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Posted in Digital Single Market (EU), Internet, Policy & Regulation Winston Maxwell

DSM Watch: Hogan Lovells partner discusses net-neutrality at BEREC forum

Below are the remarks of Winston Maxwell at the October 17, 2016 BEREC stakeholder forum in Brussels.

The FCC’s open Internet order and the BEREC guidelines on net neutrality are similar in how they analyze commercial offers by ISPs and practices such as zero rating. Both BEREC and the FCC recognize that commercial practices do not lend themselves to a one-size-fits-all regulatory approach.  In its Digital Economy Outlook, the OECD stated that zero rating practices can have pro-competitive or anti-competitive effects. It all depends on the facts.  The FCC analyzes these offers under the “unreasonable interference/disadvantage” standard.  BEREC applies what it calls a “comprehensive assessment”.  The content of both tests is similar.  The commercial offers are first analyzed under a set of competition law criteria that will be familiar to most telecom regulators.  The market power of the ISP and of the upstream content provider are key factors.  Commercial offers that are application-agnostic are better than offers that pick given applications within a class.  Switching costs for customers will be a factor.  Whether the ISP and the upstream content provider are in the same group will be important.  Telecommunication regulators in Europe are well equipped to perform this kind of competition analysis, as are national competition authorities. 

What is new is the second set of criteria in the FCC and BEREC guidelines, which focus on the social aspects of the open Internet, including the effect on freedom of expression and innovations resulting from the Internet ecosystem. Telecom regulators are generally less equipped to deal with these social factors.  Recently, the WIK consulting firm conducted a study for BEREC to determine how consumers view net neutrality, and in particular how they value net neutrality in the offers that they receive from ISPs. The WIK study gives us information on what net neutrality is worth to users.  What’s harder to measure is what the open Internet is worth to society.  We all agree that open Internet is absolutely critical to the unprecedented innovation and freedom of expression that has arisen over the last 15 years.  But agreeing on this principle does not help in resolving particular cases.  Analytical tools are required.

In a recent paper, the OECD attempted to develop a framework for analyzing and measuring different aspects of Internet openness. I found this framework potentially useful to regulators as they examine the social aspects of commercial offers under the net neutrality rules.  The OECD first starts by dividing the different aspects of Internet openness into categories.  The technical aspects of the Internet openness involve the end-to-end architecture of the Internet, such as the open protocols, the interoperability, and addressing system.  The economic aspects of openness include the well-known principle of innovation without permission, serendipitous innovation, low barriers to entry, network effects, cross-border supply and use of services.  Finally, the social aspects of Internet openness relate to fundamental rights such as freedom of expression, access to education, security, privacy, and cultural values such as multilingualism and access to diverse content.

The OECD proposes a scoring mechanism to measure these different aspects of openness in any given situation. The OECD paper targets actions by governments that might harm net neutrality.  The OECD mentions in particular data localization rules, government surveillance measures, and content blocking measures imposed by governments and that hurt the open character of the Internet.  However, the OECD’s way of thinking could be applied by regulators when they evaluate practices by ISPs.  The practice of an individual ISP will generally have far less of an effect on Internet openness than the action of a government.  However, if all ISPs in a given country apply a common practice that harms net neutrality, the impact of these measures could potentially reach the impact that would result from governmental action.

Regulators seem well equipped to apply the competition assessment called for by both the FCC and BEREC guidelines. However, when the FCC and BEREC guidelines ask for a review of social aspects such as the impact of freedom of expression or the impact on the Internet ecosystem, regulators don’t have many analytical tools at their disposition.  Some lessons can be learned from the OECD approach, but also from broadcasting regulators who are more accustomed to weighing social values when making regulatory decisions.  The case law of the European Court of Human Rights and the European Court of Justice also provides guidance.  Finally, some analytical tools might be borrowed from environmental protection authorities who have developed methods to evaluate the effects of regulatory action on natural ecosystems.

National regulatory authorities in Europe and the FCC can benefit greatly from sharing experiences. Because the framework for analysis on both sides of the Atlantic is similar, there is a great opportunity for cross fertilization between regulatory authorities when applying net neutrality principles to particular cases.