Kroes stirs up net neutrality debate – part I

In her most recent call for a single European telecoms market, Neelie Kroes, Europe’s digital commissioner, enthused about getting rid of premium roaming rates. Nothing new there, perhaps, but she also talked about “guaranteeing net neutrality”.

It seems a big shift from her previous stance on the “open internet”, where the emphasis was on making operators’ traffic management policies more transparent. The prospect of EU-wide net neutrality legislation is sure to agitate operators fearful of so-called OTT competition. It will also raise the hackles of EU sovereign states that don’t take kindly to directives from Brussels. This is going to be hard for Kroes to pull off.

It’s not yet clear how Europe’s digital chief intends to make her net neutrality guarantees, but a collision course has surely been set with many mobile and fixed-line operators, particularly those that have spent heavily on revamping their broadband access networks.

Only days before Kroes was making her speech in Brussels, directed at the European Parliament, the European Telecommunications Network Operators’ Association (ETNO) – a lobby group for the region’s biggest telecom groups – was having its own meeting in Milan where the “digital single market” was discussed.

ETNO’s subsequent statements hardly suggest that Kroes is going to have an easy net neutrality ride. While the lobby group acknowledges that investment in Europe is lagging behind other developed economies, ETNO lays only part of the blame on fragmented markets. Another contributory cause, it says, is an unpredictable and non-harmonised regulatory environment, which “still favours access seekers over investors”.

Temperature’s rising

Net neutrality never used to set pulses racing in Europe. If a network operator tried to stop customers from accessing rival services and content over the internet, or charged extra for them, it was seen as a self-defeating action. Competition in the region was so fierce, operators not toeing the net-neutrality line would surely lose out to those that did. Market forces, not regulatory intervention, seemed an effective guardian of the open internet.

This is no longer the case. A growing number of European operators now claim the right to determine what services travel over their expensively-constructed broadband networks. And nor are they afraid to hit back against consumer lobby groups and regulators that say otherwise. The temperature of Europe’s net neutrality debate is rising.

We saw this in the UK last year when the Broadband Stakeholder Group (BSG) – the government’s leading advisory agency on broadband – launched its Open Internet Code of Practice. Building on a previous initiative on transparency (giving customers easier access to information on operators’ traffic management practices) the new code cranked up net-neutrality pressure on operators.

It may even provide a window on Kroes’ thinking about how net neutrality enforcement could work in practice.

Signatories to the UK code mustn’t block any legal content or services, or make them difficult to access. If they do, they need to come clean on what restrictions are in place. And products that have restrictions cannot be marketed as providing “internet access”.

True, many UK operators saw merit in the code. BT, BSkyB, O2, TalkTalk and Three UK were among the signatories (even though it was not compulsory).

But others refused to sign, including EE (a joint venture between Deutsche Telekom and France Telecom), Virgin Media (a cable operator) and Vodafone.

While these three companies say they support open internet principles – each signed up to the previous transparency initiative – they objected to dropping “internet access” from marketing materials. It suggested, of course, they already maintained service restrictions or had plans to introduce some.

Neutrality dissent

The UK is not an isolated European example of operator dissent to net neutrality. A report last year by Berec, a pan-European regulator advisory body, found that restrictions on internet services were fairly widespread. At least 20 per cent of mobile internet users in Europe experienced difficultly in accessing VoIP services, such as Skype, which deny voice-call revenue to operators. In countries where competition is not as great, Berec said this figure could exceed 90 per cent.

Kroes, with her latest rallying cry, implies that reliance on greater transparency and market forces is not enough to “guarantee” net neutrality. She seems to prefer instead the legal clout to penalise operators if they block internet-based rivals. That will no doubt appeal to consumer groups as well.

There is a precedent for net neutrality legislation in Europe. KPN, the biggest operator in the Netherlands, warned 3G customers in early 2011 that it would make them pay extra for using third-party messaging or VoIP applications. The announcement sparked a consumer backlash and net neutrality was written into the country’s telecommunications law a few months later.

A pan-European agreement that guarantees net neutrality is unlikely to be implemented so swiftly. Instead, as in the US – where net neutrality is a much more hotly-contested topic, largely because competition is not as fierce – Europe seems headed for even greater friction between operators and regulators, perhaps even court battles. As network operators feel the growing financial strain of carrying rival internet services, it’s hard to imagine there won’t be some strong kicking back in Europe against net neutrality forces.

Kroes has got her work cut out.

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