Month: January 2015

The European reform of net neutrality: time for bazaar negotiations

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The European Union is getting closer to a common position for a European regulation on net neutrality. The Latvian presidency, who started to lead the Council in January 2015, circulated a draft proposal* which received a substantial support by other governments – although a final agreements still need to be reached – and it is now under discussion article by article.

It is premature to say whether this proposal will result in a final framework for net neutrality in Europe. In fact, a few fundamental areas of disagreement persists within the Member States, while the European Parliament it expected to object the current draft, which looks very different from the text deliberated by the same Parliament in April 2014. My impression is that the Council is voluntarily preparing an unbalanced proposal in order to have more margins of maneuver while negotiating with the European Parliament. Exactly for the same reasons why the Member States are proposing to end roaming in 2018 instead of 2015, contrary to what advocated by the European Parliament. This is what we call “Bazaar negotiations“.

The pending disagreement within the Member State: Zero Rating

The main problem is how to address the so-called “positive discrimination”, also named as “Zero Rating” models. This is the model whereby, in data caps subscriptions (i.e. when the ISP limits the quantitative usage by subscribers), the traffic of some privileged services is discounted by the customer’s allowance. Users my be induced to use such privileged services for the sample reasons that their traffic data allowance will not be affected, irrespective of the value/quality of the alternatives. Clearly, this is a way permitting an ISP to favor some services (which in return are paying the ISP) while discriminating others. The impact of this practice on the market will probably depends on the level of the allowance, the price structure of the offers and mainly with respect to traffic-consuming services such (as streaming). The worst scenario (if any) would consist in a 2-tier Internet environment: by using the positive discrimination, dominant ISP could create a basket of premium services which subscribers will normally use, unless they prefer to use alternative services whose traffic, however, must be counted in the normal allowance.

European citizens are not familiar with such practices, because data caps offers are still rare and mostly confined in the mobile sector. Facebook tried to launch this system in African countries in order to facilitate the rise of Internet services (and trying to become the dominant platform for that). However, European dominant ISP are seriously testing this option, which seems for them less problematic than the specialized/managed service option. An example is the Zero-Sporify of T-Mobile. To time, we know that Zero-Rating is prohibited and the Netherlands and Slovenia, the only European countries where a national net neutrality legislation is in force. Accidentally, both in the Netherlands and Slovenia local ISPs have been fined by the national authorities for practices infringing net neutrality also in connection with Zero-Rating tariffs schemes.

Thus, how to address Zero-Rating is still an area of disagreement amongst Member States: there is no majority in the Council to insert an ad hoc provision, or even a prohibition, however there is a blocking minority able to influence the final outcome of the reform.

The potential disagreement with the European Parliament

Should the Council find an agreement, one would wonder whether the expected draft may be ever agreed with the European Parliament. The latter made a position in April which was very strict with regard to the treatment of specialized/managed services, since it laid down a clear (and even very detailed) definition, while requiring that connectivity dedicated to such services to be clearly distinct from that used for the open Internet (best effort). By contrast, the Latvian Presidency leaves ISPs free to do whatever they want, upon the sole condition that the basic Internet access “is not impaired”. This guarantee seems to many authors, and especially libertarians, too weak.

The reference to the term “net neutrality” was also deleted from the text, despite the wishes of the European Parliament – a decision which is not terrible per se (since the content of the “net neutrality” term still needs to be defined”) but having however a strong symbolic impact. It is worth-noting that already in last November an important number of MEPs, lead by Dutch liberal MEP Schaake, wrote a letter/manifesto complaining with the relaxation of NN rules by the Council (in that case, the author of the crime was the Italian presidency). a

The Latvian Presidency also re-introduced the unlimited freedom for ISPs to impose data-caps offers to consumers and therefore allowing the former to develop Zero-Rating offers. Therefore, unless the Council finds a way how to treat with this problem, the European Parliament is expected to challenge that part of the proposed reform.

What next?

The Latvian Presidency seems confident to find an agreement within the Council by February, so as to start Trilogue negotiations quite soon. In order to be able to strongly negotiate with the European Parliament, they will need the European Commission to back the Council’s position. Would Kroes be still there, this wouldn’t be a problem (the Dutch Commissioner was eager to close the package at all costs). However, with the current institutional system the situation becomes more complicated: while Commissioner Oettinger, responsabile for DG Connect and relatively closer to big telecoms, is expected to support the Latvian proposal, a more complex position may come from Ansip, the Vice-president responsabile for the Digital Single Market. Ansip has publicly spoken in favor of the open Internet and he will like back the concerns risen by citizens and libertarian associations.