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Net neutrality in US vs. EU: BEREC digs in while American FCC transitions oversight to FTC. The consequences for operators, content providers, and consumers. Strand Consult Research Note




What’s happening in Europe

Yesterday the Body of European Regulators for Electronic Communications (BEREC) presented its assessmet of the reports of the 29 European nations with net neutrality rules. At 37 pages with a lot of diagrams, the report is a thin cup of tea that that doesn’t provide a true picture of what’s going on. While nearly every national regulatory authority asserts that the internet is open in their country, BEREC’s conclusion is that the rules need to be implemented even harder.

Strand Consult not only read and annotated all 29 reports, but summarized and analyzed the information in its own report, Net Neutrality in EU after 1 Year: Unintended Consequences for operators, content providers, and consumers. This report numbers over 100 pages and describes the many court cases against European regulators to which BEREC only briefly alluded to in its presentation yesterday.

In the meeting BEREC could point to no bad actor, so the meeting lacked popular appeal. As such, BEREC has launched a marketing campaign to communicate to the public what neutrality is and what they are doing to regulate it. A year ago BEREC’s message was that the public cried out for regulation. Apparently, this year they forgot all about it.

BEREC never made an accounting of actual net neutrality violations. It just asserted that rules were needed based upon a 5-year old survey of operators’ contracts. Now the agency seems to intensify the

way in which it wants national regulators to interpret the neutrality of legislation, but this is likely counterproductive to investment, innovation, and consumer welfare.

The new threat: free data – Zero rating

Earlier BEREC warned us about blocking, throttling, and fast lanes were the problem. Those things haven’t materialized so they need to make a new enemy. It’s call free data.  

Indeed, the Norwegian regulator Nkom declared in its report, “The biggest challenge in terms of net neutrality in Norway today is the significant increase in internet subscriptions with zero-rating of preselected applications and content. Nkom believes in general zero-rating has an unfortunate effect both on the end users' freedom of choice and in terms of competition between providers of applications and content.”  In addition Nkom’s Frode Sørensen who co-chairs BEREC’s Net Neutrality Expert Working Group made a presentation in which he declared that an evaluation of zero rating must include the impact to freedom of speech and media diversity in Norway. However Nkom does not have the authority to conduct such regulation and doing so would likely violate the Norwegian Communication Law (Ekom loven), the Norwegian constitution, and EU net neutrality law which does not even contain the term zero rating.

Strand Consult has made repeated requests to Nkom for the empirical evidence for its beliefs on zero rating. They contradict the European Commission’s official report on zero rating which concludes that free data does not create competitive harm. In any event Nkom’s view is at the odds with Swedish court which says that zero rating expands human rights and expression.

Free data has become the next battleground for net neutrality, and outgoing BEREC President Sebastian Soriano quipped that there are “fifty shades of zero rating.” He swiftly apologized for the off-color joke which fell flat an era in which public officials are routinely accused of sexual misconduct. In any event Soriano noted that BEREC’s cumbersome effort is “not required” by the EU regulation. All the same, Soriano assured that the work is just “preliminary” and “will take time to develop into full regulation” on the order of mobile roaming.

As was discussed during the presentation, BEREC has developed its own detailed criteria for assessing zero rating on a case by case basis, and as a result, it is possible that offers legal in some countries will be illegal in others. The Dutch representative noted that BEREC awaits court rulings in a number of countries. This admission reveals that BEREC is not capable to interpret the EU net neutrality law. It also suggests that the law and its guidelines will not bring the harmonization that policymakers promised.

Fake news hits BEREC

In the last BEREC meeting Soriano called the industry’s statements about deregulation supporting investment as “fake news.” Now the shoe is on the other foot. In yesterday’s meeting Soriano appeared irritated by the real media’s ostensible misstatements, or real “fake news” as it were. A New York Times story the day before alleged that the EU has “holes” in its net neutrality rules. Indeed, there were misstatements in the article, and Strand Consult contacted the journalists and editor, but they have not responded, nor have they made corrections.

Portugal has also emerged as meme in US with the charge that its allows consumers to select non-neutral content options. The American journalists who wrote the pieces, so naïve not even to know that Portugal has net neutrality rules, declared that this will be dark future in the USA if the FCC overturns the 2015 rules.

Naturally it’s a blow to BEREC to get dissed by the New York Times, but on the other hand, it got what it deserves. This is what happens when an agency conducts regulatory proceedings as popularity contests. BEREC has utterly compromised its integrity, and this desperate effort to win favor with certain groups taints its credibility.

Apparently as a capstone to his presidency and an attempt to salvage the now dissed net neutrality rules, Soriano declared that the BEREC is partnering with another “great democracy”, India.  It was absurd to hear a French-European politician urging that the EU should look to India for inspiration on internet policy, a country with limited internet infrastructure and ranks at very bottom of Internet adoption among countries in The World.

