Response by Tele2 to BEREC 2012 Public Consultation on Net Neutrality

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Tele2 is a challenger that has become one of Europe’s leading alternative operator; a company that strives to always provide the best value deal. We have 35 million customers in 11 countries. Tele2 offers mobile services, fixed broadband and telephony, data network services, cable TV and content services. Ever since Jan Stenbeck founded the company in 1993, it has been a tough challenger to the former government monopolies and other established providers. Tele2 has been listed on the NASDAQ OMX Stockholm since 1996. In 2011, we had net sales of SEK 41 billion and reported an operating profit (EBITDA) of SEK 10.9 billion.

Comments to BEREC’s public consultations on the draft reports

“Differentiation practices and related competition issues in the scope of Net Neutrality”

“Guidelines for Quality of Service in the scope of Net Neutrality”

Tele2 Group Response

July 2012

Tele2 AB (“Tele2”) welcomes the opportunity to comment on BEREC’s Draft reports assessing aspects of the differentiation practices and related competition issues and quality of service in the scope of net neutrality.1 This reply covers both the Draft Competition Report and the Draft QoS Report since the topics dealt with in the two documents are strictly interconnected. In this response Tele2 would firstly like to outline some general comments on the field of competition and quality of service in the scope of net neutrality and secondly comment on some specific matters in the two draft reports.

1 Draft report “Differentiation practices and related competition issues in the scope of net Neutrality” BoR(12) 31, hereafter referred to as “the Draft competition report” and “Guidelines for Quality of Service in the scope of Net Neutrality”, BoR(12) 32, hereafter referred to as “the Draft QoS report”

Tele2 AB, Skeppsbron 18 P.O Box 2094, SE-103 13 STOCKHOLM, SWEDEN Tel +46 8 5620 0000, Fax +46 8 5620 0040 Org nr 556410-8917, www.tele2.com 1

Tele2 would like to commence by pointing to some of the main messages in the European Commission Statement, delivered by Vice President Kroes on May 29.2 In her statement Vice President Kroes emphasized that end users need clear information about a subscription so that they can make well-founded decisions about what subscription suites them the best. She also stated that end users shall be given the opportunity to choose the service they want, including discounted services with limited online connectivity. In Tele2’s view end users shall continue to benefit from a wide range of different access forms to the Internet with different specifications, capacity, quality and terms and conditions, therefore we fully subscribe to Vice- president Kroes statement. Tele2 has some general concerns about BEREC’s draft reports. Firstly over the last years BEREC have published several reports and guidelines in the scope of net neutrality.3 Tele2 means that there are overlaps in these documents and considers there to be some conclusions that are not aligned.4 Especially Tele2 would like to point out that in several sections of the QoS document the competition consultation seems to be wrongly quoted. In order to ensure consistency and to ensure regulatory certainty we encourage BEREC to summarize the key findings of all these reports in one single document. In the Draft Competition Report BEREC carries out an analysis of what effects different practices of traffic management, such as prioritization and blocking of VoIP and P2P, have on long term innovation and end users (taking into account fundamental freedoms and its link to the unrestricted access to the internet). Tele2’s overall view is that BEREC has carried out an objective analysis of the effects of the different practices however we would like to point out that in some instances the conclusion of the analysis lack a complete picture. One main concern in this regard is that BEREC base many of their assumptions on an “either-or” situation. For example in the analysis of the effects of the practice of blocking or throttling an application BEREC does not seem to take into account that there are continuously differentiated offers including a full range of services, some which include high speed and unlimited volume while other offers are tailor-made services in order to meet other customers’ wishes and needs.

2http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/12/389&format=HTML&aged=0&l anguage=en&guiLanguage=en 3A framework for Quality of Service in the scope of Net Neutrality, BoR(11) 53 , Guidelines on Net Neutrality and Transparency BoR (11) 44, the Draft Competition Report and the Draft QoS report. 4 For example the Draft QoS paper make a statement on page 52 stating that the Draft Competition Paper comes to the conclusion that if traffic management is used it should not discriminate between content and application. Tele2 cannot find such a statement in the Draft Competition paper.

