Net Neutrality Rules Called Premature, Given New Online Business Models

LONDON -- It’s too soon to regulate the Internet, particularly in the area of net neutrality, speakers from telcos, Facebook and Skype said Thursday at the IIR telecom regulation forum. The Internet is only 20 years old, an adolescent “full of potential but also full of doubts,” said Jean-Jacques Sahel, Skype government and regulatory affairs director for Europe, the Middle East and Africa. The net neutrality debate, which shows no signs of abating, is part of a much larger discussion about commercial models in the Internet and telecom sectors, said Telefonica Group Regulatory Policy Director Robert Murik. It’s too early to regulate because no one knows where this is going, he said.

European Digital Agenda Commissioner Neelie Kroes is committed to an open Internet where consumers can choose full access, she said separately. She wants the Internet free from “digital handcuffs,” she said Thursday at the World Wide Web conference in Lyon, France. In many areas, “we are only beginning to discover what openness means,” she said. In some cases, such as when repressive regimes attempt to cut off Internet speech, it’s clear what should be done, she said. In other cases, achieving openness isn’t as straightforward, she said.

People worry about any suggestion of “limiting” the Internet in any way, Kroes said. They're concerned about controlling access to online information as a form of censorship, or throttling services to maintain a monopoly, or about ISPs ripping off consumers by not delivering the services they promised, she said. These things concern Kroes as well, she said, “and I am committed to safeguarding net neutrality.” Everyone should have the option of full access to a robust, best-efforts Internet, she said. Openness here “is a subtle term” that doesn’t mean banning all targeted offers, but about being transparent to consumers about them, she said. The EC is awaiting a final report from telecom regulators on the existence of blocking and throttling practices and will then decide what to do to guarantee full Internet access for all, she said.

Net neutrality is a “brand” covering multiple issues, stakeholders and interests, said Jonathan Fiske, Etisalat vice president-regulatory strategy. Network operators are focused on how to recoup their investment in high-speed broadband networks, he said. Content providers want to make money from their products; consumers want the latest and greatest online services without restriction; and governments want to boost their economies, protect consumers and spur competition, he said. Many also view net neutrality as being about traffic management, an open Internet or other issues, he said. Net neutrality is a commercial matter about whether network operators can charge service providers more for better quality of service and capacity, and whether the market or regulators should decide, said Fiske. The debate is all about commercial models, said Murik. Contrary to those who claim net neutrality is about civil liberties, he said, telcos are the last ones who care about what users say in emails and other online communications.

Net neutrality is part of a huge debate about how operators finance their networks, charge their customers and make money, said Murik. Traditionally, operators owned their networks, and charged subscription fees and per-minute rates, he said. Now that the telecom sector has been liberalized, other companies are using the networks, and operators sell wholesale products to rivals, he said. Things are moving toward disaggregation of the service and network levels, but aren’t there yet, he said. Operators are trying to determine what kinds of services and subscriptions customers want, he said. There shouldn’t be a rush to regulate in this transition phase, he said.

The question is what consumers and buyers of telecom wholesale services want and what they're willing to pay for, said Analysys Mason partner James Allen. In the Netherlands, where net neutrality is imposed by law, mobile operators have all raised the prices of their data packages, he said. “Price discrimination can be efficient and it can be what consumers want,” but no one knows for sure yet, he said. For corporate users, net neutrality is about consistency and transparency, said Nick White, executive vice president of the International Telecommunications Users Group. Cloud services users may be faced with a chain of network operators, and they want to be assured of consistent access to their applications and data, he said. Diverse net neutrality rules risk harming business continuity, he said.

Investors in over-the-top services don’t raise the issue of net neutrality, said SVP Advisors Partner Julio Villalobos. They're only worried about whether their services will work, not whether their data packets will be treated equally, he said. Much of the net neutrality debate is being driven by services such as video, he said. Quality of service is important for many businesses, but there are many others for whom QoS isn’t as important as take-up of their services, he said.

Contrary to those who think the Internet is unregulated, the law caught up with the Net in the ‘90s, Skype’s Sahel said. The online world is subject to offline legislation, architecture protocols, “netiquette” usage rules and the markets, he said. Any regulation must find the right balance between “unilateralist legal spillover” -- encoding the rules of one nation to restrain the behavior of citizens of another -- and “imperfect multilateralism,” he said. That requires a high degree of cooperation among governments which thus far is lacking, he said.

In the next 20 years, it will be important not to shackle the Internet and make sure the bullies of the day don’t spoil it, Sahel said. We're entering the “application century” in which software is more central than hardware, he said. The worlds of information technology, the Internet, media broadcasting and telecom are converging into innovative apps, and the job of regulation is unclear in this environment, he said. There’s a risk, particularly in Europe, that “red flag laws” will react to innovative leaps forward, he said. The question isn’t whether to regulate but how, he said. Rules should be flexible, light-touch, focus on bottlenecks, be technology and service neutral and balance the various interests, he said.

There must be much more attention to how regulation affects the Net, said Facebook EU Affairs Director Erika Mann. The Internet is a “pioneering culture” of companies on the cutting edge, and many regulations of the past don’t fit, she said. No one knows what’s coming next, including regulators, she said.

Europe is fighting to develop a barrier-free digital market, but it will be hard to make that a reality given the range of national laws, adaptations and variations, Mann said. That means Internet companies must continue to live with the diversity, which hampers the rollout of true cross-border services, she said. EU lawmakers are still pushing for “gold standard” measures for other countries to follow, she said. That approach is problematic because it sets legislation in stone when more flexibility is needed, she said. The Internet is a very young model that’s evolving and legislators must respect that, she said.