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This week the Minister for Communications, Ed Vaizey, backed Ofcom’s decision to step away from regulating net neutrality and leave the market to regulate itself.

Ofcom recently argued that the UK’s ISP market is considered effectively competitive and does not present any evidence of anti-competitive behaviour and should therefore not face restrictions on all forms of traffic management.  We recently covered their claims in more detail in our opinion article (opinion.enta.net: Update: Net neutrality – is Ofcom too timid?).

Neil Watson, Head of Service Operations

Neil Watson, Head of Service Operations

It seems the Government agrees with Ofcom, with Mr Vaizey stating: “The internet has been responsible for an unprecedented level of innovation, which has led to multi-billion dollar companies being formed in just a couple of years.

This is a model that the British government wishes to protect. A lightly regulated internet is good for business, good for the economy, and good for people.

The government is no fan of regulation and we should only intervene when it is clearly necessary to deliver important benefits for consumers.”

So basically the Government and Ofcom are planning to adopt a ‘let’s wait and see’ approach to net neutrality – waiting to see if anti-competitive behaviour will surface. I think I know the answer to that one already! For starters, O2 have already stated that they believe content providers should pay towards the cost of delivering their services because of the increasing cost to ISPs to transport growing amounts of data. O2’s CEO, Ronan Dunne, stated “If consumers alone are paying, it’s hard to see where the incentive is for content providers to use networks efficiently. Networks can’t under any economic model presume to have unlimited data capability. Part of the solution is to move away from ‘one-size-fits-all’.”

We first covered this issue back in October 2008 when BT Retail had a similar opinion regarding the BBC’s iPlayer and we returned to the subject again in June 2009 when we argued that rather than blaming the content providers for their successful innovations they should be targeting the wholesale providers to reduce the cost of bandwidth and promoting more sustainable usage based packages rather than pushing ‘unlimited’ options that they are clearly struggling to support.

BT and TalkTalk have already stated that they would look to strike deals with content providers if net neutrality remains unregulated which Ofcom and the Government have now decided will be the case. TalkTalk’s Executive Director of Strategy and Regulation, Andrew Heaney, said: “[Its] perfectly normal business practice to discriminate between them. We would do a deal and look at YouTube and look at the BBC, and decide.”

Meanwhile, BT’s Director of Group Industry Policy, Simon Milner, stated:  “We absolutely could see a situation when content or app providers may want to pay BT for quality of service above best efforts.”

Mr Vaizey did however provide some warnings stating the Government would consider three factors before considering proposals:

Openness – consumers should be able to access any legal content or service. Content providers should be able to innovate and reach users.

Transparency – providers should set out in detail the extent of their traffic management and the impact on customers.

Support for innovation and investment – ISPs should be able to manage their networks to ensure a good service and have flexibility in business models. Competition is important for ensuring continued openness and choice.

This is basically the same as the warnings provided by the EU last week who agreed with Ofcom’s decision to step back from regulation but warned that they were (amongst other factors) concerned by the following:

– Potential discrimination leading to anti-competitive effects which could compromise the internet economy in terms of innovation and freedom of expression.

– Concerns over changes to payment mechanisms (e.g. payment for content delivery) amounting to a tax on innovation.

– Potential blocking of phone services over the Internet (VoIP) and bandwidth throttling on certain sites.

Ofcom, the Government and the EU have all stated that they believe that traffic management is a necessary part of managing an efficient and cost effective network and that, whilst they are stepping back from regulation, they require ISPs and network operators to be transparent about their network management. However, just how ‘transparent’ they will need to be is anyone’s guess. Will it suffice to include basic and vague information within their small print?

We agree with Ofcom et al on this point. We also believe that traffic management is essential in managing an efficient network that delivers a good service experience for all users and sometimes that requires traffic shaping and throttling, but this is usually based on ‘types’ of traffic (e.g.  P2P) rather than where that traffic has been sent from. Like Ofcom we also believe that providers must be upfront and ‘transparent’ about the methods they deploy, with clear policies in place.

However we continue to have grave concerns over potentially creating a two tiered Internet where the type of deal an ISP has struck with the largest content providers (e.g. YouTube, Google) will determine the level of service provided when customers try to use them. Where exactly will this leave the smaller market players? Smaller content providers or providers that decide not to pay the ISPs may find their services are delivered unfavourably (throttled) when compared to their larger rivals; and those that do pay may find the demands of hundreds of ISPs too great and be unable to cope financially. Consider content providers that offer popular free or low cost services such as YouTube, Facebook and Skype for example.