BEREC underlines in the QoS consultation that transparency is the starting point when it comes to consider network neutrality within the European Directives. Tele2 strongly supports this standpoint. BEREC also makes some assumptions in the Draft QoS paper which are both vague and of concern to Tele2. For example BEREC states that the QoS experienced by the end user is often the outcome of numerous aspects which several actors in a complex value chain are responsible for. Tele2 agrees fully with this. However BEREC under section 4 and especially in regards to monitoring of QoS seems to somewhat discount the effects that the implication of the different actors in the value chain have on end user QoS experience. In section 5 of the Draft QoS Paper BEREC outlines some guidance for how NRA shall act: firstly in regards to identifying differentiated treatment of traffic and secondly when a regulatory intervention is necessary. BEREC states that a NRA will have to check whether complaints are related to traffic management of the ISP or whether the application itself actually is affected. In this sense Tele2 would like to underline that the usage of minimum QoS requirements on ISPs in relation to specific applications shall be seen as unjustifiable, disproportionate and practically unfeasible. This is based on the following; there is an almost unlimited number of applications, the different characteristics and requirement in terms of network performance of these, and finally because equal treatment of all applications is likely to lead to a lower QoS of some applications.5 Also it is very difficult to identify and clearly isolate the reason for an experienced degradation of a specific application –since this can be due to network deficiency, software application problems, terminal incompatibility, IP- interconnection or other issues. In regards to net neutrality ISPs shall be given the opportunity to differentiate their products in order to ensure that end users have an opportunity to choose the product best suited for them. Any restriction to this would limit the ability of operators to explore new business models which enhance end users welfare and make it possible for ISPs to respond to the rapid increase in demand for internet connectivity. As long as ISPs respect general obligations such as fundamental rights, competition law and general consumer legislation regulators shall not intervene and it should not be the role of regulators to shape end user offers. However stating this, Tele2 means that end users are only able to make conscious decisions when product inclusion/exceptions are descripted in a transparent manner. Tele2 are committed to carry out on-going improvements and to continue to work closely with national NRA’s, trade associations and other operators in order to ensure an even higher level

5 E.g. the improvement of QoS for all P2P applications might lead to lower QoS for example gaming applications which are very sensitive for a “correct level of “ QoS.

3 of transparency than today. This includes ensuring that information provided by network operators are available in such a way that makes it easy for the end user to compare with other products provided. In this regard NRA needs to be aware that a lot of these issues are competitive sensitive for ISPs why the involvement of NRA’s and potentially competition authorizes, is essential. Basic traffic management is an indispensable tool which is used for dealing with different type of network threats and congestion. It is used in order to maintain and improve the quality of services offered to all operators’ customers. To prevent operators to use traffic management is something which must be considered disproportionate, it would not meet the requirement of necessity nor have the effects which BEREC seem to aim for. Without traffic management it will be almost impossible to deliver a high quality internet service to customers. While stating this Tele2 believes that operators can become more transparent about the way traffic management is used. Furthermore, legal obligations currently exists which shapes the way traffic management can be used, such as data protection rules.

Specific remarks

1) Growth of the internet - relying on the so called best effort principle6 The growth of the internet is considered to be a result of the openness of the internet and of its accessibility, where available content can be reached by any user connected.7 The ease of communicating over the internet with other people and using content without the need to overcome any substantial commercial barriers has led to an extra ordinary growth in the usage of the internet. Whereby new ways of communication and accessing of information were and are provided and new opportunities to for example start businesses were and are created. As the Internet developed the applications and connectivity speed did the same – therefore Tele2 means that the “best-effort” principle of the internet shall be seen as a result of the complexity of the internet rather than the source for the growth of the internet. Tele2 considers that the degree of competition on the end-user-level in Europe over the last decade or so have provided for low consumer prices for connectivity, leading to a high level of broadband (fixed and mobile) penetration which also is a very relevant factor in the growth of the internet. However in this regard Tele2 wants to emphasize that more needs to be done in the regulatory sphere both in order to ensure compliance of specific telecommunication legislation and also when the EU introduces new measures to boost investments so that competition is not distorted on a network wholesale level in Europe, since this would directly decrease end user options, flexibility and choices in the long run. When reading the Draft Competition Report it seems as if BEREC wants to establish a fact about the historical usage of Traffic Management which does not comply with the actuality usage of Traffic Management according to Tele2.8 In the report it sounds as if traffic management is a technology which operators just recently started to use, and that the reason for the usage is that network providers have problems with network congestions. Tele2 would like to underline that Traffic management have been used since the beginning of internet to ensure that capacity is efficiently used, in order to give end users the best ‘internet experience” as possible, in order to protect users against spam and other type of network attacks and to prevent fraudulent behavior.

