Ofcom’s approach to net neutrality
Statement published 24|11|11
Growth in the use of the internet delivers substantial benefits, but may also require new approaches to traffic management
1.1 The unprecedented degree of connectivity provided by the internet has delivered substantial benefits:
- consumers are able to access a range of online products and services that would have previously been unimaginable;
- citizens are able to access news and opinion from many more sources than was possible with traditional media, improving the quality of public debate; and
- service providers and owners of content are able to develop innovative new applications, exploiting the large addressable market and low barriers to entry intrinsic to the internet.
1.2 The resulting growth in the use of the internet does however create a challenge for network operators, who must consider how best to meet demand. They are likely to do so partially by investing in new capacity, and partially by rationing existing capacity. Traffic management tools play an important role, increasing the efficiency with which operators can manage existing network capacity.
1.3 The appropriateness of different approaches to traffic management is at the heart of the Net Neutrality debate. Given the controversial nature of this debate, it is important to bear in mind that traffic management is often beneficial. It is commonly used for example to protect safety-critical traffic such as calls to the emergency services. The question is not whether traffic management is acceptable in principle, but whether particular approaches to traffic management cause concern.
1.4 It is possible to identify two broad forms of internet traffic management:
- 'Best-efforts' internet access, under which network operators attempt to convey all traffic on more or less equal terms. This results in an 'open internet' with no specific services being hindered or blocked, although some may need to be managed during times of congestion.
- Managed Services, under which network operators prioritise certain traffic according to the value they ascribe to it. An example may be the prioritisation of a high quality IPTV service over other traffic. This amounts to a form of discrimination, but one that is normally efficiency enhancing.
1.5 Our approach to traffic management recognises the benefits associated with both types of service, and seeks for them to co-exist. Our overall aim is to ensure that consumers and citizens continue to benefit from both innovation in services and investment in networks.
1.6 The tools available to achieve this have recently changed, due to revisions in the EU framework and corresponding UK law. These changes enable regulators to enhance consumer protection, by requiring greater transparency as to the use of traffic management by network operators, and to protect the quality of 'best-efforts' internet access by setting a minimum quality of service. This document sets out the approach we would currently expect to adopt if we were to consider using these powers.
Understandable information is necessary for all consumers
1.7 To date, the market has generally been an effective mechanism for delivering the benefits described above. Our approach to traffic management will therefore continue to rely primarily on there being effective competition amongst Internet Service Providers (ISPs). Effective competition requires that:
- sufficient information is available to enable consumers to make the right purchasing decisions; and
- consumers are able to act on this information by switching providers where appropriate.
1.8 The complexity of traffic management practices does, however, create a particular challenge for the provision of consumer information that is easy to understand. We recognise this challenge, and suggest that the information provided to consumers should include at least the following elements:
- Average speed information that indicates the level of service consumers can expect to receive.
- Information about the impact of any traffic management that is used on specific types of services, such as reduced download speeds during peak times for P2P software.
- Information on any specific services that are blocked, resulting in consumers being unable to run the services and applications of their choice.
1.9 Furthermore, any marketing terms used to describe services should be simple to understand, and comparable between ISPs.
1.10 In particular, if ISPs offer a service to consumers which they describe as 'internet access', we believe this creates an expectation that this service will be unrestricted, enabling the consumer to access any service lawfully available on the internet. As a result, if a service does not provide full access to the internet, we would not expect it to be marketed as internet access.
1.11 It is possible that providers may seek to market a restricted service as 'internet access' by caveating this with a description of the restrictions they have put in place. Consideration needs to be given as to whether this practice is acceptable. We believe this will depend, at least in part, on whether consumers would be able to make sufficiently informed decisions based on such a formulation or whether, in practice, the risk of consumers being misled about the service they are buying remains unacceptably high
1.12 Where consumers are entering into a long-term contract, and it is not possible to provide an appropriate level of information on traffic management policies at the point of sale, we encourage ISPs to provide a cooling-off period offering consumers the ability to terminate the contract or to change to a package that better suits their needs without having to pay additional costs. Many ISPs have already introduced a 30-day period that enables the consumer to cancel their broadband if they are not happy with the service.
