Net Neutrality: The current and proposed position in the EU – the first in a three part series

In an ‘always-on‘ age where demand for high-speed, high capacity internet continues to increase, governments and regulators around the world are faced with the challenge of how best to satisfy that demand whilst guaranteeing that access to the internet remains ‘open‘ to all users. A number of countries have already adopted specific net neutrality rules; others – including the EU as a whole – are poised to do so.

Come 30 April 2016, we will for the first time have a specific EU net neutrality framework. The framework will be embodied in a regulation (the Draft Regulation)(1)  and so it will be immediately applicable in all Member States without the need for separate national legislation. Or at least that’s the idea. As we will see, there are certain areas – particularly around ‘innovative‘ or ‘specialised‘ services – where further guidance will be needed.

This is in contrast to today’s position, where until now EU Member States have been free to decide whether or not they adopted a formal net neutrality policy, as part of their national telecoms regulatory strategies. The vast majority of Member States chose not to enact net neutrality rules, with only The Netherlands and Slovenia adopting specific net neutrality legislation. Others such as Belgium have been looking on from the sidelines, working on possible draft legislation, which will now need to be aligned with the draft EU rules.

The Draft Regulation will be an important development for the entire communications industry, whether telecoms operators and internet service providers, content and app developers, or other forms of service provider that make use of communications networks to deliver their services. It will also affect all of us as users of online services. So where will your particular business in the communications supply chain sit in the new EU order? What are the risks and pitfalls going forward? We discuss these questions in this and two subsequent articles.

In this first article in our series, we set out what ‘net neutrality’ is all about, and discuss the current approach in the Draft Regulation.

In the second article we look at particular issues around the Draft Regulation, and in the third article we discuss the various competing stakeholder interests in the Draft Directive and what it all means for players in the communication sector.

1. What is ‘net neutrality’?

There is no universally accepted definition of net neutrality – despite the considerable amount of debate on the subject.

Broadly speaking, net neutrality can be described as the principle that everyone should have access to and be able to use the internet without blocking, throttling or other forms of restriction on content, and that those engaged in transmitting traffic around the internet (for example large telcos and internet service providers (ISPs), should treat all traffic equally. In particular, telcos and ISPs should not discriminate between traffic, or otherwise treat it differently, depending on specific factors such as individual or specific user, content, site, platform, application, type of attached equipment or mode of communication.

This fundamental concept of non-discrimination has proven to be particularly flexible and controversial in some jurisdictions. For example, some legislatures and regulators (such as the Authority for Consumers & Markets in The Netherlands and the Agency for Communication Networks & Services in Slovenia ) have taken the view that included in this concept is price discrimination, so that commercial price differentiation of offers is prohibited. This is discussed in the second article in this series, in terms of the potential application of the EU net neutrality framework to zero-rated deals or offers. Zero-rated offers are banned in both The Netherlands and Slovenia. Whether such bans will be consistent with the Draft Regulation remains to be seen. However, we can certainly expect both The Netherlands and Slovenia to push hard to protect their current national frameworks.

2. How is net neutrality defined in the Draft Regulation?

After months of debate and several rounds of trilogues (the discussions between the European Commission, European Parliament and European Council which aim to broker a deal on a text before it goes to formal vote), the Parliament and Council reached agreement on a so-called ‘compromise’ text, on 30 June 2015. The timing of the deal was linked to the handing over of the presidency from Latvia to Luxembourg on 1 July 2015, with the Latvian Presidency keen to see a deal agreed during its tenure. The Council published a version of the text that confirms the Council’s position (at first reading) on 23 September 2015. The text is substantially the same as that agreed on 30 June 2015, with some fine-tuning and linguistic corrections. The text was formally adopted by the Council on 1 October 2015.

A full vote from the European Parliament is still needed on the Draft Regulation. This is expected to take place at the end of October 2015.

In assessing the new rules, some have argued that the rules don’t go far enough to protect net neutrality and that there is still too much room for carve-outs. Others argue that the new rules represent an unwarranted restriction on operators’ and ISPs’ ability to develop innovative technical offers and structure these in a way that meets consumers’ commercial needs.

A principles-based approach

The divergence in views and general difficulty in getting political buy-in from all EU Member States in time for a 30 June 2015 deal explains why there are still some areas in the current text which would benefit from further guidance and clarity. The lack of overall consensus and the pressing need to see a deal done also explains why the EU institutions decided to take a conscious move away from ‘hard and fast’ rules, towards a more principles-based approach. So, for example, this explains the absence of a formal definition of ‘net neutrality’ in Article 2 (Definitions) of the Regulation.

Is net neutrality even defined in the Draft Regulation?

No. Instead, the formal definition of net neutrality, present in several of the previous drafts, was deliberately omitted and replaced with:

• A general reference to a high level objective of “safeguarding equal and non-discriminatory treatment of traffic in the provision of internet access services, and safeguarding related end-user’s rights” (Article 1).

• In conjunction with a specific right for end-users to “access and distribute information and content, use and provide applications and services and use terminal equipment of their choice, irrespective of the end-user’s or provider’s location or the location, origin or destination of the service, information or content, via their internet access service” (Article 3(1)).

An ‘internet access service’ is defined in Article 2 of the Regulation as meaning “a publicly available electronic communications service that provides access to the internet, and thereby connectivity to virtually all end points of the internet, irrespective of the network technology and terminal equipment used“.

Although the main text of the Draft Regulation is not expected to change significantly during the final legislative stages, there may be some ‘fine-tuning‘ of the recitals. We may well see a number of important drafting changes – at least in terms of further interpretative guidance – on issues such as additional clarity on the term “innovative or specialised services“, what these really include, when these can be provided and under what terms.

3. So what does the approach in the Draft Regulation actually mean?

The rules in the Draft Regulation at a glance:

• ISPs and telcos cannot block throttle, slow-down, or otherwise restrict or degrade internet traffic.

Instead, ISPs will have to treat all internet traffic in an equal manner, unless they can show that the services in question are innovative services that require an enhanced level of quality (so-called ‘specialised services‘). Potential difficulties in identifying what types of services will qualify as “specialised services” are discussed in the second article in this series.

• The ability of ISPs and content providers to agree ‘paid prioritisation‘ of specific internet traffic (such as movies) is prohibited. 

• End-users will have a right to access and distribute ‘lawful‘ information and content, and/or run applications and services, of their choice. This has thrown up a number of issues regarding, for example, the extent to which end-users can request blocking of adult content (something which could be very important for the UK industry), and who the arbiter should be when deciding whether or not an end-user is truly ‘free‘ in real terms to exercise his / her own choice over content.

• In order to give effect to the above rights and principles, blocking, throttling or slowing down of certain traffic will therefore be prohibited, subject to clearly defined and limited exceptions for ‘reasonable traffic management‘.

There is no doubt that the adoption of the Draft Regulation will be a real game changer for the entire communications industry. For some of the issues at stake, and what this might mean for your business, please see the subsequent articles in this series.

(1):- Proposal for a Regulation of the European Parliament and of the Council laying down measures concerning open internet and amending Regulation (EU) No 531/2012 of the European Parliament and of the Council of 13 June 2012 on roaming on public mobile communications networks within the Union, whose text was agreed on 30 June 2015.

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