Net Neutrality

Mario Girasole Regulatory, Institutional and

Press Relations

June10th, 2015

A debate where nobody

is wrong (or right)

Inclusion: a moving target Social

Economic

Digital

Infrastructure Cost of Service Cost of Devices Digital Literacy Content Solutions

+ Affordable

Share of Smartphones in Devices Sales

2013 2014 Feb/2015

Mobile industry removing barriers

+33 pp

+ Available

Spectrum

Fiber

HetNets

Coverage

+ Competitive

HHI Index as of 4Q14 Source: Bank of America / Merrill Lynch

Mobile Market Revenues Evolution (% of Revenue in Mobile Service Revenue Mix)

A great transformation in

progress 2018/2020E

2010

Internet

SMS

Outgoing Voice

Incoming Voice

12%

4%

57%

27%

The rise and fall of Regulation

New Rules of engagement in the digital business value chain New Relation between State and Market

From TLC Regulation...

Paradigms shift

to Digital Public Policies

Back to basics

TLC is a Paid Service

TLC is not an Utility

Same Service, Same Rules

Digital Transparency Perspective

Back to basics

TLC is a Paid Service

TLC is not an Utility

Same Service, Same Rules

Digital Transparency Perspective

Back to basics

TLC is a Paid Service

TLC is not an Utility

Same Service, Same Rules

Digital Transparency Perspective

Paid Service: two-sided market governance

Paid Service: two-sided market governance

CADE, P.A. n.º 08012.00850112007-91, Cons. Ana Frazão: “(...) não veracidade da premissa de que o VU-M deve corresponder ao custo de uso da rede em casos de interconexão, já que o próprio regulador reconhece que o VU-M tem a finalidade de cobrir custos fixos e variáveis das operadoras móveis e ainda possibilitar a expansão da telefonia móvel e o cumprimento de metas e objetivos da política regulatória específica.”

Users (Price) TLC “Voice” Operators (ltx)

EBITDA Margin (4Q14) (41st of 47 countries)

Source: BofAML Global Wireless Matrix, 30.Apr.2015, 4Q industry snapshot

Paid Service: two-sided market governance

Users (Price)

TLC “Data”

Contents / Applications (OTT)

NETFLIX Contribution to Anatel Public Consultation 08/2015:

“(...)o regulador deveria assegurar, não só o direito de acesso (já protegido pelo Artigo 61 da LGT), mas também garantir que esse acesso seja gratuito.”

?

Revenues

Price x User Base

(ex. Zero Rating)

Traffic technical discrimination

Dominant position

Vertical integration

Exclusivity agreement

Art. 9º O responsável pela transmissão, comutação ou roteamento tem o dever de tratar de forma isonômica quaisquer pacotes de dados, sem distinção por conteúdo, origem e destino, serviço, terminal ou aplicação. § 2º Na hipótese de discriminação ou degradação do tráfego prevista no § 1o, o responsável mencionado no caput deve: IV - oferecer serviços em condições comerciais não discriminatórias e abster-se de praticar condutas anticoncorrenciais. (Marco Civil, art. 9º)

Zero Rating

What’s the problem?

Yes No

Yes No

Yes No

Long term

Short term

Antitrust

ZRT 1

ZRT 2 Beyond Behind

ARPU (US$)

GDP/capita (US$)

Population (MM)

MTR (US$) Source: BofAML Global Wireless Matrix, 30.Apr.2015, 4Q industry snapshot

4Q14

29.27

34.758

17

0.014

7.91

10.268

200

0.103

The Netherlands X Brazil: a “not-neutral” dispute

Regulatory measures cannot be

one-size-fits-all

Zero Rating ban

Paid Service: two-sided market governance

Users (Price)

TLC “Data”

Contents / Applications (OTT)

NETFLIX Contribution to Anatel Public Consultation 08/2015:

“(...)o regulador deveria assegurar, não só o direito de acesso (já protegido pelo Artigo 61 da LGT), mas também garantir que esse acesso seja gratuito.” ARPU (US$)

GDP/capita (US$)

Population (MM)

MTR (US$)

Source: BofAML Global Wireless Matrix, 30.Apr.2015, 4Q industry snapshot

4Q14

29.27

34.758

17

0.014

7.91

10.268

200

0.103

?

Fast Lane Partnerships? Specialized Services? Specialized Networks? State Aid?

Revenues Price x User Base (ex. Zero Rating)

Back to basics

TLC is a Paid Service

TLC is not an Utility

Same Service, Same Rules

Digital Transparency Perspective

So... what about neutrality?

State Market

Pragmatic NN

Dogmatic NN

Private Investments Innovation

Competition Partnerships

Free riding Low margins/investments Concentration ( prices)

Public funding “Free lunch”

Back to bureaucracy

Regu

latory Fram

ewo

rk

Institutional Framework

Incentive to investments Formulate digital public policies

Rules for market failures

“Business flexibility that makes the networks work properly for consumer benefits, in a fair competition.”

“Everything is forbidden, except the dumb pipe.”

Net Neutrality Frameworks

Conclusion

TLC is a Paid Service

TLC is not an Utility

Same Service, Same Rules

Digital Transparency Perspective

Beyond the “Neutrality Trap”...

…from a debate where nobody is wrong (or right)…

Source: J. Scott Marcus, Nov. 2014

Network Neutrality

Anticompetitive behaviour

Innovation

Freedom of expression

Consumer awareness

Privacy

… to a Customer-centric policy debate

Customer

Competition/

Investments

(OTT vs. TLC)

Digital Transparency

(Regulation 3.0)

Traffic Management

(“best effort” vs.” specialized services”)

Digital Public Policies

(Education, Health, Smart

Cities, etc.)

Privacy/Security

(ex. the encryption issue)

Thank You!

Mario Girasole Regulatory, Institutional and

Press Relations