Net Neutrality: Developments And Challenges In The EU And US

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Arab regional Forum on"Future Networks: Regulatory and Policy Aspectsin Converged Networks”(Rabat, Morocco, 19-20 May 2015)Net Neutrality:developments and challenges in theEU and USInês NolascoITU Expert & Senior Regulatory Affairs Manager at ECTA*The views expressed in this presentation are purely personal

Outline Introduction & conceptual framework* Recent developments in the EU Recent developments in the US The key role of broadband competition Concluding remarks* Based on J. Scott Marcus, ‘Net Neutrality Revisited: Challenges and Responses in the EU andin the US’, Study for the IMCO Committee, December 2014

What is Net Neutrality?Several definitions in use with different focus and policy implications: What users of a network must be allowed to do versus what providersmust refrain from doingLimit quality differentiation in general versus prevent harmful or anticompetitive discrimination (Is quality differentiation concerning per seor only forms of differentiation which are anticompetitive orunreasonable? When is it acceptable/reasonable?)The ability of all Internet end-users ‘ to access and distribute information orrun applications and services of their choice.’ (Art. 8 EU Framework Directive)Traffic ‘ should be treated equally, without discrimination, restriction orinterference, independent of the sender, receiver, type, content, device, serviceor application.’ (EC TSM draft Regulation)

Why does Net Neutrality iourFreedom ofExpressionNetNeutralityPrivacy &DataProtectionConsumerProtection and linkages e.g. to Internet Governance, Broadband Policy.

What is QoS in an IP based packet network? Quality of Service (QoS) parameters in IP-based packet networks:bandwidth, propagation delay, average and variance of queuing delay,packet loss. Some applications are more heavily dependent on QoS than others: email (tolerant of high delay) VoIP & video-conferencing (very sensitive to delay) Video (depends on user expectations) The Quality of Experience (QoE) for the user depends on the applicationbeing used i.e. how sensitive it is to delay or loss. QoS dependent applications are not necessarily high bandwidth services(e.g. VoIP versus IP video)

Is quality differentiation/prioritisation harmfulper se? QoS characteristics can be tailored to achieve QoE requirements of a specificservice through quality differentiation (e.g. prioritisation within the network) What is prioritisation? High priority IP packets are moved to the head of the transmissionqueue within a router, or Delay-sensitive packets are not dropped if router has insufficientstorage to buffer all packets waiting for transmission Differentiated QoS was always considered in the design of the internet.Prioritisation not harmful per se, can benefit network operators, contentproviders and also consumers (manage congestion; enhanced QoS forapplications that need it; mission critical applications). Important is to avoidharmful discrimination.

Exemplifying harmful discrimination/economic adbandISP

Net Neutrality & different dimensions ofconflictsSource: Scott Marcus, Study for the IMCO Committee, 2014

Diagonal conflictversusPerformance of Netflix traffic to customer over the Comcast network (July 2013-May 2014)Source: Netflix USA ISP Speed Index Results GraphDispute: Payments for video streaming, limitation to interconnection capacity (Cogent) slowing down trafficto Netflix customers. Agreement payments to Comcast (Feb. 2014). Performance customers increasedsharply. Payment not for QoS but interconnection. Peering dispute? Eco foreclosure? Merger Comcast/TimeWarner?

Developments at EU level

Legal framework EU Regulatory Framework (2002) – obligations imposed ex ante onoperators with significant market power in relevant markets.; aims to ensureinter alia that retail broadband markets are competitive. 2009 review of the Regulatory Framework - changes introduced whichrelate to Net Neutrality: The ability of end users to access content, applications and services of theirchoice made an explicit goal of EU policy (Art. 8 FD) Providers of electronic communications services must inform their end-users ofpractices regarding traffic management and the right to switch in case practicesare changed (Art. 20 USD) EU Regulators may impose minimum QoS obligations on network operators (Art.22 (3) USD) Regulators empowered to deal with interconnection issues (even in absence ofSMP – Art. 5 AD)

Experience to date and recent developments Cases of blocking notably by mobile operators (e.g. VoIP, P2P traffic – foranticompetitive considerations?). Traffic management used. Board of EU Regulatorshas considered that regulators have sufficient tools to tackle Net Neutrality issuesthat might arise. Some Member States have enacted Net Neutrality legislation (e.g. The Netherlandsand Slovenia). In January 2015 both the Dutch and Slovenian Regulators foundbreaches of Net Neutrality (ACM fined KPN and Vodafone over blocking and zerorating; AKOS found breaches by Telekom Slovenije and Si.mobil over zero-rating). EU Commission proposal for Telecoms Single Market Regulation (2013) Inclusion of Net Neutrality in order to address the concern of a possibleproliferation of potentially incompatible and inconsistent regulation Free access to content; no blocking, throttling, or discriminating; possibility tooffer specialised services; reasonable traffic management allowed. Negotiations on-going between the co-legislators (Council of the EU and EUParliament)

Developments in the US

FCC Open Internet Rules & Order (February 2015) Reclassification of internet access as atelecommunications service No Blocking: broadband providers may notblock access to legal content, applications,services, or non-harmful devices. No Throttling: broadband providers may notimpair or degrade lawful Internet traffic on thebasis of content, applications, services, or nonharmful devices. Next steps?No Paid Prioritization: broadband providersmay not favour some lawful Internet traffic overother lawful traffic in exchange forconsideration of any kind—in other words, no"fast lanes." This rule also bans ISPs fromprioritizing content and services of theiraffiliates. Transparency, Jurisdiction over Interconnection

Why does broadband competition matter?

US: Deregulation led to local monopolies

and a lack of broadband competition

The EU richer competitive environmentFixed broadband subscriptions - operator market shares at EU level, January 2006 - January201470%IncumbentsNew entrants60%50%40%30%Source: Digital Agenda Scoreboard 201420%Jan-06Jan-08Jan-10Jan-12Jan-14New entrant operators are continuously gaining market share although incumbents stillcontrol 42% of the subscriptions. Access regulation is key going forward.

Markets and regulation in the EU and USUSEUMarketstructureDuopolisticMost US homes served either bycable television provider or telcoMore competitiveEU customers can choose betweenany of a number of broadbandprovidersExplained byThe removal of access regulation in2002-2005.Resulted in the disappearance ofcompetitive providers (using LLU orshared access)Effective regulatory framework forlast mile fixed wholesale access(based on LLU, shared access andbitstream)Likely leadingtoHigher level of network neutralityincidentsLower level of network neutralityincidents

Concluding remarks Quality differentiation/prioritisation is not harmful per se and canbenefit network operators, content providers and also consumers. Thekey point is to avoid harmful discrimination. The EU and US regulatory regimes very different and have produceddistinct market outcomes. The EU has a richer competitive environmentdue to last mile access regulation. Competition plays a key role in deterring harmful discrimination.Competitive broadband markets make Net Neutrality problems lesslikely.

Thank you!

Key bibliography J. Scott Marcus, Net Neutrality Revisited: Challenges andResponses in the EU and in the US, Study for the IMCOCommittee, December 2014 Prepared Remarks of FCC Chairman Tom Wheeler, The Facts andFuture of Broadband Competition, 1776 Headquarters,Washington, D.C. September 4, 2014.Available at: and-future-broadband-competition The FCC Open Internet Rules and Order (February 2015)

breaches of Net Neutrality (ACM fined KPN and Vodafone over blocking and zero rating; AKOS found breaches by Telekom Slovenije and Si.mobil over zero-rating). EU Commission proposal for Telecoms Single Market Regulation (2013) Inclusion of Net Neutrality in order to address the concern of a possible

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