what is to be included in the support file, this is not really a valid concern.

Security may be of concern to operators as opening up channels for extraction could expose them to online attacks and the like. While this is possible, employing the necessary controls in the interface could minimise this risk.

This change could possibly lead to new business models where vendors in the industry could provide exchange type services, and act as a proxy to not only provide the services around the exchange of this data but also to limit the number of required connections for partners and even perform the data validation required. For large operators this may not be necessary but smaller operators could possibly benefit from outsourcing this function.

Concluding thoughts

As the market for operators continues to change and margins are put under further pressure, the focus will continue to be on reducing turnaround times for settlement of interconnect invoices. Greater number of wholesale partners and agreements will result in more complex processes around settlement and providing better methods of assuring revenue will be required. The current methods will need to evolve, just as the market has evolved and a more pragmatic and progressive approach will need to be considered and the foundations laid for a more streamlined approach.

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Some of you follow @talkRA on Twitter. I recommend you do; it is the smart way to be notified about every new post on talkRA. In many respects, this Twitter account has been our quietest success story. It has been running steadily for four years, and has amassed more followers than GRAPA – although we never resorted to the spammy marketing techniques beloved by Papa Rob. Our tweets stimulate around 5% of visits to the website, demonstrating that some people find this service useful. But lately something odd has been happening. More and more of you have started following a different Twitter account – @ericpriezkalns – even though that idiot tweets about anything and everything except communications risk and assurance.

Do not be alarmed; nobody has been deliberately misled. The idiot @ericpriezkalns is the same idiot who is blogging now. With a name like that, there is little chance of being confused with someone else, and I am not famous enough to be spoofed. But be warned, if you follow that account, it will not tell you anything you might find useful at work… unless your work involves writing stories, reading poems, or forming opinions about anything from American politics to space tourism to what would happen if zombies were real. (Though on that latter point, it should be noted that promoting zombie preparedness is an effective way to encourage serious risk planning.)

But perhaps I do myself a disservice. I always tried to keep my professional telecoms activity separate from my other interests in life. My thinking was that someone who spends their days reconciling CDRs may not want to hear about a science fiction story I just got published. However, more of you are following @ericpriezkalns for whatever reason, so perhaps the boundaries should be blurred from time to time. And when it comes to the fiction I write, a lot of the stories revolve around the themes that will interest this audience: advances in technology, the gathering of huge volumes of data, the increasing reliance on computers to make decisions, unforeseen risks and the implications for ordinary people.

One of my stories was published in the October edition of a British science fiction magazine called Jupiter, and it features a man drifting in deep space, with only his intelligent space suit to keep him company. Using the imagination to contemplate the risks in this scenario is as valid a mental exercise as evaluating how to mitigate a zombie apocalypse. Being marooned in deep space would involve a loss of communication, lack of information, the isolation of a person from social contact, and reliance on technology without any back-up. These issues are not so different from those dealt with by telco assurance and risk professionals. For those who are interested, the magazine is available from the back issues section of the Jupiter website, or the Kindle version can be downloaded from Amazon.

Jupiter 46:Carpo

If you are wondering why that idiot @ericpriezkalns is not listed amongst the authors, that would be because I use a pen name – Ray Blank – for my fiction. My Ray Blank alter ego also relies on the @ericpriezkalns Twitter name, which is why that account is more likely to tweet about story writing than business assurance. And please do not jump to conclusions on Twitter, or you may end up following the real Raymond Blank instead!

I know it can be an unpopular opinion, but I have always argued that good assurance and risk management requires imagination. You will not prevent something going wrong, if you do not imagine it going wrong, and you will not know where to look for real problems, if do not theorize about where to find the evidence. When I managed teams, I was always keen on activities that stimulated people to think laterally, and creatively. If those activities were fun, that was better still. I know that many of you work very hard, and it may not feel like there are enough hours in the day to make time for games. Furthermore, your boss may not appreciate you doing anything which does not look like serious and productive work. But allowing your mind to wander, and getting team members to bounce ideas around, are crucial to enhancing your productivity.

