Does Europe need regulation to preserve net neutrality?

The Internet may have been ‘born free’ but we increasingly hear talk of access providers blocking users' access to content. Some telcos are also thinking about charging content providers for delivering their services. Ed Whitacre, (Chairman and Chief Executive of AT&T) for example, has been quite outspoken about this intention.

The question of ‘net neutrality’, is the focus of fierce debate, particularly in the US. What does it mean, or more importantly, what is it held to exclude? Non-net neutrality has been used to describe either of the following two situations:

• blocking or throttling access to Internet-based services, content or applications
  
  
• charging service, content or application providers for delivery of traffic. Such charges might be based on the level of quality-of-service (QoS) involved.
  
  

European mobile operators have been doing this for some time: blocking VoIP over their 3G networks, for example. The idea of restricted mobile Internet access, which is better than none at all, is apparently accepted by many consumers.

But somehow we expect more from our fixed broadband service providers. We expect them to give us the ‘whole’ Internet.

Are such practices against the customer interest? Not necessarily. Sometimes an operator needs to prioritise some services over others to guarantee QoS for which its customers have already paid.

Innovative charging models for the Internet should also not be ruled out. Charging the ‘sender’ of information is nothing new: after all, it's been used in the voice world for decades. The economic justification for such charging models is well researched: charging the sender of traffic is one way to compensate for network externalities involved in providing access. Mobile operators use inbound call revenues to reduce market entry costs to efficient levels (for example, by subsidising handsets), so should fixed operators not be able to do the same? Innovative price models may help operators pay for much needed network investment, for example, to introduce fibre in the local loop and to guarantee quality of service.

The flip-side of this is that where there is market power, there is usually scope for abuse. Restricting access to services is one way an operator with market power can protect itself against revenue loss from competing services and this is unlikely to be in the public interest. Also, just as monopolies are often in a position to overcharge their customers, it is not inconceivable that they would be able to set inefficiently high prices for inbound traffic and quality of service.

Does this mean European regulators should act directly to prevent it? Not necessarily; regulation that controls commercial companies' pricing structures and their end-customer offer might be considered overly heavy-handed and as having the potential to constrain innovation. Instead, regulators should concentrate on getting the wholesale access remedies available to them under the regulatory framework right. Ultimately, if customers are not getting the content, quality or price they want, they should be able to switch.