Outsourcing speed measurement

BEREC has a dream to outsource speed measurement to end users who subsequently generate complaints to regulators. The problem is that the measurements are bogus, on the order of 8-fold according to ARCEP, the French regulator. Operators spend millions, if not billions, of euros to measure the speed and quality of their networks. If there was a cheaper, better way to do it, e.g. hacking a mobile app, operators would have already done it.

However, BEREC wants to move the point of measurement to the end user because it gives consumers the appearance of control, even though such measurements are not accurate, and at best measure only the capability of the device. Strand Consult’s report The experienced mobile coverage - what is bogus and what are the facts? describes why crowdsource measurements on a mobile network are bogus. This research note describes how the Dutch Telecom Regulator ACM has attempted a dubious plan with Google.

Even though most European countries already have speed disclosure rules, the EU is insisting on yet another layer of disclosure. Thus, the net neutrality regime is becoming a grotesque bureaucracy of meaningless information, compliance, and adjudication.

Transparency

BEREC bills its speed measurement efforts as “transparency” for consumers. Strand Consult wishes the agency would practice what it preaches. As Strand Consult’s report demonstrates, BEREC operates largely in secret when it comes to net neutrality. It has consistently denied Strand Consult’s requests to make public information about its closed-door meetings with “stakeholders” including the names of participants, the topic of discussion, and meeting materials. Indeed the website for its Expert Working Group on Net Neutrality doesn’t seem to have been updated since 2014.

In addition to its summary and analysis of the 29 reports on year one of net neutrality in the EU, Strand Consult has pieced together the details about the secret meetings to inform operators about the effort to regulate their companies without their knowledge.

What’s happening in the United States

Strand Consult follows the net neutrality regulation around the world. The United States is in focus for their efforts to repeal harmful net neutrality rules imposed in 2015. Recently Strand Consult made this research note US telecom regulator FCC to vote on repeal of harmful net neutrality rules and restore a free market Internet.

The seemingly faultless New York Times has decried the effort as “gutting network neutrality”, a “sweeping repeal of rules” and “removing all oversight from the sale of internet access.” But in fact, the proposal strengthens and extends transparency requirements for operators, and it increases oversight of the market to the Federal Trade Commission (FTC) as well as the FCC.

Until the 2015, the FTC had jurisdiction over broadband internet access, but the 2015 rules removed its authority under a common carriage exemption. In any event, both agencies have committed to sharing authority to coordinate online consumer protection and ensuring that transparency provisions are respected.  Strand Consult’s Vice President Roslyn Layton served on the President Elect Transition Team for the FCC, and she explains why the FTC is fully capable, and even preferable to the FCC, to oversee broadband internet access.

Many supporters of net neutrality assert that rules are necessary to protect and promote “innovation” yet among the many countries that have adopted hard rules, there is no incidence of a new app or technology, at least that policymakers can point to. Indeed, the EU reports no  innovation as the result of the rules, and in the US, the apps and services enjoyed today were developed prior to 2015.  Strand Consult’s report Understanding Net Neutrality and Stakeholders’ Arguments describes how policymakers have sold the public a “bill of goods.” The promises they made have not borne fruit.

When it comes to net neutrality, the world is going into two directions. One way is the path of innovation and investment. The US is going in this direction by returning to the framework that made it the world’s Internet leader, driving $1.5 trillion in investment, and birthing unprecedented innovation. The US is on track to launch 5G in 5 cities in 2018, two years ahead of schedule.

Europe is going the other way, that of regulation as subterfuge. BEREC, the European Commission, and the European Parliament use regulation to compensate for their shortcomings: the failure to be competitive globally, the failure of creating an environment that supports investment, and the failure of leadership. The EU forgot that it was supposed to create capacity among its member nations, not dependency. The EU lacks about €150 billion in investment in next generation networks. Net neutrality regulation will only make the gap worse. It will not make the EU competitive or create jobs, the very reasons the European Commission claimed rules were needed in the first place.

The need for transparency and fact-based debate

Just as operators fight for the privacy of their customers, Strand Consult fights for the transparency of regulators. BEREC has conducted many consequential meetings on net neutrality behind closed doors in which they invite their preferred "experts" to give arguments to pre-determined policies. Strand Consult has petitioned BEREC and many EU regulators to provide the rightful and legal transparency required by EU law. Strand Consult's report Net Neutrality in EU after 1 Year: Unintended Consequences for Operators, Content Providers, and Consumers describes these secret meetings. Strand Consult also offers a report Understanding Net Neutrality and Stakeholders' Arguments and a workshop to prepare operators to engage in the high stakes net neutrality debate.

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