A word game, a conversation about current affairs, creating a hypothetical scenario and then analysing it – these can be great ways to boost your team’s morale and find innovative new ways to help your telco. I know many of you have enjoyed the puzzles that talkRA has published from time to time. Exercising the mind purely for the sake of exercise is not a waste of your time. Whether the exercise is mental or physical, it can increase strength, suppleness and energy.

In The Structure of Scientific Revoutions, physicist and historian Thomas Kuhn showed how great advances often occurred when scientists moved into unfamiliar fields, and so introduced fresh thinking that was not hamstrung by old preconceptions. Nobel laureate Richard Feynman embodied those principles; he would take time away from his study of subatomic physics in order to paint portraits, or to calculate the oscillations of a plate spinning atop a pole. Feynman’s agile mind gave him the confidence to point out when NASA’s bosses said silly things about risk management. Our work may be more humble, but we can still learn from the example of these great men. For these reasons, I recommend that you occasionally step back, and look at the world from a different angle. You can do that during office hours, and whilst at home too. I have often commented that our employers pay us to think, and there is no way to control when good ideas should come to us. This means work problems will sometimes be solved during our personal time, and vice versa.

Though I usually keep my work and my personal life separate, I only have one mind to think about both. I know my mind will accomplish more if I grant it the freedom to think what it wants to think when it wants to think it. This is a better approach than placing limits around the mind. This fact will be appreciated by a thoughtful manager, who wants a thoughtful team. And if we are not going to do our work in a thoughtful manner, then we are unlikely to do it well.

The connections between the spheres of work and personal life have been made more apparent to me recently, and not just because telco professionals started following my personal Twitter account. I got my story published after practicing the art of writing for years. When I began writing fiction, I had no objective other than writing for my own amusement, and for those few friends who took an interest. And I would never have tried to write stories without first taking a lateral step in my career, by starting a blog about revenue assurance. That blog led to this blog, but it also led me to write about other topics, and progressively I spent more time writing fiction than fact.

When I first experimented with a revenue assurance blog, I could not tell what it would lead to. For example, it has resulted in the confusion of managing two Twitter accounts! More seriously, I benefitted from a range of unanticipated experiences. Some experiments end quickly, whilst others are more successful, and spawn further experiments like a chain reaction. If you allow your mind to wander between professional and personal interests, you may be surprised by the cross-fertilization that can occur, and the results in your own life. I am happy to say that experimenting with allowing my mind to wander has worked wonderfully well for me. I encourage you to give it a try, because you have nothing to lose, and whilst the benefits are impossible to predict, they may be great.

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Let me begin by apologizing to everyone who does not live in the USA. Sometimes, when discussing the internet, you have to discuss what is happening in America.

And let me also apologize to everyone who prefers to avoid politics. Sometimes, when discussing the internet, you cannot avoid politics.

Phew. It is a relief to get the apologies out of the way. Maybe only 20% of you are still reading. I congratulate you for making it this far. The title for this piece includes the name of the current US President, the name of a high-profile Republican Senator who would like to be US President, and the words ‘net neutrality’. These subjects encourage people to have strong feelings, and fixed opinions, sometimes before they acquaint themselves with relevant facts. But if we, as professionals, do not understand how the net neutrality debate is fundamentally about the pricing of communication services, and what the real issues are when setting those prices, then there is little hope that the general public will ever share that understanding, or that governments will make the best decisions. The vacuum of ignorance creates the potential for politicians to say all sorts of things, take all sorts of policy positions, without caring if they help anyone but themselves. And if you are not interested in how prices are set for the internet, and who gets to decide those prices, then perhaps you are in the wrong line of work.

This article is about a very short speech given recently by US President Obama, and the reaction it provoked. But before I discuss Obama’s words, I want to show you an image. It is an image that people saw, before they heard Obama’s words.

