Professional Documents
Culture Documents
MAY 2015
Hal Singer is a Senior Fellow at Progressive Policy Institute, Principal at Economists Inc. and Adjunct Professor at Georgetowns McDonough
School of Busi-ness.
POLICY MEMO
POLICY MEMO
BACKGROUND
POLICY MEMO
Other real-time applications include highdefinition (HD) voice service and holographic
video streaming used for virtual reality, both of
which require prioritization by ISPs to ensure
HD voice and video quality, respectively. HD
Voice uses wideband audio connections to more
accurately reproduce the human voice, resulting
in more natural sounding speech.13 These realtime applications require better handling than
the best efforts given to all other packets on the
Internet. Latency (delays), jitter, and packet loss in
the transmission of a communications threaten the
value proposition of a real-time service.
POLICY MEMO
POLICY MEMO
Similar losses should be expected for other realtime applications, such as HD voice or holographic
video streaming used for virtual reality. For example,
one forecast estimates the Global HD voice
market to grow from $815.5 million in 2014 to
$2.3 billion in 2019, with North America expected
to be the largest market in terms of market size.31
Global revenue for the consumer virtual reality
market (hardware and software combined) is
estimated to grow from $90 million in 2014 to
$5.2 billion in 2018.32 Virtual reality shipments will
create a $2.8 billion hardware market by 2020, up
from an estimated $37 million market in 2015.33
The global virtual reality in gaming market was
worth $467 million in 2012 and is expected to
reach $5.8 billion by 2019, with North America
accounting for 37 percent of the total.34
One episode suggests that, at least for certain realtime applications, the fraction of transactions that
are vulnerable to a ban on paid priority could be
substantial. VCXC, which offers HD voice service,
has sought a stay of the order to prevent the ban
on paid priority from taking effect.27 According to
VCXCs petition, certain HD voice providers will
need paid prioritization to tie into the future all-IP,
all HD voice network. Because the order prohibits
A $1 billion decline
represents a 5.5 percent
decline relative to the
telcos 1996 capex.
POLICY MEMO
The discouragement of
sponsored-data plans
would prevent certain
low-income Americans
from connecting to the
Internet.
POLICY MEMO
POLICY MEMO
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Source: USTelecom
Notes: USTelecom imposed an adjustment to remove long-distance-related capex based on trends near the time of acquisition of Qwest (2001
forward) and AT&T and MCI (2006 forward).
POLICY MEMO
POLICY MEMO
variable.
CONCLUSION
11
POLICY MEMO
ENDNOTES
1.
2.
Ibid.
3.
Remarks of FCC Chairman Tom Wheeler as prepared for delivery at the Broadband Communications Summit, Apr. 14, 2015,
http://www.fcc.gov/document/chairman-wheeler-broadband-communities-summit-austin-tx.
4.
Statement of FCC Commissioner Ajit Pai on New Evidence That President Obamas Plan To Regulate The Internet Harms
Small Businesses and Rural Broadband Deployment, May 7, 2015 (citing plans of KWISP, Wisper ISP, SCS Broadband,
Joink LLC, Aristotle Inc., and Washington Broadband, Inc.), http://transition.fcc.gov/Daily_Releases/Daily_Business/2015/
db0507/DOC-333383A1.pdf.
5.
In the Matter of Preserving the Open Internet, Report and Order (released Dec. 23, 2010), 76 n.229, https://apps.fcc.gov/
edocs_public/attachmatch/FCC-10-201A1_Rcd.pdf.
6.
7.
Ibid at 50.
8.
Notice of Proposed Rulemaking (released May 15, 2014), at 39 (emphasis added), https://apps.fcc.gov/edocs_public/
attachmatch/FCC-14-61A1.pdf.
9.
In the Matter of Protecting and Promoting the Open Internet, Report and Order on Remand (released May 15, 2014), 125
(Accordingly, today we ban arrangements in which the broadband service provider accepts consideration (monetary or
otherwise) from a third party to manage the network in a manner that benefits particular content, applications, services, or
devices.), [hereafter 2015 Open Internet Order], http://transition.fcc.gov/Daily_Releases/Daily_Business/2015/db0403/FCC15-24A1.pdf.
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POLICY MEMO
27. Petition for Stay Pending Judicial Review of Daniel Berninger, Founder Of The Voice Communication Exchange Committee,
Http://Vcxc.Org/Documents/Berningerstaypetition.pdf.
28. Ibid at 4 (emphasis added).
29. EY, Shaping Your Telehealth Strategy (2014), http://www.ey.com/Publication/vwLUAssets/EY-shaping-your-telehealthstrategy/$FILE/EY-shaping-your-telehealth-strategy.pdf.
30. IBIS, Telehealth Services in the US: Market Research Report, http://www.ibisworld.com/industry/telehealth-services.html.
31. High-Definition (HD) Voice Market worth $2.29 Billion by 2019, http://www.marketsandmarkets.com/PressReleases/highdefinition-hd-voice.asp.
