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Summary:

The proposed new rules would stop carriers from blocking services that compete with their own, but still allow subtler types of discrimination. It would be an improvement, but also allow the creation of a two-speed internet.

Neelie Kroes

Europe’s digital chief, Neelie Kroes, said last week that she would push through the EU’s first net neutrality legislation as part of a drive to demonstrate the relevance of the union. There was no detail at the time, but now we have it – and net neutrality advocates will not be pleased.

Kroes laid out her plans at a meeting on “guaranteeing competition and the open internet in Europe” on Tuesday morning. Here’s a breakdown:

  • One size may not fit all — ISPs should be able to offer connections with guaranteed quality of service, with regular subscribers getting a “best efforts internet”.
  • Transparency — People signing up to internet packages should be clearly told what is included, what is not, and what speed they can expect.
  • Easier switching — It must be easier to switch provider. Barriers including “excessive charges, modem hire or email addresses” will be “removed”.
  • No blocking/throttling — ISPs and carriers will not be able to deliberately degrade or block services that rival their own, such as VoIP or messaging services.

That last one is arguably the most important new proposal: for the first time, it will not be legal for a mobile carrier to block or throttle Skype usage, for example. However, it won’t answer all the concerns of net neutrality advocates.

The basics

Let’s remind ourselves first of what net neutrality means in practical terms: the idea that all services get treated equally on the internet. Some real die-hards will argue that it should mean the banning of traffic management, but that’s unworkable and frankly it clouds the debate. What we are really talking about is maintaining a truly open and competitive market for internet services.

Blocking and throttling services is a flagrant and very widespread abuse – European regulators have estimated that 236 million mobile subscribers in Europe are blocked from using Skype – so obviously it will be good to see that go. But what about more subtle attempts at favoring some services over others, such as Deutsche Telekom’s current ploy?

As we reported in April, Deutsche Telekom is introducing usage caps on its fixed-line internet services. The ISP’s own entertainment services, often bundled with its internet connectivity, do not count towards these caps. So, in effect, customers are being steered towards the use of these services and away from that of Netflix-style rivals, because the use of the latter services might mean hitting those caps and seeing a slowed-down connection as a result. This is a disincentive for startups that might want to set up new services in Germany to rival Deutsche Telekom’s in-house offering.

It’s far from clear that the European Commission’s new proposals would stop such behavior. Similarly, there is nothing in there to stop a different kind of net neutrality abuse: ISPs charging content providers for carrying their traffic. In fact, the acceptance of the idea of a two-speed internet – for this is what Kroes is in effect describing – makes this sort of development more likely.

If there’s a fast lane in place, carriers can go to content providers and ask: “Would you like to be part of that lane, or relegated to best efforts?” The result? Entrenched and deep-pocketed providers would be able to pay, while their newer, smaller rivals would not.

Cloud impact

One of the speakers at the Brussels meeting was James Waterworth, the vice-president of the Computer and Communications Industry Association (CCIA). He pointed out that it’s all very well to introduce transparency requirements for consumers, so that they understand what they’re signing up for, but that doesn’t do much for businesses:

“Because cloud services depends on network effects, transparency will not work. If you are the CIO of a company with a salesforce who move around, who go between 5-20 sites, possibly across different countries, if you want to deploy a productivity suite you’d have to know which productivity suites can or cannot be used on all the different connections your workforce will travel to. That’s impossible.”

And then there was the contribution of law professor Chris Marsden, of the University of Sussex. He suggested there was a fatal flaw in the argument of ISPs who want to bypass net neutrality – they say they need to place limitations on connectivity in order to deal with the “data explosion”, but there is in reality no such thing. Marsden noted that figures from Cisco itself – remember, a company trying to sell carriers kit to cope with this supposed explosion – indicated a manageable increase in the amount of data people are using:

“There is no data explosion on the European internet, so we shouldn’t be trying to make policy based on a fallacious assumption,” he said. “If we keep talking about data explosions, the thing that’s going to explode is the heads of the technical people who know there is no data explosion.”

Whether or not you agree with Marsden’s interpretation of Cisco’s figures, his point highlights an inherent logical contradiction in the carriers’ stance: if the “data explosion” is so severe as to necessitate the creation of fast lanes with guaranteed quality of service, doesn’t that mean the “best efforts” slow lanes will necessarily be slower than the equal-access lane we have today? And if that’s not the case, then why create divided classes of internet access? They can’t have it both ways.

U.S. comparison

Kroes’s proposals are not that dissimilar to those brought in by the U.S. Federal Communication Commission (FCC) a couple of years back (rules that are currently back in court due to the displeasure of Verizon). Those rules also mandate transparency and stop fixed-line providers from discriminating against certain types of traffic, although they are somewhat more lenient towards mobile providers – a distinction Kroes doesn’t appear to be making. And like the European Commission’s proposals, the FCC’s rules leave scope for a two-speed internet.

In short, the FCC’s rules were what the uncharitably-minded might call “a fudge” or, in kinder terms, “net neutrality lite”. It appears that Kroes is aiming for something similar, albeit without the short-sighted split between fixed and mobile connections.

In some ways it is understandable that she is doing so. The commissioner is desperate to introduce Europe’s first net neutrality legislation ahead of next year’s European Parliament elections, which threaten to fill the parliament with people who want to end the European project. She wants to show that the concerns of the ordinary person – particularly the younger ordinary person – are being taken into account.