6 Draft competition Report, for example page 4 (§2) and 11 (§32). 7 Building on the assumption that the content is legal and that State regimes and other parties have not chosen to use content filtering or blocking to a large extent. 8 For example on page 13 (§46) in the Draft competition Report.

2) Future Trends in the area of capacity The fact that there is an increased demand for data transmission over the internet cannot be disputed, even if the growth rate of this increase may be debated.9 However the data capacity required to meet the demand from end users does not build on a simple and straightforward equation. The usage patterns vary a lot – both over time (during the day) and from one user to another. There are new mobile applications being launched continually, e.g. spotify, voddler, word feud, which in one big leap increase capacity demand substantially in a network (and in single cells). However this extra ordinary increase in demand for these applications is very likely to decrease again over time. The capacity demand therefore fluctuates greatly. Consequently the scale of investments necessary in order to ensure that congestion never occurs cannot be seen as economically justifiable or desirable. Stating this, telecommunication providers have a responsibility to ensure that they have sufficient capacity in their networks to provide the service levels they communicate and offer to end users (the speeds advertised and stated qualities etc.). In conclusion this means that sufficient investments in network capacity will not and cannot be the only permitted method for ensuring a steady high level quality of internet usage, other means such as traffic management must be seen as an acceptable technique. Declaring this Tele2 strongly believes that all measures utilized that may have an effect on the end user experience shall be carried out in a transparent manner and ISP, as any other service provider, have an obligation to fulfill all contractual commitments towards end users. Furthermore Tele2 would like to point out the investments carried out by telecommunication network providers in Europe may not solve all issues of adequate capacity. For example if an end user in Europe with a 1GB connection is trying to access a website which is not connected with sufficient capacity the European end user will still have trouble approaching this site. Finally Tele2 would like to emphasize that investment as such is not a regulatory obligation. As long as capacity and other quality issues are declared in a clear and transparent manner towards end users (i.e. not misleading consumers in regards to service level), operators shall have the right to decide when to invest in capacity increases. Investment will occur when it is needed from a competitive perspective and when it can be seen as economically sustainable.

9 Draft Q&S Report page 17, BEREC claims that figures from CISCO shall be read as if traffic rate of growth is declining. Tele2 comments on this below.

3) New type of applications with high demand for quality In the Draft Competition Report it is argued that new applications are provided by CAPs that demand a level of quality that may go beyond the traditional best effort quality.10 In Tele2’s view this is something which is happening frequently with a lot of different applications. Video, VoIP and TV streaming applications could be considered as such applications. They require a minimum level of broadband speed or dedicated bandwidth to ensure a satisfactory quality. In cases where end users have subscriptions offering a slow broadband connection, a video or TV streaming application will quickly lead to congestion. While stating that CAPs are providing new applications that demand a high level of bandwidth, Tele2 would like to underline that these new types of applications are believed to lead to an increase in end user demand for high speed network connectivity, which Tele2 of course support. Concerning this matter content application providers and ISPs have a shared responsibility in order to ensure that end users acknowledge that not all applications function with a sufficient level of quality on all type of subscriptions. This can simply be described by pointing to the lack of bandwidth of the end user subscription. While some end users will, based on this knowledge, upgrade their internet connectivity to ensure satisfactory speed this is not the wish of all. The once who do not have the need for high speed internet, the once that use internet for more basic services which are not bandwidth sensitive such as internet banking, e-mail or e-commerce webpages should not be forced to subscribe to the same type of high speed internet connectivity subscription as those using both a lot of bandwidth and volume.

