ARCEP favors an uncomplicated, flexible approach to net neutrality

OVUM VIEW

Summary

On September 20, 2012 ARCEP, the French telecoms regulator, submitted to the French government and parliament its report on net neutrality. ARCEP is just one of many regulators to engage with this issue, which has become progressively more important for stakeholders as the volume of Internet traffic has increased, leading to questions regarding control. Certain positions on transparency and network management have become widely accepted, although different measures and regulations have been proposed or implemented in different countries.

ARCEP’s report, which builds upon the 10 proposals it published in 2010, focuses on four key areas: transparency, traffic management, quality of service, and interconnection. Should net neutrality legislation be required, ARCEP recommends that it be flexible and not so overly-detailed as to constrict its application. This stance appears sensible and justified, and national regulatory authorities (NRAs) that are yet to take action in this area would do well to take note of ARCEP’s conclusions. ARCEP concedes, however, that it is now up to the legislator to assess what further action needs to be taken. Hopefully the government and parliament will be as pragmatic as the regulator.

Countries have opted for different approaches to tackling net neutrality

As Ovum’s recent report Net Neutrality: The Approach of Regulators and the Industry makes clear, the subject of net neutrality is now a hotly debated topic around the world. What began in the US as a dispute between incumbent local exchange carriers (ILECs) and Internet content and service providers (ICSPs) has quickly spread to Europe, South & Central America, and Asia-Pacific. There is now a general acceptance among stakeholders that changes to the “Internet model” are needed to encourage future investment, and to ensure that innovation continues to benefit the consumer. The definition of net neutrality is also evolving, and correctly encompasses the issue of pricing on both sides of the market.

However, regulators and policymakers have often adopted differing views on the correct course of action to take. Three countries (Chile, the Netherlands, and Peru) have enshrined in national law the principal of maintaining a neutral network, while others (such as the UK) have adopted a more wait-and-see approach that allows experimentation with new business models. Nevertheless, it has generally been acknowledged by all concerned that certain forms of traffic management can and must be carried out in order to guarantee performance and ensure the safety and integrity of the network. Importantly, authorities at the regional and national levels have concluded that enhanced transparency for consumers around exactly what their Internet service can and cannot do is an important tool, whether or not ex-ante regulation has been imposed. NRAs appear to highly value consumers’ ability to access and understand their ISP’s traffic management policies.

Competition and transparency are important for a well-functioning market, but they may not be enough

ARCEP has been following this issue closely, and in September 2010 published 10 proposals and recommendations setting out the path that it would follow. Following a period of public consultation, in September 2012 it published its final report on net neutrality. The report, which serves as a follow-up to the 10 proposals, centers on four pillars: transparency, traffic management practices, quality of service (QoS), and interconnection. ARCEP believes that, while transparency has increased thanks to action from market players, further efforts must be made to improve the provision to consumers of clear, relevant, and understandable information on the available services (including their quality and limitations). Competition and transparency are desirable features of markets, yet they may not always be sufficient. Encouragingly, the regulator has looked for improvements in other areas.

As part of its monitoring, ARCEP has reported that fewer instances of throttling or blocking have occurred, particularly in mobile networks, suggesting that ex-ante regulation would be disproportionate at this time. However, some techniques which are contrary to the 2010 recommendations are still being used, and ARCEP is therefore calling for the elimination of the blocking of VoIP and P2P traffic. The regulator concludes that QoS is a crucial long-term issue that must be monitored in order to “strengthen competitive emulation”. By the end of 2012 ARCEP will adopt a decision that specifies QoS indicators for fixed networks. These will complement the existing measures in place for mobile networks, and will allow the regulator to react quickly to a fall in QoS. With regards to interconnection, ARCEP reports that, while the relationships between Internet players are evolving, there is no need to strengthen the regulatory framework at this time. This goes contrary to what network operators such as Telefonica have been pushing for.

Factors such as quality of service should be considered before imposing stricter ex-ante regulation

ARCEP’s report provides an overview of the work it is currently carrying out, and explores the technical and economic aspects of the net neutrality debate. Promisingly, its approach to the issue is a progressive one, and it will begin by promoting competition and transparency, and recommending open access for consumers to all types of services. ARCEP can use the powers granted to it under the revised telecoms framework to set minimum QoS requirements should such measures prove necessary. However, it seems that the NRA would prefer to employ less strict tactics, in the medium term at least. ARCEP recognizes that an important assessment of markets should be undertaken before proportionate regulation is applied, and that different regulatory instruments should be available to NRAs to allow a degree of flexibility.

ARCEP is therefore correct to warn the French parliament against rushing to implement overly-detailed additional ex-ante measures in such a constantly changing sector. In fast-moving, evolving markets such as telecoms, regulators and law-makers can sometimes impose ex-ante rules prematurely. Excessive or poorly thought-out regulation can have a detrimental effect on investment, and be a major hindrance to the free and unconstrained development of markets. Sensibly, ARCEP will adopt QoS indicators by the end of 2012, and will continue to monitor and analyze market trends. However, as the regulator admits, the decision ultimately lies with the French parliament and government, which will determine how this report is to be taken forward.

APPENDIX

Author

James Robinson, Associate Analyst, Regulation & Policy

james.robinson@ovum.com

Further reading

Net Neutrality: The Approach of Regulators and the Industry (September 2012)

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