Mobile operators in The Netherlands must be wondering what hit them. The Dutch parliament, acting with speed and ferocity rarely seen, has introduced net neutrality legislation that will have far-reaching effects on the viability, future profitability and even survival, of companies such as KPN, Vodafone and T-Mobile. If other European countries and the European Commission follow suit it could set the industry back ten years and stifle any urge to invest heavily in mobile broadband upgrades, the same demanded by Ms Neelie Kroes, the European commissioner responsible for the European Union’s digital agenda.
It all began when KPN announced poor first-quarter earnings because customers using smartphones were flocking to OTT services such as WhatsApp and Skype, thus sidestepping KPN’s lucrative SMS and international voice business. In response, KPN chief executive, Eelco Blok, announced plans to charge customers extra for using Skype and WhatsApp. This, along with the admission that KPN had been using ‘deep packet inspection’ (DPI) to monitor and manage traffic on its network caused outcry from consumers and consumer rights watchdogs.
Attempts to explain that DPI was common practice in the industry, and in no way encroached the privacy of consumers, only served to add fuel to the flames. Lack of understanding on how internet providers monitor traffic to remove bottlenecks, protect customers from viruses and spam, and at the same adhering to law enforcement demands, did not help the operators’ case.
They now find themselves having to allow customers to use whatever services they like, a move that will mainly benefit over-the-top (OTT) players who currently do not contribute to the operators coffers and make free use of sophisticated, limited and expensive network resources.
Vodafone rightly pointed out that the bill would “lead to a large increase in prices for mobile Internet for a large group of consumers” by blocking the company from offering varying prices for varying services. The operators inability to offer premium services to customers that were willing to pay, severely limits their ability to offer differentiated services and quashes any moves they may have planned to negotiate new peering arrangements with OTT players. (See “Euro 'Google Tax' battle looms” for more on this).
The biggest fear for other European operators is that their national regulators will jump in without taking a closer look at the ramifications. Worse still would be the European Commission mandating similar retrograde ‘net neutrality’ legislation. After all, the mandate of the EU Commission grants it power to oversee draft national regulatory measures through a consultation at EU level. This review mechanism is meant to consolidate and safeguard the internal European market. The role of the Commission is decisive, to ensure consistent regulation and to bring more transparency into the regulatory process. The Dutch move appears have been made in isolation.
The emotional arguments for equal access to all are not in question. Even the FCC in the USA took umbrage in its yet to be legislated rules, and treated mobile operators more sensibly, keeping in mind the spectrum and bandwidth limitations they have to work with. The exact opposite scenario has happened in The Netherlands, with mobile networks being singled out for ‘special’ attention.
If this does not send alarm bells through the industry, it should. The very livelihood, and possible survival, of many mobile operators is now in question. Surely it is time for them to group together to educate the market and lobby other legislators, before it’s too late.