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Net Neutrality Developments in the European Union

1.      Introduction

This contribution will consider current moves in the European Union (EU) to legislate net neutrality regulation at the regional level. The existing regulatory landscape governing Internet Service Providers (ISPs) in the EU will be outlined, along with net neutrality initiatives at the national level in countries such as Slovenia and the Netherlands. The new proposals to introduce enforceable net neutrality rules throughout the EU will be detailed, with comparison made to the recent FCC proposals in the US, and the extent to which these proposals can be considered adequate to advance the interests of Internet users.

2.      Existing regulatory landscape in the EU

Various provisions from existing EU telecoms regulation are relevant to net neutrality. This regulatory framework has promoted intra-platform competition by stimulating competition at the retail, consumer-facing level for fixed line telecoms, rather than inter-platform competition between different technologies such as cable and copper wires — a feature of the US regulatory landscape. EU telecoms regulation has pursued a ‘technology neutral’ policy, more concerned with the extent to which markets are competitive than the type of technology used to deliver services. If a market is not competitive, then ex ante regulation will be applied with the idea that the regulation will no longer be needed once competition has been achieved, and market-based solutions suffice.

[caption id="attachment_3968" align="alignleft" width="300"]Photo By: Razor512 - CC BY 2.0 Photo By: Razor512 - CC BY 2.0[/caption]

Following the most recent reforms of EU telecoms regulation in 2009,Council Directive 2009/136, 2009 O.J. (L 337) 11 (EC), Council Directive 2009/140, 2009 O.J. (L 377) 37 (EC), and Council Regulation 1211/2009, 2009 O.J. (L 337) 1 (EC), national regulatory authorities (NRAs) in each EU Member State are required to impose ex ante regulatory obligations on entities in the electronic communications sector which have significant market power (roughly equivalent to a dominant position) in relevant markets. The Commission has published Recommendations on the relevant product and service markets to be regulated in 2002,Commission Recommendation of 11 February 2003, [2003] OJ L 114/45, with an updated version in 2007,Commission Recommendation of 17 December 2007, 2007 O.J. (L 344) 65, and then again in 2014, Commission Recommendation of 9 October 2014, 2014 O.J. (L 295) 79. Wholesale broadband markets are included in these Recommendations as markets for which national telecoms regulators should use ex anteregulation to address competition problems, due to high barriers to entry, market structures not tending towards effective competition, and antitrust lawalone being insufficient to address market failure.[1]User-facing retail broadband markets, however, have not been not included in the list of markets which required ex ante regulation, and competition therein is deemed to be in a healthier state. It also seems that this market definition excludes broadband provided over cable networks suggesting that, in principle, this form of broadband provision is not subject to the ex anteobligations. Yet in markets where there is significant market power, the regulatory framework enables NRAs to impose certain ex ante regulatory obligations, including transparency and non-discrimination in relation to interconnection or access, accounting separation, access to and use of specific network facilities, and price control and cost accounting obligation. Some of these obligations, especially transparency, non-discrimination and access to facilities, if applied, may mitigate net neutrality concerns.

Even in markets where there is no significant market power, however, NRAs are still empowered to take actions which may go some way to ensuring net neutrality:

  1. Framework Directive, article 8: NRAs have a high level obligation to promote competition in the provision of electronic communications networks by ensuring that users“derive maximum benefit in terms of choice, price and quality”;“ensuring that there is no distortion or restriction of competition,” and “promoting the provision of clear information, in particular requiring transparency of tariffs and conditions for using publicly available electronic communications services.”
  2. Access Directive, articles 4, 5(1)(a): Operators of public communications networks are obligated to negotiate access and interconnection with each other, and NRAs are empowered to impose access and interconnection obligations even where there is not a SMP designation on undertakings controlling access to users “to the extent that is necessary to ensure end-to-end connectivity.”
  3. The Universal Services Directive, articles 20, 22 (as amended by Directive 2009/136/EC), details various transparency obligations  incumbent on communications providers. These comprise the provision of information on the services being contained in contracts made   with users including whether there are any conditions limiting access and the use of services and applications (so long as these conditions  are legally permitted), the minimum service quality levels offered, any procedures put in place to measure and 'shape' traffic and how these  procedures could affect service quality. NRAs also have the power to set minimum quality of service requirements in order to prevent the degradation of service and the hindering or slowing down of traffic over networks.[1]

While some of this existing telecoms regulation in the EU might go some way to protecting net neutrality interests of users, it does not guarantee full net neutrality.The more weighty obligations which relate to SMP designation do not apply to most ISPs, and some of the provisions that might protect against the adverse effects of non-net neutral conduct are optional and seem not to have been enforced in practice.