1.13 If there are material changes in traffic management policies once a consumer has purchased a service, ISPs should provide an update as quickly as reasonably possible. If these have a significant impact on the service being purchased, we also encourage the ISPs to provide the consumer with the option of switching to another package or another service provider, and provide information to consumers as to how they can exercise this choice.
1.14 We do not describe what more detailed information might be provided, over and above the desired outcomes set out above. We note, however, that the self-regulatory model recently proposed by major ISPs provides a good foundation. Under this model each ISP commits to:
- provide more information to consumers about what traffic management takes place, why and with what impact;
- provide customers with clear, easy-to-understand information on traffic management so that they can better compare broadband packages, and
- publish a common Key Facts Indicator (KFI) table, summarising the traffic management policy for each package on offer. These tables have been available on signatories' websites since July 2011.
1.15 We welcome this initiative. If properly implemented, and complied with by all providers, the KFI has the potential to provide appropriate, comparable and current information on traffic management policies. This will be of direct benefit to some consumers, but perhaps more importantly, can also underpin the provision of further information by intermediaries, such as reviewers and price comparison websites.
1.16 However, the technical nature of the KFI means that it will not by itself provide information which is accessible and understandable for all consumers. For the current self-regulatory approach to be effective, ISPs need to consider how best to provide such information. We would like to see ISPs approach this challenge creatively, drawing on their own experience, and also on the lessons that can be learned from the sale of other complex products.
1.17 We will monitor progress, and keep under review the possibility of intervening more formally in order to ensure that there is sufficient transparency as to the use of traffic management by network operators.
'Best-efforts' access to the open internet as an engine of innovation
1.18 It has been argued that the success of the open internet in fostering innovation is because it has enabled 'innovation without permission'. Anyone with an idea can, at least in principle, use the open internet as a vehicle for testing their idea in the market.
1.19 The result has been an unprecedented explosion in the availability of new content and services to citizens and consumers. These have transformed a wide range of economic and social activity, including the way we buy and sell goods, consume content (whether music, books or video), play games, search for information, participate in social networks, and so on.
1.20 These services deliver significant benefits to UK citizens. The internet is the first truly global network, allowing us to access news, views and information from anywhere in the world. The result is increased public scrutiny, transparency and accountability.
1.21 Access to the open internet is also increasingly important as a means for citizens to participate in the process of public debate and democracy, and as a means for accessing a range of public services over the internet.
1.22 From the perspective of protecting the citizens' interest alone it will be important to be vigilant in relation to the core connectivity of the 'best-efforts' open internet and the access to information and services which it provides. It is important to note however that we see no concerns in this regard in the UK at present.
1.23 From a consumer perspective, the widespread availability of 'best-efforts' access to the open internet gives rise to the following key economic characteristics:
- low barriers to entry, allowing innovators to create and distribute new services; e.g. anyone who wants to can develop an application or create a website;
- low transaction costs that enable a wider range of transactions; e.g. consumers selling goods on eBay;
- large addressable markets that allow new business models to develop; e.g. for the provision of niche content, by giving suppliers access to a wider audience; and
- near-instant access to content and services; e.g. downloading music, films or books.
1.24 These characteristics have created a virtuous circle, in which all consumers are able to access a wide range of products and services, whilst any service provider can exploit the large addressable market and low barriers to entry intrinsic to the internet to develop innovative new services and to test demand.
1.25 Markets work at their best by enabling a process of experimentation and discovery, under which many ideas are tried, with the successful ones taken forward and the unsuccessful discarded. It is notable that the internet economy has been characterised by the creation of an environment in which a vast number of different individuals and companies have been able to create ideas and test them through a global network that offers a massive potential addressable market. This has been associated with a period of intense and highly productive innovation.
1.26 Our approach to traffic management recognises the benefits associated with both 'best-efforts' internet access, and the provision of managed services, and seeks for them to co-exist.
1.27 There is, however, a risk that network operators prioritise managed services in a manner that leaves insufficient network capacity for 'best-efforts' access to the open internet. If the quality of service provided by 'best-efforts' internet access were to fall to too low a level, then it may place at risk the levels of innovation that have brought such substantial benefits during the internet's relatively short life so far. This would clearly be a significant concern.
1.28 If there was sufficient reason for concern in relation to this issue then we would need to consider intervening in order to ensure that consumers and citizens continue to benefit from the widespread innovation that has delivered such significant benefits since the internet's creation. We might do so by using the powers which allow us to safeguard 'best-efforts' access to the open internet, in particular by imposing a minimum quality of service on all communications providers.
