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29 October 2015

Europe’s half-hearted net neutrality laws disappoint purists

There is a growing feeling in Europe that the European Parliament made a major mistake by putting the legislation for net neutrality into the same bill as new rules for mobile roaming. In order to ensure that the latter went through, no-one was prepared to tamper with the former.

Roaming charges around Europe, especially for data, act as a major disincentive for millions of Europeans to use cellular services. That has been bad for the reputation and revenue of MNOs, and although they fought tooth and claw to prevent the end of roaming charges, that will lead to higher usage of their networks.

However those parties which have focused on getting net neutrality established in Europe are now worried that the legislation has not gone far enough, because none of the proposed amendments was taken up, partly in an effort to avoid delays to the rules to end roaming fees.

The key issue is the ability of MNOs to privilege their own services in two ways – to allow data used on some services NOT to count towards the mobile data cap; or to speed up their own content or that of partners (they are barred from slowing down any content). There are concerns about whether these priviliges could be extended to partners – YouTube for instance – which pay to have their content excluded from the data allowance, or given superior performance.

The final proof will be when individual countries enact their own legislation, of course, but in the meantime, members of the European Parliament voted to change something that is hurting now, rather than for something that might hurt later. The competitive level of European ISPs is such that neutrality is not currently an issue – whether that remains true, depends on how much operator consolidation the European Commission allows in future. As long as there are 3-4 MNOs with nationwide networks in each country, and rival fixed access operators in each territory, the net neutrality line can be held. If that changes, then we get all that comes with it.

Data caps really only mean something right now while caps and video delivery are ‘incompatible’ – ie, if a cellular customer today watched three hours of UHD video on the phone every day, with current data caps, they would get massive excess data charge. But in a post-LTE small cell world, with widespread WiFi carrier offload, the caps may go so high as to make this a non-issue, and that’s perhaps only 7-8 years away.

In the meantime settlement deals like the one Liberty Global agreed in order to be allowed to acquire The Netherlands’ Ziggo, also frame net neutrality issues in Europe –t it was made to adopt a net neutrality stance in order to get that deal done. For eight years it must remove any clauses in content contracts which prevent a TV channel from going on its own over the top, and it must not block this content, and must provide adequate interconnection capacity through at least three uncongested routes into its internet network.

That is net neutrality by the back door for at least eight years, since wherever Liberty Global competes, it will undermine anyone who tries to breach the spirit of such a deal, just because it isn’t allowed to itself – in effect acting like a net neutrality policeman.

But also in order to see OTT video services take off, it is healthy for MNOs to take a stake in a) their own services, b) partner services, and promote them as mobile-first TV offerings, which means adding another healthy dollop of competition in pay-TV across Europe. So allowing them a small advantage, like it not contributing to caps, is not so bad.

Eventually this OTT market may also consolidate, but as long as there are pure-play OTT video services like Netflix, and broadcasters offering catch-up services, the free OTT and pay OTT markets will have a high number of combatants in each and every European market. So on balance, and for now, we suspect that the fears of neutrality supporters are overblown.