Last year, US regulators imposed “net neutrality” rules on operators that
restricted their ability to manage internet traffic on their networks. This
week, European regulators gave operators in their jurisdiction a fairly free
hand to manage traffic as they like. They can even charge content companies
for speedier delivery of their sites or services if they want.
Advocates of “net neutrality” fear this could turn the internet from a
democracy to a plutocracy, where rich sites run faster than poor ones.
Europe’s telecoms operators contend that maintaining networks is expensive
and they need more money to cope with rising traffic. They commissioned
research from consultancy AT Kearney on the topic, which argued that if
operators upgraded their networks to meet forecast demand to 2014 without
any extra revenue, their returns on capital would fall by 3 percentage
points to about 9 per cent.
That argument seems to have persuaded regulators at the European Commission
but the continent’s operators cannot declare victory just yet. Commissioner
Neelie Kroes will investigate current practices and might still regulate in
the future. She wants operators to reveal how they are meddling with traffic
and make it easy for their customers to switch providers.
The operators also have to figure out how to persuade content companies such
as Google to pay them money. What if they all say no? Threatening to block
certain sites would be foolish, since most consumers would just switch to a
different network where Netflix or YouTube was still available. Yet if the
operators teamed up to negotiate with content companies, they could fall
foul of competition regulation.
As Kroes has given operators a chance to win a bigger chunk of the internet’s
riches. It is not yet clear they have the strength or the nous to take it.
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