The Internet has transformed the ways that we access, consume, and use information. For years, debates have raged in both the United States and Europe over so-called “network neutrality”—the extent to which the government should require entities that provide Internet access services to treat the content that they transmit equally. In the past several months, there have been significant events with regard to network neutrality laws in the U.S. and the EU. Regulators in both jurisdictions have promulgated sweeping rules that impose new obligations on companies that operate in the telecommunications sector. This article provides an overview and high-level comparison of the new legal framework in both jurisdictions, and offers some key takeaways for companies affected by network neutrality laws on both sides of the Atlantic.
The FCC’s Open Internet Order
On February 26, 2015, the Federal Communications Commission (FCC) adopted its Open Internet Order, a comprehensive regulation to foster market access to the Internet and to prohibit Internet service providers (ISPs) from favoring certain types of content. In particular, the FCC order prohibits ISPs from: (i) blocking access to legal content, applications, services, or non-harmful devices; (ii) throttling lawful Internet traffic on the basis of content, applications, services, or non-harmful devices; and (iii) receiving payment (or other consideration) for favoring or prioritizing particular content. In addition to these bright-line rules, the FCC also adopted a general “no unreasonable discrimination” standard for ISPs.
At the same time, however, the FCC qualified some of these rules by embracing the concept of “reasonable network management.” Tools and practices falling into this category allow broadband service providers to “optimize overall network performance and maintain a consistent quality experience for consumers while carrying a wide variety of traffic over their network.” The FCC has defined “reasonable network management” as:
“A network management practice is a practice that has a primarily technical network management justification, but does not include other business practices. A network management practice is reasonable if it is primarily used for and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service.”
Reasonable network management is an exception from the bans on blocking and throttling (but not paid prioritization). Because the FCC’s definition is rather open-ended, its particular application will have to be fleshed out on a case-by-case basis.
But the FCC’s regulatory reach went further than these core issues. Two other key changes are new rules governing common carriers and the regulation of mobile broadband services:1
- Reclassification of ISPs. The FCC’s Open Internet Order reclassified ISPs from “telecommunication services” to “common carriers.” This gives ISPs the same regulated status as held by providers offering traditional landline telephone services, though the FCC has indicated that it will forebear from enforcing most of the rules that apply to other common carrier, including rate regulation.
- Regulation of Mobile Broadband. The new order applies the open Internet rules to mobile as well as fixed broadband providers. Previously, the FCC had excluded mobile services from several network neutrality provision, sheltering a more immature market.
The FCC has argued that these principles will help preserve and protect the “‘virtuous cycle’ in which innovations at the edges of the network enhance consumer demand, leading to expanded investments in broadband infrastructure that, in turn, spark new innovations at the edge.”2
The FCC’s order is now under legal challenge with the U.S. Court of Appeals for the District of Columbia. The challengers argue that the order violates the FCC’s statutory authority and the First Amendment, as that it was procedurally improper. Until the court renders its judgment, the FCC’s Open Internet Order remains fully in effect.
The EU’s New Network Neutrality Regulation
In comparison to the U.S., this is the first time the EU has adopted an EU internal market-wide rule for network neutrality.3
In the EU, the lawmaking process involves the European Parliament, the European Council, and European Commission. The trilogue negotiations between these EU institutions ended on June 30, 2015. On that day, the European Parliament and the European Council reached an agreement on the compromise text of new rules to end mobile phone roaming fees and to safeguard open Internet access, the latter also known as network neutrality rules.4
The new laws, which include provisions on roaming and network neutrality, entered into force three days after its publication in the Official Journal of the European Union, on November 29, 2015.5 However, the provisions governing network neutrality have an implementation grace period. Those provisions will enter into effect after April 30, 2016. This gives the private sector a few months to adjust to the new legal framework.
Key Material Provisions
The new provisions establish common rules to safeguard “equal and non-discriminatory treatment of traffic in the provision of Internet access services.” When providing Internet access services, providers shall “treat all traffic equally, without discrimination, restriction or interference, independently of its sender or receiver, content, application or service, or terminal equipment.”6
Traffic prioritization follows a two-step assessment. First, paid and non-paid traffic prioritization is distinguished. Paid traffic prioritization is prohibited per se. Second, the rules differentiate between allowed and prohibited types of non-paid traffic prioritization.
