UK government proposal to dump Net Neutrality will not create a free market

You can’t leave government alone for a minute can you? One minute they are heaping garlands on the tech industry with TechCity proposals and the like. The next minute they are proposing to dump Net Neutrality – the entire reason we had a flowering of innovation in the first place.

UK Communications Minister Ed Vaizey said in a speech at an Financial Times conference today that Internet service providers should be allowed to favour traffic from one content provider over another, so long as the user was aware this was happening. Oh sure, that’s going to happen. Vaizey’s view is that market should decide whether ISPs can charge for preferential content delivery, thus creating a slow lane for those who can’t or won’t pay for the fast one.

Howwever, by not supporting Net Neutrality the UK government stands to hand large swathes of the Internet economy over to large ISPs and increasingly big media companies like Sky which offer Internet connectivity. Can you imagine Sky allowing non-Sky programme’s packets ahead of its own content? No.

Though ISPs can charge media companies for more assured delivery if content like streaming video, innovation startups – a whole sector which the government appeared to be supporting only the other week – will not have the same market clout.

Thus there will not be a ‘free’ market under this policy.

Here is Vaizey’s speech, as released to the media.

“The Open Internet Speech”

The Internet is fast becoming the dominant medium in the world.More than a third of the earth’s population is connected. Facebook is the third largest country in the world and by 2020 it has been estimated that the Internet will reach 5 billion users.

The Internet is central to the global economy. According to a recent report commissioned by Google, the internet sector in the UK alone was worth £100 billion of turnover in 2009 and the UK is the largest per capita ecommerce market in the world. Yet fifteen years ago, the Internet barely existed as a consumer medium.
The Internet has changed the way we work, do business, shop and communicate. It has changed the way we communicate with government.
The internet has been responsible for an unprecedented level of innovation, innovation which has led to multi billion dollar companies being formed in just a couple of years.

So let me be absolutely clear. This is a model we want to protect. A lightly regulated Internet is good for business, good for the economy, and good for people.

But it is also right the Government puts in place the right infrastructure to support it and has a view on how it should be governed.

Broadband policy
In terms of the infrastructure the private sector is leading the effort to meet that growing demand – BT have committed £2.5bn investment in upgrading their network so that two thirds of the population will be able to access superfast broadband by 2015 and Virgin Media, have committed to reaching 50% of households with speeds of up to 100mbps by 2012.

Government have committed over half a billion pounds in the Spending Review to support further broadband rollout across the UK. This policy ensures that the UK has a broadband infrastructure capable of supporting increased productivity and growth throughout the UK – consistent with our ambition to have the best superfast broadband network in Europe by 2015.

The Mobile Internet and Spectrum
Recently we have seen mobile internet and wifi connectivity explode. The number of people in the UK connecting through their mobile phone has doubled over the past year.

The introduction of the smartphone has put the networks of some operators under immense strain. That is why I have made it one of my priorities to secure the earliest possible release of 800MHz and 2.6GHz spectrum. It has been a bumpy ride, but we are now on course for this to be auctioned in 2012.

In addition, the Government has made a commitment to release 500MHz of spectrum below 5GHZ currently held by the public sector over the next ten years.

Where is the investment coming from?

Even with the availability of this significant amount of spectrum, there will still be challenges. Cisco – as I understand you heard yesterday – predict that mobile data traffic will double every year through to 2014. That will mean 3.6 exabytes of traffic a month – roughly equivalent to 175,000 years of DVD quality video. Meeting this demand will be a global issue and we will play our part in the discussions and debates on how this will happen.

The continued delivery of high quality content will therefore require massive investment, and it may also mean networks and the traffic that flows over them are increasingly managed as the information super-highway – an old phrase but with compelling resonance in this debate – becomes ever more crowded.

Net Neutrality
That brings me to an idea that is being much discussed these days. Net Neutrality.

It is a debate has taken many different paths in different parts of the world.

In the United States the Administration, along with the FCC, have looked seriously at legislating to prevent ISPs from blocking or degrading services. President Obama has affirmed his commitment to net neutrality on several occasions.

Unlike in the UK, in some parts of the US consumers have no choice which ISP they use because only one offers a service in their area. So the debate has particular resonance there. ISPs could have total control over which services and applications a consumer has access to, and could give preferential treatment to those they favour.

