‘Hurrah! The Netherlands has become the first European country to enshrine Net Neutrality in law.’
Many would share John Naughton’s joyous feeling expressed in his blog on 10 June. Many - but not everyone. In fact, a good number of those following the Net Neutrality debate would be cautious, if not adverse. Where do you stand?
On 9 June 2011, the Netherlands became the first country to encode the principle of Network Neutrality into national law, ensuring that telecoms and Internet service providers would place no restrictions on user access, or discriminate based on types of Internet content, services or applications. To some extent it does not come as surprise, bearing in mind that some of the Dutch telecom providers openly block access to Skype and similar VoIP and online messaging services over their networks, giving the advantage to their own voice services.
Similar breaches of Network Neutrality principles are made by the telcos in other countries as well. While entirely restricting the access to some online applications and services is a somewhat blunt way to protect your own interests, more sophisticated approaches include openly or tacitly throttling the bandwidth for some applications such as VoIP or peer-to-peer (based on the type of application which can be easily tracked by the ISP), or surcharging for these while not charging for others (like Facebook) in ‘bandwidth caps’ models.
Clearly, this annoys and worries the users; they request an open Internet – the unrestricted access to any content, application or service online. On the other hand, however, the telcos and ISPs look for business models that will ensure proper returns on their investments in infrastructure, and motivate them to invest further in order to deliver the service with a due quality, in spite of the fast-growing demands from new services for larger and larger bandwidths. Governments and regulators face the challenge to find the balance.
One of the major challenges regulators face is whether to act pre-emptively (ex-ante), in order to prevent possible breaches of the Net Neutrality principle, or to respond based on precedents (ex-post) once (and if) the breach occurs. Another challenge is whether the problem should be dealt with, with ‘hard law’ – encoding the principles into legislation – or if ‘soft law’ (guidelines and policies) would be sufficient.
Views on this are very divergent: telcos and ISPs commonly advocate existing telecom competition laws and soft ex-post anti-trust responses as sufficient to deal with Net Neutrality as well, while user communities and the software and content industry stand strongly for an ex-ante hard law approach for electronic communications, justifying that the competition is not sufficient to protect users’ interests. Governments and regulators play somewhere in between, based on the level of competition and the existing legal frameworks in their countries.
For instance, the USA copes with a lack of true telecom competition; there, the Federal Communications Commission (FCC) is in a years-long fight with the major telcos over its legitimacy to codify and enforce its Network Neutrality principles defined through its own policy acts into legally binding rules. Japan envisages possible congestion due to fast-growing demands for bandwidth because of new services; back in 2007 its Ministry of Internal Affairs and Communications worked on a comprehensive report on Net Neutrality, amending its policy programme with the principle of no discrimination. In the European Union, which has a solid competition and legal framework on telecommunications, the European Commission provided directives to national regulatory authorities to promote ‘the ability of end-users to access and distribute information or run applications and services of their choice’ within its amended Framework Directive in late 2009 (yet remains very cautious not to endanger the innovations and investments from business). The Declaration of the Committee of Ministers of the Council of Europe on Network Neutrality in late 2010 clearly supports the Net Neutrality principles, and calls member states and the private sector to further work on guidelines. None of these approaches, however, calls for either of the extreme poles, but rather for positions in between.
The most known and most accepted are the Guidelines by the Norwegian regulatory authority (NPT): a soft regulation based on the collaborative dialogue with the entire Internet industry and community. Voluntary but broadly supported, they provide a new ‘collaborative’ approach to Internet regulation; yet, ultimately, the regulators always preserve the option of transforming these into hard law – if necessary.
The Netherlands has chosen a pole: ex-ante with a hard law approach. Such a regulatory approach will certainly satisfy the users; the question is whether it will stifle further investment by the telcos. If it does, the Dutch might need to revert to a more balanced approach; if it does not, however, this model might outshine the Norwegian one and show that the telcos were crying about Net Neutrality debates for no reason. Let’s wait and watch closely.