Non-paid prioritization is only allowed if (i) the prioritization is independent of the origin and destination of traffic and (ii) one of the following narrow exceptions applies:
- specific content that has been deemed illegal by e.g., a court order or public authorities can be blocked from transmission;
- traffic may be prioritized to preserve the security and integrity of the network because the network is being misused or viruses, malware or denial of service attacks. Measures that fend off these attacks fall under the exception; or
- the prioritization serves minimizing temporary or exceptional network congestions. This exception cannot be invoked if the network is frequently congested due to underinvestment in the network and constant capacity scarcity.
Traffic management measures are not considered prioritization. They are exempt from the rules governing traffic prioritization if they serve the purpose of grid maintenance, contribute to an efficient use of network resources, or optimize overall transmission quality. The EU Network Neutrality Regulation describes them as follows:
“Reasonable traffic management measures applied by providers of Internet access services should be transparent, non-discriminatory and proportionate, and should not be based on commercial considerations. The requirement for traffic management measures to be non-discriminatory does not preclude providers of Internet access services from implementing, in order to optimize the overall transmission quality, traffic management measures which differentiate between objectively different categories of traffic. Any such differentiation should (…) be permitted on the basis of objectively different technical quality of service requirements (for example, in terms of latency, jitter, packet loss, and bandwidth) of the specific categories of traffic, and not on the basis of commercial considerations.”7
The EU rules also harbor a privilege for “specialized services.” Specialized services are services that are different from—and are provided in addition to—the open Internet access services. They have specific quality requirements for specific content, applications, or services. Examples include IPTV, high-definition video conferencing, and healthcare services, including telesurgery. Specialized services have higher technical requirements that “cannot be ensured in the best-effort open Internet.” They may receive (non-paid) prioritized treatment if that is objectively necessary for the service and is narrowly tailored. ISPs in the EU would be required to provide enough capacity so that specialized services can be offered without slowing down general Internet access.
Network Neutrality Laws Compared
While the EU and FCC rules aim to advance similar goals, they do so in different ways. The EU laws focus primarily on Internet traffic management and incorporate detailed rules and examples describing the fairness, non-discrimination and transparency elements. The rules are very concise and only encompass two core sections, i.e., three pages. The narrow focus is illustrated by the fact that the provisions are part of a legislative package covering mobile telephone roaming charges—relating to mobile telecommunication services traffic management.
In comparison, the FCC rules are much more detailed and laid out in more than 400 pages. The rules address ISPs, Internet traffic exchange, non-broadband Internet access services, data services, and reasonable network management rules in a more nuanced fashion.
The key similarities and differences are the following:
- No Blocking and Throttling. Under the FCC rules, ISPs are prohibited from blocking lawful content, applications, services, or non-harmful devices, unless they are engaged in reasonable network management. There is a separate (but largely parallel) ban on throttling, which is designed to avoid efforts to evade the no-blocking rule by rendering an application effectively, but not technically, unusable. The FCC’s no-throttling rule specifically prohibits actions that single out content competing with the service provider’s own business.
The EU Network Neutrality Regulation does not provide stand-alone rules for blocking and throttling. Instead, the EU has adopted a general rule prohibiting “any traffic management practices which go beyond reasonable traffic management measures, by blocking, slowing down, altering, restricting, interfering with, degrading or discriminating between specific content, applications or services, or specific categories of content, applications or services, should be prohibited, unless a justification or exception applies.”
The gist of the US and EU blocking and throttling rules is similar, however. In both jurisdictions, network operators are barred from blocking and/or throttling lawful content, subject to a somewhat open-ended exception reasonable network or traffic management. The EU rule also has a general “justification” exception, which may operate as a safety valve that is missing from the more rigid FCC rule.
- No Paid Prioritization. The FCC’s Open Internet Order entails a blanket prohibition on accepting payment or any other form of consideration for traffic prioritization. The EU’s approach to network neutrality is very similar: paid traffic prioritization is prohibited per se. There is no exception from these rules in either jurisdiction for “reasonable” network or traffic management. Such measures simply cannot take the form of paid priority lanes.
- No Unreasonable Discrimination. Both the FCC and the EU have a general prohibition on ISPs unreasonably discriminating between different content or applications on their networks. In the EU, this is simply one aspect of the general rule; in the U.S., it is a broad (but more ambiguous) catch-all limit on forms of discrimination beyond blocking, throttling, and paid prioritization that ISPs might try to use to favor some content over others. In both jurisdictions, interesting questions arise about what may be covered by this prohibition; in particular, whether certain kinds of “zero-rating” plans and data caps may be under threat.