Competition law also exists in the EU aside from telecoms regulation. If an entity has a dominant market position, then conduct which does not accord with net neutrality may be conceptualised as using that dominant position in violation of EU competition law. In the absence of a dominant position, however, network management conduct is unlikely to be anticompetitive, unless collusion with competitors or collective dominance can be shown – or the content or services to which it is giving priority over its network form a dominant position in their own market.

It seems that the scenario in which anticompetitive conduct is most likely to be found is when there is a provider with a dominant position in the Internet wholesale market. Indeed, the European Commission recently investigated that market for suspected anticompetitive conduct in the form of abuses of dominance by Orange, Deutsche Telekom and Telefonica in their negotiation of wholesale Internet connections with parties such as large online content providers and Internet backbone providers for international access and interconnection. However in late 2014, the Commission closed the case, stating that the telecoms operators’ conduct did not appear to breach EU competition law by excluding competitors from the Internet transit market or Internet content markets (thereby providing an unfair advantage to the operators’ own content services), although the Commission also stated that it would continue to monitor the sector closely.

It would therefore seem that many network management practices by retail ISPs are permissible and that while non-net neutral conduct by wholesale ISPs may not be permissible in theory, it may not be investigated in practice.European competition authorities have not been particularly active in investigating ISPs’ network management practices — such as blocking, prioritising or degrading access to certain content and applications — aside from the Commission’s aforementioned investigation.

4.      Net neutrality initiatives at the national level 

Some individual EU Member States have proceeded with laws and regulation on network management at the domestic level. The Netherlands in May 2012 became the first country in Europe to mandate a net neutrality principle in the form of a law which prevents ISPs from interfering with applications and services on the Internet.[2]The law provides an exception for “necessary” interference, but what is “necessary” has been narrowly defined to apply to congestion, preserving the integrity and security of the network, service, or user terminal, restricting the transmission of unsolicited communication to the user when the user has given consent, and to give effect to a legislative provision or court order. Also in 2012, Slovenia became the second Member State to legislate on net neutrality, prohibiting ISPs from restricting, delaying or slowing down Internet traffic at the level of individual services or applications except in the case of urgent technical measures to ensure the smooth operation of the network (eg to avoid traffic congestion), to preserve the integrity and security of networks and services, for limiting unsolicited communications, or in accordance with a court decision.[3]

France has also been active on the subject of net neutrality. It currently does not have enforceable laws on the matter but in September 2010, the communications regulator ARCEP published its ten proposals on net neutrality.According to the proposals, ISPs which offer ‘Internet access’ should give users the ability to send and receive the content of their choice, to use services or applications of their choice, to connect the equipment and use the programmes of their choice (provided these do not harm the network), and there should be sufficient and transparent quality of service. Also, the general rule should not differentiate the methods of treatment of each individual data flow by the type of content, service, application, terminal or IP address of the sender or the receiver, and any deviations from this are to be limited – deviations which are too significant are forbidden from being termed by the ISP an offer of ‘Internet access.’ These too-big deviations are to be termed ‘managed services,’ which ISPs are permitted to offer so long as they do not degrade the quality of Internet access below a sufficient level. ISPs must also be transparent with users about the services and applications accessible via the Internet connection, their quality of service and any limitations and traffic management practices. Furthermore, ISPs which give online service providers Internet access must do so in an objective and non-discriminatory fashion, allowing all reasonable interconnection requests aimed at making the online service provider’s services or applications accessible to Internet users.

5.      EU net neutrality proposals 

In the European Union, the debate around whether specific regulation was necessary for net neutrality has gained momentum and has resulted in a Proposal, COM (2013) 627 final (Sept. 11, 2013), on the matter which is part of a new Telecoms Package recently agreed to by the ‘trilogue’ of the three main EU institutions (European Commission, Council of the European Union and the European Parliament).

These net neutrality proposals comprises something of a volte face for the European Commission, which previously had considered the existing Telecoms Package sufficient to address net neutrality concerns by providing European consumers with information about Internet services and competitive retail broadband markets as well as giving national regulatory authorities the power to set minimum quality of service standards in their territory.The proposal does, however, follow European Parliament resolutions supporting net neutrality, such as that of the Parliament’s Industry Committee in 2011 which urged the Commission to take a more active approach towards net neutrality. It also follows data from the Body of European Regulators for Electronic Communications (BEREC), which found that there was widespread interference with peer-to-peer (P2P) networks and Voice over IP (VoIP) on fixed and mobile networks in the EU. According to BEREC, the most frequently reported restrictions on traffic were the blocking or slowing down of P2P traffic on both fixed and mobile networks, and the blocking of VoIP traffic which mostly took place on mobile networks.