This video is buffering - or is it?

This was captured two seconds into the playing of a video taken from the White House’s official YouTube channel. Let me be clear: it is not a graphical representation of any actual buffering that occurred before the video started playing. This is a frame of an animation that is part of the video itself. It suggests that buffering is taking place, but there is no buffering. Play the same video over and over, and this pseudo-buffering animation will always look identical, always last the same duration. It is a simulation of the graphics sometimes displayed when buffering occurs. Why include this animation before a seemingly important announcement by the most powerful man in the world? A generous answer would say it illustrates the speed of the internet, in a way that people can relate to. I think that answer would be too generous. This animation is very short, and no subsequent attempt is made to clarify that people were shown a simulation. Most people will wrongly believe they waited a few seconds for some buffering, before the video of Obama actually began. Public understanding of net neutrality is poor. Leaders should explain complicated issues fairly and honestly. That President Obama’s communication team decided to use this deceptive animation before Obama spoke on the topic of net neutrality creates a very bad impression of their sincerity, and their transparency.

So what did Obama say about net neutrality? Here is the 2-minute video, and I analyse the transcript below.

Hi everybody. Ever since the internet was created, it’s been organized around basic principles of openness, fairness, and freedom.

It would be more accurate to say the internet has been disorganized since its creation. Obama makes it sound like thoughtful people sat around a table, and made a conscious decision that the internet should be open, fair and free. On the contrary, the character of the internet has been driven by the absence of authorities that could impose their values – whether benevolent or otherwise. The TCP/IP protocols direct how data moves around a network; they contain no mystical insight into the concept of fairness. Businesses that laid cables did so because they wanted to charge others for using them, not because of a holy devotion to increasing liberty.

There are no gatekeepers deciding which sites you get to access.

This is no longer true. It was true during the very early days of the internet, but ever since governments started censoring and curbing the use of the internet for a variety of reasons – to stop child pornography, to combat terrorism, to protect copyright, and so on – there have been gatekeepers who decide what content you can access. Maybe you always agree with their decisions, but gatekeepers definitely exist.

There are no toll roads on the information superhighway.

Except for the most obvious one, paid by every consumer. We all pay an access fee, in order to use the internet. What is that, if not a toll? This particular toll road runs over the final mile, connecting our home (or our mobile phone) to the rest of the network. What Obama means is that, after you pay for access to the network, there are no further tolls that might influence your journey.

This set of principles, the idea of net neutrality, has unleashed the power of the internet, and given innovators the chance to thrive.

Or rather, the internet is it what is, and allowed innovators to thrive. Later on, some people started talking about principles, and gave names to them. In this case, the reality of net neutrality existed before the idea of net neutrality.

However, I recognize that you could take a different view, and argue that net neutrality means nothing more than implementing networks so they manage the flow of traffic in a neutral manner. In that sense, I would agree that the internet was designed to be neutral. However, the neutrality of a network is not the same as the neutrality of all networks. Some confusion can occur here. Suppose I build two, completely separate, neutral networks. One has high bandwidth, one has low bandwidth. They are both neutral, in the original technical sense, because no traffic prioritization occurs on either network. Now suppose I choose to connect person A to the high-bandwidth network, and put person B on the low-bandwidth network. The political and economic issues that Obama refers to as ‘neutrality’ have more to do with this scenario – who is serviced by which network, and whether that leads to some inequality of practical outcomes – than by the conception of neutrality in its original technical sense.

These arguments get very confused because we can be very unclear about the subject of conversation, when we talk about a network. In some senses, the internet is just one network. But by analogy, that would mean I should think of the North American road network as just one network, and not as many different roads. I can drive a car from any part of the road network to any other part of the road network, and the internet is similarly connected. However, concepts like fairness cannot be realized simply by asserting that the same rules should apply to every part of the North American road network. I must also understand that if an inadequate highway connects two towns with growing populations, that road will get increasingly congested. At the same time, some authority might decide to waste money by building an unnecessary road elsewhere. It is meaningless to talk about the rules being fair, if the practical reality is that one driver speeds along a road which only he uses, whilst many other drivers are stuck in jams for hours on end. Managing the relationship between infrastructure and use requires more sophisticated thought than that offered by dogmatic, but ultimately meaningless demands for fair rules. In this context, fair treatment is tied up with practical issues that cannot be reduced to a few simple rules.