32. Consumer Virtual Reality market worth $5.2bn by 2018, http://www.kzero.co.uk/blog/consumer-virtual-reality-market-worth13bn-2018/
33. The Virtual Reality Report: Forecasts, market size, and the trends driving adoption, Business Insider, Apr. 29, 2015, http://
www.businessinsider.com/virtual-reality-headset-sales-explode-2015-4.
34. Transparency Market Research, Virtual Reality in Gaming Market Expected to Reach USD 5,839.9 Million Globally in 2019,
June 30, 2014, http://www.transparencymarketresearch.com/pressrelease/virtual-reality-gaming-market.htm.
35. See generally Diana Carew, Zero-Rating Kick Starting Internet Ecosystems in Developing Countries, PPI Policy Memo,
March 2015, http://www.progressivepolicy.org/wp-content/uploads/2015/03/2015.03-Carew_Zero-Rating_Kick-StartingInternet-Ecosystems-in-Developing-Countries.pdf.
36. Josh Wright, Net Neutrality, the MetroPCS Complaint, and Low-Income Consumers, Apr. 13, 2011, http://truthonthemarket.
com/2011/04/13/net-neutrality-the-metropcs-complaint-and-low-income-consumers/.
37. Trai receives 1 million emails on net neutrality, Times of India, Apr. 23, 2015, http://timesofindia.indiatimes.com/tech/technews/Trai-receives-1-million-emails-on-net-neutrality/articleshow/47024829.cms.
38. The war over Zero Rating: All you need to know about the new battlefield of net neutrality, Economic Times, Apr. 21, 2015,
http://economictimes.indiatimes.com/tech/internet/the-war-over-zero-rating-all-you-need-to-know-about-the-new-battlefieldof-net-neutrality/articleshow/46994367.cms.
39. Is Netflixs commitment to net neutrality a lie?, The Verge, Mar. 3, 2015, http://www.theverge.com/2015/3/3/8142899/netflixnet-neutrality-flipfl.
40. Netflix has second thoughts about its deals with iiNet and Optus, Mashable, Apr. 16, 2015, http://mashable.com/2015/04/16/
netflix-regrets-the-unmetered-data-deals-it-made-with-optus-and-iinet/.
41. 2015 Open Internet Order, 142.
42. Ibid 151 (citing Public Knowledges concerns).
43. Ibid 140.
44. Ibid 151 (citing Consumer Union concerns).
45. Ibid 229.
46. Ibid 232 (emphasis in original).
47. Ibid 233.
48. Ibid 236.
49. Ibid 235.
50. Octavian Carare, Chris McGovern, Raquel Noriega & Jay Schwarz, The Willingness To Pay For Broadband Of Non-Adopters
In The U.S.: Estimates From A Multi-State Survey, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2375867.
51. OECD Broadband Portal, http://www.oecd.org/sti/broadband/oecdbroadbandportal.htm.
52. Carew, supra, at 4 (noting that 45 percent of global mobile operators offer some form of zero rating).
53. Id. at 7 (noting that a three-month zero-rating program offered by Globe Telecom in the Philippines led to a doubling of
the companys mobile data user base). The uptake in Africa after the first year of Facebooks zero-rating plan was equally
impressive. Id. at 8.
54. CSMG, Assessing the Impact of Regulation on Deployment of Fiber to the Home, Jan. 16, 2003, http://apps.fcc.gov/ecfs/
document/view?id= 6513403787.
55. Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, Report and Order and Order on
Remand, and Further Notice of Proposed Rulemaking, Aug. 21, 2003, https://apps.fcc.gov/edocs_public/attachmatch/FCC03-36A1.pdf.
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POLICY MEMO
56. 2015 Open Internet Order, 513 (The Commission retains authority under sections 201, 202 and the open Internet rules to
address interconnection issues should they arise, including through evaluating whether broadband providers conduct is just
and reasonable on a case-by-case basis.
57. Ibid 37.
58. The FCC does not offer an economic theory for how unbundling requirements could induce a provider to increase its
investment.
59. Ibid 414 n. 1210.
60. FCC Classified DSL as Information Service, Tech Law Journal, Aug. 5, 2005, http://www.techlawjournal.com/
topstories/2005/20050805a.asp.
61. Robert Atkinson & Ivy Schultz, Broadband in America: Where Is It and Where Is It Going? Preliminary Report Prepared for
the Staff of the FCCs Omnibus Broadband Initiative, Nov. 2009, http://www8.gsb.columbia.edu/rtfiles/citi/91a20123-25010000-0080-984f56e8d343.pdf.
62. TIA, Investment, Capital Spending And Service Quality In U.S. Telecommunications Networks: A Symbiotic Relationship,
Nov. 2002, http://www.tiaonline.org/policy_/publications/filings/documents/Nov13-2002_CapEx_QoS_Final.pdf.
63. Using USTelecoms data for cable and telco capex paints a more dramatic picture. The difference in the differences between
2008 and 1996 is $10.6 billion, a decline of 38.7 percent. The difference in the differences between 2005 and 1996 is $10.2
billion, a decline of 37.2 percent. Data are available upon request from author.
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2015
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