Legal Briefing

Throttling net neutrality?

The In-House Lawyer Logo

TMT | 04 July 2011

Streaming video recently overtook peer-to-peer networks to become the largest single category of internet traffic, according to Cisco’s Visual Networking Index.1 This is a key reason why global internet traffic has increased eightfold over the past five years.2 With expected further dramatic increases in data traffic (Cisco estimates that internet traffic will increase fourfold over the next five years3) due to the growth of internet protocol television and 4G mobile services and the emergence of traffic management technologies such as ‘deep packet inspection’, which has increased the ability of network operators to prioritise certain types of traffic, the debate concerning net neutrality is becoming even more prominent.

Net neutrality is a term used to refer to the treatment by internet service providers (ISPs) of different forms of data being transmitted via the ‘pipes’ that make up their networks. The net neutrality debate is often polarised between:

  • those who believe that internet applications, content, content providers and users should be treated equally by ISPs with no discrimination against any application or content through prioritisation of traffic or by blocking particular traffic – in the words of Barack Obama – ‘we can’t have a situation in which the corporate duopoly [of cable and telephone companies] dictates the future of the internet and that’s why I’m supporting what is called net neutrality’;4 and
  • those who believe that network operators must reasonably be able to control access and use of the pipes over which data is transmitted potentially using different pricing structures for different types of users/data.

The announcement of the forthcoming BT Content Connect service earlier this year, which will be a content distribution network enabling video traffic to be stored closer to the user, thereby reducing congestion on the network and allowing for faster download speeds, shows that network providers are already implementing tiered service provision offerings. BT intends to offer the Content Connect service in basic, standard, premium and custom-tiered packages.

UK VIEW ON NET NEUTRALITY

On 24 June 2010, Ofcom issued a consultation on net neutrality and traffic management, which closed for responses on 9 September 2010.5 Ofcom’s preliminary view, as set out in the consultation, was that:

  • there is currently insufficient evidence to justify regulation to prohibit certain forms of traffic management;
  • more needs to be done regarding consumer transparency around traffic management; and
  • charging both consumers and content providers for guaranteed quality of service might potentially benefit consumers.

The responses to the consultation divided opinion between ISPs, who wanted a tiered internet on a commercial basis, and broadcasters, encouraging Ofcom to take a more hardline approach to ISPs throttling internet traffic and rejecting any division of internet traffic on a commercial basis. Ofcom has been keen to monitor developments and keep the position under review based on its view that, if a situation arose where it needed to take action, it could do so under existing rules. Ofcom has emphasised the importance of competition between ISPs to ensure that issues around net neutrality do not arise. This is because if an ISP blocks a certain kind of traffic on its network it is believed by Ofcom that a UK consumer can switch ISP relatively easily given the number, and overlap of coverage, of ISPs in the UK. However, arguably the bundling of broadband with telephone, mobile or TV increases the consumer’s difficulty in switching ISPs and reduces the scope of competition in the broadband sector.

In March 2011 the Broadband Stakeholder’s Group6 published a voluntary industry code of practice on traffic-management transparency for broadband services7 and BSkyB, BT, O2, TalkTalk, Three, Virgin Media and Vodafone have signed up to the code.

The code commits signatories to:

  • provide further information to consumers about what traffic management takes place, for what purpose and with what impact;
  • comply with a set of good practice principles on providing information to consumers that is ‘understandable, appropriate, accessible, current, comparable and verifiable’;
  • publish a common key facts indicator (KFI) table, summarising the traffic management practices for each broadband product, to be available on ISPs’ websites by the end of June 2011; and
  • allow comparison websites to compile traffic management practices across a range of broadband products.

The publication of the traffic management transparency code by the ISPs suggests that they wish to stave off any further legislation in this area through self-regulation using such a code or at least become compliant with such legislation in advance. The code will be piloted in 2011 and its implementation will be reviewed in early 2012.

Ofcom’s more relaxed approach to regulating the internet in the UK is in contrast to the actions of the EU legislative bodies who are keen to impose some uniform minimum requirements for the regulation of the internet across member states.

