[Comment] Europe and net neutrality: let users control the Internet
ANDREA RENDA
31.03.2009 @ 09:28 CET
EUOBSERVER / COMMENT - After endless - and mostly unproductive - discussions on issues such as spectrum reform and the need for a pan-European regulator (EECMA, BERT, GERT?), the debate on the EU telecoms package is now reaching new peaks with the review of the Universal Service Directive. And the level of disagreement in the trialogue is such that the upcoming deadline is increasingly looking like a dead end. Things are becoming even more worrying since, while the three institutions struggle with the core provisions of the directive, a hectic and subtle debate has emerged over the need to include in the new text provisions to mandate the neutrality of the network.
"The net neutrality debate is way more complex than it appears at first blush" (Photo: Notat)
In essence, the debate revolves around one key issue: whether, on an IP-based infrastructure, internet service providers (ISPs) should be forced to treat all bits equally, or whether they should be allowed to prioritise some packets over others in order to guarantee better quality of service for some applications compared to others. In other words, the debate is about "traffic management:" should ISPs be able to charge more to application and content providers that demand higher quality of service? Or should they put all packets in the same queue, treating them only on a "best effort" basis?
"Neutralists" argue that, if ISPs will be allowed to discriminate between packets, they will use this power to block undesired content, thus reducing freedom of speech. In addition, vertically integrated ISPs may put competing VoIP (voice over internet protocol) companies and any other application providers at a disadvantage by reserving better quality of service to their own applications, and leaving competing ones in the "dirt track" of the Internet. Accordingly, we witness an escalation of rhetoric, with some lobby groups and political parties spreading the fear of the end of the Internet as we know it, the death of free speech, and the ultimate victory of the telecom giants. The new motto is "who wants to control the internet?"
On the other hand, ISPs claim that, without a degree of network management and traffic shaping, network congestion would make it impossible for European users to enjoy sufficient quality of service, especially for those applications that are more bandwidth-intensive and time-sensitive than others. This is critical since, with the advent of the so-called next generation networks (NGNs), the same infrastructure (the Internet) will not only be used to surf and send emails, but also to make phone calls, watch TV, gamble, vote, play video games, and even access eHealth and eGovernment services. Once this becomes a reality, ISPs will need to manage their networks in order to avoid that end users suffer from severe reductions in the quality of service: live streaming of events, for example, may simply not work if the network is polluted with massive p2p downloads or, increasingly, YouTube traffic.
Who is right in this battle of titans? To start with, it bears recalling that the current debate is not about changing the neutral architecture of the internet, by infringing the "all bits are equal" principle that - some argue - is key to the whole design of the network of networks. To a large extent, the Internet is not neutral today: packets are already being prioritised and inspected, and mostly for virtuous purposes, such as filtering spam traffic. Moreover, some application providers - including VoIP operators - and giants like Google and Akamai use advanced caching services and local server networks to ensure that their packets "get there first." In a nutshell, the status quo is "not neutrality," rather than "net neutrality." And this has been acknowledged also by oft-quoted gurus of the Internet, such as Tim Berners Lee.
From an economic viewpoint, it seems reasonable to let ISPs set up their platforms in a way that best serves the interest and preferences of their increasingly diversified users. ISPs know very well that on NGN platforms, it takes many to tango: users will find it worth to subscribe to future internet offers only if platforms allow access to as many applications and as much content as possible. Would you attach your internet subscription the same value if you had no access to YouTube or Skype? Accordingly, ISPs must ensure both that application and content providers join their platforms, and that users are offered the best possible set of services at the most competitive price. In some cases, they will even have to negotiate with premium content and killer application providers to make sure their subscribers gain access to these valuable offers.
Cost and effect
What's more, the possibility for ISPs to charge for quality of service appears as a decisive feature for the sustainability of NGN business models. With reasonable network management, the ISP would also be able to charge less for the monthly subscription fee. Once on the internet, users will be able to choose between free "best-effort" services and higher-quality services, for which competing VoIP providers pay a fee to the ISP. The latter may then have a stronger incentive to deploy and maintain an NGN: it will reap some revenues from end users through subscription fees, some revenues from users of its own high-quality VoIP service, and revenues from QoS charges paid by competing suppliers of high-quality VoIP service users. What's more important, users may be willing to pay, say, a €30 monthly fee to be able to choose between a free best-effort service, or a paid high-quality VoIP service. Likewise, business customers may well be willing to pay for securing quality of service in teleconferencing and many other applications.
This is why the net neutrality debate is way more complex than it appears at first blush. There is a growing demand for high QoS services, and technological development can and should satisfy this demand. Moreover, net neutrality affects incentives to invest in new infrastructures: absent the possibility to reasonably manage traffic, ISPs may simply decide not to invest in NGNs - like it or not, no one would bet on users paying, for example, €100 to get a best effort service.
Does this mean that Europe should opt for network management without reservations? Not at all. It only means that a pro-neutrality solution, despite its intuitive appeal, is far from being a pro-consumer solution.
On the other hand, like in any market, and under given circumstances, actors can end up engaging in undesirable practices. In the case of ISPs, this could mean blocking rival applications or discriminating their competitors by intentionally degrading their quality. This is much more likely if competition in the ISP market is weak: on the one hand, if ISPs know that consumers can easily "vote with their mouse" and turn to competing internet subscriptions in case applications are blocked or degraded, they will have no interest in doing so. To the contrary, if the ISP is a monopolist, it will have a clear incentive to shape traffic at will, and not in its users' interest.
EU anti-trust laws
But NGNs are not the only environment in which discriminatory or exclusionary practices may emerge. This occurs in virtually all markets, and antitrust laws such as Article 82 of the EU Treaty are there to scrutinise and challenge business conducts. In this respect, application blocking is a textbook example of refusal to deal, and as such - if performed by a dominant ISP without an objective justification - would fall under Community antitrust laws. The same can be said for intentional quality degradation, which would amount to "applying dissimilar conditions to equivalent transactions," and as such would be challenged by the same article of the Treaty. As in all markets, trustbusters may well step in - but they normally wait for things to go wrong, before they do it.
Furthermore, as regards the fear that some applications are given a preferential treatment over others in exchange for a fee, isn't the whole economy based on this? Ever heard of express courier services, business class tickets or even highway tolls?
To sum up, the current calls for rules mandating net neutrality in the EU telecoms package seem ill-conceived. EU institutions and member states should act to ensure that markets remain competitive, open and transparent; that ISPs provide clear and precise information to end users over restrictions or any other management practice that applies to their service offers; and that users can quickly switch to competing ISPs if they are not satisfied with the offer. Policymakers should also clarify under which conditions management practices will be considered as legitimate, and when competition laws will intervene to stop exclusionary conducts.
This way, they will ensure that Europe speedily proceeds towards an era in which long-awaited investment in NGN takes place, and users can really choose what Internet they wish to have, tomorrow.
Andrea Renda is Senior Research Fellow at the Centre for European Policy Studies (CEPS) and author of "I own the pipes, you call the tune: The net neutrality debate and its (ir)relevance for Europe"
