The new US order about net neutrality and Internet, and the impact upon Europe

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The FCC, the US regulator for telecoms and Internet, will soon adopt a fundamental decision in the matter of telecom and Internet regulation: as anticipated by various sources, US broadband access will be soon classified as a telecommunication service (while it is currently classified as an information service)  with a twofold consequence:

– FCC will be empowered to impose net neutrality rules to US broadband ISP, and intends to do so: fact is, FCC intends to prohibit blocking, throttling and paid prioritization of online services;

– FCC will be empowered to impose access remedies to broadband ISP such as pricing control, ULL and bitstream, in other words to open their network to alternative operators like it happens now in Europe (NB: chairman Wheeler has specified that this power will no be enforced for the time being).

It is clear that the FCC is playing with the American ISPs the stick and carrot game, where the stick consists in the new NN regulation, while the carrot is the guarantee not to apply access regulation to broadband access. US IPS are scared about the possibility to apply access regulation to their networks and have loudly claimed that they could stop fibers investments if FCC does so.

While the FCC decision is destined to provoke an intense debate in the US, it is interesting to see whether it could influence similar debates in the EU, or vice versa.

Net neutrality

The EU is getting closer and closer to define a NN regulation. The Council is currently discussing a text which, after long months of debates, should be finalized by February 2015 so as to be submitted to the European Parliament and European Commission for the final negotiation and approval. In a previous post I remarked that the Council draft was too much telco-oriented and would have probably faced opposition or reserves by the European Parliament as well as by some directorates of the European Commission. Whatever the Council will finally agree, it is certain that the new US position will affect the balance of the European negotiations. The European Parliament will surely attack the paid prioritization proposed by the Council, on the basis that this practice is destined to be prohibited in US. Whatever the compromise will be, the Council will have to offer in return a more robust guarantee for best effort Internet. The Parliament will also feel stronger in advocating some symbolic amendments, such as an explicit reference to net neutrality and openness of the Internet. To sum up, the new FCC position on NN will surely help the European Parliament to defend its citizens-friendly approach.

Access regulation and competition

As stated above, the new classification of broadband in the US would theoretically permit an application of economic regulation to American ISPs, such as pricing control, ULL access and so on, although this possibility has been loudly excluded for the time being. It is therefore uncertain how this approach could impact on European policy, where access regulation is imposed in practice and not only in theory. The European Commission will start to revise the European framework in 2016 and there are strong pressures by historical incumbents (such as Orange, Telefonica and Deutsche Telekom) to lift regulation in order to boost investments (although the link between regulation and investments is controversial and challenged by many). In this respect, a paramount role will be played by the comparison of European and US data/figures relating to BB performances such as investments, speed, coverage, price, quality, consumer satisfaction and so on. In the past big US telcos such as Verizon and AT&T have loudly claimed that the US broadband market should be more successful than the Europea one, at least in terms of profits and network/fibers investments. Nevertheless, more recent data have radically challenged this assumption: various voices has shown that US consumers pay BB more expensive than in the EU, and the quality is not better. Also the debate about network investments has become more controversial, since it has been shown that with the Bush’s deregulation in the 2000 the percentage of revenue dedicated by US ISPs to investments has decreased. Only the profitability data resist for the time being: US ISP make more profit than European ones.

In light of the above, if the comparison of US/EU data will show that EU is performing better than US, despite the burden of internal fragmentation, it is possible that the EU access regulation approach will be endorsed by the US authorities, rather than vice-versa.

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