Coordination of US-EU Net Neutrality Rules, Role of ISP Interconnection Agreements Open Questions

The EU legislation, known as the “connected continent” or “telecommunications single market regulation,” addresses a range of issues such as spectrum allocation and mobile roaming charges, but most of the attention has focused on its net neutrality provisions (CD April 3 p13). In response to the EC’s original proposal, the European Parliament before it adjourned in May approved language that would let ISPs offer specialized services of higher quality as long as the services didn’t affect the availability or quality of services offered to other companies or service suppliers.

The discussion now moves to the Council of Ministers. Italy, which holds the EU presidency, produced compromise language last month on the entire legislative package. Government officials have only had a preliminary exchange of views on it, said an EU diplomatic official. Most EU countries “support EU rules set at a level of principles, leaving more scope for [Body of European Regulators of Electronic Communications] guidelines and national enforcement,” said the presidency’s proposal. It recommended inserting a definition of net neutrality and “more concise and less technical language” defining specialized services as “services optimised for certain content or applications and offering enhanced quality end to end.” The presidency proposed that specialized services shouldn’t prejudice general Internet quality, and that traffic management be transparent, nondiscriminatory and proportionate. The compromise text will be amended in light of the Nov. 27 informal talks, said an Italian presidency spokeswoman.

The upcoming negotiations “are an opportunity to send a clear signal to the other EU institutions and the European public that there is a political will to establish an EU framework which enables the EU to take up its role as a champion of the open Internet,” industry, consumer, broadcasting and public interest groups said in an Oct. 1 letter to national ambassadors to the EU (http://bit.ly/1rRW1TG). The Center for Democracy & Technology, Computer and Communications Industry Association, European Broadcasting Union, European Consumers’ Organisation, European Digital Rights, La Quadrature du Net, VON Europe and others pressed the Council to clearly enshrine the principle of nondiscrimination with regard to traffic management and specialized services.

Governments are likely to push back against some of the Parliament’s net neutrality amendments, said Hogan Lovells (Paris) communications lawyer Winston Maxwell. Some of the amendments would “make it hard for so-called ‘managed services’ to exist,” he said.

Harmonization Unlikely

Don’t look for a harmonized EU and U.S. approach to net neutrality, at least not based on developments so far, said industry lawyers.

There appears to be little chance for alignment of EU and U.S. approaches, said Steptoe & Johnson (Brussels) attorneys Yves Botteman and Agapi Patsa. That the European Parliament voted for more detailed rules on net neutrality than some countries, such as France and Germany, appear willing to consent to indicates that the debate at the EU level is operating on its own dynamic, with very limited scope for coordination with the U.S., said Botteman. The two attorneys handle antitrust and competition matters.

Botteman said he’s getting indications from people close to the matter that EC President-elect Jean-Claude Juncker and his new commissioners may want to “rethink the whole shebang.” Many in the market believe the Council won’t approve the connected continent package before the new EC takes office in November, he said. Juncker has said he wants “ambitious legislative steps” toward a connected digital single market within the first six months of taking office (CD Sept 11 p16). This appears to indicate the legislation may be put on hold, with a new discussion to take place, Botteman said. That may mean either the EC proposal will be withdrawn or a watered-down net neutrality provision, which sets out general principles rather than rules, will emerge, said Patsa. In that case, the EU and U.S. approaches will probably take very different paths, she said.

There’s tension between the EC ambition to take more control over regulation of the telecom market and the belief by most EU nations that regulation should be handled nationally, said Botteman. If net neutrality is handled via broad principles left to each country to articulate in its national laws, there could be a patchwork of different approaches in Europe, as opposed to a single approach in the U.S., he said. Companies might end up having to modify their activities according to the laws in individual EU countries, said Patsa.

Interconnection

Interconnection plays a role in the net neutrality debate on both continents, said industry lawyers.

An FCC decision on net neutrality is “likely to prove highly influential” in Europe, said Hogan Lovells (Washington) technology, media and telecom lawyer Trey Hanbury. In terms of direct effects, he said, the FCC net neutrality NPRM focused heavily on ISP connections to end-users as opposed to network-to-network interconnections. Many commenters have “pointedly noted that network interconnection can prove just as disruptive to the end-user experience as throttling, blocking and other, more direct, ISP behavior,” said Hanbury.

While the FCC appears engaged on highly visible “upstream” practices such as paid prioritization, it remains to be seen if it will address other, less visible, upstream practices such as discriminatory interconnection or routing, Hanbury said. An FCC focus on principally downstream connection might have a less limited direct international impact than a decision centered more on upstream practices, he said.

The Oct. 3 EC Cogent decision (http://bit.ly/ZbMgFA) (CD Oct 8 p11) finding no evidence that dominant European telcos abused their position in the Internet connectivity (peering and transit) market “has a clear link with net neutrality,” telecom consultant Innocenzo Genna wrote on his blog (http://bit.ly/1yHcfFD). Incumbents may potentially commit abusive practices because they negotiate Internet traffic deals and control the end-users to which such traffic is directed, such as Google’s YouTube, said Genna, who advises nonincumbent, smaller players. That market is normally competitive because if an operator charges too much, other operators can simply change carriers, he said. When the traffic has to be terminated on the end-user -- the subscriber holding the final terminal/device -- other operators have no option but to accept the prices and conditions set by the telcos controlling the connection, he said.

Termination is unregulated in the Internet sector, said Genna. Competition problems don’t normally arise because telecom companies can’t allow themselves to cut Internet traffic terminating at their clients, he said. But commercial peering agreements seem to be getting more difficult and some major European players are trying to charge more when peering with their counterparts, he said. The EC decision made clear that incumbent ISPs may have an interest in creating artificial traffic congestion by reducing or limiting interconnection capacity to force rivals to pay more for peering, he wrote. This could raise net neutrality problems where none existed, he said.