A Tale Of Two Blockades

In the past few days, two disputes from across the world have been reported from telecom industry. One of them is from the USA and the other, from India. Both reports are about blockade against a service by an operator; in one case it is against another operator. Looking at the reports, I couldn’t help wonder how the principle of carriage and its pricing have evolved in modern times, sometimes quite unfair to the operator too.

The Tale of AT&T vs. FaceTime
In August 2012, AT&T had indicated that subscribers who want to use FaceTime calling services one 3G will have to move to a “Mobile share” plan and blocked the service for others. FaceTime, for those who are not aware, is a video calling service available in iOS i.e. on iPhone and iPad. The “Mobile Share” plan entitled users to a tiered price structure with a committed base data volume, as well as, the ability to share this volume across multiple devices each of which can be added to the account by paying a surcharge per device. FaceTime calling was blocked for all other users even if they had a tiered 3G data plan.

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This created a furore in the US, with Net Neutrality groups raising it formally with FCC, in September.

As of the time of this post, the issue is under analysis by FCC, although AT&T has allowed the service without restrictions on LTE subsequently and seems to have explored opening the service for users with unlimited plans too.

The Tale of Vodafone vs. Aircel
This story is from India. Vodafone, as I understand, has tired to negotiate for a higher revenue share for SMS originating from Aircel.

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Usually, the prevailing practice is that an originating network retains a lion’s share of revenue for the traffic they generate towards a destination network. This is justified by a convention wherein, the originating operator gets the benefit of having acquired the subscriber who triggered the traffic, thus giving rise to a monetization opportunity. This also makes sense when one considers the fact users will pay for their own actions & it is easier for the originating network to bill and collect from the user.

From what I read and understood, Vodafone has asked for a 50% share in revenue, which has not been acceptable to Aircel.

Citing the reason that they were unable to come to an agreement on termination charges for SMS services, Vodafone decided to block text messages originated from Aircel. Aircel had to approach TDSAT, the appellate body for telecom disputes in India.

As of the time of this post, TDSAT had ordered removal of the blockade by setting an interim termination charge.

The Similarity
In both cases, the point of similarity is that the operator providing carriage was not happy with the remuneration for carriage. Both, data services and SMS are offered under unlimited plans.

But that is about it; nothing more. Or, are there other similarities too? šŸ™‚

The DifferenceĀ 
Apart from the basic difference that one is about a video calling service and the other about Short Message Services, there are a few significant differences between the two.

The FaceTime video calling service is a peer to peer service but at the same time hogs network resources with impact on available network capacity. SMS, on the other hand, is a store and forward service and has rarely known to cause a run on the network capacity.

The number of users with FaceTime video calling service is a small sub-set of the costumer base and the operator has no record available with them to plan and build the network ahead of demand. The case of SMS is the exact opposite.

In other words, the issue about the FaceTime video calling service is partially an Engineering problem too, while the SMS issue is purely a business problem (Personally, I would not endorse Vodafone’s action as customer friendly anyway)!

Pricing Carriage And ServiceĀ 
It is important to understand that what every customer enjoys is a result of the carriage and the service, taken together.

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In all pricing schemes, there have to be a basic price component that goes towards the carriage – its design, implementation and upkeep. All services, including the so called OTT services, should be considered as carried over the top of the carriage.

Allowing service based pricing in the name of net neutrality without recognizing the cost of carriage will be unfair to the operators, as much as blockading specific services is to end users. There are good Engineering Models to understand and set a price for carriage. This is essential in today’s era when the carriage is considered a commodity. Service pricing can be dictated by value delivered and be determined by market forces.

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2 thoughts on “A Tale Of Two Blockades

    • I was aware of the Vodafone blockade through my newsfeed. Was not aware that Airtel too had done that.

      Likewise on the FaceTime story too, I recall reading sometime back about a UK operator doing likewise, which I have not mentioned.

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