Ad-blocking by telcos – like bringing a knife to a gunfight

Written by on May 27, 2015 in Features with 0 Comments

Businessman shaking hands  while holding weaponRecently we have seen a bunch of articles (see here [paid], here, here) suggesting that some mobile network operators – notably in Europe – are considering deploying ad-blocking capabilities in the network, and potentially charging companies such as Google for the right to ‘unblock’ them via some sort of revenue-share agreement. A company called Shine has been mentioned as a possible vendor – I’ve spoken to the firm in the past and was unconvinced.

That said, the idea that mobile operators might block ads in their networks, or charge for the traffic they use, is not new.

In fact, I believe invented the concept myself, 4.5 years ago. (See this post  – sorry to anyone trying to patent the idea!). I wasn’t entirely serious, but I could see it was a possible future.

Another thing I’ve said before is that telcos often “take 4 years to spot a good idea, 4 years to implement it & another 4 years to realise they’re too late.”

And in this case, it’s already too late. While ad-blocking might be effective for stopping in-browser ads, the technology will struggle with other formats like in-app ads (except where they are from an obvious source, or in a hybrid ‘webview’ page in the app). It also struggles with various forms of ‘native’ advertising embedded into content, such as video pre-roll ads or sponsored-content promotions.

In addition, the landscape has changed massively since 2010, in terms of the way that ads are delivered, dataplan size and the large role that Google/Android and other advertising-centric companies have on the overall mobile landscape.

There are also many possible responses and workarounds to ‘block the blockers’ – see below. My view is that these experiments will not just fail – they could backfire spectacularly.

Regulatory & policy context

As context, there is also much more awareness – and much less tolerance – of networks ‘messing about’ with Internet traffic in 2015 than 2010, although parallel concerns over privacy and the power of a few web players perhaps make ads ‘fair game’ despite that.

There is also a growing war in Europe especially, against US-based Internet companies being waged by some of the more shrill ‘public policy’ teams at major telcos. Telefonica is among those advancing the most egregious and hypocritical arguments – with its blog putting up strawman after strawman, which I sometimes try to counter in the comments.

This fight is tacitly supported by the new European Commissioners Ansip & Oettinger, who seem less capable of forming independent and coherent opinions about telecoms than their “steely” predecessor Kroes.

In a nutshell, some European telcos feel they can ‘get away with’ harassing Google and to a lesser degree Apple and Facebook, and get air-cover from their national regulators and the European Commission. While the current trials might have the convenient excuse of “protecting users’ dataplans”, the reality is much more duplicitous – they are jealous that Google has out-innovated and out-maneouvred them, in a similar fashion to their rhetoric about ‘OTTs’, when they have been asleep at the communications wheel for 20 years.

Minimising the data burden on users

The point in my original post was that one of the few forms of non-neutrality that regulators and the public might tolerate is that of dealing with mobile adverts. Perhaps that traffic could be paid for by the advertisers and their channels. Advertising is widely disliked – as evidenced by the growing number of (mostly PC-based) browser users downloading ad-blocking software themselves. A recent German lawsuit by publishers was defeated, but we can expect additional action to follow if telcos try to take the same path – as well as worsened relationships between the two groups of companies.

While the morality of overall ad-blocking is dubious (it’s how useful free content is paid for), on mobile data-plans with low usage caps it may indeed be an onerous burden. Websites have a right to advertise at me, but don’t have a right to make me incur substantial extra costs for the “privilege” of being “advertised at”. Auto-playing video or audio adverts alongside static content are especially disproportionate. Various forms of pop-up or other intrusive formats are also occurring in mobile, as browsers get more capable – and there is justifiable resentment at some of these.

Paying for ads’ data usage while roaming is especially awful, and is perhaps where the operators genuinely could offer user benefit and value by blocking them. Unsurprisingly, this will probably be the last use-case considered, given the perennial and profitable rip-off prices charged for data-roaming.

Sidenote: A compromise I’d suggest from the mobile advertising industry: ensure that ads take up no more than 10 percent of the total traffic needed for a given website or app when accessed over cellular networks. This would neutralise the bulk of the arguments being advanced here.

I actually believe that traffic for ads is one of the very few categories that might be viable as a source of ‘sponsored data’ – although this will be in the form of discretionary promotions (e.g. bulky movie trailers downloaded for free) rather than some sort of across-the-board tollgate. I estimated the future market size of sponsored traffic for advertising in my recent report on new monetisation business models – it may reach $2bn by 2019 (see here). But the model suggested here – block ads unless the companies pay up or agree a revenue share – is the wrong one entirely.

Extortion only works against the weak.

Deploy counter-measures!

And in this case, the advertising machinery is anything but weak. The ridiculous thing about this concept is the ease with which such measures can be mitigated. I can think of 5-10 possible workarounds straight away. The most obvious group of approaches is to blend apps with content so they cannot be teased-apart, and another set involves using methods to avoid the filters in some way. There are plenty of other possibilities too.