Abandoning these principles would threaten to end the internet as we know it. That’s why I’m laying out a plan to keep the internet free and open.

Which is fine and dandy. Except it is not clear who, exactly, is threatening to ‘abandon’ these principles. Or whether there is any evidence that they intend to do so.

Note the importance of what we mean by ‘net neutrality’, and how different meanings are given to the phrase by different people. If we stick to the original, narrow, technical meaning, then two customers could be connected to two neutral networks, and be charged very different amounts for very different quality of access over those networks. When Obama talks about ‘abandoning’ net neutrality, he is talking more about prices and economics than about the technical aspects of neutrality.

Please keep in mind that if we treat neutrality like a religious dogma, then we would never discriminate between a personal email and unwanted spam, between a video of cats falling over and the streaming of hardcore porn, or between the purchase of an ebook via Amazon and the purchase of heroin via the Silk Road 2.0. We need to ask hard questions, about what politicians mean, when they use words like ‘free’ and ‘open’.

And that’s why I’m urging the Federal Communications Commission to do everything they can to protect net neutrality for everyone.

They should make it clear that whether you use a computer, phone or tablet, internet providers have a legal obligation not to block or limit your access to a website. Cable companies can’t decide which online stores you can shop at, or which streaming services you can use.

Forgive me, but at this point I can no longer take Obama seriously. The history of electronic communications, and the commercial interests of the businesses involved, has yielded no evidence that communication providers want to censor or restrict communications. They make money by selling access, not by limiting access. The few times that comms providers have experimented with restrictive models, such as when mobile providers pushed users on to walled gardens, the free market has rapidly forced them to abandon their foolishness. Internet providers give unfettered access not because of government protections, but because customers want it, because rivals will offer it, and because customers can switch suppliers if they do not get what they want.

On the other hand, there are plenty of examples of internet providers being criticized for being too free in allowing access. Who criticizes them? Who wants to impose restrictions upon them? Very often it is politicians who want to limit access. In some cases those politicians are backed by other kinds of big business. Whether we are talking about anonymous online financial transactions using crypto-currencies, or controls that stop youngsters from seeing pornography, or darknet markets for illegal drugs, or obstructing P2P traffic in order to reduce piracy, typically communications providers are vilified for not doing enough to control the traffic that flows over their networks. Many times they have been accused of indirectly profiting from crime, if they do not stop their customers from doing unlawful things. At such times, politicians often present themselves as white knights, riding to the rescue. But then it makes no sense to damn internet providers for interfering too little, whilst whipping up fears that the same companies may interfere too much.

And they can’t let any company pay for priority over its competitors.

This is the real issue: who pays for what. Obama misled the public, by pretending that corporate censorship poses a threat to net neutrality. His real concern is over payment, and if he really wanted to explain the issues to the public, he would have concentrated on this topic.

To put these protections in place, I’m asking the FCC to reclassify internet service under Title II of a law known as the Telecommunications Act.

Title II is economic in character. It follows a long-established model used in other sectors, as well as telecoms, to prevent monopolistic behaviour by controlling prices. For all Obama’s guff, it would be unbelievably crude to deploy this mechanism just to prevent websites from being blocked. There would be a hundred better ways to impose rules to make every websites available to everyone – and whatever the rules are, they would need to be reconciled with those occasions when the government mandates the blocking of websites.

The FCC is the US communications regulator. If the FCC applied Title II to the internet, they would have far more control over the prices and payment for internet services. Obama wants them to control prices. If Obama wants the public to understand the issues, he should make an argument for increased price control, not by telling scary stories about websites being blocked.

