Traffic Management and ‘net neutrality’

Summary

Executive Summary

1.1 The internet is increasingly central to the lives of citizens, consumers and industry. It is a platform for the free and open exchange of information, views and opinions; it is a major and transformative medium for business and e-commerce, and increasingly a mechanism to deliver public services efficiently. As such it provides access to a growing range of content, applications and services which are available over fixed and wireless networks.

1.2 Many of these services, particularly those which contain video content, require high capacity networks to deliver them. Some networks are already experiencing congestion problems as consumers use 'bandwidth hungry' services. Even in the longer term, as next generation networks are deployed, there may continue to be congestion problems particularly in wireless networks.

1.3 In response, network operators and internet service providers (ISPs) are making greater use of traffic management techniques. These can allow them to handle traffic more efficiently, to prioritise traffic by type, to charge for guaranteed bandwidth or to block or degrade the quality of certain content. . Whilst traffic management potentially offers some benefits to consumers there are also concerns that firms could use traffic management anti-competitively. The increasing use of traffic management also raises questions about consumers' awareness and understanding of the impact that traffic management has on their broadband service.

1.4 There is growing international interest as to whether, and to what extent, traffic management should be subject to regulation. Countries including the US, Canada, Norway and France are considering adopting 'regulatory requirements in this area. On the 17 June the Federal Communications Commission (FCC) began a public process to consider possible frameworks for addressing the high- speed connections most consumers use to access the internet. This includes consulting on options to ensure consumers have access to relevant information about their broadband services and for preserving the open internet.

1.5 Proponents of 'net neutrality' argue that traffic management by network operators and ISPs could lead to discrimination, in turn harming what they see as essential features of today's internet . The debate ranges widely including questions such as whether citizens have a 'fundamental right' to a neutral internet, or whether 'net neutrality' promotes economic competitiveness and growth. These are important questions, but also ones primarily for governments and legislators.

1.6 In Europe the revised European Framework for Electronic Communications Regulation (the Revised Framework) includes some specific changes to legislation designed to prevent the degradation of services and the hindering or slowing of traffic. The revisions, once implemented by the UK Government, will introduce more specific requirements for greater transparency. They will also provide for the UK Government to empower Ofcom to impose a 'minimum quality of service on the internet'. The European Commission has announced that it will publish a consultation on net neutrality soon.

1.7 Against the background of this wider debate, traffic management raises two key questions for Ofcom, in relation to our duty to promote the interests of citizens and consumers in carrying out our functions. These are:

1. What stance should Ofcom take on any potential discrimination?
   
2. What is the best way to deliver consumer transparency?

1.8 The purpose of this document is to initiate an open discussion with all our stakeholders as to how our existing and prospective powers under the Revised Framework due to pass into UK law in 2011 might be used in the UK to address traffic management concerns.

Traffic management and discrimination

1.9 At the heart of the traffic management and net neutrality debate, is a concern that traffic management could be used as a form of anti-competitive discrimination. To date Ofcom has received no formal complaints from industry that require investigation. But we are aware of areas of disagreement between network providers and ISPs and some content, applications and service providers.

1.10 We believe the potential anti-competitive effect of discriminatory traffic management policies may be a valid concern and relevant for consideration as part of our general duty to promote competition.

1.11 Generally speaking, our initial position is that discriminatory behaviour is only a potential issue where firms have substantial 'market power' and could discriminate in favour of their own services ^(-1-). In this case, any form of discrimination will come under very close scrutiny to ensure that there are no anti-competitive effects. We believe that there is insufficient evidence at present to justify the setting of blanket restrictions on all forms of traffic management.

1.12 The Revised Framework also provides for the UK Government to empower Ofcom to impose a minimum quality of service. In that event there are a number of approaches we could take but it is likely that our initial view would be to explore existing competition tools and consumer transparency options before considering a minimum Quality of Service.

1.13 We welcome stakeholder views on both the nature of any potential anti-competitive discrimination in the market, appropriate regulatory remedies, if any, and initial views on the appropriateness of imposing a minimum quality of service.

Consumer Transparency

1.14 Traffic management presents two potential challenges for consumers. Firstly, when comparing different services consumers might find it difficult to understand the various traffic management policies and the impact that these policies would have on their user experience (for example on the content, services and applications they may want to access).Secondly, consumers might find it hard to understand the impact that any changes to their existing provider's traffic management policy would have on their internet experience.

1.15 We believe that a lack of transparency in this area may already be an issue for consumers. The potential for consumer harm could increase as traffic management becomes more widely deployed and more sophisticated.

1.16 Consumer transparency is an issue of global interest with initiatives taking place in a variety of countries.

1.17 The European Commissioner, Neelie Kroes, has recently stated that consumer transparency of traffic management is 'non-negotiable' ^(-2-) . We agree and consider that it is critical that consumers are appropriately informed of traffic prioritisation, degradation or blocking policies being applied by their ISP and that they are able to factor these in when making purchasing decisions.

1.18 Effective consumer transparency requires information to be meaningful to consumers. Simply providing information will not enable consumers to make informed purchasing and switching choices if it is not the right type of information, and is not presented in a way that is useful. We think that it is important that industry works together to find creative and effective solutions for delivering consumer transparency. We recognise that it would be important to track and evaluate the impact of these consumer transparency approaches.

1.19 However, a failure to provide the transparency required for consumers to make informed choices is likely to increase pressure for introducing potentially more prescriptive policy options provided for by the Revised Framework, such as a minimum quality of service.

The role of this document and next steps

1.20 In this discussion document we consider the key issues and set out our initial thinking on net neutrality and traffic management. Ofcom is seeking views on the issues raised. To help stimulate debate we set out a number of questions at the end of this executive summary.

1.21 We will conduct a series of roundtables with industry, citizen and consumer groups over the summer and we encourage interested parties to participate in these discussions.

Questions for discussion

1.22 We are seeking views on a range of questions and require responses by the by 9 September 2010. This will allow us to take these views into account when we input into the European Commission's Consultation (expected to conclude by the end of September). The questions are set out below:

1. How enduring do you think congestion problems are likely to be on different networks and for different players?
   
2. What do you think are possible incentives for potentially unfair discrimination?
   
3. Can you provide any evidence of economic and or consumer value generated by traffic management?
   
4. Conversely, do you think that unconstrained traffic management has the potential for (or is already causing) consumer/citizen harm? Please include any relevant evidence.
5. Can you provide any evidence that allowing traffic management has a negative impact on innovation?
   
6. Ofcom's preliminary view is that there is currently insufficient evidence to justify ex ante regulation to prohibit certain forms of traffic management. Are you aware of evidence that supports or contradicts this view?
   
7. Ofcom's preliminary view is that more should be done to increase consumer transparency around traffic management. Do you think doing so would sufficiently address any potential concerns and why?
   
8. Are you aware of any evidence that sheds light on peoples' ability to understand and act upon information they are given regarding traffic management?
   
9. How can information on traffic management be presented so that it is accessible and meaningful to consumers, both in understanding any restrictions on their existing offering, and in choosing between rival offerings? Can you give examples of useful approaches to informing consumers about complex issues, including from other sectors?
   
10. How can compliance with transparency obligations best be verified?
    
11. Under what circumstances do you think the imposition of a minimum quality of service would be appropriate and why?
    

Footnotes:

  1.- Given the nature of this discussion document, market power is considered as a broad conceptual principle. We do not seek to assess the relevant product and geographic markets where such market power may arise.

  2.- A conference in Paris on 13 April 2010 http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/10/153