While others are still dithering on the issue of net neutrality, the Dutch have boldly decided to intervene by adopting explicit net neutrality legislation, but what this means in practice and whether others will follow remains to be seen.
The Dutch upper house recently gave its approval to the new national telecom law. The lower house had already agreed the new law some 12 months ago in June 2011. Like all other EU member states, the Dutch needed to implement the 2009 EU telecom package into their national law. Predictably, the minority government had proposed a conformist implementation of the EU rules, which only contains new policy objectives to promote net neutrality. In a surprise twist of political circumstances, however, a parliamentary majority soon adopted an amendment introducing explicit rules on net neutrality. Interestingly, around the same time, an apparent misguided comment by an executive of Dutch incumbent KPN during an investors conference call, that KPN applied deep-packet inspection to find out who was using mobile messaging service WhatsApp, may well have served as a catalyst for the amendment. KPN had just announced new mobile data tariffs that would have imposed extra charges on users of applications like WhatsApp.
So, what does the new law say?
In essence, new article 7.4a says that access to Internet services and applications must not be blocked or throttled. Similarly, providers must not make their Internet access charges dependent on the services and applications used; so, charging extra or applying other special conditions for using specific Internet services like Skype will not be allowed. Charging differently for different bandwidth packages will still be allowed.
Unsurprisingly, the new law includes a few exceptions. Providers may, for example, still take action to prevent or manage congestion on their networks, as long as they treat all similar “bits and bytes” equally and do not favour one service or application over another. Providers may also employ so-called “proportional prioritisation”; so, in case of congestion, generally giving priority to users with higher bandwidth packages over those with lower ones, proportionally to their respective packages. Net neutrality may also be curbed for reasons of network and service security and integrity, for example to deal with botnets, DOS attacks or hackers. Blocking spam will still be allowed; and legal requirements and court orders will still need to be complied with. So, blocking access to sites like Pirate Bay, for which there are a specific Dutch court orders, will be allowed.
All this still leaves several key open issues. What, for example, is meant by “throttling”, “congestion”; “similar services”? Who exactly is caught by the new law? Even the four-pages of explanatory memorandum to the new Dutch law fail to bring much clarity, which means that it will be left to the Dutch regulator, OPTA, to step into to breach. For those concerned, the good news is there will be a 12-month transition period. After that, however, OPTA may impose fines of up to 10% of providers’ annual revenues for any breaches of the new law.
What about traffic management?
Where does this leave services for which special arrangements are needed to guarantee their quality; so-called “managed services”? Delay-sensitive, quality-critical services like voice, online gaming and HD video all require traffic management; and, in principle, the new law does not ban this. It is generally accepted that providers of these services need special arrangements with telcos to get some preferential treatment. It is also generally accepted that some form of dimensioning, based on assumptions about likely network use at any one time, is necessary simply to make networks run smoothly while demand for bandwidth-hungry services increases. But questions like how much preferential treatment can be given to these managed services before other “best efforts” open Internet access starts to suffer, remain as yet unanswered.
These issues become especially pressing when services are blocked, traffic management applied and “special lanes” carved out on the Internet in a way that discriminates against providers of competing services. Last month, OTT video provider Netflix was one of the latest big new names upping the ante for more open access and net neutrality in the US, arguing the biggest US broadband provider Comcast was giving preferential treatment to its own video services over those of others.
What are others doing?
Whether other governments and regulators will follow the Dutch example remains to be seen. Over the years, the UK’s Ofcom and EU regulators’ body BEREC have published several discussion documents and consultations. In its latest, Ofcom said it “will monitor progress” (including the impact of the self-regulatory model proposed by major UK ISPs), keep under review the possibility of intervening more formally, and publish an update “in summer 2012”. Ofcom also said, for example, that where ISPs offer services to consumers as “Internet access” this creates an expectation that these services are “unrestricted”. For the moment, Ofcom and other EU regulators are broadly taking the reliance-on-market-forces approach, underlining the importance of providers being transparent about the services they offer.
In the US, the FCC has adopted and proposed several net neutrality regulations, mainly focusing on general principles of transparency and non-discrimination, but none going as far as the Dutch law. Meanwhile, the FCC has been grappling with various legal challenges from the industry.
Chile appears to be the only other country that has codified net neutrality into its national law, like the Dutch, but as its communications market is rather different from the Dutch, drawing any further parallels between the two is unlikely to be helpful.
Some may argue that relying on the operation of market forces to deal with issues like blocking and discriminatory activity, is fine if consumers can easily switch between the many different access providers. After all, “walled garden” and similar business models have proven not to be sustainable in the past. For such reliance to work, however, would at least require a significant degree of transparency in the market, so consumers can make informed buying decisions; although it is open to discussion how much elasticity there really is in the current market, especially for triple- and quad-play packages.
The Dutch decided not to wait for action from Brussels, to the regret of Dutch EU “Digital Agenda” commissioner, Neelie Kroes, who commented that “we must act on the basis of facts, not passion; acting quickly and without reflection can be counterproductive”. But that is just it; net neutrality has long been a hot political issue and most involved in the debate are passionate about it. And the camps are polarised. On the one hand there are those that believe in the open Internet, where fundamental rights like freedom of expression are fully respected; where democracy and innovation reign; and where blocking any (lawful) information has no place. To prevent congestion, providers would simply need to keep investing in and scaling their networks. On the other hand, there are those that are trying to deal with huge increases in traffic on their networks because of bandwidth-hungry services and applications and to deal with the declines in their revenues because of VoIP, MMS and similar services. They are also trying to assert their position as more than just “dump pipes” that merely exist for OTT providers that are seen as unwilling to share the cost of network investment.
While governments and regulators remain sitting on the fence, it seems the debate on net neutrality still has a long way to go before we can expect any widespread actions.
This article was first published in the May 31, 2012 edition of Total Telecom.