4) New approaches to ensure stable connectivity There are many approaches considered by ISPs in order to ensure the most efficient networks. Tele2 wants to stress that this is done parallel with carrying out necessary and smart investments in networks to meet end user demand. In some instances it seems as if BEREC is considering future approaches as an “either-or” approach by ISPs. Tele2 would like to share our position on some of these new approaches and developments. - an evolution of the best efforts interconnection framework in order to increase the contribution of CAPs to the financing of the costs of conveyance of the traffic of their services: Tele2 believes that a new cost structure where CAPs would accept to co-finance Interconnection is not likely in the near future. There need to be other elements involved for this new financial structure to develop. However as Tele2 underlines in

10 Draft competition Report page 18 (§66)

7 our response to the Consultation relating to “An assessment of IP-interconnection in the context of Net Neutrality”, there should not be any new legal obligations introduced hindering such a voluntary development in the future. Of course this position builds on the fact that cooperation’s between ISP’s and CAPs which would have a direct effect on end user experience are sufficiently explained to end users and that the co-financing does not distort competition. - a development of better traffic management in order to offer quality- differentiated or service-segmented offers: As stated above internet traffic is not stable in the sense that the flow is consistent, meaning that network investments will not be the only means needed to handle the future level of internet traffic. Furthermore the end-user demand differs. In the future it may not only be speed and volume demands that vary amongst costumers but instead different content demand. Thus being able to offer more price attractive and suitable offers building on different requirement for content to the end user may meet the wish of European consumers. This is why Tele2 believes that traffic management will need to be developed further. However stating this, Tele2 consider it to be crucial that all techniques used for traffic management fully respect fundamental rights such as privacy and freedom of expression, in parallel with being used in a transparent and informative way towards end users. It is therefore difficult to elaborate in detail how traffic management could be developed in the future in order to be able to offer quality-differentiated or service-segmented offers. - a development of end-to-end quality service offerings Tele2 does not believe it is likely that such approach will develop. We base this assumption on the significant cost is would bring in order to ensure end-to-end quality. As of now neither ISP’s, end-users nor CAPs are likely to be willing to carry that cost.

5) Potential effects of new business models According to BEREC it could become more frequent in the future to block specific CAPs, and that this blocking would only be removed if the CAP pays the ISP to remove it.11 In this sense Tele2 believes that BEREC to a large extent are simplifying the internet service provider market structure in Europe. We argue that there is a high level of competition on end-user level across Member States. Even if an ISP chooses to block a CAP towards all its subscribers there is still no proof that other ISP’s in the same Member State would act in the same manner (while obeying to competition

11 Draft competition Report page 22 (§86)

8 legislation). Rather an opposite situation is likely since access to popular content could then be used as a competitive advantage by other ISP’s. This scenario is therefore not likely with current competition laws, transparency obligations and end users ability to easily change their internet provider. In addition, there are currently some European ISPs blocking applications such as VoIP. To be able to access these applications it is the end user rather than CAPs that have to pay either an extra fee for access to a specific application or changing their subscription or operator. If CAP’s would be willing to pay for removing the blocking instead of end-users Tele2 does not see any risk or legal hinder for such a development.

6) Transparency of traffic management and QoS In order to reduce congestion differential treatment of traffic may be applied. As stated several times above Tele2 considers this to be a necessity, however we also believe that this shall be done in a transparent manner towards end users. Currently there are different methods, terminology and approaches used amongst ISPs across Europe and within member states for sharing information towards internet subscribers concerning what type of traffic management is used, the effects of this and why it may be considered to be a necessity when providing an internet service. Tele2 strongly believes that in order to ensure that the right information is shared, in the most efficient way, hence ensuring that end users understand what is done and providing them with a possibility to compare different internet subscriptions, a joint approach involving national regulators, ISPs and consumer organizations is essential. Tele2 are already involved in these types of discussions with national industry association.12 While ensuring that end users are provided with clear information about traffic management and other differentiation technologies, it is essential that transparency obligations do not lead to an excess volume of information. This could be avoided by utilizing different level of information, based on the need and wishes from different users. For example basic information of what is prevented in a subscription shall be stated clearly in all market communication, while more technical description may only be available on ISP’s webpages (still easy to access). In regards to speed limitation in internet connectivity, a result also of elements outside the control of operators, this moreover needs to be conveyed to end users in a transparent and clear way. Hence operators shall provide clear information about the speed and quality that an end user can expect during different scenarios. In this regard

12 For example in Sweden and Norway where Tele2particpate in industry dialogue in order to reach a common understanding for how to achieve transparency measure in a collective way. In the Netherlands a voluntary code of behavior has been signed with the large ISP’s and the Ministry to report on traffic management and what influences the speed experience of a customer.

