In the rapidly developing arena of internet regulation, law-makers and industry leaders the world over are grappling with the issue of “net neutrality” whether internet service providers (ISPs) should be permitted (or, indeed, required) to manage internet traffic according to its type and size, or whether all networks should be “neutral”.  While some governments, such as the Dutch and Chilean governments, have passed regulations that mandate net neutrality, other countries believe that heavy-handed regulation will stifle innovation and growth. This article examines some of the arguments from both sides and looks at the status of this issue in the UK – in particular whether the UK is likely to legislate on this issue or not.

What are the arguments?

The “pro-neutrality” side of the debate believes that all internet traffic, from bandwidth-heavy high-definition videos to basic emails, should be treated equally by ISPs and permitted to travel across the internet at equal speed. The primary concern is that any attempt to disrupt the free flow of traffic (by authorising ISPs to block or otherwise manage content) would harm what they see as the primary characteristics of the internet. This could ultimately lead to “big-brother” censorship, where ISPs prioritise content from heavyweight service providers offering video on demand services, such as Sky Anytime, or online gaming, such as Nintendo or Sony, who may have the resources, and be prepared, to pay ISPs for special treatment.

The alternative view is that the internet services to which consumers have grown accustomed can only continue to be delivered with effective “traffic management” that necessarily favours some content over others. It is claimed that the extra bandwidth consumed by increasingly sophisticated services (for example, online multiplayer gaming and voice-over-internet services), has congested networks and intensified the strain on the internet’s infrastructure, resulting in lower transmission speeds for all. Proponents of this view, generally the ISPs themselves, argue that the prohibition on differentiating between types of network traffic will make it harder for them to cater to what they perceive as a genuine consumer need for such services, for instance, for uninterrupted, high-definition video and music streaming and effective security measures (such as parental controls). 

International policy developments

Last month, the Netherlands became the first EU member state to introduce laws to protect the neutrality of its networks (following Chile’s introduction of similar measures in May).  In the United States, the Federal Communications Commission (FCC) will shortly publish net neutrality rules in the Federal Register, which are likely to take effect in the autumn. The FCC’s view is that while, in the past, “broadband providers endanger the Internet’s openness by blocking or degrading content and applications without disclosing their practices to end users”, basic standards for conduct by ISPs are necessary to ensure the internet’s continued openness.

The Council of Europe agrees, and has drafted a set of Internet Governance Principles stating that “openness, interoperability and end-to-end nature [of the internet] should be preserved [and] should guide all stakeholders in their decisions related to internet governance”. The Council is firmly of the view that “any traffic management measure or privilege should be non-discriminatory, justified by overriding public interest, and must meet the requirements of international law on the protection of freedom of expression and access to information”.

In the UK, the Communications Minister, Ed Vaizey, has stated his preference for industry to lead the way in developing the UK’s policy on net neutrality, and for a light-touch approach to regulation. Speaking at the Intellect 2011 Consumer Electronics Conference this month, he argued that any regulatory framework implemented “must be dynamic and flexible enough to keep up with the pace of change we are seeing in these markets”.

In order to determine what such a regulatory framework may look like, the UK communications regulator, Ofcom, launched a public consultation on traffic management and net neutrality last summer, which led to spirited responses from industry leaders and interest groups alike on both sides of the discussion. Further details on the consultation may be found here.

Consumer Interests

The main themes to emerge from Ofcom’s consultation were the need to (i) protect consumers and (ii) promote and maintain effective competition in the market for broadband service providers.

Consumers are best served by transparency and the appropriate disclosure of information relating to the services provided. Consumers must have sufficient, comparable information to make informed choices when selecting an ISP and to vote with their feet if they wish to change ISPs (e.g. if their current ISP interferes with or downgrades their broadband service to an unacceptable degree). Where ISPs are not willing to disclose information about the performance of their services to their users, some content providers (especially those that may be disadvantaged if forced to pay a premium for network priority) have indicated that they will. For instance, in November the BBC suggested adding software to the BBC iPlayer to indicate to users whether the user’s ISP had degraded their service leading to poor-quality video streaming, the idea being to pressurise ISPs into foregoing the prioritisation of traffic.  

The presence of a number of suppliers in the market does not necessarily guarantee effective competition at the consumer’s level. The US broadband market, for example, is effectively a relatively uncompetitive oligopoly and in those circumstances it is easier to justify regulation to protect consumers, since there is very little that consumers can do to either drive down prices or raise the quality of services offered to them. While consumers have greater choice of suppliers in the UK, a lack of information may make it challenging for consumers to distinguish between the services offered by different ISPs and to switch ISPs if they are not satisfied with the level of service – thereby reducing the beneficial effects of having, technically, a price-competitive market.

However, in its response to the consultation, the Communications Consumer Panel, an independent advisory body established under the Communications Act 2003, pointed out that very little research is available (from the UK or elsewhere) that analyses consumers’  decision-making about broadband services or the extent to which consumers understand the information provided to them by the relevant ISPs about such services. In order to identify what the regulatory framework hopes to achieve, it will first be necessary to identify, by undertaking research into consumers’ understanding of traffic management and their behaviour surrounding the selection of broadband services, the issues that need to be addressed by it.

UK: is regulation on the way?

The prevailing mood in the UK seems to be in favour of light-touch or self regulation, where ISPs govern themselves, to ensure the fair application of net neutrality principles as a pragmatic alternative to introducing proscriptive regulations that the industry is likely to rapidly outgrow.

There is a clear commercial incentive for ISPs to prioritise certain content in exchange for fees from the provider in question. If voluntary codes and competitive forces are not sufficient to check practices such as prioritising content transmission from certain sources, regulation may be the only answer.