How Ofcom can develop more flexible net neutrality rules for specialised services

The United Kingdom needs more flexible net neutrality rules as the Rishi Sunak government seeks to bolster the country’s leadership in emerging technologies. Creating more flexible rules for specialised services—from remote-assisted surgery to driverless transportation systems—will be crucial to the UK’s efforts to bolster technological innovation and consumer welfare. 

Net neutrality—or open internet—is the principle that internet service providers (ISPs) must treat all traffic equally without prioritising, throttling, or blocking any particular content or service. Although broadband connectivity and the telecommunications industry have thrived in the United States under a more permissive approach to net neutrality, the European Union took a much stricter approach. The EU’s net neutrality rules was domesticated into UK law through the Net Neutrality Regulation 2016, which continues to provide the main legal framework for the UK’s net neutrality rules.

European Union policymakers view strict net neutrality regulations as necessary for ensuring that service providers do not arbitrarily discriminate against certain content and websites. However, if the net neutrality regulations are defined and interpreted too strictly—as is currently the case under the UK’s EU-derived rules—it can prevent internet service providers from prioritising traffic for specialised services and even offering certain services altogether.

As emerging technologies develop further, Parliament and Government will ultimately need to update or replace the Net Neutrality Regulation with a more flexible, market-friendly legal framework. Until then, Ofcom can design more flexible rules for specialised services while operating within the existing legal framework.

First, Ofcom would benefit from a comprehensive assessment of different types of specialised services and developing more flexible criteria for classifying and regulating such services. Currently, Ofcom builds on the definition of specialised services provided by the Body of European Regulators for Electronic Communications (BEREC), an EU regulatory body. Since Ofcom is no longer required to consider the BEREC Guidelines, it can change the criteria for classifying specialised services and adopt more flexible rules, as we pointed out in our net neutrality consultation response earlier this year.  

Second, Ofcom should consider creating a sandbox to create a more-market friendly regulatory framework for offering specialised services. Due to the rapidly changing nature of communications technology, there is a growing need to understand how those technologies interact with the net neutrality rules and other legal frameworks. To that end, Ofcom could create a regulatory sandbox where companies receive regulatory relief and guidance for offering specialised communications services. By working closely with companies, Ofcom can better understand emerging technologies and changing business models, calibrate internet rules, and suggest ways to revise legislation accordingly.

In designing such a program, Ofcom can draw from the UK’s leadership in creating financial technology (fintech) sandbox programs. The Financial Conduct Authority (FCA) became the world’s first regulator to create a fintech sandbox, which was subsequently adopted by more than 50 jurisdictions, including Singapore, South Korea, and the US. Since then, several regulators have created sandbox programs to promote innovation in other sectors. For instance, Utah in the US and British Columbia and Ontario in Canada have launched sandbox programs to promote legal innovation. Meanwhile, the EU has proposed the creation of national AI sandboxes in EU member states (Spain launched the first one last year). 

In its consultation request for the 2023–2024 strategic plan, Ofcom mentioned its ongoing efforts to develop “spectrum sandboxes” to understand the evolving needs of spectrum users and calibrate authorisation approaches accordingly. Similar arrangements for specialised services—like machine-to-machine communications, remote-assisted surgery, and driverless transportation solutions—could help Ofcom better understand, classify, and regulate different categories of specialised services.

However, because sandboxes for specialised services will most likely implicate the overlapping jurisdictions of multiple government departments—such as the FCA, the Competition and Markets Authority, and the Department of Transportation—Ofcom will need to cooperate with other regulators and develop a mechanism for coordinating regulatory relief and jointly supervising sandbox participants. Continued engagement with regulators through such fora as the Digital Regulation Cooperation Forum will be crucial to Ofcom’s efforts to that end.

Finally, Ofcom could develop reciprocal sandbox agreements with other advanced economies such as Australia, Canada, and the US.  Overseas companies could use such sandboxes to offer innovative specialised services in UK markets in exchange for regulatory guidance, accelerated authorisation, and/or exemption from certain rules. Similarly, UK-based companies could also participate in reciprocal sandbox programs overseas and receive similar benefits.

As the next generation of wireless technologies widens the gap between basic and more advanced internet applications, regulatory agility is crucial for enabling innovation and improving consumer welfare. By adopting a more pragmatic, flexible approach to digital regulation, the UK can lead the way in developing a distinct regulatory approach that balances consumer protection, business needs, and innovation.