Regulators need to keep in mind that this is very difficult since there are numerous elements that will affect both the speed and quality of especially mobile internet connectivity, e.g. distance from a base station, application problems, terminal incompatibility etc. Therefore requirements in regards to transparency need to be realistic and should rather build on certain type of information elements that need to be included in market communication rather than exact speed or quality indications. While operators have an obligation to be transparent and use communication that lead to realistic expectation an information overload should be avoided.

7) Effects of traffic differentiation and the impact of switching possibilities BEREC seems to believe that differentiation will have a negative effect on end-user experience. However they underline that the impact of the negative effect varies based on the level of transparency and cost/ease of switching operators. Tele2 firstly would like to point that not all traffic management have negative effect on end-user experience, actually it is often the opposite. For example a user that would, based on traffic congestion, not be able to use a bandwidth sensitive application are able to do so while another subscriber who is utilizing a non-bandwidth sensitive service may have his/her applications down prioritized although this will not affect that users experience. Secondly, an end user shall be able to make well-founded decisions about what type of subscription they want to have; including what features they need and do not need, what speed they want and what volume is sufficient for their requirements. To ensure constancy and provide end users the ability to easily compare subscriptions Tele2 believes that industry needs to establish transparency measures and methodology jointly. Tele2, as most other ISP’s across Europe use a range of different loyalty periods. The loyalty periods are partly used to subsidize the cost of hard ware such as mobile phones (primarily smartphones) and routers. The method of loyalty periods can be seen as an instrument to ensure that not only people that have the money to pay a large lump sum for example for a smartphone are able to acquire one. By utilizing this method Tele2 have assisted in ensured that a large number of customers today are connected to the internet by mobile and fixed solutions. Stating this, a subscriber is at any time able to cancel their subscription. If this is done before the loyalty period expiries the balance not yet paid will become due. In the case of an alteration to the terms and conditions during the loyalty period the end user, in accordance with EU telecommunication regulation, has the right to terminate his/her contract. Tele2s experience is that switching of service providers is sufficient and the current EU legislation is satisfying.

A good example of how easy it is to switch operates is Sweden and the Netherlands where an end user easily can swop ISP by simply providing basic details on the webpage of a service provider. The new service provider makes sure that the end user’s contract with the former ISP is terminated. However Tele2 would like to point out that in some member states the compliance by some operators and the supervision by NRA’s may be improved. End user’s shall have the opportunity to choose the services best suited for their wishes and price range, including the possibility of subsidization of hardware even if this means longer loyalty periods.

8) Effects of blocking BEREC states that “due to network effect, even the blocking of one single (popular) application can have far reaching consequences”.13 Tele2 means that BEREC’s statement is exaggerating the situation and does not take into account the level of competition in the European internet access market. If blocking is done in a transparent way, and other type of subscriptions are offered (which is the case in a competitive market) blocking of one type of application on one type of subscription would not have as far reaching consequences as BEREC states. This since the end user simple can subscribe to a subscription where the application is included.14 The model of different subscriptions can be compared with flight tickets – a customer has the possibility of purchasing different type of classes on the same flight to the same destination. If you fly in business/first class your ticket includes all meals and drinks “for free” on your way to your destination. While if you fly economy class you will have to purchase drinks and beverages. Both tickets will ensure you are able to fly but what is included differs. Furthermore BEREC states that because of broadband access and internet access markets face competition there are good reasons to believe this form of differentiation [restricting access to different services] will not be a successful strategy.15 Tele2 agrees with the last conclusion. Since the market is functioning well there are no incitements for regulations in this field. The Dutch Net neutrality law was not needed in our view; with competition the market was and is functioning well, therefore there was no need for specific rules on net neutrality. 9. Assessing traffic differentiation and prevention of degradation

13 Draft QoS Report page 33. 14 This scenario is only relevant before the end user enters into a contract. If the blocking of the application is introduced during the loyalty period this is seen as an alteration of the contract and would according to EU legislation lead to the possibility for end users to terminate their contract. 15 Draft Competition Reprort page 57.

