Transcript Net Neutrality_Santosx

BEREC Approach to Net Neutrality
- Competition issues
Workshop on EU telecommunications regulation
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Introduction – BEREC Work on Net Neutrality
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Where do we come from? (1/2)
 BEREC response to EC public consultation on net
neutrality (2010):
 “A literal interpretation of network neutrality […] is the principle that
all electronic communication passing through a network is treated
equally. That all communication is treated equally means that it is
treated independent of (i) content, (ii) application, (iii) service, (iv)
device, (v) sender address, and (vi) receiver address. Sender and
receiver address implies that the treatment is independent of enduser and content/application/service provider.”
 “There have been and will continue to be deviations from this strict
principle. Some of these deviations may well be justified and in the
end-user’s interest but other forms cause concern for competition
and society. To assess this, NRAs will need to consider a wider set
of principles and regulatory objectives.”
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Where do we come from? (2/2)
 BEREC internal report on net neutrality (2010):
A non exhaustive list of key issues were identified as priority for BEREC’s future
work – stemming from the following main questions:
 1) How to ensure that competition is effective? – especially while enabling
consumer choice and avoiding discrimination.
 Assess the risk and impact of discrimination (for end-users, operators, CAPs)
 2) How to ensure end-users are able to fully exercise their choice?
– with emphasis on effective transparency, and if necessary via minimum
quality requirements.
 Evaluate best ways to achieve transparency (incl. monitoring of services)
 Initiate the complex analysis of minimum quality requirements definition
It was also deemed necessary, when analysing these issues, to consider a
specific aspect of the Net neutrality debate, which corresponds to the following
question: should specific features of the Internet be considered and, if so, how?

Develop a common view of what “access to the Internet” or “specialized services” consist of
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The projects undertaken to date:
evaluate the situation and examine the application
of the revised EU legal framework
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Transparency guidelines are about best ways to provide the mandatory
information on traffic management practice, and thus help fostering
competition and disciplining ISP through enhanced competition.
Traffic management investigation (TMI) is about knowing what is really
happening in the field at present.
CEA “Competition issues & NN” is an economic analysis about which
practices may cause harm to the end users, and under which conditions.
QoS Guidelines are about assessing "degradation of service" and the
conditions and ways to use the new art. 22.3 USD, i.e. how to intervene
when deemed necessary.
NGN “IP interconection & NN” is an overview of IP interconnection
markets and economic relationships between operators in the context of Net
Neutrality.
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BEREC projects related to Net Neutrality
2011
2012
2010
NN & Transparency
Transparency follow-up
NN & QoS Framework
NN & QoS Guidelines
Net Neutrality EWG
Commission
Consultation
BEREC
Response
CEA EWG
NGN EWG
Competition issues related to NN
IP-interconnection in the context of NN
Task Force
Commission
Letter
Traffic Management
Investigation
BEREC
Response
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Net Neutrality agenda today
2011
2012
2010
NN & Transparency
Transparency follow-up
NN & QoS Framework
NN & QoS Guidelines
Net Neutrality EWG
Commission
Consultation
BEREC
Response
CEA EWG
NGN EWG
Competition issues related to NN
IP-interconnection in the context of NN
Task Force
Commission
Letter
Traffic Management
Investigation
BEREC
BEREC
Response
Response
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Traffic Management Investigatio
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Trafic management investigation : overview
1.
Overview of practices (cf. last Plenary’s presentation)
 Blocking/throttling of P2P or VoIP traffic
 Other occurrences of blocking/throttling
 Congestion management
 Other specific types of measures
2.
Quantification of practices
 Number of operators applying main types of practice,
 and corresponding customer base
 Number of Internet access subscribers affected by operators’ practices (provisional)
 Distinction between the types of enforcement (technical, contractual only)
 Cross-country aggregated statistics for the most frequent practices, in order to
represent the relatively contrasted situation across Europe
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The submitted snapshot is complete – fine tuning of data in the coming days
This EU view supports the analysis developped in the three reports
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Quantification of practices
(number of operators)
A closer look at how restriction is enforced
03.05.2012
CEA EWG / Competition issues
related to Net Neutrality
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Quantification of practices
(operators weighted by their total number of users)
Quantification of practices
(number of subscribers)
Aggregated statistics
per types of national
markets
24.05.2012
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How does the situation look like?
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Traffic management practices have been identified through the TM investigation
 A majority of ISPs offer Internet access service with no application-specific restrictions.
 But specific practices, such as blocking or throttling of peer-to-peer traffic or VoIP, may create
concerns for end-users.
 They occur more often in mobile networks than in the fixed network sector.
 Risks? Tools? (cf. hereafter)
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However, the European situation appears, with respect to Net Neutrality
concerns, rather satisfactory in general.
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The 3 reports help better understanding the risks and which ones may turn into
concerns, and they show that existing regulatory tools, when deemed necessary,
comprehensively enable NRAs to address net neutrality related concerns.
 Monitoring quality of service, and if transparency measures are sufficient
 Continue improving our understanding of interconnection markets and CAPs/operators
relationships
 Assess the most appropriate regulatory tool:
 competition law, symmetric / asymmetric regulation, minimum quality of service requirements,
dispute resolution…
 3 criteria : effectiveness, necessity and strict proportionality
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BEREC Report on competition issues related
to net neutrality
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Scope and objectives of the document
 A contribution to the Net Neutrality debate : which practices may
prove to be problematic ? under which conditions ?
 Analysis of “differentiation practices” from an economical point of view
 “Differentiation practices” as deviations from best effort situation
(traffic management, contractual limitations)
 Focus on End Users
(leaving aside the analysis of interconnection markets).
 Broad definition of potential effects: harm on consumers (and not
only on competition) including static and dynamic efficiency.
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Value chain and description of markets
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End Users and Content &
Application Providers
(CAPs) are not physically
connected although they
interact in “content and
application” markets.
Electronic communications
services markets around
Internet are complex and
include several types of
players, among others :
- Hosting and connectivity
providers (HCP)
(= CAP’s ISP)
- End user connectivity
provider (ECP)
(= End user’s ISP)
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Localization of differentiation practices
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Most differentiation
practices take place on
the retail broadband
market, whose state of
competition plays a key role.
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Traffic management
practices could also
modify the current status
where ECPs and CAPs do
not have any commercial
relationship (“no
commercial relation
practice”).
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Ability to differentiate / discriminate and effects on
end-users : a framework for analysis
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Traffic management practices could take several forms and have different aims, it
being difficult to judge them in absolute terms.
The analysis is focused on predominately economic practices, with room for strategic
behavior.
Framework of analysis (based on incentives):
Significant Market Power (SMP) ?
yes
no
yes
Vertically
integrated?
no
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Practices analyzed
(in accordance with the “traffic management investigation” results)

