Month: August 2016

Why the telcos industry is so annoyed with Berec’s Guidelines on net neutrality

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Kudos to Berec, the European agency of national regulators. Despite strong opposition and public campaign brought against by a large part of big European and US telcos, the agency resisted to pressures and substantially confirmed the well-expected Guidelines on net neutrality, a first draft of which had been already disclosed last June and was subject to very extensive public consultation. The Guidelines adopted on August 30, 2016 specify important practical details as well as the correct interpretation of the principles laid down by Regulation 2120/2015 in the matter of net neutrality. One should not forget that such regulation had been approved after long debates and fierce fight in Brussels and Strasbourg.

The most important part of the Guidelines concerns the ability of ISPs to carry out so-called zero-rating and network management practices. Remarkably, Berec has not prohibited such commercial behaviors but, instead, decided to lay down a detailed list of conditions and circumstances that national regulators should now assess in order to adopt whatever decision in this matter (whether prohibition or authorization). The most remarkable condition indicated by Berec is that both zero-rating and network management practices should not be driven by commercial considerations, in other words they should not discriminate services so as to favor the ISP’s own Internet services (or these of a commercial partner) to the detriment of competitors. Instead, such practices should be “agnostic” and applicable to a generic categories of services, not to a specific service. To make a practical example: an ISP could use such practices to favor in general music-streaming, or VOIP, or all messaging platforms, while it could not discriminate in favor of just a specific Internet provider, e.g. the sole Spotify for music streaming; the sole Skype for VOIP; the sole WhatsApp for messaging; and so on.

One would wonder why the big telco industry is so annoyed (“big” comprises mobile and fixed dominant operators, with the exclusion then of MVNOs and alternative fixed operators). In fact, Berec i) did not prohibit anything, it is just saying that national regulators will have to assess and take a decision, on the basis of the criteria indicated in the Guidelines; ii) expressed favor vis-à-vis zero-rating and network management practices, while preferring them when provided in an “agnostic” way. So, what?

To understand the irritation of the big telco industry, one should think about the following.

First, the big telcos industry has been enormously lobbying in the past in order to have free hands in the matter of net neutrality and, to tell the truth, at beginning they were succesfull because the first draft of Regulation 2120/2015 (the one proposed by Commissioner Kroes in September 2013) provided such freedom in substantial terms. Thus, big telcos hoped to use that regulation to have large discretion in discriminating Internet services and traffic so as to supersede any national legislation contravening such power (such as the net neutrality laws in the Netherlands and in Slovenia for instance). However, after fierce fight in the Parliament and Council such discretional power was strongly limited, the provisions relating to zero-rating and network management practices were drafted in a more vague form and a clear reference to non-discrimination was made.

Despite of the above, the telco industry still hoped that Berec would issue Guidelines interpreting the Regulation in a way that zero-rating and network management practices would be simply allowed, also discriminating amongst commercial services, without further assessment by anyone. To the contrary, Berec laid down just criteria and referred the competence to decide on specific cases to the national regulators, which in the future will exercise a formidable power in this matter. This scenario is indigestible to big telcos which would prefer to avoid to discuss their commercial practices with national regulators (because in that case they also have to discuss with consumers associations).

Secondly, criteria and conditions laid down by Berec will have an important impact upon the heart of big telcos’ commercial strategy. Berec indicates that “non-agnostic” zero-rating and network management practices will likely to be forbidden by national regulators. This is a disastrous news for big telcos because discriminating Internet services (in order to favor own or partnered services) is what this telco industry has in mind since all the net neutrality battle and debate started (in 2005 in the EU).

Fact is,  since margins of connectivity have been declining in the years because of technology and competition developments (especially with regard to the mobile sector), big telcos have been thinking to recover money by bundling connectivity with services by way of discriminatory practices, so as to receive additional fees at least from content and services providers (accused to use their networks for free: but this is another story). This claim has been normally presented as “innovation”, however it is difficult to understand how zero-rating or network management practices favoring a specific Internet service, to the detriment of others, could be seen as “innovative”. In other words, there is nothing of innovative in giving access to Spotify, WhatsApp or Facebook for free (i.e., discounting their traffic from data caps) or in clean uncongested way (which should be normal, by the way). Innovation means providing new services, rather than providing the same services in a more complex, expensive and byzantine way.

Luckily, Berec has rightly understood the issue. Kudos.