Across Europe NRA’s or other websites provides different services where end users are able to measure speed of their internet subscription. There are also global services that provide this type of instrument. These services do not usually provide information about speed of different applications but rather provide the user of a general indication of speed. Tele2 support these measurements tools and encourage usage of them. Although these services provide end users with an easy-to-use-tool to validate the overall speed of their internet connection it has been shown several times that the service stipulates a very arbitrary picture of the end user speed connectivity. Mainly because of the fact that other features are not taken into account, such as network deficiency (e.g. distance from a base station or WIFI access point), software application problems, terminal incompatibility, IP interconnection or other factors which are outside the control of operators. In case of monitoring Tele2 is, based on our experience with end user monitoring of speed, of the opinion that monitoring shall only take place on a reactive basis when the complaint has firstly been verified in some sense. Otherwise there is a risk that NRAs will be trying to solve problems which do not exist. Furthermore a general proactive monitoring of QoS approach cannot be considered as objectively justifiable. This is especially the case if operators would be obliged to hand over information or set up technical solutions for carrying out this monitoring which cannot be seen as proportionate if no real problem have been identified. Therefore, if monitoring of differentiated treatment of traffic is found to be necessary since a real problem in regards to traffic degradation have been identified; it shall be carried out on the basis of an objective trigger. Article 22(3) in the Universal Service Directive16 provides NRAs with a possibility to impose minimum QoS requirements. This obligation shall be seen as a tool that is meant to be used to protect customers from a degradation of their existing service. Tele2 means that this requirement shall only be used in cases where service quality is of concern; hence the quality of service is down-graded. As stated in recital 34 to the USO directive QoS is safeguarded through a high level of competition. With the current level of competition, with some adjustments in transparency and with the current stipulated possibility for end-users to switch operators, there is no need for an NRA to impose further obligation in order to ensure QoS.

16 Universal Service Directive 2002/22/EC amended by directive 2009/136/EC hereafter referred to as the USO directive.

Comments to BEREC’s public consultation on the draft report “Assessment of IP Interconnection in the context of Net Neutrality”

Tele2 Group Response

July 2012

Tele2 AB (“Tele2”) welcomes the opportunity to comment on BEREC’s Draft report assessing aspects of the IP interconnection in the context of Net Neutrality.1 Tele2 would hereby like to submit the following remarks. BEREC’s states that the internet ecosystem has managed to adapt IP interconnection arrangements to reflect changes in technology, changes in market power of players, demand patterns and business models. This happened without a need for regulation.2 Tele2 coincides with this; the internet ecosystem has managed very well to adapt IP interconnection arrangements without the need for regulation up until now. There has so far been a rapid growth of the internet and to date there have not been any evidence of imbalance between parties, nor any irregularities leading to distortion in competition in the internet value chain. Tele2 would like to stress that any proposal for regulation or recommendation from BEREC and/or actions to regulate from the European Commission should only take place when it has been shown to be necessary to solve a specific issue. Furthermore in cases when regulation can be considered a suggested measure needs to be proportionate to the means that the regulation is meant to solve. Tele2 means that the

1 Draft report “assessment of IP interconnection in the context of net neutrality” BoR(12) 33, here after referred to as “the Draft report”. 2 The draft report page 48.

Tele2 AB, Skeppsbron 18 P.O Box 2094, SE-103 13 STOCKHOLM, SWEDEN Tel +46 8 5620 0000, Fax +46 8 5620 0040 Org nr 556410-8917, www.tele2.com 1 introduction of EU legislation in the area of IP Interconnection would at this stage be premature. With a continues swift development within the area of internet services, concerning both new type of categories and technical solutions for content distribution networks and new type of business models, Tele2 believes that premature regulation would potentially hinder the future innovation in this area rather than promote it. It may also hinder a sustainable development of the electronic communication sector especially in regards to future necessary investments in European telecommunication infrastructures. Tele2 believes that the emergence of hyper giants such as Google, Akami and Amazon etc could potentially lead to new ways of distributing costs for using the internet. Such new costing/revenue schemes have yet to be developed however if they are they could lead to new positive developments for telecoms markets, services and technological innovation – which would lead to end-user benefits. Therefore the European Commission and BEREC shall respect the need for private sector leadership and commercial agreements in this area. The future IP Interconnection ecosystem shall provide possibility for both best effort delivery and end-to-end quality of service delivery. Tele2 however does support the work carried out by several NRA’s across Europe3 in regards to monitor the IP-Interconnect market in order to ensure that there is no distortion in competition. With the great number of both transit providers, Content Delivery Networks (hereafter referred to as CDN’s) and Content and application providers (hereafter referred to as CAP’s) and with a great number of national Internet Service Provider’s (hereafter referred to as ISP) in all Member States providing end users a possibility to choose from who they would like to purchase their broadband connection – the current level of competition shall be considered sufficient. Although stating this, Tele2 would like to underline that more efforts are needed in order to ensure better competition in the telecommunication wholesale market.4

