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O2 chief says consumer fees alone are not enough

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Consumer fees alone are not enough to pay for the infrastructure needed to deliver content to mobile phones, according to O2 chief executive Ronan Dunne, hinting at an erosion of the principle known as network neutrality.

Dunne told a conference last week that content producers should be prepared to pay network operators for the delivery of their material to subscribers. The issue has been a major sticking point in the US telecoms industry.

Proponents of net neutrality believe that internet users pay for access to the whole internet and should have all information delivered to them equally well.

But operators of telecoms networks have suggested that those companies which produce bandwidth-heavy content should contribute to the costs of maintaining networks and receive preferential network treatment in return.

Dunne told last week's Westminster eForum meeting that big companies should contribute to the cost of delivering their material to mobile phone users.

"Isn’t it fair to ask those big companies that are fuelling the data surge to help make a contribution to the infrastructure? If consumers alone are paying for the data there is no incentive on content providers to use networks efficiently," he said.

"So we think that part of the solution may come in moving away from the old one-size-fits-all model," said Dunne. "The alternative – that we all continue to pay for unlimited access – would simply end up pricing out the vast majority of our customers, who will continue to have a relatively modest but growing use of data in order to pay for the small proportion of very high users."

Dunne said that the problem facing mobile network operators was that they were investing billions of pounds in infrastructure to cope with a massive increase in data use, while facing a very price-competitive market.

"An increasing share of [growing] data traffic will travel across mobile networks," he said. "Think of all the data ever carried across mobile networks since they were first launched in the 1980s. By 2014, mobile networks will carry 133 times more than that total in just one single year."

"Already within the last 12 months, we’ve seen an increase from a quarter to a third of UK residents who use their mobile to go online. And among those aged 16 to 24 that proportion rises to almost half," he said.

"Previous technological evolutions have brought costs down. But what is unique about this surge in data use is that it is driving costs up," said Dunne. "At a time when most industries in the UK are facing falling demand, we are facing more demand for data than we can handle."

In the US, controversy has surrounded attempts to link payment to networks by content producers to better treatment of their material. The idea that content producers should pay for the carriage of their services or that they could effectively buy better access to consumers has divided opinion.

Telecoms companies have raised the idea as a response to the increasingly bandwith-heavy material that consumers are using. They believe that companies which profit from this material should share the cost of delivering it.

But consumers' groups believe that an internet subscriber should be served the whole internet on equal footing and not find it harder to access material on a network just because the content producer has not paid extra to the telecoms company.

Dunne said that the UK market would be different, and that the greater degree of market competition would ensure access to all information.

"In the United States, following a deal between Google and Verizon, this issue has attracted an enormous amount of attention," he said. "But what differentiates the UK model from that of America is the sheer competition in the UK. From the UK consumer point of view, you have a real choice of providers and can switch if they’re not delivering the experience you want in the way you want it."

"So as long as there is transparency from the providers – and I think we have duty to be transparent on these issues – then competition will help ensure that democracy continues to thrive on the internet," he said.

An O2 spokeswoman said that Dunne's speech "doesn't constitute a change of policy" for the company.

Copyright © 2010, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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