Encryption of content is the most obvious. It is already widespread in mobile, and is growing fast – in some networks, more than 50 percent is encrypted. There are multiple styles, ranging from SSL built-in to HTTPS traffic, SRTP for WebRTC traffic, through to using compression and proxy servers. Some of these are still theoretically ‘blockable’ based on IP address, but the risk of false positives increases hugely. The inclusion of Google’s SPDY technology into the HTTP2 standard has pretty much ensured this is a one-way ratchet for web traffic in future.

Belated efforts by the telco industry such as the ‘Open Web Alliance’ to limit crypto usage or propose ‘trusted proxies’ for traffic management are already failing and, ironically, are undermined by ‘untrustworthy’ actions such as this.

Google is already offering a VPN option in its new Fi service, intended to secure traffic over 3rd-party WiFi. It doesn’t take much imagination to see that this could become a ubiquitous feature for Chrome – or even Android OS – over any connection. All the operator would see would be a single stream of encrypted traffic to and from Mountain View or a local Google node – perhaps even inside its own network.

The other obvious fly in the ointment is WiFi. Most smartphone users already spend 50-90 percent connected to 3rd-party WiFi access in homes, offices, cafes, hotels and other places. Advertising will work normally in those places. Ignore the “seamless” carrier-WiFi hype – mobile operators’ own hotspots are a tiny fraction of the total in most countries, and will stay that way. We won’t see fixed ISPs and every WiFi operator pursuing a similar strategy of ad-blocking either – there is no rationale for it. This means that (a) Google and other advertisers will further assist users in finding WiFi, perhaps even subsidising it; and (b) Tools will be built into OS’s or 3rd-party SDKs to allow developers and advertisers to download and pre-cache advertising via WiFi, serving it up locally as-needed.

Indeed, we would likely see various new ad-related APIs, or delivery services, being rolled out in Android and iOS, plus browsers, to help work around the blockages. These developments will not have come as a surprise to many, and it is foolish to believe that countermeasures are not already being worked on.

Of course, Fi also means that Google now has a very good view of the wholesale costs of mobile data provision, and this will impact the ridiculous ‘revenue share’ concept still further. At absolute worse-case, it will be asked to pay fees much lower than the consumers’ retail price of mobile data. There will also be no justification for “double-charging” consumers for the same data paid for by advertisers.

Actions have consequences

The mobile industry is playing with fire here. The countermeasures available to Google, Facebook and others are powerful. There is a very significant risk that rather than increasing revenues, that instead these moves will actually decrease revenues, as well as increase costs and have assorted other unintended consequences – especially more encryption, and more use of 3rd-party WiFi.

Some of the ads that may get blocked will no doubt cause embarrassment or even legal action – I can’t imagine competition authorities being amused if TelcoA blocks ads for TelcoB, for example. There’s also a strong risk that TelcoA blocks some of its own advertising, given the typical distant and disconnected silos within a large operator. That should make for some lively boardroom discussions. The publishers vs. telcos fight won’t be pretty either.

I also envision the system lacking “discrimination”. Unless there is a laborious “white list” process, it will probably block ads for charity appeals, or stop government-paid ads for voting registration or impending tax-return deadlines. That should cause much amusement in policy circles, I’m sure. There will inevitably be a host of ‘false positives’ and ‘false negatives,’ as you can expect companies to use the same distribution channels and ‘signatures’ for both ads and ‘legitimate’ content.

The biggest irony is that all this will just encourage continued advancement of native apps and OS’s vs. more-powerful browsers – the exact opposite of what many telcos would like to see happen. In-app advertising will inevitable be more block-proof than web-based versions.

It’s even possible that Google will start tiering or limiting its own services on ‘hostile’ networks, to encourage users to churn to ‘friendly’ ones. And in extremis you could even imagine MNOs being made to pay for subscribers’ access to certain apps or services. Most people would more happily switch telco, than switch Internet ecosystem.

My prediction is that these ad-blocking services will never see the light of day – and if they do sneak out, will cause untold amounts of pain. The idea the MNOs will get a significant revenue-share of a business to which they add zero value is laughable.

Overall, trying to extort protection money “in case something nasty happens to your ads” is a silly and unnecessary risk. Never mind the old cliché about bringing a knife to a gunfight – the mobile industry is trying to act like a racketeer here, but is only packing a rusty spoon in its belt.

Re-printed courtesy

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About the Author

About the Author: Dean is founder and director of Disruptive Analysis and a prominent, influential & outspoken technology industry analyst and consultant, specialising in the telecoms, mobile and wireless sector. He speaks at 30+ conferences per year and offers strategic advisory services to operators & vendors? He can be contacted at .


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