3 For example OFCOM 4 Considering that BEREC states in the consultation that incumbents still have around 43% of markets shares in the retail internet access market, more regulatory efforts are needed to promote more competition among European internet providers especially on the wholesale level.

1. Comments on relevant questions

1.1 Question 1, Are any other important players and/or relationships missing? Question 2, Do you agree with the classifications of CAPs as outlined above? Question 3, Do you agree with the classifications of CAUs as outlined above?

Tele2 does not believe that any important players and/or relationships are missing although the Application layer seems to be simplified. Also the image seems to imply that CAUs are customer of CDNs. The grey CDN area should furthermore only cover the CAPs side.

1.2 Question 4, Do you agree with the classifications of ISP’s as outlined above? The Draft report describes the costs and revenues for an eyeball ISP’s to be the following: Costs: To provide connectivity eyeball ISPs need to buy upstream capacity via transit and/or peering, so that their customers can access content from distant non- affiliated CAPs connected to other ISPs. Tele2 agree with this description but would like to underline that it is highly simplified. An eyeball ISP needs to carry other costs for ensuring access for CAUs to CAPs, the primary cost is that of transmission / transport. This cost might align with the needed transport to build an access network however it may also fall outside this scope. A popular approach to lower transit costs today is to lease transmission capacity to a large IXP and exchange traffic for free (peering). The cost of the transmission links must be taken into account. Naturally, the access network and the

3 technology solution used for this will also influence the total cost for the ISP. Therefore the definition in the Draft paper is correct however it is described in a manner which is too isolated since it does not take into account all aspects. Revenues: The provision of connectivity for users encompassing the transmission of up-stream and downstream traffic is the main source of revenue. This statement is correct however revenues may also be generated from specialized services, as well as the pro-vision of connectivity and/or hosting to CAPs.

1.3 Question 6, To what extent are requirements regarding traffic ratios still important in free peering arrangements? Traffic ratios are still considered important when negotiating free peering agreements however it is often not considered the sole prerequisite for achieving free peering agreements. Some carriers still honor the idea that equal ratio is the main basis for free peering agreements since it is considered to indicate an equal division of transport cost. An imbalanced ratio would then indicate that one part is taking advantage of the other (usually a CDN server cluster placed at a provider’s edge – placing high outbound traffic (inbound to the provider, carrier, ISP, having to transport that traffic to the end user)).

Specifically for Tele2, we often do not consider ratio as the most important aspect, since we will still need to transport the traffic between the CAUs and CAPs.

1.4 Question 8, Does an imbalance of traffic flows justify paid peering? When the parties cannot come to an agreement of free peering, because there is no incentive, (different volume flows, different tiers) Tele2 means that some type of indemnity is justified, such as paid peering. In a free and well-functioning market economy contractual parties shall not be obliged to bear someone else’s costs.

1.5 Question 9, Does paid peering increased? Tele2 does not have any facts in this regards however our believe is that paid peering is increasing. The reason for this believes is that originally Tier1 networks have grown weaker and the large incumbent networks stronger.

1.6 Question 13, Should in the future Europe evolve to have more decentralized IXPs closer to CAUs? In Tele2s view IXPs make peering easier for parties, when there are market incentives for IXPs to provide their services. There are however many occasions when ISPs benefit from using other connection facilitates than IXP’s. One reason is that this can be done closer to a large number of end user; decreasing costs and increasing quality. The position and number of IXP in Europe, shall according to Tele2 be based on what is economically desirable, i.e. there will be an increase of IXP’s at different locations across Europe if there is a need and economically justifiable. There are many examples where a number of Internet service providers have grouped together and started an IXP because there was a need for this. In fact, almost all IXPs started out like that at one point.