In plain English, I’m asking them to recognize that for most Americans, the internet has become an essential part of everyday communication and everyday life.

In plain English: yada yada. I think the FCC is already aware of the importance of the internet, without needing to be told by Obama.

The FCC is an independent agency, and ultimately this decision is theirs alone. But the public has already commented nearly four million times, asking the FCC to make sure that consumers, not the cable company, gets to decide which sites they use.

It is true that the public has strong opinions. But if the public was asked to explain net neutrality, they would give four million different explanations, and many of them would be wrong. The public has a right to express all sorts of opinions on all sorts of topics, from how election finance laws should be changed, to who should win this year’s Nobel Peace Prize. Politicians often choose to ignore opinion, just as Obama did when the public was outraged by revelations that America’s secret services had extensively spied on private electronic communications, using them to track millions of law-abiding American citizens, and to monitor foreign allies like German Chancellor Angela Merkel.

Having torn into Obama’s verbal manipulations, I now want to succinctly state the key issue, which Obama omitted from his speech. The nature, and future of the internet, will be determined by whether differential pricing can ever be allowed. The point is not whether a packet gets treated the same as the next packet, but what is the right way to charge for the flow of those packets. At the moment, ISPs may charge the same monthly amount to two neighbours, though one uses the internet far more than the other. Meanwhile, charging for internet use differs greatly, depending on whether the final connection involves a wire or radio. If we want a society where the same prices are applied to all internet traffic, we must agree consensus answers to sensible questions about what it means to say one service is the ‘same’ as another. That has not happened yet, and most politicians have avoided such intelligent debate.

A simple but mistaken assumption is that the only conceivable reason to permit differential pricing is to allow internet providers to charge differential prices to their consumers. But this does not match the real-life examples raised by network providers. They argue that they want to negotiate fees from the big businesses that encourage traffic, not the individuals who consume the traffic. That way, a big business which requires a lot of bandwidth to thrive – such as Netflix – can be charged for having its needs satisfied. Instead of focusing solely on the final mile, as seen from the consumer’s point of view, pricing might better reflect the source of content. Obama’s intervention implies he does not want businesses like Netflix to receive tailored bills for a tailored service. Such a development would contradict neutrality, as Obama sees it, because it means not all users of the internet are treated the same.

Obama suggests that net neutrality is necessary to protect the little guys, in a struggle of consumers vs. big business. The truth is that this debate is more of a struggle between consumers, big businesses, and other big businesses. Aside from the network providers, there are many other large corporations who profit greatly from the internet, and who perceive neutrality regulation as a mechanism to keep their costs down. I will not express an opinion on how these businesses have influenced the debate, and whether their interests should be protected. However, I do believe it is despicable for Obama to use an emotional topic – censorship!!! – to justify price controls without clearly stating how some big corporations might benefit from price controls. In particular, if internet providers could levy higher charges from big businesses that rely on the internet for their profits, that would imply consumers would represent a smaller share of total revenues. Wherever the revenues come from, those revenues will ultimately determine the investment that is made in the internet.

For all the principles, platitudes and emotional language, it is not logically obvious that consumers must benefit from net neutrality, in the way Obama understands the idea. Consumers might be better off if more internet investment was fuelled by revenues from the big businesses that run the most popular, and most bandwidth-intensive, websites and services. At the very least, this is not an argument that can be resolved by loose talk about ideas, fairness and freedom. This is fundamentally a question of economics, and the relationship between prices, supply, demand and investment. In other words, this is the kind of topic that lots of people might express an opinion about, but unless they have some data that supports a coherent economic model that predicts investment in network infrastructure, then we should not be listening to them.

At this point I should mention the intervention of Senator Ted Cruz, who responded to Obama’s speech. Sadly, the Texan legislator and favourite of the Tea Party did not share an economic model that will forecast investment in network infrastructure. But he did tweet about net neutrality, and here it is.