The net neutrality proposals which have been agreed to by the three legislative institutions of the EU comprise the following:

  • End-users shall have the right to access, distribute and use (legal) information and content, services and applications of their choice;
  • Equal treatment of all Internet traffic by Internet providers, without discrimination, restriction or interference, subject to ‘reasonable traffic management measures’ which cannot be based on commercial considerations;
  • In particular, providers shall not block, slow down, restrict, degrade or discriminate between specific content, applications or services;
  • There is also an assurance, in Article 23 of the Proposal, that the quality of ‘open Internet access’ services will not be hampered by the provision of innovative services such as IPTV and telemedicine which share the same infrastructure – these ‘specialized services’ they may only be offered where there is sufficient capacity for them, and their provision should not affect the availability or quality of generic Internet services.[4]

The net neutrality rules must now be approved formally by a vote of the European Parliament, which is likely to happen later this year. If approved, the official text will come into force throughout the EU on 30 April 2016.

While the proposed rules seem to have been initially well-received, some commentators have pointed out that the provisions are silent on the issue of ‘zero-rating’— i.e. users being offered ‘unmetered’ or free access to a certain site or provider’s content but not for sites or content from other sources. Zero-rating is considered by some to be a violation of the net neutrality principle, and EU-wide clarification on the issue would be a welcome addition to these proposals. Furthermore, some have suggested that the lack of clarity on zero-rating may require that the existing net neutrality laws in the Netherlands and Slovenia be modified (as well as possibly requiring the removal of a controversial adult pornography filter in the UK). The extent to which it addresses content delivery networks is also unclear — even though use of content delivery networks can have a similar effect to non-net neutral conduct by prioritising certain traffic using deep packet inspection, its implementation may not be covered by the proposals.

Net neutrality proponents may see the proposed regulation as ‘too little, too late.’ While net neutrality was first raised as a policy issue more than ten years ago, it has taken a long time for the EU to arrive at the point where ex ante regulation is being considered — and meanwhile technology and business practices have moved on.

6.      Comparison with the US

There are strong commonalities between the EU’s proposed net neutrality rules and those passed by the US Federal Communications Commission (FCC)in March of 2015. Both sets of rules prohibit blocking, throttling, and paid prioritisation, and impose transparency obligations on Internet providers. In addition, both sets of rules do not apply to interconnection agreements — the FCC considers that the best approach at the moment involves a presumption against intervention (including vis-à-vis content delivery networks) but it does have the authority to consider claims involving interconnection; and the EU’s proposals do not mention interconnection agreements at all, leaving the extent to which the rules would apply to such agreements unclear.

However, there are some important differences between the two sets of rules. One such difference is that the FCC rules do not include a ‘non-discrimination’ obligation. Additionally, while it may amount to rhetoric in practice, the EU’s rules create a positive right of end-users to access, distribute and use (legal) information and content, services and applications of their choice, while the FCC creates a negative obligation on Internet providers not to unreasonably interfere with or disadvantage end-users’ ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice. In practice, this may mean that individuals in the EU will have a greater ability to bring actions against providers which infringe their right.

Another difference can be found in the relationship between ‘normal’ Internet services and ‘specialized’ services such as IPTV and telemedicine. As mentioned above, ‘specialized’ services can only be provided in the EU if they do not interfere with the availability and quality of normal Internet services and can only be provided where there is sufficient network capacity. Under the FCC approach, ‘specialized’ services cannot be provided in a manner which undermines the purpose of the open Internet rules, and will take action if the services is providing the ‘functional equivalent’ of a normal Internet services or is being used to evade the FCC’s net neutrality rules. It remains to be seen how these two approaches to specialized services play out in practice. Despite the different wording, it may well prove that in practice both jurisdictions treat specialized services in a substantively similar way.

Finally, as mentioned above, the EU’s rules have been criticised for their silence on zero-rating. In contrast, the FCC has explicitly considered the issue[5] and decided not to prohibit zero-rating outright, but to examine such practices under its no unreasonable interference/disadvantage standard, taking action, if necessary, based on the circumstances of each case.

7.      Conclusion

After much to-ing and fro-ing on both sides of the Atlantic,the EU has followed the US in releasing its own, and possibly final, net neutrality proposals in the last few months. Questions remain over whether the European Parliament will approve the proposals, and how they will be implemented in the 28 Member States of the EU. In addition, the FCC’s rules in the US have already been subjected to legal challenge, so it may be some time before net neutrality is properly implemented in either jurisdiction. Furthermore, in not addressing new practices, such as zero-rating and the use of content delivery networks, which may have effects similar to those net neutrality regulation aims to counter, both sets of proposed rules may be ‘too little, too late’ to be of much practical utility to Internet users in the US and EU.

[1] The press release for the 2007 Recommendation summarizes the included markets.
[2] An unofficial English translation of the proposed version of the law is available from Daphne van der Kroft, ‘Net Neutrality in the Netherlands: State of Play’ (Bits of Freedom, 15 June 2011).
[3] See wlanslovenija for an English translation.
[4] See the European Commission press release for a summary and the relation to IPTV and other “specialized services.”