The FCC has long recognised the problem. Back in 2005 it issued its Broadband policy statement which detailed four principles of the open internet. These included the ability to connect any legal devices that do not harm the network; competition among network, application, service and content providers; and the important principle, that users should be free to access the content, applications and services they want as long as it was legal to do so.
In September 2009, under the new Administration the FCC Chairman proposed two additional principles; an absolute requirement for transparency and a requirement that ISPs should refrain from discriminating against particular Internet content or applications, while allowing for reasonable network management. The Chairman went on to explain that in his view the principle, if enacted, “would prevent ISPs from blocking or degrading lawful traffic over their networks, or picking winners by favouring some content or applications over others…..”

Google and Verizon have also agreed a way forward on how operators and content owners should work together. Their proposal includes a presumption of non discrimination on provision of content but with managed services and traffic management being allowed. It also only applies to fixed networks allowing, controversially, Mobile networks to pursue their own way forward, which has in the past included discrimination against VOIP.

The debate that has still not concluded in the US. The FCC has said it will return to the issue in the New Year.

Canada has followed a more direct path. In October 2009, the Canadian regulator, the CRTC (Canada Radio-television and Telecommunications Commission) issued a determination which accepted that ISPs should be allowed to use traffic management measures but that these measures must be designed to address defined technical or security needs and nothing more. The CRTC went on to say that traffic management policies must be “neither discriminatory, nor unduly preferential” and that practices such as degrading or preferential treatment of one application, class of application or protocol over another may warrant investigation. They also forbade outright blocking of content for commercial reasons and the slowing down or degradation of “time sensitive” traffic like VoIP or IPTV without advance permission. As far as we are aware there hasn’t yet been any adverse reaction from operators to these new obligations.

In France, the regulator, issued a consultation in July, seeking views on traffic management practices and whether any regulation, beyond the powers under the new Communications Framework, is necessary. They also declared that operators should not discriminate between traffic streams. While they were free to develop managed services operators should also provide access to the whole internet which must not degrade below a certain acceptable quality of service.
In Norway, industry, consumer groups and government have come together to work out and agree a voluntary set of guidelines on Net Neutrality. These include entitlement to a connection with predefined capacity and quality, as well as the ability to send and receive content and use services andapplications of the user’s choice. The guidelines also include an entitlement to an internet connection which is free of discrimination.

In the European Union, Commissioner Kroes has made it clear that she will not tolerate operators failing to live up to their transparency obligations or engaging in anti competitive practices; while at same time saying she will wait until after the revisions to the Electronic Communications Framework are implemented next May to determine whether further approaches, such as Guidance, by the Commission are necessary. I think she is absolutely right to adopt a wait and see approach.
The issues here are complex. People don’t even agree what is meant by net neutrality. It is a term which means different things to different people.

At the heart of this debate, however, is the extent to which traffic should be managed on the Internet, and more specifically whether ISPs should ever have the right to favour one content provider over another, particularly for commercial reasons.

I want to take this opportunity not to attempt a definition, but to set out some principles which should guide our debate.
First, openness – Consumers should always have the ability to access any legal content or service. Content and service providers should have the ability to innovate and, most importantly, to reach end users. This is a principle consistent with the FCC principles I alluded to earlier and the thrust of the “open Internet“ provision in the Framework Directive agreed last year.

Secondly, transparency – This is a fundamental principle which will soon be enshrined in our own national regulations following the EU Framework Review. Under the new provisions providers must present information about their service, including the nature and extent of their traffic management policies and their impact on service quality in a clear, visible and easy to understand form for all their customers.

And third, the ability to support investment and innovation – Creating the content and networks of the future requires investment. This means ISPs should be allowed to manage their networks to ensure a good customer service. It means allowing flexibility in business models. It means supporting competition. We are lucky to have such a competitive internet access market in the UK because that competition is an important tool in ensuring continued openness and choice.
Having described these principles, I now wish to offer some observations.