The problem with this tweet is that it responds to Obama’s lousy analogies about net neutrality (we need to protect the principles espoused by the mythical internet founders by massively increasing regulation!) by offering an equally lousy, though opposing analogy. Obamacare was the President’s attempt to reform the provision of US healthcare. It essentially shifted some of the costs from those who most need healthcare, to other people who did not want to purchase health insurance. Because Obamacare is a kind of government intervention that influences the price of healthcare, there is a tenuous analogy to one implication of applying Title II to the internet. But beyond that, the two policies have little in common. One reason that Obamacare is unpopular is that it forces people to buy a service, even if they do not want it. Nobody is suggesting that people should be forced to invest in network infrastructure, even if they do not use the internet. Obamacare changes how much consumers pay for healthcare, and finds a new balance in who pays for what. The best objection to Title II is that it would prevent internet providers from shifting more of the cost away from consumers, and on to big businesses.

As a result of his poor analogy, Cruz has strengthened his opponents more than he has weakened them. Thousands of self-appointed net neutrality advocates have flocked to the web, to ridicule Cruz’s understanding of the internet. For example, The Oatmeal lambasted Cruz for not understanding net neutrality. That author made the following statement:

I’m going to… explain to you exactly how net neutrality works.

The author then proceeded to give a ludicrously simplistic explanation. This only proves:

  • it was written by a pompous clown with no idea of how net neutrality works; and
  • that it is impossible to give an exact description of net neutrality because so many people are so obviously talking at cross-purposes.

However, there are very many pompous clowns like this author. They believe they are experts because they have a computer and they like to use it. At the same time, they are clueless about the economic issues entwined with net neutrality. Many of them are so busy delivering sermons that they never hear valid opinions that differ from their own. That is why they make time to crucify Cruz, but seemingly failed to notice any errors or oddities in Obama’s speech – including that peculiar buffering animation. If Cruz wanted to exert a positive influence on the net neutrality debate, he should have taken time to explain the issues surrounding price controls in simple terms, and made them relevant to consumers. It is unfortunate he did not, preferring to throw out an attention-grabbing but unhelpful soundbite instead.

Is this net neutrality debate relevant to you? You are reading this on the internet right now, so you must care a little bit about it. And whilst you may not be in the US, you will be conscious of America’s influence over the internet, as well as the possibility that other governments will follow the example set in the USA. What makes net neutrality so significant to our line of work is that lots and lots of people – including the President of the USA – have revealed themselves to be complete asshats, spouting wild opinions about what fuels network investment, what leads to improved internet services, how to efficiently manage traffic, and how to set prices, without showing any data to support their beliefs. One reason they can get away with this nonsense is because the communications industry has traditionally been lousy at gathering and interpreting the relevant data for itself. Many important investment decisions have been justified by little more than gut feelings and guesswork, or by a herd instinct where one telco takes a lead, and every competitor follows. This is not a great way to run a multi-billion dollar collective enterprise that connects every person on this planet. We claim to be intelligent; we should use more intelligence when making decisions.

At the core of our difficulties is trying to understand the relationship between investments, and the returns they generate. Building network infrastructure is a long-term activity. Customers purchase communications services on a much more short-term basis. Infrastructure decisions will have lasting consequences, but a YouTube video is watched on a whim. For all the talk about Big Data in the comms industry, there can be no better use of data than to improve our understanding of which network investments will yield the best returns, and which prices generate the best profits. The debate about net neutrality sits right at the fulcrum of these issues, because it has the potential to change the dimensions of who makes which decisions, and why. Whoever makes these decisions, whether it is a private company or a public servant, the quality of the decision will depend on the quality of the data they used. To get the best results, we will need more than fine talk about principles, and simplistic analogies about fairness and openness. We need lots of data, and sophisticated forecasting models. Without them, we are all guilty of coasting in neutral, unable to drive investment in the right direction. That is because we lack the substance to back our talk, and to justify our decisions.

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