Net neutrality debate: If startups want to rival Google, they must show some green to telcos

So says the CEO of Deutsche Telekom, a, er, telco giant


Just a few days after new net neutrality rules were passed by the European Parliament, the CEO of Deutsche Telekom has revived fears over how "loopholes" will lead to an unequal internet.

As head of one of Europe's largest telcos, Timotheus Höttges was not a big fan of efforts to make it illegal for his company to differentiate between certain types of traffic going across its networks.

The rules were passed "against our wishes" he noted in a blog post this week, and will serve simply as "more regulation."

But all is not lost, thanks to "specialized services" that were written into the rules by the European Commission – largely as a result of extensive telco lobbying – but which form one of the four "loopholes" that critics say threatens to undermine the rules.

Höttges argues that this loophole will in fact serve the interests of small businesses who "cannot afford ... server parks all around the world, to bring content nearer to their customers and thus improve the quality of their services."

"Why are these special services needed on the net?" he posits. "The Internet is multifaceted, and creates services that nobody could have imagined until recently. From video conferences, online gaming, telemedicine, and automated traffic management, through to self-driving cars and connected production processes in industry. All these services have different, in some cases more demanding quality requirements than simple surfing or emails that can arrive a few milliseconds later."

The European Commission went to similar lengths during discussions to paint "specialized services" as something on the edges of the market, such as high-definition videoconferencing or telesurgery.

But Höttges then starts to push a much broader and more mainstream definition of these "specialist" offerings, including email, video streaming, and even simple booking services.

"Quality differentiation on the Internet has long been common practice," he wrote. "Users can decide for themselves the level of service they want, and what this service is worth to them: additional storage space for emails, for instance, costs extra, just as do enhanced search functions on Xing and LinkedIn, or videos in HD instead of SD quality. In future there will also be the option of booking a service with assured quality in exchange for a few more euros. Quality differentiation is by no means a revolution on the Internet, but natural development."

Money talks

What critics will note is that taking such a broad definition provides telcos with a significant financial incentive to charge a large array of companies more for higher-quality data transmission.

The fear then is that significantly fewer resources will be put into improving the baseline service, making it increasingly necessary for companies to pay for decent consumer access. The idea of "true" network neutrality – as currently championed in FCC rules in the United States – is that by not allowing differentiation, telcos would be forced to focus only on increasing network speeds and resiliency for all.

Höttges is having none of the argument however, and claims that the real beneficiaries of specialist services will be small businesses. "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 ... small companies cannot ... If they want to bring services to market which require guaranteed good transmission quality, it is precisely these companies that need special services."

And all Deutsche Telekom asks for in return is a grappling hook locked into a company's financial well-being. "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."

So all any young upstart needs to do to compete with more established companies is pay the telcos to provide a really good service.

Of course, those established companies can also pay Deutsche Telekom to receive really, really good service. But then the smaller companies will then also get the opportunity to pay the telco even more to make sure they can stand shoulder-to-shoulder with their bigger rivals. Everyone wins. So long as by "everyone" you mean Deutsche Telekom.

But before people condemn Höttges for publicly stating exactly what campaigners feared would happen, he wants everyone to know that the telco also understands the importance of a free and open internet.

"The Internet is certainly more than just a virtual marketplace," he notes. "It has an important social function as a medium for information and participation. It must therefore remain free, open and non-discriminatory ... As a result, the free and open Internet now has a legal basis and a guaranteed future."

You see? Oh, hang on, he's not finished.

"But at the same time, the opportunity remains to further develop the Internet through increased investments and with new innovative services. As such, the EU and Europe's politicians have succeeded in finding a balance of interests. That is good for Europe. And good for the global Internet."

And good for his Q1 earnings. ®

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