Net neutrality: What's the latest in the controversial debate?

Net neutrality is hot topic in both Europe and in the US at the moment and the last two weeks have seen action on both sides of the Atlantic. Hannah Willson explores the latest developments in this controversial debate.

In the US

The Federal Communications Commission (FCC), led by its Chairman Tom Wheeler, saw a successful vote on its proposal on net neutrality on 26 February. This landmark ruling marks a significant change in the regulation of internet service providers in the US, reclassifying them as a public utility akin to a phone service, and imposing a set of rules by which they must abide.

Broadband providers will now be considered a ‘telecommunications service’ under Title II of the Communications Act and as such will be subject to much heavier regulation, including:

• being prohibited from blocking or speeding up connections for a fee;
• paid prioritisation will be prohibited i.e. broadband providers cannot strike a deal with content firms (such as Netflix) for smoother delivery;
• interconnection (or peering) arrangements will be regulated by the FCC; and
• the rules will also apply to mobile operators and not just fixed providers.

Net neutrality has been a controversial issue in the US over the past year, with a record breaking over 4 million comments sent to the FCC during its consultation (helped along by US comedian John Oliver’s live 13 minute TV outburst in June 2014) and President Obama publicly supporting net neutrality. No surprise then that the FCC vote was won 3 (Democrats) – 2 (Republicans).

The FCC has taken up the mantle following Verizon’s successful challenge last year against its previous net neutrality rules (the Open Internet Order of 2010) where the courts held that the FCC did not have the jurisdiction to regulate broadband providers, as they were classified as an ‘information service’, and the Open Internet Order was therefore unenforceable against broadband providers.

The FCC’s ruling has been met with mixed support from the open internet supporters – Netflix’s CFO has said that they would have preferred a non-regulated solution, and with outspoken disapproval from the broadband providers, describing it as misguided, outdated (Verizon’s amusing response was written in Morse Code and translated into typewriter font dated 1934) and too onerous, with commentators suggesting that there is scope for it to become even more so by future administrations.

It is expected that the broadband providers will be launching a legal challenge to the ruling before too long as well as continuing to support the Republican led ‘Internet Freedom Act’ through Congress, an Act which will overturn the FCC ruling if it comes into force.

In Europe

Meanwhile in Europe, the Telecoms Council published a statement on 4 March setting out its proposal for a draft telecoms regulation and mandate to start negotiations with the European Parliament on ‘safeguard[ing] open internet access’.

In contrast to the FCC ruling, the Council appears to be proposing a two-tier internet that would permit ‘specialised services’ to have separate treatment, but the intention is that the draft regulation shall ‘ensure that companies that provide internet access treat traffic in a non-discriminatory manner’. This regulation could mean the creation of a ‘fast lane’ for certain types of traffic – an anathema to the concept of the open internet.

Each side of the argument has been vocal in reaction to the Council’s proposal:

• 100 MEPs of the European Parliament in an Open Letter on the same day called for more ‘clearly defined rules for Europe’ on net neutrality, linking the success of the Digital Single Market to the Telecoms Single Market. They say that the Telecoms Council should ‘adopt an ambitious position’ to ensure ‘consumers are protected, innovative start-ups develop and competition on the open internet is fair’; and
• the anti-net neutrality lobbyists also disapprove, with the European Telecommunications Network Operators’ Association (ETNO) commenting: ‘Let’s not tie the hands of an entire industry with tight net neutrality rules. Users and business will benefit from pro-innovation and pro-investment rules’. 

If the so-called telecoms package is approved by the European Parliament, the law would apply from 30 June 2016, but after the Open Letter obtaining the European Parliament’s approval may not be a straightforward task.

What is net neutrality?

To put these debates in context – what do we mean by ‘net neutrality’ or the ‘open internet’. Put simply it is the concept that all information and services should have equal access to the internet. Meaning that each and every user of the internet has equal access without discrimination or charges based on the type of user, content, site, platform, application etc.

Pro-net neutrality supporters argue that net neutrality should be preserved to encourage innovation and to prevent the internet becoming dominated by those companies that can afford to pay for prioritisation. Whilst the anti-net neutrality advocates argue that the internet has flourished in a non-regulated environment and regulation could stifle future investment and innovation.

What does this mean for the UK

The UK has a competitive telecoms market and all of the major UK ISPs (including mobile operators) have signed up to the voluntary Code of Practice on the Open Internet 2012, committing them to the provision of full and open internet access products and confirming that traffic management practices will not be used to target and degrade the services of a competitor. This self-regulation arguably negates the need for any formal regulation in this area that would take place if the European telecoms package is successful.

This competitive UK market is also a contrast to the US where certain geographical areas may only have one option when choosing their broadband provider. Ofcom has to date considered the market as an effective mechanism to control net neutrality and for the time being self-regulation (such as the Open Internet Code) and healthy competition is likely to keep the internet ‘open’ in the UK without the need for formal regulation.

Strong arguments have been made against an FCC-style regulation in Europe – not least that significant infrastructure investment is required by ISPs to keep up with the Kroes’ Digital Agenda (Virgin Media has recently announced a £3bn investment in its infrastructure) and the ISPs need to see a return on that investment. One of the key questions raised in this debate is: Should internet-hungry content services such as Netflix help the ISPs pay for that investment? In fact in Australia Netflix has recently announced a tie up with ISP iiNet by which the provision of its content over the iiNet network will be outside of the data caps applied to their customers. This practice, known as zero-rating, is not currently captured by the Council’s proposal, leaving the door open for similar deals to take place in Europe (even if the telecoms package is approved).

Observers are waiting to see whether the FCC ruling will have an impact on the European market but for the time being, in the UK, it is a case of watch this space.