I have already blogged a few times (eg here about perverse effects of net neutrality rules being applied always and everywhere as if there were some sort of human right to equal treatment of internet traffic. Specifically i expressed particular concern about the idea that there must be something wrong, in essence, with “zero rating” certain types of traffic.
I am very disappointed (but perhaps not all that surprised) this week, then, to read the draft new BEREC guidelines on net neutrality because they fail, in my view, to consider the essential purpose of any ex ante market intervention, which must surely be to protect consumers and facilitate competition. Blanket zero-rating rules can do exactly the opposite but yet the guidelines, without expressly banning zero-rating in all cases, certainly push national regulators in most cases to outlaw the practice.
“Zero rating” means allowing a user to use data for certain services without any charge and without depleting their data bundle allowances. It is of course of most relevance to mobile services, since fixed internet access services involve data bundles much more rarely.
I previously gave the examples of cases where zero-rating was prevented (in the EU) in the Netherlands and in Slovenia. In both of those cases the results seem entirely perverse to me. In the Netherlands Vodafone was fined for zero-rating the HBO-Go service, which competes with Netflix and in Slovenia telecoms operators have been prevented from zero-rating competitors to Spotify and to Dropbox.
In all these cases then the result of banning zero-rating has been to impede the ability of a new entrant content company (whether for video, audio or cloud storage) to compete with established incumbents. Surely this is precisely the opposite of the effect that we would wish?
As a telecoms specialist working with clients all over the world i am very proud of the EU model of telecoms regulation. It is rightly held up as the gold standard of international best practice. This is because, working from first principles, the EU model is to intervene in markets only where there is a market problem – ie only where one (or more) operators have market power, and so the ability, in the absence of regulation, to abuse their power and impede competition. If there is no market power issue there should be no intervention.
The new net neutrality rules (which are contained in the Open Internet Regulation and then interpreted by the (draft) BEREC guidelines which have prompted this post) seem to me to run entirely contrary to this basic principle. As regards zero-rating they say that the practice is likely to “undermine the essence of the end-users’ rights” and to “lead to circumstances where end-users’ choice is materially reduced in practice” (para 39). This seems to me just to be flat out wrong. In all the examples given above zero-rating could, far from reducing choice, help a new entrant enter the market.
I see no reason to have any specific rules or guidelines on zero-rating at all. EU regulators could simply apply the normal competition law principles – if (and only if) the practice amounts in practice to an abuse of a dominant position is would be outlawed (and the offender fined). Importantly there should, in my view, be no reason even to examine a zero-rating practice in the first place unless a complaint is made, and then the test the regulator should be applying is the normal competition law test, not something new around “undermining the essence of the end-users rights”.
Net neutrality rules were not handed down by God to Moses on Mount Sinai and they are not an end in themselves. There is nothing intrinsically wrong with discriminating between communications services – this is only problematic where it amounts to abuse of a dominant position. In the US, where the whole concept of net neutrality arose, there may well be a case for ex ante rules of this nature because of the lack of competition between ISPs, but in Europe (where there is much more competition) this makes no sense to me and will only serve to (continue to) make it more difficult for new Over The Top services to become established.
As an afterthought i would add in the context of the ongoing Brexit referendum that even if you agree with me that these regulations are entirely misconceived it does not follow that the UK would be better off leaving the EU. If we wish, following a Brexit, to continue to be part of the single market we would still have to comply with the EU telecoms rules, and if we leave then we lose our ability to influence these.