EUROPEAN VIEW ON NET NEUTRALITY

The revised Framework Directive8 amended in November 20099 introduced new rules enabling national regulatory authorities (NRAs), such as Ofcom, to set minimum quality levels for network transmission services to limit discrimination by ISPs between the types and sources of data travelling across their networks (all such regulations to be transposed into UK law by May 2011):

  • Article 8(4)(g) of the revised Framework Directive requires NRAs to promote the interests of the citizens of the EU by promoting the ability of end users to access and distribute information or run applications of their choice.
  • Articles 20 and 21 of the revised Universal Service Directive contain measures in relation to the transparency of information provided by service providers.10 In particular, contracts with consumers must provide information on any conditions limiting access to or use of services and applications. Service providers must also provide information on minimum service quality levels and on traffic management measures.
  • Article 22(3) of the Universal Service Directive provides that member states must ensure that NRAs are able to set minimum quality of service requirements on service providers.

On 9 November 2010, the European Commission published a report on its consultation concerning net neutrality showing that:

  • the EU Telecoms Reform package11 is thought to be sufficient to provide the necessary legislative tools to deal with net neutrality issues, although the effectiveness of such rules should be assessed when the reforms have been implemented at a national level, which must take place by May 2011;
  • there was a consistent view that traffic management is fundamental to operate a secure and efficient network, although some respondents were unsure as to whether traffic management could be abused to favour one service over another and what the privacy risks were in relation to the use of ‘deep packet-inspection’;
  • the Body of European Regulators for Electronic Communications (BEREC), created by the EU Telecoms Reform package in 2010 and replacing the European Regulators Group for electronic communications networks and services, suggested that the use of traffic management may lead to anti-competitive effects, reduced innovation and freedom of expression over the internet and uncertainties for consumers due to lack of transparency between service providers; and
  • some content providers are concerned that changes to pricing mechanisms (eg payments for content delivery only) might amount to a tax on content innovation.

The Commission recently published a communication on the open internet and net neutrality concluding that it is committed to maintain an open internet and ensuring the ‘maintenance of a robust best-efforts internet to which everyone has access’.12 The Commission believes that the introduction of the EU Telecoms Reform package is likely to provide a competitive landscape that will uphold principles of net neutrality. However, as member states are still implementing such legislation it remains to be seen how effective those measures will be in practice.

The Commission and BEREC will continue to review several issues (such as barriers to blocking, throttling, traffic management, transparency and quality of service) that arose during the consultation and the Commission reserves its right to assess any behaviour related to traffic management that may restrict or distort competition under EU competition law. The evidence resulting from BEREC’s investigations will be published later in 2011 and will include any instances of blocking or throttling certain types of traffic. If ‘significant and persistent’ problems are discovered, the Commission will assess the need for more stringent measures, in the form of guidance or legislation, to achieve competition and consumer choice. Such measures may involve facilitating consumer switching, imposing specific obligations regarding unjustified traffic differentiation applicable to all ISPs irrespective of market power, or prohibiting the blocking of lawful services.

US VIEW ON NET NEUTRALITY

Traditionally the US debate on net neutrality has had a higher profile than in the EU or UK due, in part, to the US having only a few large ISPs, which inhibits the customer’s ability to change ISP if they don’t like the price of the services or the traffic management policy of the provider.

Google and Verizon have joined forces to present their vision of an ‘open internet’, intended as a framework for future regulation of US internet services.13 This ‘vision’ listed a set of seven proposals that guarantee equal access to the internet and prohibit wired broadband providers from discriminating between different kinds of internet traffic to ensure that no one can pay to have their traffic treated more favourably.14 However, they do suggest that there might be loopholes for mobile traffic and for some specialised content allowing internet providers to give priority to certain online traffic.15 The two firms also propose enforceable transparency rules and the power for the Federal Communications Commission (FCC) to impose ‘a penalty of up to $2m on bad actors’, ie those who commit net neutrality transgressions.

In December 2010 the FCC agreed to adopt the following rules relating to net neutrality (although the decision to do so was split along party lines with the Democrats voting for and the Republicans voting against these rules) through the Open Internet Order:16

  1. fixed and mobile broadband providers must disclose their network management practices, performance characteristics, and terms and conditions of their broadband services;
  2. fixed broadband providers may not block lawful content, applications, services or non-harmful devices; mobile broadband providers may not block lawful websites or block applications that compete with their voice or video telephony services; and
  3. fixed (and not mobile) broadband providers may not unreasonably discriminate in transmitting lawful network traffic.

The FCC have found that some broadband providers are reluctant to provide disclosure of network management practices, which may delay the coming into force of the Open Internet Order. Certain smaller broadband providers are challenging whether the disclosures rules set out in the Open Internet Order are compliant with US federal law and claim that they impose a disproportionate burden on those smaller providers.