Firstly, some people seek to distinguish between the fixed and mobile Internet. However, we believe this distinction is unlikely to hold much importance in a converged environment and is unlikely to prove viable over the long-term. Indeed, we can look to the CRTC in Canada, which initially laid down a specific set of rules for wireline/fixed operators in 2009, but more recently decided to apply the same traffic management rules to mobile operators.

I also think it is important to acknowledge that virtually all ISPs manage traffic already. They do this to ensure the smooth running of their networks. This doesn’t cause any major problems at the moment but it is important that consumers know exactly what service they are buying and have the ability to switch services should the nature of their service change. Ofcom is currently looking at ways in which the switching process could be improved and made easier for consumers, and expects to report back by the end of next year.

We have got to continue to encourage the market to innovate and experiment with different business models and ways of providing consumers with what they want. This could include the evolution of a two sided market where consumers and content providers could choose to pay for differing levels of quality of service. The market could develop in many different ways. The important thing is that ISPs and networks remain free to innovate. In doing so they may make mistakes and consumers should have the ability to make them pay for those mistakes.

Again, the key is that consumers must be informed and aware of what they are buying and of any limitations attached to it; allowing them to choose a level of connectivity appropriate for their needs.

Transparency is not something that should only be available to consumers. It is a principle that needs to extend throughout the entire value chain. Content and application providers should be able to know exactly what level of service they are getting especially if they are paying for it. The Broadband Stakeholder Group have been working towards the development of a transparency toolkit with broad industry buy in and I thank them for their efforts in this so far.
So what do these Principles mean in a regulatory context? This Government is no fan of regulation and we should only intervene when it is clearly necessary to deliver important benefits for consumers.

The recently revised EU Framework for Electronic Communications has given Regulators (such as OFCOM) powers to intervene in the market to determine (If it is appropriate) “Quality of service” guidelines. But these are back stop powers. Competition in the market, combined with transparency, the ability to switch, and an overall adherence to the sort of principles I have outlined, should render such intervention unnecessary.

The initial responses to Ofcom’s recent consultation – alluded to by Ed Richards yesterday – on traffic management also reinforce the view that there is no need for intervention. There is broad agreement on the need for traffic management; and there is broad agreement that there is not yet evidence of any impact either on competition or consumers from traffic management. We are still at an early stage here. Such impacts and harms could arise in the future, and greater transparency is required to combat this.

The strong competition we enjoy in Europe and especially in the UK, will be an essential safeguard against unfair discrimination. This is a key issue and I will look to Ofcom to keep this under review and ensure that Government is sighted as the market develops. It is important that we recognise the potential for harm to consumers or to new innovative companies should the market develop in an anti competitive way.

Internet Governance
Beyond unfocused or ill thought out regulation on an “open Internet” there are, I am afraid, more important and potentially damaging issues at stake with respect to the future of the Internet; issues which you as business as well as governments need to take seriously. We have almost taken the Internet for granted. Yes, we might argue about copyright or security but we rarely concern ourselves with the addressing mechanisms themselves; we take for granted that our e-mails will arrive where we want them to and that we will be able to access sites wherever they are located.

But it is these very issues that were being discussed in New York last week by governments; in preparation for a debate in the General Assembly in December on the future of the Internet Governance Forum; and were on the agenda of the International Telecommunication Union’s (ITU) Plenipotentiary Conference last month in Mexico. In both cases the debate revolves around whether the current multi-stakeholder and predominantly business led approach involving ICANN should continue or whether it should be solely governments, operating in the UN or ITU that should decide on the naming and addressing arrangements on the Internet and on public policy issues; such as cyber security.

I am pleased to say that in Mexico, and I hope in the UN, sense will prevail and the Internet will remain the innovative and open force for business growth it has been and is today. But we will need to be vigilant.

I believe that we are at a crucial stage in the history of the internet. The decisions we make now will have far reaching consequences. We should tread very carefully. In order for the Internet to continue as the open, innovative force for good that it has been over the past 20 years it is essential that all elements continue to prosper. This means ensuring that content providers and applications have open access to consumers and vice versa. But it also means allowing ISPs and networks to innovate and experiment with new ways of delivering what consumers want so we can ensure continued investment in the infrastructure that delivers the content and applications we all use.
The internet has been successful precisely because it is open. That is the most important principle of all.
Thank you very much.