Does Europe need net neutrality regulation?

Martin Cave, director, Centre for Management under Regulation, Warwick Business School

The second reading of the European Union’s telecom package in 2009 includes a major bone of contention ­ – network neutrality rules.

Ministers have previously raised valid concerns about the impact of internet regulation ­ – such as net neutrality – ­ on the deployment of next-generation networks and maintaining affordable access.

Proponents of net neutrality argue that allowing ISPs to use network management techniques undermines the principles of open and equal access that have always characterised the internet.

Why is net neutrality bad for European web users?

Its advocates are concerned that ISPs will arbitrarily reduce their level of service to certain customers and content suppliers. This view is shared by large online firms such as Google, which want someone else to defray the huge cost of the expanded networks and bandwidth capacity required for video and other emerging applications.

But it is a question of who pays – ­ European consumers or companies such as Google. If regulation prohibits different service levels being offered, the web’s value would diminish. It is better for all, especially consumers concerned about affordability, that firms that impose a greater cost on the network should pick up the costs.

For consumers, the real issue involves the web’s rapid transition to providing video services. The costs of deploying the systems necessary for this will be billions of pounds. Net neutrality would create a loophole allowing large-content firms to avoid paying to deploy these networks to users.

Moreover, if problems were to emerge, they could be solved with far less expense to web users by mandating clearer customer information and using existing tools to deal with market power. The need for the legislation is unproven, and the unintended consequences for the deployment of next-generation networks, competition, innovation and renewed economic growth are not worth the risk.

Most European policy makers seem to recognise this, and remain focused on accomplishing the most important broadband objective ­ – investment and deployment of next-generation networks. This will be critical to European economic recovery.

Martin Cave is director of the Centre for Management under Regulation at Warwick Business School