Republicans remain unconvinced that such regulations are necessary and claim that they would reduce innovation and job creation. As a result Republicans are attempting to use legislation in the House of Representatives (H.J. Res. 37) to ensure that the FCC Open Internet Order is overturned, although President Obama will have the power of veto over any such decision, meaning that such attempt by Republicans is unlikely to succeed.17

In addition, Verizon (despite their vision for an ‘open internet’ referred to above) and MetroPCS challenged the FCC Open Internet Order, on the grounds that the FCC has exceeded its authority, in the federal appeals court of the District of Columbia. This was the same court in which Comcast successfully challenged the FCC’s jurisdiction when Comcast admitted to slowing down and/or blocking traffic to and from BitTorrent (a peer-to-peer protocol).18 The court dismissed the lawsuit as it was filed prematurely due to the Open Internet Order not being posted in the Federal Register and therefore those rules were not deemed to be in effect.19 However, the likelihood is that Verizon will challenge the Open Internet Order in the US courts when they are effective.

CONCLUSION

The gap between the philosophical issue of equality for all, as against the commercial costs to the networks and telecoms companies in providing that equality and so controlling the scope of the service offerings, makes this an issue that will not be quickly resolved. It doesn’t seem likely that the onset of increased broadband speeds in the UK will negate the net neutrality debate in the near term.

To date, the regulators in the US and Europe are keen to protect the rights of the individuals regardless of the commercial pressures of some of the largest businesses in the world. The FCC in the US is taking the lead by implementing specific rules to ensure net neutrality, whereas it remains to be seen whether the EU Telecoms Reform package will uphold net neutrality principles and ISPs in the UK are attempting to self-regulate to attempt to control the standards by which their traffic management policies are to be judged.

Ofcom seems to be keen to continue its light touch regulation in the UK with respect to net neutrality issues taking the view that the market for ISPs will provide enough choice for consumers, and therefore competition between ISPs, which ensure that consumers are not disadvantaged by a tiered internet.

By Ivor Drake, solicitor, Kemp Little LLP.

E-mail: ivor.drake@kemplittle.com.

Notes

  1. See http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-481360.pdf.
  2. See http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-481360.pdf.
  3. See http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-481360.pdf.
  4. Barack Obama podcast on ‘Network Neutrality’ first broadcast on 8 June 2006 – http://obamaspeeches.com/076-Network-Neutrality-Obama-Podcast.htm.
  5. See http://consumers.ofcom.org.uk/2010/06/ofcom-opens-debate-on-net-neutrality.
  6. See http://www.broadbanduk.org.
  7. See http://www.broadbanduk.org
  8. Directive 2002/21/EC ‘on a common regulatory framework for electronic communications networks and services (Framework Directive)’.
  9. Directive 2009/140/EC ‘amending Directives 2002/21/EC on a common regulatory framework for electronic communications networks and services, 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities, and 2002/20/EC on the authorisation of electronic communications networks and services’.
  10. Directive 2002/22/EC ‘on universal service and users’ rights relating to electronic communications networks and services (Universal Service Directive)’ as amended by Directive 2009/136/EC
  11. The EU Telecoms reform package consists of: (1) Regulation (EC) No 1211/2009 of the European Parliament and of the Council of 25 November 2009 establishing the Body of European Regulators for Electronic Communications (BEREC) and the Office; (2) Directive 2009/136/EC of the European Parliament and of the Council of 25 November 2009 amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services, Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws; and (3) Directive 2009/140/EC (referred to in note 6).
  12. See http://ec.europa.eu/information_society/policy/ecomm/doc/library/communications_reports/netneutrality/comm-19042011.pdf.
  13. See http://www.bbc.co.uk/news/technology-10920871.
  14. See http://googlepublicpolicy.blogspot.com/2009/10/finding-common-ground-on-open-internet.html.
  15. ‘Verizon-Google Legislative Framework Proposal’ – http://docs.google.com/viewer?url=http%3A%2F%2Fwww.google.com%2Fgoogleblogs%2Fpdfs%2Fverizon_google_legislative_framework_proposal_081010.pdf.
  16. See http://www.fcc.gov/Daily_Releases/Daily_Business/2010/db1223/FCC-10-201A1.pdf.
  17. See http://www.gpo.gov/fdsys/pkg/BILLS-112hjres37rh/pdf/BILLS-112hjres37rh.pdf.
  18. See http://www.washingtonpost.com/wp-dyn/content/article/2010/04/06/AR2010040600742.html.
  19. See http://www.broadbandexpert.com