European Union: Open Internet And Net Neutrality

Last Updated: 5 January 2012

Article by James Walsh, Senior Associate, Telecoms Team and Charlotte Walker-Osborn Head of TMT Sector.

What? Both Ofcom and the European Parliament have recently made recommendations to address the issues of the open internet and network neutrality.

So what? On 17 November 2011 the European Parliament adopted a resolution to keep the internet open and neutral by ensuring that EU telecoms rules are properly enforced as well as calling on the European Commission to monitor internet traffic management practices. Ofcom followed this announcement by publishing a statement on 24 November 2011 setting out its views on the steps it expects internet service providers to take to ensure customers are aware of how internet traffic is being managed on their networks.  The measures do not enshrine net neutrality firmly as a principle of law, but are a good step towards ensuring transparency for consumers about what service they will receive from service providers.

The principles of Net Neutrality

Increased demand for applications and services over the internet has created a challenge for network operators who have a finite amount of capacity that they can provide.  The conundrum facing network operators is whether to invest in additional network capacity and/or how to better manage their existing capacity.  For legacy networks traffic management (i.e. putting controls or limitations on particular types of internet traffic or users) is considered essential for the proper operation of the internet.

Although the use of traffic management can benefit consumers, net neutrality proponents argue that it is anti-competitive and negatively impacts upon users' rights to enjoy the full benefit of the internet.  Until recently, net neutrality has not been enshrined in any way into UK law.

The recently amended EU telecommunications regulatory framework has incorporated a number of measures that have arisen out of the network neutrality debate.  These include:

  • requiring national regulatory authorities ("NRA") to promote the ability of end users to access and distribute information to run applications of their choice (so called net freedoms);

  • imposing measures to ensure enhanced transparency of information being provided by service providers, including providing consumers with information on any conditions limiting access to or use of services and applications, minimum service quality levels and on traffic management measures that could impact of service quality; and

  • enabling NRAs to set minimum quality of service requirements on service providers.

Network neutrality proponents would argue that these measures do not go far enough, and indeed they do not strictly provide for network neutrality.  Rather, they increase the obligation on network operators and service providers to be more transparent about their services.

The European Parliament

Back on 19 April 2011, the European Commission published a communication on the open internet and net neutrality in Europe, with the Body of European Regulators ("BEREC") having been asked to undertake a fact find exercise on a number of issues, including barriers to switching, blocking or throttling of internet traffic, transparency and quality of service.  The European Parliament in its resolution raised a number of areas that it considered that the European commission should focus its attentions, including:

  • ensuring consistent application and enforcement of the existing EU telecoms regulatory framework and that the Commission should within 6 months of receiving BEREC's findings assess whether further regulatory measures are required;

  • closely monitoring the development of traffic-management practices and interconnection agreements.  Paying particular attention to blocking and throttling of traffic, excessive pricing for VoIP and file sharing, anti-competitive behaviour and excessive degradation of quality; and

  • providing EU guidelines for ensuring that the current rules on network neutrality are properly and consistently applied and enforced.

The European Parliament was of the view that departures from network neutrality could result in anti-competitive behaviours, including blocking of innovation, restrictions on freedom of expression and media pluralism, lack of consumer awareness and infringements of privacy.  Specialised or managed services should not be permitted to infringe on the ability of users to obtain "best effort" internet access.  Reasonable traffic management is therefore required to ensure that end user connectivity is not disrupted by network congestion; however, National Regulatory Authorities need to use their powers to ensure minimum quality of service standards are met.

EU ministers plan to adopt formal conclusions on the open internet and net neutrality in Europe at the Transport, Telecommunications and Energy Council on 13 December 2011.

Ofcom

Ofcom in a statement dated 24 November 2011recognised that there are two main forms of internet traffic management - "best efforts internet" and "managed services".  Its' approach to traffic management recognises the benefits associated with both of these approaches and aims for the two to co-exist.  Ofcom's ultimate aim in this area is to ensure that consumers and citizens continue to benefit from both innovation in services and investment in networks.  The underlying premise of this approach is that there is effective competition amongst ISPs so that consumers have enough information to enable them to make the best purchasing decisions and to switch providers where appropriate.

The use of traffic management techniques can negatively impact on the provision of consumer information.  Ofcom in its statement set out what it considers to be the basic principles for the provision of clear consumer information, namely: it needs to be appropriate, accessible, understandable, verifiable, comparable and current.  Ultimately these principles can be seen as requiring a trade off between simplicity and completeness and only time will tell whether such a balance has been achieved.

To supplement these principles Ofcom has indicated that the information provided should include at least the following:

  • average speed information indicating the level of service consumers can expect to receive;

  • information on the impact of any traffic management that is used on certain service types, such as the impact on P2P software at peak times; and

  • information on services that may be blocked or where consumers are unable to run the services or applications of their choice.

Material changes to information provided to consumers need to be notified as quickly as possible and where such changes have a significant impact on the services purchased the ISP should give the consumer the option to switch to another provider.  In addition where marketing terms are used to describe the services provided such terms must be simple to understand and capable of being compared with other providers.  Ofcom also encouraged ISPs to enable "cooling off" periods for customers to cancel contracts they are not happy with especially where the customer is tied in for a long period of time.

However, Ofcom does not intend to be more prescriptive in this area for now, as its preference is for voluntary self-regulatory codes to emerge, such as the traffic transparency code put in place by a number of ISPs since July 2011.  The downside to such an approach is that only Ofcom is able to verify independently certain information that is provided by ISPs.  Under such a scenario Ofcom intends to gather and review relevant information as part of its duties to report on the state of the UK's infrastructure under the Digital Economy Act.  For such an approach to work Ofcom itself considers that ISPs need to think carefully about how best to provide information which is accessible and understandable.  Its intention is to monitor this process and keep under review the possibility of intervening more formally in order to ensure that there is sufficient transparency as to the use of traffic management by network operators.

Ultimately, provided that there is genuine competition and rivalry among firms, Ofcom does not necessarily regard the blocking of services by competing providers or discrimination against competing services as being anti-competitive.  It argues that it should be possible to rely on the operation of market forces to address the issue of blocking and discrimination.  Although it does have concerns that restricted access to the internet could have a stifling effect on innovation, especially in relation to the current blocking of services by mobile operators.  If such actions remain as widespread and persistent as at present Ofcom would need to consider whether the benefits of intervening outweigh the risks associated with such an approach.  At present it does not  consider such intervention necessary, due to the stage of the development of the market, but it will continue to monitor the situation closely.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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