No panic, please, on neutrality regulation

Following last month’s bizarre machinations in the Dutch parliament, the country’s new net neutrality law is now heading in the wrong direction. Against this background of factional wrangling, it was refreshing to be reminded that the European Commission’s more cautious, ‘wait-and-see’ stance on further regulation is supported not only by network stakeholders but also by leading academics. 

In early 2009, a group of eminent European economists issued a statement on the inappropriateness of imposing increased internet regulation in the EU.  The statement concluded as follows:

“… so far, net neutrality in Europe is a solution looking for a problem which either does not exist or can be solved by mandating clearer customer information and using existing tools to deal with market power. The need for the legislation is unproven, and the unintended consequences on restricting variety, competition and innovation are too big for comfort”.

Despite the more recent clamour in the Netherlands - and elsewhere – for regulatory intervention, the economists’ sceptical view remains largely unchanged.  A paper by Martin Cave on ‘Competition and Consumer Protection Issues in the Net Neutrality Debate’ was submitted to the OECD Working Party on Competition & Regulation for its meeting on 27^th June (Paper ref. DAF/COMP/WP2 (2011) 4).  As before, Professor Cave considers that Europe’s relatively high level of retail competition in internet access has acted as a defence against the exertion of market power, and that any rules on access blocking would be premature:

“…given that currently there do not seem to be significant risks and evidence that exclusionary behaviour is an endemic feature of competition in Europe, ex post rules seem a better option”.

Indeed, Professor Cave goes on to point out the difficulties of even establishing ex ante regulations in a complex, multi-sided market such as the internet.  And he contends that some new optional powers, such as the imposition of a minimum QoS obligation on ISPs (under the revised Universal Service Directive), have been ‘introduced ahead of any evidence of need’:

“As a result, regulators such as BEREC are currently engaged in the task of defining the conditions in which such instrument might be applied…an ‘anti-precautionary’ principle can be applied to regulators, stating that they should not be granted powers ahead of demonstrated need”.

Ofcom please note….