Ofcom Consultation: Net Neutrality Review
On behalf of the Competitive Enterprise Institute (CEI), I welcome the opportunity to submit the following comments in response to the Office of Communication (Ofcom)’s net neutrality review consultation. Founded in 1984, the Competitive Enterprise Institute is a non-profit research and advocacy organisation focusing on regulatory policy from a pro-market perspective based in Washington, DC. CEI experts research and advocate policies to accelerate technological innovation and promote economic competitiveness through regulatory reforms in policy areas such as telecommunications, data privacy, artificial intelligence, and platform regulation, among others.
As post-Brexit Britain recalibrates its approach to telecommunications policy, the United Kingdom needs to adopt a careful approach to net neutrality that balances the competing priorities of promoting internet access, efficient broadband networks, consumer protection, and technological innovation. To that end, the Competitive Enterprise Institute appreciates Ofcom’s intention to adopt a more flexible, pragmatic net neutrality framework and its efforts to seek stakeholder input and expert comments through this consultation.
The main points in this consultation response are summarised below:
I. Assessment of and proposed approach to zero-rating offers (Questions 1 to 4)
- More flexible approach to zero-rating offers: Ofcom’s proposed flexible approach toward zero-rating offers is a step in the right direction. By allowing consumers to access certain internet content without reducing their overall data allowance, zero-rating can help improve consumer welfare, especially for low-income consumers. By allowing ISPs to provide zero-rate content while implementing proportionate transparency measures and reporting requirements, Ofcom can help calibrate net neutrality rules so that they cater to the needs of UK consumers and businesses better (Question 1).
- Classification of Type One entities for zero-rating offers. Ofcom’s clarification that it will not grant preferential Type One classification to public sector entities that compete with the private sector is a welcome development (Question 2).
- Holistic approach to net neutrality compliance. Ofcom’s flexible, comprehensive approach to zero-rating determinations is a step in the right direction. By analysing the impact of a proposed offering on consumers and markets more holistically, Ofcom can make better-informed decisions, benefit consumers, and promote innovation (Question 3).
- Allowing zero-rated content after a consumer has reached his or her data allowance limit. A more permissive approach to zero-rated content could help broaden consumer choice and improve consumer welfare (Question 4).
II. Assessment of and proposed approach to retail offers (Questions 5 to 7)
- Retail offers with different quality levels. When Internet service providers (ISPs) are allowed to customise retail offers, they can offer basic subscriptions at affordable prices while offering premium services for a higher fee. By prioritising traffic to different consumer segments accordingly, ISPs can improve the efficiency of their existing networks and build higher-quality networks in the long run (Question 5).
- Retail offers where different quality levels are content-specific. Allowing ISPs to offer differentiated services for different content—for example, by zero-rating certain content when data allowance has been used—can benefit consumers (Question 7).
- Retail offers where different quality levels are service specific. Although various internet services—from web browsing to augmented reality and virtual reality applications— all require connections to the internet, they have substantially different connectivity needs. Allowing ISPs to tailor retail offers based on consumer and business needs will enable them to offer more customised services, improving consumer welfare and efficiency (Question 7).
III. Assessment of and proposed approach to traffic management (Questions 8 to 10)
- Greater flexibility for traffic management. Greater flexibility in traffic management rules could help ISPs improve user experience in cases where internet traffic surpasses capacity. That is why Ofcom’s proposed approach, along with proportionate reporting requirements and transparency measures, is a step in the right direction (Question 8).
- Traffic management based on differentiated retail offers. Internet service providers should be able to vary speed for different segments of subscribers for varying levels of services as long as they meet minimum quality standards as specified in terms of service and consumers within equivalent categories receive similar quality of service (Question 8).
IV. Assessment of and proposed approach to specialised services (Questions 11 to 12)
- Greater flexibility for specialised services. In light of rapidly changing communications technologies, Ofcom is right to recognise the need for specialised internet services in the context of virtual reality, driverless vehicles, and remote surgery (Question 11).
- Framework for assessing specialised services. Ofcom should review whether it should revise or expand evaluation criteria set by the Body of European Regulators for Electronic Communications (BEREC) for defining and regulating specialised services (Question 11).
- Regulatory sandbox for specialised services. Ofcom should consider creating a regulatory sandbox to develop and calibrate rules for specialised services. That would enable Ofcom to customise internet regulations and advise Parliamentary committees on ways to revise legislation in line with changing technological developments (Question 11).
- Reciprocal sandbox agreements. Ofcom should consider creating reciprocal sandbox agreements with other advanced economies such as the US and Canada (Question 11).
V. Scope of the net neutrality rules, terminal equipment and public interest exceptions (Questions 13 to 16)
- Tailored approach to different categories of terminal equipment. Instead of a one-size- fits-all policy, Ofcom should adopt a customised approach that allows ISPs to prioritise traffic flows depending on the types of terminal equipment, provided that traffic for equipment within the same category is treated identically (Question 13).
- Public interest exemption for emergency video communications services. Ofcom should amend the General Conditions of Entitlement (GCs) and instruct ISPs to prioritise and provide zero-rated access to emergency video relays (Question 15).
- Scam, fraudulent content, and parental controls. To the extent that existing technology and the law allow, ISPs should be allowed to block internet scams and fraudulent content and provide in-network parental controls. Such a policy could enhance consumer welfare as ISPs compete to deliver services with superior content filters and parental controls (Question 16).
I. Assessment of and proposed approach to zero-rating offers
Question 1: Do you agree with our assessment of zero-rating offers and our proposed approach?
Ofcom’s proposed flexible approach toward zero-rating offers is a step in the right direction.1 Following the Court of Justice of the European Union (CJEU)’s rulings in September 2021, the European Union has adopted a more restrictive approach toward zero-rating offers. Following the CJEU decisions, zero-rating offerings of specific content categories are no longer available in the EU, as reflected in the updated revised BEREC guidelines.2 Such restrictions, which effectively ban zero-rating offers unless they are applied to all content, diminish consumer welfare for users who could have otherwise benefitted from free or low-cost access to zero-rated content.
As Ofcom correctly recognises, most zero-rating offers have the potential to benefit consumers, especially low-income consumers with low-cost internet subscriptions with a limited data allowance. By allowing ISPs to provide zero-rate content while implementing proportionate transparency measures and reporting requirements, Ofcom can help create net neutrality rules that better reflect the needs of UK consumers and businesses.
Question 2: Do you agree with the criteria we use to define Type One, Type Two, and Type Three zero-rating offers and our proposed approach to such offers?
Ofcom’s development of three separate categories is a much-needed first step in adopting a more permissive approach to zero rating under the UK’s current net neutrality framework. However, in making such a determination, Ofcom needs to ensure that it does not grant regulatory privilege to government and public sector entities at the expense of their private sector rivals.
As Ofcom correctly recognises, allowing consumers to receive zero-rated content from government departments and public sector entities like the National Health Service can help improve consumer welfare. To that end, Ofcom proposes classifying beneficial content from government and public sector entities as Type One offers, which will not undergo additional scrutiny to determine whether they comply with the net neutrality rules.
However, this preferential access should only apply to services where government has a monopoly—such as the defence and police—rather than in sectors like the media and the arts, where public sector entities often compete with the private sector.