The most important question today; is data a commodity?

Questions And Answers

Net neutrality is a debate which has raged on for years, but now the battle is getting bitter. Despite all the fantastic arguments from both sides, no-one seems to want to address the root question directly; is data a commodity or not?

It is a simple question which could have massive repercussions. Business models will change, attitudes will be altered and rules will be rewritten. The telecoms, technology and media industries will be forever changed once this question is answered, and perhaps this is the reason no-one is; fear of getting it wrong and being remembered for the wrong reasons. But for all the arguments which are surfacing, whether it would be prioritized traffic, privacy or zero rating, the common mystery is whether data is a commodity or not.

If the commodity question is answered, the blue-sky debates up the value change will be mostly rendered redundant. Let’s look at internet traffic prioritization as an example. If data is a commodity, like electricity, you should not be able to prioritize access; you can’t pay for better data, in the same way you can’t pay for better electricity to power your TV. The GB you use is exactly the same as the one your neighbour does, irrelevant as to how much you paid; the only difference is how much you consume.

That said, on the other side of the coin, providing data coverage is an expensive business, and with the OTTs piggy-backing the vast investments being made, the telcos should be allowed to generate ROI. Unlike electricity, the infrastructure to satisfy our insatiable appetite for connectivity is not there right now. We expect the telcos to build this infrastructure, but become annoyed when they come up with another idea to recapture this investment.

Should the telcos be allowed to prioritize data? If you consider data a commodity, no they shouldn’t. But if you consider it a value product, yes they should.

One of the big problems the telco industry is facing is the supply chain. The telcos ‘generate’ data as well as getting it to your device. In the electricity industry, the supply chain is much more clear cut. In the UK, the consumer buys electricity from Ofgem licensed suppliers (such as SSE), who are customers of distribution network operators (such as National Grid), who are responsible for the construction and maintenance of the infrastructure.

Looking at electricity, you can see why it is a commodity. You pay the suppliers for power, who then pay the distribution network operator to get the power to you. The infrastructure is already there, it is simply a case of maintaining it. The distribution network operators also don’t have to worry about above-the-line advertising to battle for the consumer, therefore can concentrate investments solely on the infrastructure.

In the telco game, you pay the supplier for both data consumption and transmission. Due to our demands, telcos are having to supply use more (volume) in a significantly larger geography (coverage). It’s an expensive game which we have to pay for somehow.

Traffic prioritization one way in which they can generate extra cash without impacting the wallets of the consumer. The money is generated by charging the OTTs, such as Netflix, to access the information toll road. These OTTs have made huge profits off the investments made by telcos, who are left to collect the crumbs. The risk for the OTTs is minimal in this sense as they will never have to dip into their pocket, therefore should be taxed by the telcos somehow.

Some might argue this charge would be relayed onto the consumer through monthly subscriptions, or it would prevent start-ups and disruptors from entering the marketplace as they would automatically be on the backfoot without the same cash resources as the established players, but this is a very theoretical argument.

Another point to consider is the act of throttling data. Telcos are giving you data at a certain speed, until the relationship changes, then it is slowed down. Some might argue that you are not necessarily paying to gain faster access, but paying to avoid being penalised. Telcos don’t speed data up, they downgrade your connection. Is this just a polite way for the telcos to hold the consumer to random?

A final point to make is the necessity of data. Could you manage your day-to-day live without the internet? Probably, but culturally it would be unacceptable. Could you run your business without connectivity? Probably not. To the majority, whether by culture or design, the internet is as crucial as electricity, therefore perhaps it should be considered a commodity not a value product.

If you are able to answer the data commodity question, the arguments above are all answered as well. The root question to everything associated with data transmission and how it can be monetized is whether data is a commodity or not.

Identifying this as the main problem is all well and good, but this leads onto other important questions which need to be answered as well, most notably, who should decide?

Should the government be allowed to make such a significant call? Does it have the skills to make an accomplished decision? Can it remain politically neutral to ensure fairness? How would people feel about this much government intervention in such a commercially driven area? Is this a decision which should be ratified internationally? What about countries which have state-run communications networks? Or the private ones? Could they be trusted to come to an agreement? Can industry be trusted to come up with the answer on its own? Will the OTTs and the telcos ever come to a mature decision? Should the OTTs be allowed to continue to bite the hand that feeds them? Does the consumer have any idea the telcos are almost on their knees?

The question is only six words long, but the consequences are much more significant. It is the most important question, which is continuing to be ignored because it’s a very complicated one. But the battle will only continue to get more bitter the longer it is swept aside.

Is data a commodity or not?

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