VoIP :
 Incentives to block VoIP : protection of existing business (vertical integration) +
current retail voice and data tariff structure (cross subsidization).
 Importance of retail competition to prevent foreclosure.
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Peer to peer :
 High potential impact on consumers’ welfare.
 Vertical integration is not the standard case. Possible reasonable incentives to
throttle P2P: congestion management (i.e. cost reduction).
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Differentiation of services to CAPs :
 Positive differentiation: some specific CAPs benefit from a better quality of
delivery on the ISP’s network (e.g. managed service or higher data cap)
 Negative differentiation: some specific CAPs face a lower quality of delivery (e.g.
traffic throttling)
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Consequences of the practices
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In case of vertical integration
 Blocking or degradation of competing applications or contents on the Internet
could have a foreclosure rationality behind, which harms end-users by
reducing current competition and future choices.
 Effects are higher if the end-user’s ISP has some degree of market power.
 On the other hand, these practices might not be sustainable in a transparent
market with low switching costs because end-users could discipline ISPs.
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Absent vertical integration
 The rationality behind such practice is either cost reduction or income increase.
 From a static point of view, a fair traffic management could have positive
effects if the market is effectively competitive (not so clear in case of SMP).
 From a dynamic point of view, this could reduce future innovation and
content diversity, limiting future end-users’ choice.
 Difficulty : balancing current benefits vs future costs
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Lessons drawn from the assessment

Importance of market conditions and ISP characteristics in the assessment:
 Vertical integration and foreclosure.
 Market power of the ISP / number of ISPs performing the same practice.
 Consumers’ choice / existence of alternative (unrestricted) offers.
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Moving from “no commercial relation practice” to direct negotiations
between ISPs and some CAPs raises several questions:
 Balance of power between ISPs and CAPs varies
 Effects on general welfare are complex
 Risks of discrimination between CAPs
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Importance that practices are non-discriminatory among content and
applications providers, based upon objective criteria and proportionnate.
 In other cases, the rationality could be distortion of competition.
 Preference for “content and application agnostic” practices.
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Role of competition and possible action of NRAs
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Competition could avoid potential negative effects of differentiation
practices. Some conditions are needed in retail markets:
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Downstream markets effectively competitive.
Awareness of end users: transparency.
Ability to switch and avoid differentiation practices.
Caution: balance between individual valuation of content, switching cost and
network effects
When retail competition is not enough to grant an adequate output for endusers, NRAs have different ways to deal with specific behaviours :
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Asymmetric regulation (article 7, when SMP) (+ competition law & NCA)
Symmetric regulation (article 5)
Minimum QoS (in particular, in the non SMP environment).
Dispute resolution (depending on the legal status of CAPs).
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