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European Broadband Industry Sets Sights On Flexible EU-U.S. Net Neutrality Approach

Thursday, May 15, 2014

By Joe Kirwin  

May 14 — European broadband providers are pushing hard for European Union regulators to seek a trans-Atlantic approach to open Internet rules at a time when the Federal Communications Commission has been forced to reconsider U.S. net neutrality rules.

The FCC may vote May 15 on whether to open comment on a proposal to revamp its 2010 net neutrality rules after the U.S. Court of Appeals for the District of Columbia Circuit said the agency's no-blocking and nondiscrimination rules too closely resembled common carrier regulations (Verizon Commc'ns Inc. v. FCC, D.C. Cir., No. 11-1355,1/14/14).

“The timing is perfect for industry and regulators from both sides of the Atlantic Ocean to seize the innovation and investment opportunities presented by our sector.” Matthias Kurth, Cable Europe

Groups such as the European Telecommunication Network Operators and Cable Europe say that a recent vote in the European Parliament establishing strict net neutrality rules are outdated and will further slow the European digital economy, which already lags behind that of the U.S. and some parts of Asia.

“The timing is perfect for industry and regulators from both sides of the Atlantic Ocean to seize the innovation and investment opportunities presented by our sector,” said Cable Europe Executive Chairman Matthias Kurth in a recent speech delivered to a cable industry conference in California. “The cable industry is fully in support of an open Internet. Yet what we are witnessing is a real risk that in a desire to ensure an open environment regulatory constraints will stifle the most innovative and exciting developments.

“We should learn from one another to reach a best practice mode and it is for industry to drive this process,” Kurth said.

EU Overhaul Legislation

In April, the European Parliament adopted last-minute amendments to the pending EU regulatory telecommunications legislation to overhaul its regulatory framework that would restrict broadband operators from offering specialized services at high speeds to content providers such as Apple Inc., Google Inc. or online movie services such as Netflix Inc.

“If these restrictive changes to the open internet provisions are confirmed, the European digital economy will suffer and EU businesses will be put in a difficult competitive situation with respect to other regions of the world, especially the United States,” ETNO Chairman Luigi Gambardella told Bloomberg BNA. He added that the EU must fall in line with the FCC because it “wants to recognize that innovation is the very essence of the internet.” ETNO is the Brussels-based European Telecommunications Network Operators' Association.

For consumer and public advocacy groups, the European Parliament amendments are hailed as a major victory that will prevent the Internet from becoming a “pay-to-play” market place as opposed to an open, egalitarian utility.

However, the EU legislation awaits a vote in the Council of Ministers in the second half of 2014, now the focus of intense lobbying. The EU broadband industry, as well as content providers, are calling for EU member states to back the net neutrality approach outlined in the original European Commission proposal put forward in September 2013.

“In Europe, we need to take a decision on whether we are to be part of the future innovations and put our continent back on the internet map,” Gambardella said. “To this end, the upcoming work of the Council of Ministers on EU’s net neutrality rules will be key in helping Europe regain its digital leadership.”

Content Provider Critics

Not only the Internet service providers support a more flexible net neutrality approach. Even major content providers such as Google Inc., Apple Inc. and others—who have petitioned the FCC not to allow broadband companies to charge more for delivering services at higher speeds—are not happy with the European Parliament position.

“The IT industry would ideally like the U.S. and the EU to take a similar approach on this question,” said a lobbyist representing companies such as Apple, Google, Cisco Systems Inc., Oracle Corp. and others, who spoke to Bloomberg BNA on condition of anonymity. “But the European Parliament position does not help. We are urging member states to re-work this legislative proposal, stripping out much of the technical detail and giving a clearer line regarding the broader political debate around net neutrality.”

According to EU diplomats and industry officials, the vote in the Council of Ministers will reflect the different approach that EU member states are expected to take compared with the one approved in the European Parliament. France and Germany have already voiced their dissatisfaction with the European Parliament stance.

“EU member states do not have an election to worry about,” said EU diplomat, who spoke to Bloomberg BNA on the condition of anonymity, referring to May 22-25 European Parliament elections. “So the approach of member states is much less political and more focused on the economic reality.”

More Nuanced Approach

From the European Commission vantage point, the proposal it put forward in September 2013 is a compromise that meets the concerns of consumer groups and others worried that pay-for-play platforms would leave many in a slow lane while more affluent users benefit from high-speed lanes that content providers have negotiated with Internet service providers. The EU executive body also believes that the FCC should and probably will adopt a flexible approach in line with the European Commission proposal.

“Like the Commission, the FCC in the United States recognizes that you can not take a fundamentalist approach to network management,” European Commission spokesman Ryan Heath told Bloomberg BNA. “However we believe our proposal gives strong protections and necessary commercial flexibility. It does not need to be watered down in light of U.S. developments.”

One of the reasons the European Commission took a more nuanced approach to net neutrality was the recognition that investment by European telecom operators in high-speed networks was falling dangerously behind other parts of the world. Although the European Commission has resisted for years arguments that the incumbent network operators such as Deutsche Telekom AG, Orange S.A. and Telefonica S.A. could exclude new entrants from using their newly constructed high-speed networks, it accepted that new revenue is required to make the needed multibillion-dollar investments.

Challenging Antitrust Limits

The need for new revenue, the European Commission says, is especially true since the same legislation proposed in September 2013, calling for a nuanced, flexible net neutrality policy, would ban the controversial roaming fees European operators have charged to process cross-border telephone calls.

In some ways, the debate in the EU over net neutrality rules ties in with a parallel, highly divisive issue in the EU telecom sector that also has trans-Atlantic implications. European telecom operators say that EU competition rules that prevent the formation of pan-European carriers that can match the likes of AT&T Inc. or Verizon Communications Inc. are a further reason that a relaxed approach to Internet neutrality rules are needed. Currently, the European antitrust authority holds that fewer than three or four telecom operators in each EU member state would put consumers at a big disadvantage.

Although the anti-consolidation position by EU antitrust officials is now being questioned—the current candidates for the next European Commission presidency have signaled a change as has German Chancellor Angela Merkel—European operators say a U.S. approach to net neutrality that gives them the right to earn more revenue would give the U.S. a greater advantage. In theory, this issue could be addressed in the Transatlantic Trade and Investment Partnership (TTIP), EU telecom operators say.

However, the European Commission as well as the telecom operators and content providers say TTIP will probably take years to be completed.

“We need solutions now,” said the EU lobbyist working for the content providers. “This is an urgent issue and this sector can not wait for TTIP—although it is something we support. But in the meantime, it is important that the FCC approach and that of the EU will create a level playing field. Otherwise, EU businesses will be put in a difficult competitive situation with respect to other regions of the world.”

To contact the reporter on this story: Joe Kirwin in Brussels at correspondents@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

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