The number of connected servers and the volume of transmitted data has grown exponentially in recent years. As a result, the internet’s infrastructure is challenged to keep up with the increasing demand for data. Internet service providers (ISPs) have a hard time handling this data explosion. They argue that they should be allowed to offer fast-lane access to content providers willing to pay an extra fee for a quality of service (QoS) option. This position is opposed by supporters of net neutrality, who believe that startup content providers would be unable to afford priority access and that innovation would be stifled. The current regulatory trend in the US and the EU favors open networks and stronger consumer protection. The Council of the European Union published a new draft of the Single Market Regulation that sets the parameters for the future EU net neutrality regime in January 2015. A few weeks later, the US Federal Communications Commission (FCC) issued new rules that include strict requirements to protect net neutrality.
Net neutrality in the US
The FCC has been struggling to decide whether it should allow a more flexible approach to data transmission. In 2008 and 2010 it imposed net neutrality regulations on fixed and mobile broadband providers, banning them from unreasonably blocking access to certain content and from unreasonably discriminating between content providers when transmitting network traffic. At the same time the FCC exempted cable companies from several of these obligations. These regulations have since been quashed by the US courts, and in response the FCC has published a new net neutrality framework by way of a ‘notice for proposed rulemaking’, which was open for public comments until September 2014. In February 2015 a new regulation - known as the Open Internet Rules - was issued by the FCC. The new regulation subjects broadband providers to transparency rules and bans three specific practices: blocking, throttling and paid prioritization.
The new regulation prohibits unreasonable interference and prevents content providers from being disadvantaged. In many ways, it is similar to the FCC’s previous attempt to implement a net neutrality regime. However, the two primary differences - aside from the fact that broadband service providers are now reclassified and subject to regulations on common carriers - relate to the scope by which the FCC can individually analyze certain practices and the approach towards pay-for-priority arrangements. Rather than prohibit ‘unreasonable discrimination’ - as provided by the FCC’s 2010 regulation - the 2015 regulation only prohibits ‘unreasonable interference or unreasonable disadvantage’. This more flexible approach provides the FCC with options to regulate broadband providers on a case-by-case basis, allowing for exemptions when necessary. In addition, the new regulation explicitly prohibits pay-for-priority arrangements, which is a significant departure from the FCC’s previous position.
Net neutrality in the EU
EU directives on the liberalization of the telecoms sector endorse in principle regulations to preserve net neutrality. But at the same time it is left open to member states if and how they implement the rules. As a result, many countries have no legislation on net neutrality - and those that do are pursuing different approaches. The proposed EU Single Market Regulation, which was expected to be adopted by the end of 2014, is still in the making. According to the EU Commission, the new EU regulation will end discriminatory blocking and throttling and warrant effective net neutrality. However, the principle of net neutrality shall not be without exceptions: the current draft specifies that reasonable ‘traffic management measures’ are to be allowed in certain cases. On the other hand, only providers of ‘internet access services’ are required to treat all traffic equally in the operation of their networks; there is no corresponding obligation for providers of so called ‘specialized services’. These services may therefore use pay-for-priority arrangements as long as there is no lack of ‘sufficient network capacity’ or as long as they do not pose a risk of interfering with the ‘availability and general quality of internet access services’.
This rule would most likely result in legal uncertainty, as the threshold to an illegal quality interference is not defined. Furthermore, it is unclear what would be classified as a ‘specialized service’. The rule might only cover critical infrastructure such as machine-to-machine communications, the technology that enables self-driving cars or essential eHealth applications. On the other hand it might also capture services such as video streaming, filesharing or video gaming, which place great demand on internet capacity. As a result, we can expect that EU law-makers will try to clarify what falls into this category.
The effect of competition law
It should also be noted that the concept of net neutrality is affected by EU competition law. Concerns about net neutrality are essentially two-fold: first, such behavior can amount to an abuse of a dominant position under Article 102 of the Treaty on the Functioning of the European Union (TFEU); second, it may form an anti-competitive agreement pursuant to Article 101 of the TFEU - irrespective of a dominant position.
More information on net neutrality and competition law can be found here.