The big news this week is that Neelie Kroes vice president of the European Commission is going to go ahead and enact a Net Neutrality directive in Europe if she can get the backing of the College of Commissioners and the European Parliament. It is by no means certain that she will get those agreements and the GSMA has begun in earnest to lobby against the decision, almost on the day it came out.
Cellular operators had largely thought to have escaped her deliberations after she last spoke out in favor of Net Neutrality, and while here at Faultline we are 100% behind the principle, the precise definition and the policing of any such law is fraught with huge difficulties. The key elements that Kroes is after stopping is the blocking of sites and Apps such as WhatsApp. KPN was forced under Netherlands law to stop blocking WhatsApp, but it is only one of two European countries that have a Net Neutrality law in place.
The big issues for Kroes and where she will hit hardest is the idea of blocking online services or throttling them back, which she says happens in one in five fixed lines and at one in three mobile customers. Her other beef is that many Europeans are not getting the broadband speed they are paying for or which they see advertised.
There are a number of apps that cause consternation in the cellular space, data services which eat into SMS revenues, and video services which kill masses of bandwidth using protocols that are designed to hog spectrum. If Kroes can resolve the wording of such laws so that common practices can, for the most part, remain unchanged, then perhaps she can get this law through. Initially her revisions to the cost of roaming in Europe, going country to country on cellular, were rejected by the European Parliament or at least slowed down, but she came back with more legislation on that and data roaming and now has cellular operators heading down the path she always wanted them to go.
We imagine this will be a fight, with lots of lobbying, but this time with the US FCC having new leadership known to be uninterested in over-regulating operators and fairly unsure of the value of Net Neutrality, she may even come under pressure from that quarter.
The first highly publicized Net Neutrality attack came when Comcast was prevented by the FCC of blocking the VoIP service from Vonage in the US in 2008. The FCC said it would legislate if Comcast did not back down, and after a lot of fuss and chest thumping, it did. But the end result was that another way of crushing the momentum that Vonage had built up was found. Shortly after it went public the three major telcos Verizon, AT&T and Sprint, each sued Vonage for patent infringement in the process whereby it connected VoIP traffic to normal phones, saying those were patents belonging to them. This was a case of the major telcos being patent trolls, and it should have been blocked. The Vonage coffers were emptied and in 2009 virtually all of its IPO proceeds were stolen from it after Jury trials found Vonage guilty of patent infringement. The company stopped growing and today it has managed to put back around $100 million into its coffers, but since then pressure from cable companies has driven down fixed line voice in the US, and forced everyone to have VoIP as an offering.
People always find ways in which they can bankrupt a smaller innovator, instead of beating it in the market, and we’re sorry but that was a poor day for American justice. It was a farce and a turkey shoot.
This is a big risk by Kroes, because if she tries to get this Directive through and is prevented, it will set back the case for Net Neutrality forever and immeasurably harm the internet. A European Directive is when the European Commission tells its member countries to create a law, as quickly as possible, similar to the wording of its directive, but taking into account other local laws.
The key element will be whether or not operators have to treat all internet traffic as best effort. Kroes says not, but did not deal with the issue of how to differentiate between real time and non-real time internet, and whether or not cellular and fixed line providers could still offer ‘managed services’ which are not part of the internet, but which use IP, which would be one a way around this legislation. Fixed line operators do this with IPTV and cellular could introduce that same kind of differentiation if it is entered into voluntarily, rather than on the back of ultimatums brought on by service blocking.
Our feeling is that this is a long, and largely unprofitable road, but that if anyone can get it through and get it right, its Steelie Neelie.