opinion


Net neutrality: what next for the telecoms industry?

Net neutrality 2

Telecoms.com periodically invites expert third-party contributors to submit analysis on a key topic affecting the telco industry. In this article Gustaf Duhs, Partner and Head of the Competition and Regulatory team, and Maliha Mahmood, Senior Associate in the Competition and Regulatory team, both at Stevens & Bolton LLP, provide a view on the issue of net neutrality and what it means to the telecoms industry from the legal point of view. 

The issue of net neutrality has been making headlines on both sides of the Atlantic with the FCC recently adopting new net neutrality rules. Closer to home, four of the European telecoms industry bodies representing the major telecom providers recently called on the EU for lighter net neutrality rules. This article looks at the concept of net neutrality, examines some key issues in the net neutrality debate and summarises recent developments in both the EU and the USA.

What is net neutrality?

Tim Berners-Lee, founder of the World Wide Web, has described net neutrality as “the principle that each ‘packet’ of data must be treated equally by the network. In practice, this means that there should be no censorship: the state should not restrict legal content from citizens….. that there should be no restrictions based on economic motivations. A packet of data – an email, a webpage or a video call – should be treated the same whether it is sent by a small NGO in Ljubljana or a FTSE 100 company in London.”

Key issues in the net neutrality debate

Broadly issues around net neutrality focus on the following four areas:

  • Paid prioritisation: should internet service providers (ISPs) be allowed to charge content providers a premium to have their data put in a ‘fast lane’ and get their content to end-users more quickly? Those in favour would say it results in a premium service, and that prioritisation might be crucial to certain innovations (e.g. driverless cars).  They also say that an additional revenue stream for ISPs might encourage further investment in infrastructure. Detractors are concerned that it might create a two tier internet, and make it harder for new entrants to compete with established providers.
  • Zero rating: this refers to agreements whereby content providers, like Facebook or Wikipedia, enter into arrangements with mobile network operators to offer their content to customers of that network for free. In this way, customers can access these websites without it counting against their data volume allowance. Again the concern here is that this entrenches the position of those players who are large enough to make these deals and discourages customers from using competitors who do not have a zero rating.
  • Blocking and throttling: the ISPs’ traffic management practices have been called into question, with some accusing ISPs of de-prioritising, blocking or intentionally slowing down (‘throttling’) access by consumers to internet services that compete with the ISPs.
  • Internet filters: the four largest ISPs in the UK have agreed “family friendly filters”.  There are concerns about the extent of these filters, with accusations that they block information that should be allowed and that there is a lack of transparency as to how these filters are applied.

Recent EU developments  

Regulators have yet to resolve their approach to the issues outlined above. However, some EU member states, namely the Netherlands, Finland and Slovenia, have already adopted national legislation, and taken recent actions to address some of the issues identified above:

  • The Dutch authority for consumers and markets fined KPN €250,000 for blocking various online services including internet calls on its free wifi hotspots.
  • The Dutch authority also fined Vodafone €200,000 for not charging its customers for the data they used to watch pay-TV channel HBO.
  • In Slovenia, the national telecoms regulator has taken action against national carriers Telekom Slovenije and Si.Mobil for prioritising certain web applications.

At an EU level, a new draft telecoms regulation has been passed by the European Parliament and proposals are now being discussed in the European Council with a view to agreeing on appropriate EU legislation.  The areas of the European Parliament’s draft dealing with net neutrality are broadly as follows:

  • “End-users shall have the right to access and distribute information and content, run and provide applications and services and use terminals of their choice, irrespective of the end user’s or provider’s location…”
  • “Providers of internet access, of electronic communications to the public and providers of content, applications and services shall be free to offer specialised services to end-users… only… if …not to the detriment of the availability or quality of internet access services…”
  • “Providers of internet access services shall not restrict the freedoms provided in paragraph 1 by blocking, slowing down, altering, degrading or discriminating against specific content, applications or services, or specific classes thereof, except in cases where it is necessary to apply traffic management measures. Traffic management measures shall be transparent, non-discriminatory, proportionate and necessary…”

Provisions in relation to internet filtering may also be included in the final version of the text.

Recent US developments  

In the US, the Federal Communications Commission (FCC) voted to adopt new net neutrality proposals on 26 February. The proposed rules have not yet been made public but they were outlined in an FCC Fact Sheet which summarises the new rules as follows:

  • Bright Line Rules, namely:
    • No blocking
    • No throttling:
    • No paid prioritisation
  • A general Open Internet conduct standard that ISPs cannot harm consumers or content providers.
  • Enhanced transparency rules in relation to the conduct of broadband providers.
  • An acknowledgement that ISPs can engage in reasonable network management provided that network practice must be primarily used for and tailored to achieving a legitimate network management and not commercial purpose.

Meanwhile, Republicans in Congress have proposed net neutrality legislation that would not go as far as the FCC’s proposals. The FCC’s proposed rules are expected to be challenged in court by ISPs.

Summary

The debate around net neutrality broadly focusses on tensions between those that believe in a free internet (in every sense of the word), and those that believe the internet should be open to commercialisation. At its heart, and as is perhaps most vividly demonstrated in the US, this is a political issue, which might depend on attitude to commercialisation and the free market more generally.

The proposed EU and US rules appear to seek a middle ground between those two views but even if high level principles can be agreed the devil is very much in the detail.  The following issues immediately spring to mind in relation to the EU legislation:

  • Do the territorial restrictions in Article 23(1) impact on content intended for a particular geographic area (e.g. BBC iPlayer, Sky Go etc.)?
  • What does “to the detriment of the availability or quality of internet access” really mean and how will this be measured? Commercial providers will presumably not pay for ‘specialised services’ unless they are better.
  • The difficulty one assumes in relation to traffic management measures will be in policing whether this is in fact being done, and seeing how this interacts with the offering of specialised services.

Even if the high level principles in relation to net neutrality can be agreed, the real meaning and implications of net neutrality as it applies in practise is likely to involve a considerable degree of interpretation, and undoubtedly considerable legal wrangling.

Gustaf DuhsGustaf Duhs previously worked as a legal adviser at the Office of Fair Trading. He now heads up the competition team at Stevens & Bolton where he advises clients on a range of competition, EU and regulatory matters. He also advises on commercial contracts.

 

 

Stevens & Bolton Portraits - 04 09 14Maliha Mahmood has experience of advising on all aspects of competition, EU and regulatory matters including cartel, abuse of dominance and other regulatory investigations, merger control and state aid law. 


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