1.29 Any use of a minimum quality of service would need to be considered carefully, balancing the benefits of such an intervention against the associated risks. We are not, at present, aware of any actual concerns which would merit carrying out such an assessment. However, given the importance of 'best-efforts' access to the open internet for innovation, we will keep this issue under review.
1.30 We will do so as part of the process for reporting on the state of the UK's communications infrastructure . This process requires us to gather data on the coverage, capacity and resilience of the main public networks and services available in the UK, and as part of this process we will also gather data on the approaches to traffic management adopted by different network operators. We will use this to keep under review whether there is a case for intervention.
1.31 There is also a concern that service innovation would be hindered if providers of internet access blocked services, or applied traffic management in a manner that discriminated against competing providers. As well as being a general concern, there is also a specific current concern that some mobile operators already block services provided by some competing providers.
1.32 We do not have a general objection to models of competition where vertically integrated operators do not provide open access to their networks, provided that there is genuine competition and rivalry among the firms. In such circumstances, we do not necessarily regard the blocking of services provided by competing providers, or discrimination against competing services, as being anti-competitive. We do however have a specific concern in the context of the discussion in this document that restricted access to the internet could have a stifling effect on innovation.
1.33 Our stance as a regulator is therefore that any blocking of alternative services by providers of internet access is highly undesirable. Similarly, whilst we recognise that some forms of traffic management may be necessary in order to manage congestion on networks, we expect such traffic management practices to be applied in a manner which is consistent within broad categories of traffic. Where providers of internet access apply traffic management in a manner that discriminates against specific alternative services, our view is that this could have a similar impact to outright blocking.
1.34 We recognise that any regulatory intervention in this area must be based on careful consideration of the risks of unintended consequences, and we recognise that the market is dynamic. Our current view is that we should be able to rely on the operation of market forces to address the issues of blocking and discrimination. There are several examples in recent history of internet service providers providing access to a restricted set of services within a 'walled garden', but business models of this kind have not proven to be sustainable in the face of competition from more open forms of internet access.
1.35 We emphasise however that our ability to rely on market forces to address this issue does depend on effective consumer transparency being provided by internet service providers as to the nature of the services they offer. As discussed above, we encourage service providers to provide information on any services which are blocked or discriminated against, and to avoid marketing services as 'internet access' in circumstances where that use of language might result in poorly informed purchasing decisions, or be misleading.
1.36 We would in any case be concerned if the current blocking of services by mobile operators remained both widespread and persistent, in which case we would need to consider whether the benefits of intervening outweighed the risks. We do not believe such consideration is appropriate at this stage of the development of the market, but this is an issue which we will monitor closely.
1.37 In summary:
- We recognise the benefits associated with 'best-efforts' internet access and the provision of managed services, and seek for them to co-exist.
- We would be concerned if network operators were to prioritise managed services in a manner that leaves insufficient network capacity for 'best-efforts' access to the open internet. In such circumstances we would consider using the powers which allow us to safeguard 'best-efforts' access to the open internet by imposing a minimum quality of service on all communications providers.
- We regard any blocking of alternative services by providers of internet access as highly undesirable. Where providers of internet access apply traffic management in a discriminatory manner, our view is that this could have a similar impact to outright blocking. Our current view is that we should be able to rely on the operation of market forces to address the issues of blocking and discrimination, but we will keep this position under review.
- Effective competition requires that sufficient information is available to enable consumers to make good purchasing decisions. This document sets out our current view as to what we believe to be necessary, both in terms of technical information on traffic management practices, and transparency as to services which are blocked or discriminated against.
1.38 We will monitor progress, and keep under review the possibility of intervening more formally in relation to the issues we have identified in this document. We will do so as part of our ongoing work, within the context of our infrastructure reporting duty, to monitor traffic management practices. We expect to publish our next update on this work in summer 2012.
1.39 As this is a rapidly developing area we will continue to engage with industry, consumer bodies and consumers on any new concerns that may emerge. We will also be working through Body of European Regulators of Electronic Communications (BEREC) to assess market developments at a UK and EU level.
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Ofcom’s approach to net neutrality (229 kB)
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