1.7. Question 14 Will traffic classes ever become available in practice on a wide scale? Tele2 does not consider traffic classes as likely to happen because the commercial interest of the networks that would need to be involved (e.g. transit network, access networks) are different and the complexity and expenses to realize such classes (conclusion of agreements, technical implementation, continuous changes) at least currently seem to be disproportionate to the additional value achievable.

1.8 Question 16 Will other solutions for improving QoE like CDNs become more successful rather than traffic classes? Quality of Experience almost always equate to more bandwidth and lower latency both elements are fairly straight forward to achieve. Adding more bandwidth to current interconnects as well as establishing new interconnects is something that ISPs has done when it is economically justifiable since the beginning of the Internet. Decentralizing and locating services closer to the end users is a trend we have seen over the last years and which is becoming more and more popular. It effectively decreases latency as well as reduce backhaul costs for ISPs. Tele2 does not foresee any other methods besides further decentralizing services (essentially expanding CDNs).

1.9 Question 19, Given the cost reductions and the economies of scale and scope observable in practice, why do network operators call for compensation? Tele2 would like to emphasize that the assumption stated in this question by BEREC is somewhat predisposed. Firstly, all bandwidth comes with a price. If the ARPU

5 does not increase in the same pace but only increases with the average-bandwidth- usage-per-customer, then the equation and assumption stated in Question 19 is not correct, hence the reason why ISP’s would like to have the possibility to call for compensation not only from end users but also from other actors in the ICT-value chain. Secondly, there is neither legislation nor regulation stating that a network operator must peer with another network. Therefore it is up to each and every Internet service provider to decide themselves whether peering with another network is of benefit to their end-users and/or to them. Some, typically ex- incumbent, provides internet services to a large share of their country’s' population and they have recognized the opportunity to charge all other network providers access to their network. They are also sometimes calling for compensation from content providers simply because they can. When a service provider has a sufficiently large customer base "locked in"(i.e. there is only one sufficient route for internet traffic), that service provider has a unique opportunity to charge for access from content providers. This situation does not exist within Europe and is not that common elsewhere in the world. However Tele2 believes that it is important that IP interconnect markets are monitored to avoid misuse of dominant market powers and exorbitant prices. This since profiteering will hurt the end-user experience.

1.10 Question 20, Do you subscribe to the view that CDNs lead to improvement of QoS without violating the best effort principle? In Tele2s view CDNs improve performance without violate the best effort principle. Tele2 would like to however re-phrase the question so that it focuses on QoE rather on QoS. In general Tele2 consider it to be in the interest of customers that CDNs are used since content becomes available fast without violating the best effort principle, since it is not directly linked to any CAPs in a way that CAPs do not actively influence the service provided by CDNs. A concrete example could be the service Skype, which can provide quite good QoE without employing end to end QoS. Developments in codecs, protocols and server/client applications can provide better QoE without needing additional QoS. But this will never eliminate the need for QoS. For instance QoS is also an important tool in managing faults and congestion caused by faults. In the case of severe congestion during a fault QoS is the tool allowing critical protocols like remote management to still function. Or in the case of a longer fault (e.g. underwater fiber cut, important routers are down) then QoS can ensure important traffic (e.g. voice) can still work well in the detriment of not so important traffic (e.g. P2P, video, etc.).

1.11 Question 22, Is there a general tendency for eyeball ISPs to deploy their own transit capacitates and long distance networks or even to become Tier-1 backbones? There is a tendency for any network above a certain limit to grow beyond the markets in which they serve customers just to interconnect for traffic exchange. Multiple examples exist for service providers leasing capacity over the Atlantic and over the Pacific only to peer on the “other side”. With a larger network, it often enhances the reach. A small network might only have revenue and traffic enough to get a link to the adjacent country to pick up a few more peers while a larger provider can purchase inter-continental links. The largest eyeball ISPs are indeed aiming for becoming “Tier-1” or at least transit-free.