18Apr/140

Edito by Yves Gassot

Net neutrality : From one extreme to the other or the great transatlantic divide

GASSOT Yves

Yves Gassot
CEO, IDATE

 

 

Should we take legal measures (and if so, which) to prevent internet service providers (ISP) from becoming the web’s gatekeepers, and undermining the open internet?

 

The question is apparently far from resolved, and recently gave rise to two completely opposite set of events on either side of the Atlantic.

In the United States, two potential game-changing moments have occurred. First is the decision from the federal Court of Appeals in Washington that seriously undermines the principles laid down by the FCC. Once again, judges have ruled that FCC provisions forbidding operators from blocking access to lawful sites, or slowing a connection when they decide that generated traffic is preventing the network from running efficiently, have no legal foundation. If they do not contest the FCC’s power to regulate the internet (and have admitted the legality of the obligation to be transparent in the commercial information provided to consumers), they decided that the federal agency’s stipulations cannot go beyond that, once ISPs’ services are not governed by the principles of common carriage (which are imposed on telecommunications services and forbid any form of discrimination).

We should also remember that cable companies have always refused to bow to common carriage rules, including when they began to provide broadband access via cable modem. The FCC did not want to introduce asymmetrical regulations when telcos began providing ADSL access, and confirmed at the time that internet access would be considered an information service. Even if it wanted to, the FCC today would have little chance of persuading Congress from changing its mind about this. It does, however, have some power when it comes to imposing remedies as conditions for approving mergers or acquisitions (as it did on Comcast when it took control of NBC).

Which brings us to the second major bit of news: the interconnection agreement between Comcast and Netflix. In the past, the SVOD service – which is thought to account for a quarter of internet traffic during peak hours – had consistently refused to negotiate any paid peering agreement with telcos and cable companies, preferring to use the services of the transit operator in charge of its content delivery network (CDN) and managing peering locations with ISPs. Hence the surprise over the deal with Comcast, even if we do not know exactly how much Netflix has agreed to pay (as the deal is a commercial one) or what we should make of it. Some are seeing this as the natural outcome to the Washington court ruling, and its de facto eradication of net neutrality rules. Although, in fact, interconnection agreements have never been covered by the FCC’s guiding principles. What we can take away is the clout that the number one ISP in the US was able to wield over Netflix. But we may also discover an agreement that is in fact advantageous for the SVOD service. One that allows it to avoid having to got through a transit operator, and improve the quality of access to its programming in the bargain. Some market watchers are saying that the planned merger between Comcast and Time Warner Cable, which is currently being scrutinized by antitrust authorities, may have forced the cable giant to offer proof of its ability to play well with a major service provider.

So what happens next? Comcast is not the only ISP, so we are waiting to see what kind of deals Netflix might strike with the markets other two heavyweights, AT&T and Verizon. And Netflix is not the only content provider. In addition to ISPs’ services, we need to remember the competition brewing between the various TV access device providers (Roku, Amazon Fire TV, Chromecast, Apple TV…) and online media (video, game, music) stores that combine their own content and access to third-party services. A few days after the Comcast – Netflix deal was announced, we learned that Apple was negotiating a deal with Comcast to have guaranteed bandwidth for the supply of its own VOD service…

Meanwhile, on the other side of the Atlantic, the game changer came from the European Parliament. Taking up the report released by Ms Kroes last September, it sought to strengthen Europe’s net neutrality legislation. Rather than sticking with a balanced text that gives NRAs the power to oppose ISPs’ discriminating against content and application providers, it adopted a definition of net neutrality that we had thought confined to only its most stringent proponents: ““Net neutrality” means the principle according to which all internet traffic is treated equally, without discrimination, restriction or interference, independently of its sender, recipient, type, content, device, service or application” (amendment 234, retained). Under these circumstances, the ability to differentiate access offers or to charge extra for preferential treatment on ultra high-speed fixed and mobile (1) networks will have been nipped in the bud.

Of course, it is likely that the European Council will want to make changes to the text before it is passed into law. But it is curious to see how the Kroes report, which was supposed to focus on creating investment incentives, resulted in this proposal.

And astonishing to see such extreme and opposite directions taking shape at the same moment on either side of the pond.

Yves GASSOT

[1] One of the fundamental differences between net neutrality principles as defined by the FCC and Europe is that European regulations apply to the mobile internet as well.
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