In the U.S., the legality of such plans will have to be resolved on a case-by-case basis under the general “no unreasonable discrimination” standard. In the EU, the European Commission has suggested that limits on what it calls “sponsored connectivity” (“a commercial practice … not to count the data volume of particular applications or services against the user’s limited monthly data volume”) are implied in the general non-discrimination requirement.8
- No Altering. The EU rules ban ISPs from “altering” data transmitted on their networks. There is no parallel prohibition in the FCC rules, though certain alterations may fall within the ban on unreasonable discrimination.
- Regulatory Perspective. The EU’s angle to network neutrality is strongly rooted in the concepts of consumer protection, transparency, and non-discriminatory access to Internet services. The FCC has also considered these aspects, but places a comparatively stronger emphasis on the forces of innovation and business needs. Also, the FCC has given much consideration to the effects on the First Amendment aspect of the regulation, an impact assessment that is missing from the EU rules.
- The FCC may enforce the Open Internet Order through investigations and the processing of formal and informal complaints, which may ultimately lead to the imposition of fines or other remedial measures. The Enforcement Bureau is authorized to request written opinion from outside technical organizations and obtain additional technical advice from industry standard-setting bodies.
Under the EU rules, national regulatory authorities may impose requirements concerning technical characteristics, minimum quality of service requirements and other appropriate and necessary measures on ISPs. With that, the enforcement of network neutrality laws is left to the EU member states. The Body of European Regulators of Electronic Communications (BEREC) shall issue guidelines on the implementation of the EU Network Neutrality Regulation. Those BEREC communications will be particularly important for the private sector and should be monitored closely. Penalties for violating network neutrality laws will also be determined by the EU member states. The penalties provided for must be effective, proportionate, and dissuasive. Member states shall notify the European Commission of those rules and measures by April 30, 2016, which is the same day that the laws will enter into effect.
The FCC’s Open Internet Order and the EU Network Neutrality Regulation have much in common: both flatly prohibit paid prioritization; and both put substantial limits on blocking, throttling, and other forms of discrimination, subject to tailored exceptions focused on reasonable traffic management measures.
Nevertheless, there are important differences in the approaches that the U.S. and EU regulators have taken, particularly when it comes to enforcement. The EU’s approach is more general and leaves considerable room for the EU Commission, BEREC, and the EU member state’s national regulators to exercise discretionary powers. Enforcement of the U.S. rules is more centralized with the FCC.
In both the U.S. and the EU, the broad principle of network neutrality has been ratified but there are many questions that remain unanswered. From fleshing out the contours of reasonable network management, to deciding what kind of content and applications are unlawful (and thus outside the rules), to determining whether zero-rating plans and data caps are permissible, both U.S. and EU regulators have their work cut out for them in giving shape to the new rules. In the meantime, companies operating in this space should proceed with caution and seek legal guidance to help manage the uncertainty.
1 For a detailed analysis of the FCC’s defense of its Open Internet Order, see WSGR Alert, “Five Things to Know about Net Neutrality,” December 10, 2015, https://www.wsgr.com/WSGR/Display.aspx?SectionName=publications/PDFSearch/wsgralert-net-neutrality.htm#2.
2 In the Matter of Protecting and Promoting the Open Internet, Report and Order on Remand, Declaratory Ruling, and Order, Docket No. 14-28. The full text is available here: https://www.fcc.gov/document/fcc-releases-open-internet-order.
3 Within the EU, only Slovenia and The Netherlands have national network neutrality laws. Both countries have adopted their legislation in 2012. France and Belgium are currently working on legislative proposals, but do not have a national legal framework in place yet. See the French proposal (in French) here:https://www.republique-numerique.fr/pages/projet-de-loi-pour-une-republique-numerique) and the Beligan proposal (in Dutch and French) here: http://www.dekamer.be/FLWB/pdf/53/1467/53K1467001.pdf.
4 The press release is available here: http://www.consilium.europa.eu/en/press/press-releases/2015/06/30-roaming-charges/.
5 The position of the European Council titled “Position of the Council at first reading with a view to the adoption of a Regulation of the European Parliament and of the Council laying down measures concerning open Internet access and amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services and Regulation (EU) No. 531/2012 on roaming on public mobile communications networks within the Union” (EU Network Neutrality Regulation) was adopted in its final version without further amendments. The Council’s version is available here: http://data.consilium.europa.eu/doc/document/ST-10788-2015-INIT/en/pdf.
6 Recital No. 8 EU Network Neutrality Regulation.
7 Recital No. 9 EU Network Neutrality Regulation.
8 Available here: http://europa.eu/rapid/press-release_MEMO-15-5275_en.htm.