Net Neutrality – Intrusive Regulation or Protection of Open Internet?

The introduction of net neutrality regulations in the EU and the US has been one of the most discussed topics in the TMT industry in the past few years.
 
The term “net neutrality” refers to the principle that internet service providers (ISPs) should treat the flow of all data traffic between the providers of content, applications and services and internet end-users equally, thereby safeguarding free expression and non-discrimination of any content. Subject to several exceptions, net neutrality prohibits ISPs from engaging in blocking, slowing down, altering or otherwise interfering with content, regardless of whether the content is a high-definition video or a small-sized email. Thus, the net neutrality principle disables ISPs from attempting to conclude agreements with content providers who pay for preferential treatment of their content over the content of others. From an end-user perspective, preferential treatment typically results in faster loading or loading in a better quality.
 
This practice exercised by ISPs, also called as “pay-to-play fast lanes,” has been criticised by internet end-users and small and medium-size content providers who lack the funds to compete with large content providers such as Apple, Facebook, YouTube or Netflix. Nevertheless, these “over-the-top” providers largely favoured the introduction of net neutrality in order to avoid additional expenses incurred to ISPs.
 
Net neutrality rules are often considered as vital to consumer protection. There is justified concern that the paid “better standard” would not bring any real advantage to end-users, but instead would be used by ISPs to handicap (and in extreme cases block) the content of the content providers who refuse to pay.
On the other hand, net neutrality is contested by the ISPs. They argue that net neutrality curtails their sources of income, unreasonably regulates a self-regulated internet environment and hinders internet development. Moreover, critics point out that net neutrality reduces incentives to invest in internet infrastructure and might result in higher prices that will eventually be imposed on the consumers.
 
Net Neutrality in the US
 
In the US, net neutrality was introduced by the Open Internet Order 2015 and adopted by the Federal Communications Commission (FCC) in February 2015. However, several statements from President Trump’s administration and newly appointed chairman of the FCC, former lawyer of one of the largest ISPs, Verizon, Mr. Pai indicates plans to reverse net neutrality after the recent overturning of regulations of internet privacy protection. They thereby intend to leave the internet industry to conclude voluntary agreements that would regulate itself. In May 2017, the FCC was expected to commence deliberations on repealing the Open Internet Order 2015.
 
Net Neutrality in the EU
 
In the EU, the net neutrality principle was introduced by the EU Open Internet Access Regulation No. 2015/2120 (“Regulation”), which came into effect on 30 April 2016. Like the Open Internet Order 2015, the Regulation primarily aims to ensure equal and non-discriminative treatment of internet content and internet users’ rights. The Regulation was further interpreted by the BEREC Guidelines issued in August 2016 and guidelines of national regulators for electronic communications.
 
Both the Open Internet Order 2015 and the Regulation set forth a number of exceptions from the obligation of equal treatment of all data traffic. These exceptions include reasonable traffic management, specialised services and so-called zero-rating.
 
Under the Regulation, ISPs may implement reasonable traffic management measures based on objectively different technical quality of service requirements of specific categories of content. In accordance with the net neutrality principle, ISPs are banned from implementing traffic management measures based on commercial considerations. The traffic management measures must meet several requirements concerning transparency, impartiality and duration. This, however, does not apply to traffic management measures imposed to (i) comply with laws (e.g., blocking of websites with child pornography), (ii) preserve the integrity and security of the network (e.g., prevent cyberattacks), and (iii) prevent impending network congestion and mitigate the effects of congestion. According to the BEREC Guidelines, ISPs are not allowed to implement traffic management measures to block spams and advertisements.
 
Also, specialised services are exempt from the net neutrality obligation under the Regulation. Specialised services are services that need to be carried out with a specific level of quality, which cannot be assured by standard best effort delivery. However, the provision of specialised services may not be to the detriment of the availability or general quality of internet access services. Examples of specialised services may include real-time health services but also, according to BEREC Guidelines, delivery of voice service within the LTE (VoLTE) or linear broadcasting IPTVs.
 
One of the most criticised aspects of the Regulation is its failure to explicitly ban “zero-rating.” Zero-rating is where an ISP applies a price of zero to the data traffic associated with specific content (most likely an application chosen by commercial criteria) and the data does not count towards any tariff data cap of the ISP. Zero-rating is mostly applied by providers of telecommunication services. According to the BEREC Guidelines, zero-rating practices shall be assessed on a case-by-case basis. It explicitly prohibits zero-rating where all applications are blocked (or slowed down) once the data cap is reached, except for the zero-rated application(s), unless the zero-rating applies to an entire category of applications (such as all music streaming applications) and not only to certain applications thereof (such as music application of the ISP).
 
Conclusion
 
Any regulation of the internet environment is a sensitive topic that is carefully examined by businesses experts as well as the general public. The principle of net neutrality was introduced in order to maintain a fair and non-discriminatory environment on the internet, to ensure limited control of ISPs and to maximise competition. In the US, the fate of net neutrality remains uncertain. Given that before the adoption of the Open Internet Order 2015 the FCC received almost 4 million public comments (partly due to the public plea of John Oliver, the HBO late-night host); any limitation of net neutrality will not be an easy task. Two months ago, FCC new Chairman Ajit Pai revealed plans to rollback the previous administration’s net neutrality rules. John Oliver’s response was to rally his viewers and wider internet audience once again. The host encouraged the viewers to visit the FCC site and once again comment on a need of strong net neutrality rules. The upcoming months will show how serious the efforts of President Trump’s administration and the new FCC leader to curtail net neutrality really are. In the EU, the main attention will be placed on the actual application of the Regulation and related guidelines in practice as well as the interpretation of many vague expressions therein. The local regulators are issuing their own statements commenting the Regulation and the guidelines while taking into consideration the local market practices. Similarly as with the EU new data protection and privacy regulation there are voices which commend a transparent and non-discriminatory approach to net neutrality and there are voices which foresee it as overregulated, online economy damaging approach. We will have to wait and see whether the US ‘markets-first-fast-lane’ or the EU ‘openness-innovation-better-value-online services’ approach will work or whether both will thrive on their respective markets. Hopefully when the wait is over, there will be a fast internet to check the progress at.

Hana Gawlasová is a recognized leader in information technology and telecommunications regulation, recommended in Chambers Europe, The Legal 500 EMEA and Who’s Who Legal. She focuses on information technology and personal data protection work and provides practical, concise and value-added advice. She has a background in computer programming and is a keen early-adopter of new technologies. She had been included in both the list of top 25 Czech businesswomen and the list of notable Czech female lawyers. Hana continuously promotes women in the workplace initiatives and is very active in pro bono and community investment work. 

Hana can be contacted on +420 221 662 240 or by email at hana.gawlasova@squirepb.com