On the other hand, smaller ISPs may not be able to arrange deals with the larger content providers, therefore not benefitting from the contributions to the cost of delivering their services and potentially making them uncompetitive in the market. In such a highly competitive market, how can such activities not create the anti-competitive behaviour that Ofcom and the Government are so adamant won’t be a problem?

Surely such practices will become an obvious barrier to further innovation as new content providers attempt to enter the market and launch their services only to be swarmed by demands for payment in order to achieve optimum delivery by ISPs.

We recently conducted a poll on opinion.enta.net (Opinion.enta.net: Poll: Should Ofcom enforce net neutrality?) to gather our readers’ opinions on this subject. We asked the question “Should Ofcom enforce net neutrality?” – 86% of voters responded “Yes, Ofcom hasn’t gone far enough” and just 14% answered “No, the Internet can regulate itself”*. If you would like to add your vote, the poll is still open.

There is still some common sense in Government, with Labour MP for West Bromwich East, Tom Watson raising an Early Day Motion (EDM) against Mr Vaizey’s decision. He states: “That this House expresses its concern at the recent comments made by the Minister for Communications and Creative Industries that internet service providers should be allowed to abandon the principle of internet neutrality and prioritise users’ access to certain content providers; notes that Open Internet has delivered competition, innovation and unlimited access to new services; further notes that Open Internet has played a pivotal role in enhancing democratic participation and freedom of expression; believes that abandoning the principle of internet neutrality will stifle online innovation and lead to websites paying internet service providers to ensure their content gets priority; does not believe that mere transparency is likely to lead to protection of customers and citizens from harm, especially as ISPs seeks to lock their customers into long-term bundled service agreements with telephones, televisions, mobile telephones and internet; and calls on the Government to act against internet service providers who may seek to restrict customers’ internet access for market advantage through minimum service guarantees.”

Unfortunately, EDM’s are just a way to encourage further debate of a subject in the House of Commons, although in reality few EDMs actually get debated. So whilst we applaud Mr Watson for highlighting the issue further we won’t hold our breath for any kind of review or changes.

Interestingly the BBC have decided to stick with their original plan to name and shame ISPs that throttle iPlayer traffic rather than pay for their content to be delivered favourably, providing iPlayer users with a traffic light style warning system.  In April 2008 the BBC’s Director of Future Media and Technology, Ashley Highfield, said: “Content providers, if they find their content being specifically squeezed, shaped, or capped, could start to indicate on their sites which ISPs their content worked best on (and which to avoid). I hope it doesn’t come to this, as I think we are currently working better together than ever.” Unfortunately 2 years on and it looks like it soon will come to this. But this is a very interesting strategy that could significantly hinder ISPs such as BT, TalkTalk and O2’s plans to obtain financial support from content providers and raise awareness amongst end users of the types of traffic shaping they are employing.

Net neutrality is an important principle that ensures all Internet traffic is treated equally and that every user receives a fair and equal service. These latest proposals will potentially turn this on its head and could cause major problems for the future of the Internet, which up until now has nurtured innovation and economic success.

UPDATED: 22nd November 2010

Over the weekend Mr Vaizey has ‘clarified’ his position on net neutrality, stating that if our concerns are realised and anti-competitive behaviour ensues, he would seek to use regulation. He said: “My first and overriding priority is an open internet where consumers have access to all legal content. Should the internet develop in a way that was detrimental to consumer interests we would seek to intervene.”

He added: “I don’t accept the premise that I am not protecting the internet from enormous commercial concerns. I’m all in favour of innovation providing it’s not detrimental to consumers. People are already entitled to choose the speed of their connection, but we’re not saying one ISP should be able to prioritise one provider’s content over another and I don’t support the commercial decision to downgrade a rivals site.”

We understand his reluctance towards unnecessary regulation however we urge caution with this approach. Many leading ISPs are already stating intentions to strike deals with content providers (and some content providers are refusing to – BBC) which inevitably leads down the road towards anti-competitive behaviour and a detrimental effect on consumers’ service. At this stage Mr Vaizey intends to step in but will it be a case of too little, too late?

Have your say!

What do you think about net neutrality? Do you think it should be protected by Ofcom and our Government or do you think the Internet can regulate itself? Let us know your thoughts by leaving us a comment below.

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*Statistics correct at time of publication.

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