Home > Media and Analysts > Speeches and Presentations > 2007 > Mar > Regulating the Internet

21|03|07

Regulating the Internet: Speech at Westminster eForum

WHERE THIS DEBATE HAS COME FROM

Westminster eForum

20 March 2007

Sometimes hear that this is an American debate which isn’t really relevant over here.

We don’t think that. Can see why if you think of the underlying trends that are behind this issue. Three main ones:

• Rapidly increasing traffic on the internet . For example, three years ago a graphics-heavy website would have been heavy usage. Now, heavy usage is a high definition film. This rapid increase in traffic is generating substantial congestion in some parts of the internet.
• Change in the nature of applications on the internet . People are increasingly using the internet for time-sensitive applications, such as VoIP or streaming video.
• Increased intelligence in network routers . Early internet routers were kept simple in order to cope with large volumes of traffic. But today’s routers are capable of identifying packets associated with different applications, and prioritising them accordingly.

All of these trends create a desire, and deliver an ability, to change the internet from a network that delivers all traffic on a best-efforts basis, to one that prioritises traffic according to particular criteria. We believe that they are all trends that are likely to continue, and in fact accelerate.

Means that what’s at stake are some very fundamental issues around:

• what kind of a network the internet is
• the future of commercial relationships on the internet. Who pays whom, who owns the customer relationship, do network owners have the right incentives to build networks that application providers want to use? The net neutrality issue is at the heart of all of these.

DIFFERENT FLAVOURS OF NET NEUTRALITY

• This debate is much more subtle than the often-polarised views would make out. To understand those subtleties need to understand that net neutrality is a continuum.
• Start with the most extreme version of net neutrality. That says that all bits are equal: there’s no discrimination on the basis of any type of application or anything else.
• Let’s be clear: that’s not really a mainstream view in Europe (although I believe it is in the states). Good thing, because not a very smart idea. Useful to understand why not:

• real advantages to consumers of treating different types of application differently. Some applications much more sensitive to jitter or delay than others. Something like VoIP, or video conferencing – really sensitive. Something like a software download – doesn’t really matter.
• in fact the next wave of innovation in internet networks could be around this kind of prioritization. Could offer internet access packages to consumers that were tailored for gaming, for example, or for peer-to-peer traffic.

• The contentious issue in Europe is this: should a network operator, or ISP , be allowed to prioritise traffic on the basis of particular applications ­– for example not video, but YouTube video. And should they be able to charge the application provider for doing this?
• In a way more contentious is the converse of this: should a network operator, or ISP , be allowed to degrade – or even block – traffic on the basis of a particular application­ or application provider – like Skype or Yahoo?

WHEN WOULD REGULATION BE APPROPRIATE?

So where does this leave regulators?

In Europe , two points (and by the way, this is where the situation is a bit different to the US ):

• partly as a result of regulation, we have a situation where we can rely on competition to make this less of an issue; and
• we think that the European framework allows us to deal with any particular problems should they arise

Why does it help the issue if you have a competitive market between ISPs?

• say an ISP went to MySpace and offered them a guaranteed quality of service, in exchange for a fee. Is there any constraint on what that fee was, or could they charge what they like?
• MySpace could always say no if the price was too high, situation would remain as it was
• but it’s in ISP ’s interests for MySpace to say yes – because better service for its customers

• or, say an ISP blocked, or severely degraded VoIP traffic on its network so that you couldn’t use that application. Makes the ISP a less attractive proposition to consumers, because you can’t use VoIP. So if consumers know that, and so long as they can switch easily, competition limits ISPs’ ability to do that. Want to come back to that issue of interventions and switching.

Second point is that we think the European Regulatory Framework allows us to deal with any particular problems that do arise. European Framework, which is transposed into our Communications Act, has a concept called Significant Market Power, which is close to concept of dominance, and which is the trigger for ex ante remedies.

• If a network operator with SMP was charging for prioritisation, or blocking or degrading traffic, in ways which we considered anti-competitive, the current European Framework gives us the tools to put in place the necessary remedies.
• If a network operator without SMP was charging for prioritisation, or blocking or degrading traffic, then because of the operator’s lack of SMP , this activity would be unlikely to be anti-competitive, and not therefore need to be regulated.
• Question is: what if a network operator without SMP was degrading or blocking traffic in some way that caused concern? Could argue that if didn’t have SMP , couldn’t be abusing their market power, so wouldn’t be a problem. But in fact two other powers that might be brought to bear:
• we could apply Article 5.1 of the Access and Interconnection Directive, which allows us to impose ex ante obligations on operators to ensure end-to-end connectivity
• we could use our powers derived from the European Framework which enable us to require suppliers (even non SMP suppliers) to comply with various general conditions in order to take part in the market to address particular issues, for example, in relation to information transparency.

So at this stage we consider that the European Framework gives us the powers that we need to address these issues, but we will continue to keep our position under review.

CONSUMER INFORMATION AND MIGRATIONS

• There are two areas that we remain concerned about in relation to net neutrality: transparency of consumer information , and service migrations. We think these are increasingly important.
• Arguments I set out above only work if consumers know what they’re getting.
• if they want to use VoIP, or peer-to-peer traffic like Bit Torrent, they need to know which ISPs don’t degrade that kind of traffic

• Provision of this kind of consumer information in a way that consumers can understand is likely to be a particular challenge. To some extent, internet users have shown themselves to be capable of detecting technical restrictions introduced by ISPs and using collective power to lobby for removal of restrictions they do not want.
• But for the mass market, broadband is a complex enough consumer proposition without having to consider the extent to which certain application providers are prioritised or de-prioritised by ISPs.
• We think it is a supplier’s responsibility to ensure that information about these kinds of considerations is communicated to consumers, and done so in a way that is understandable. We’re encouraged that ISPA has published a best common practice document for their members, encouraging them to provide clear information about internet filtering practices.
• But if there was evidence that the market wasn’t doing that adequately, we might need to revisit this issue. And the powers that I have already mentioned under the general conditions could be used to require suppliers – even non SMP suppliers – to address, for example, the information that providers supply consumers about their products.

If customers don’t like what they’re getting, they need to be able to switch suppliers.

• Ofcom has been particularly focused recently on broadband migrations. For example, we have introduced new rules about broadband switching to require all providers to comply with a migration authorization code.
• We’re now exploring what happens if an ISP changes its traffic shaping policies materially. We think, if they do, they should tell consumers about it, and if the change is big, that implies that consumers to leave contracts that lock them in. We’re exploring with the industry how we can make that best practice across all suppliers.

CONCLUSION

• While the debate is important and is likely to continue for the reasons that I’ve outlined, we believe that the existing market structure in Europe, combined with powers to address net neutrality concerns under the existing European Framework, will be sufficient to address issues that arise in relation to net neutrality now and in the future.
• We will continue to monitor closely developments in this area and will be particularly concerned to ensure that consumer information transparency exists, and service migrations are simple, easy and effective for consumers.

Dougal Scott
Director of Policy Development, Ofcom

Back to top