The problem is, net neutrality is a relatively abstract concept that will never excite most people until it’s gone. The other part of Kroes’s big push – the abolition of mobile roaming premiums within the single market – is a much more sure-fire vote-winner.

If the proposals she is making don’t do the job, and if they’re not connected with winning the carriers’ acceptance of lower roaming fees, perhaps they shouldn’t be rushed.

  1. Ok, Neelie Kroes needs to be exiled to the US , where buying politicians is legal.

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  2. Is net neutrality really an important issue in Europe?

    In the UK at least my understanding was that Ofcom was relaxed about net neutrality as unlike in the US where fixed broadband is effectively a duopoly, there are a large number of ISPs to choose from. So for instance, if a subscriber doesn’t like BT’s broadband service they can switch to Sky, TalkTalk, Virgin, Orange, John Lewis, etc. So unless they all collectively decide to start behaving in an anti-net neutrality manner, the market can be left to work it’s magic & we don’t need any additional regulations

    This is something that I don’t understand about EU/national telecoms regulation. We have national regulators and we have the principle of subsidiarity. So if a national regulator doesn’t see the need for new rules on net neutrality but the EC commissioner is pushing for new rules, does this mean that the EU push overrides the national regulator but then what about the principle of subsidiarity – I am confused – David do you know how this works??

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    1. David Meyer Tuesday, June 4, 2013

      You bring up the example of the UK, which is by far the most competitive telecoms market in Europe – many people in the rest of the union aren’t so lucky when it comes to choice or the ability to switch provider (I know – here in Germany, I just had to endure a number-porting procedure that took weeks rather than a day or two, as EU law is supposed to ensure).

      Regarding subsidiarity, that depends on the type of law the Commission brings in. It could be the sort that mandates what must be transposed into national law, or it could give more leeway. Anyway, in this case Kroes is following reports and recommendations from those regulators themselves (http://berec.europa.eu/eng/news_consultations/whats_new/1281-berec-has-adopted-two-summaries-and-the-updated-reports-on-net-neutrality)

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  3. At the event this morning, VP Kroes was given a letter signed by 20 European CEOs asking the European Commission to protect the open internet. The letter is public here: http://www.reddit.com/r/POLITIC/comments/1fn1r7/net_neutrality_open_letter_by_european_ceos_to/

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  4. paul martin Tuesday, June 4, 2013

    I have some sympathy with Deutsche Telekom. They do all the physical ground work then some US company comes along and hogs the bandwidth for people that just sit and watch movies for a fixed rate with a model that ensnares customers by evolving from being a tech company to creating their own content. It could be said that BT are addressing this issue here in the UK by providing the carrot of Sport on their Broadband network.

    The complaints about poor network performance then get aimed not at Netflix but DT who end up expending their resource on upgrading the network so even more video dross can be downloaded.

    Finally I am not clear whether there is confusion in the EU as to what the law that they are bringing will do. Items 1 & 4 in your list above, to me, seem to have inherent conflict but then again is not such a useful finance source avenue during subsequent legal wrangling.

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    1. #1 and #4 are not in conflict. One size of bandwidth may not fit all but #4 blocks discriminatory filtering or throttling based on site or service.

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    2. DT is selling this bandwidth to customers. So if they advertised 20Mbps @30 Euros and their customers end up using those 20Mbps I see no wrong other than DT having mis-planned the increase in usage of data services over their connections.

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  5. Pál Zarándy Wednesday, June 5, 2013

    Regarding the data explosion. It is a myth indeed. Please consider Rewheel’s latest report (to be debated on the upcoming Single Market for Telecoms in Brussels, which considers the per capita mobile data volume consumption in different member states. In Finland it is over ten times higher than in Germany, even though in Finland some key LTE bands (800 MHz) are not even in use, unlike in Germany. The report is here: http://rewheel.fi/insights_15.php

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  6. First on Cisco: their numbers are actually not overly optimistic, and they have had times where they have revised up in retrospect. They recognize the potential conflict of interest and proactively avoid it. They also have had low estimates for WiFi offload.

    On the man points:

    1. It makes sense to allow differentiated pricing, which can actually open up internet access to more people by enabling some to get less and pay for less.

    2. Ensuring easier switching and no throttling should help address the worst potential competitive issues here.

    3. OTT players can always contract with telcos to offer services to user at no extra cost. I don’t see why any government should want a capital-intensive industry to essentially subsidize OTTs.

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    1. 1 – Whatever “less” is should not be sold as internet access.
      2 – That depends very much on where you live. Many areas will only have one supplier with a decent network.
      3 – Nobody is subsidizing anything. Broadly speaking, the content providers’ telcos charge them for their outgoing traffic, and the users’ telcos charge them for incoming traffic. What you’re talking about is the ability for the users’ telcos to double-charge.

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      1. The very fact that regulations require carriers to charge solely for the connection acts as a subsidy to OTTs and prevents the carriers from realizing full ROI; when combined with fractured, small markets, new networks become unattractive investments. There is a reason Japan and Korea are so far ahead of Europe in telecoms (the US is due to a consolidated, large market). See this paper from the UK: http://stakeholders.ofcom.org.uk/binaries/consultations/jrg/responses/PNSol.pdf

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  7. This is how the law looks like in Slovenia: https://wlan-si.net/en/blog/2013/06/16/net-neutrality-in-slovenia/

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