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2015-11-05 07:57:25
The EU s new internet rules will hurt the continent s startups
Oct 31st 2015
INTERNET providers will be barred from charging online businesses for fast lanes that is, giving priority to their traffic except for certain specialised services, such as videoconferencing or telesurgery. They also must not block or slow traffic other than reasonably to manage their networks, such as to avoid congestion.
This is the essence of a law the European Parliament passed on October 27th, after months of argy-bargy with the EU s executive, the European Commission, and national governments. For those unfamiliar with the debate over network neutrality , the principle of treating all internet traffic equally, the rules may seem much the same as those approved by America s Federal Communications Commission (FCC) in February. But although the wording is similar, the details vary enough that they may produce a very different outcome one that could further weaken Europe s smallish online industry.
To understand the differences it helps to compare the telecoms markets on both sides of the Atlantic. America has big, profitable fixed-line and mobile operators, such as AT&T, Comcast and Verizon, which want to be free of regulation. They may not be very popular with their customers, but competition between them is limited and they wield great lobbying power. However, they have found their match in America s internet giants, including Google and Facebook, which have an interest in keeping internet traffic untrammelled, and have formed a strong pact with the country s vocal internet-policy campaigners.
In Europe the balance of power between the two industries is more uneven. Activists and politicians have pushed for stricter net-neutrality rules, but they have not hooked up with the continent s internet industry, which anyway lacks political heft. In contrast, Europe s telcos, often former (and, in some cases, still partially) state-owned firms, have kept a direct line to their respective governments. And they have two arguments in particular that carry weight in national capitals and Brussels: looser net-neutrality rules would allow them to introduce new services and make the money they need to improve their networks; and such rules would also let them charge America s mighty online firms for using their networks.
Unsurprisingly, then, Europe s new rules have bigger loopholes than America s, even if the law just passed is much stricter than the commission s first proposals. America s rules also allow reasonable network management, for instance, but ban operators from discriminating against certain types of service, such as video or file-sharing which the EU s law allows. Similarly, American internet providers can offer specialised services, but the FCC can intervene if it thinks they are using this exception to undermine the spirit of net neutrality. In Europe the exception is so broad that internet providers could bring in paid-for fast lanes simply by labelling them as specialised services, reckons Barbara van Schewick of the Centre for Internet and Society at Stanford University.
Although the differing small print of Europe s and America s rules may not have dramatic effects in the short term, there is a reasonable chance that net neutrality in practice in the EU will be much weaker than in the US, write Stefan Heumann of the Stiftung Neue Verantwortung, a think-tank in Berlin, and others in a recent report.
This is good news for fixed-line and mobile operators, but is likely to hurt European internet startups because it creates barriers to market entry, argues Mr Heumann. Online firms will face extra fees for telecoms services and extra bureaucracy no problem for the mostly American firms that dominate the internet business, but unhelpful for smaller European contenders. Or indeed American ones. Interestingly, an open letter expressing concern about the loopholes, in the run-up to the European Parliament s vote, was signed by some smaller American online firms such as Etsy, Kickstarter and Tumblr, though not by Facebook or Google.
Much depends on how national regulators interpret the new rules. Some countries have already passed stricter laws. The Netherlands, for instance, bans zero rating , in which a mobile operator strikes a deal with, say, Facebook, in which people s use of the social network on their phones does not count towards their monthly data allowance, potentially discouraging them from switching to Facebook s rivals. The EU s new law, in theory, allows zero rating; in America the FCC says it will judge on a case-by-case basis. If Europe ends up with a patchwork of local rules, that will make it harder still for its online startups to gain scale. So much for the commission s grand talk of a digital single market .
That said, America s new rules are also far from set in stone. Republicans are still trying to stop the FCC from enforcing them. Several of their presidential hopefuls have said they would get rid of them. And in December a court in Washington, DC, will hear legal challenges against them by telecoms firms. The rules of the digital roads will be in flux for the foreseeable future, but in Europe toll booths, fast lanes and an assortment of traffic signs are likely to be more frequent than in America.