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Network Neutrality: The Global Dimension


Pierre Larouche


Tilburg Law and Economics Center (TILEC); College of Europe - Bruges; Tilburg University - Tilburg Law School; Center on Regulation in Europe (CERRE)

August 15, 2011

TILEC Discussion Paper No. 2011-035

Abstract:     
This paper first sets out a framework for understanding network neutrality, by organizing the various issues raised in the course of the network neutrality debate. Secondly, recent US legal and regulatory initiatives are briefly reviewed. Thirdly, the situation under EU law is surveyed. Finally, the conclusion compares the two regulatory responses and considers how the global network neutrality debate could unfold.

In the short term, ISPs must take measures to deal with imbalances and congestion on their networks. Beyond that, in the longer term, ISPs are looking to introduce differentiated Quality of Service (QoS) offerings, so as to turn their services to a two-sided platform. The most fundamental policy concern within ‘network neutrality’ is whether differentiated QoS should be allowed at all. Economic arguments point to benefits, as well as potential risks. However, depending on how it is implemented, differentiated QoS could lead to market fragmentation, where largely standardized IP-based offerings would be replaced by primarily national platforms. Market power concerns also arise, most significantly at the ISP level. Vis-à-vis users, the ability of users to switch to another ISP acts as a brake on any abuse on the part of the ISP. Vis-à-vis content providers, the ISP is in a position similar to that of a terminating operator, but this analogy is imperfect. There is a widespread concern in the literature that an ISP with market power could integrate vertically and then engage into discrimination against, or even blocking of traffic from, non-affiliated content providers.

In its Open Internet Order of December 2010, the US FCC found that differentiated QoS is undesirable, towards content providers except if it can be brought within an exception (reasonable network management, specialized services). Mobile ISPs also have greater leeway to discriminate than fixed ISPs. Despite its efforts to rely on economic analysis, the FCC is mired in technological categories.

In the EU, the European Commission has adopted a different policy line so far, whereby the introduction of differentiated QoS is possible, within some safeguards and subject to the application of EU competition law. The Commission relies on economic analysis and remains technology neutral, in line with EU communications policy.

At the global level, it must be expected that different local market situations and policy preferences will lead to divergence on network neutrality. While divergence is not harmful as such, in the case of network neutrality spillovers could arise, and global market fragmentation could occur.

Number of Pages in PDF File: 28

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Date posted: August 15, 2011 ; Last revised: October 6, 2011

Suggested Citation

Larouche, Pierre, Network Neutrality: The Global Dimension (August 15, 2011). TILEC Discussion Paper No. 2011-035. Available at SSRN: http://ssrn.com/abstract=1909811 or http://dx.doi.org/10.2139/ssrn.1909811

Contact Information

Pierre Larouche (Contact Author)
Tilburg Law and Economics Center (TILEC) ( email ) ( email )
Warandelaan 2
Montesquieu Building, Room M 535
Tilburg, 5000 LE
Netherlands
+31.13.466.8270 (Phone)
College of Europe - Bruges ( email )
Dijver 11
B-8000 Brugge, Oost Vlanderen 10000
Belgium
Tilburg University - Tilburg Law School ( email ) ( email )
Warandelaan 2
Montesquieu Building, Room M 535
Tilburg, 5000 LE
Netherlands
+31.13.466.8270 (Phone)
Center on Regulation in Europe (CERRE) ( email )
Rue de l'Industrie 42
Brussels, 1040
Belgium
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