How the UK Can Reform Net Neutrality Regulations and Promote Innovation

By Ryan Nabil of CEI.

"As post-Brexit United Kingdom recalibrates its approach to net neutrality, the country needs to balance competing priorities of Internet access, efficient broadband networks, consumer protection, and technological innovation. That is why efforts by Ofcom—the UK’s communications regulator—to adopt a more flexible, pragmatic net neutrality framework and seek expert comments through the recently concluded consultation is a welcome development. CEI responded to Ofcom’s consultation with feedback on the proposed net neutrality reforms and recommendations on how to meet Ofcom’s goals.

Net neutrality—or open Internet—is the principle that Internet service providers (ISPs) must treat all traffic equally without prioritizing, throttling, or blocking any particular content or service. Although broadband connectivity and the telecommunications industry have thrived in the United States under a more permissive approach to net neutrality, the European Union took a much stricter approach. The EU’s net neutrality rules was integrated into UK law through the Open Internet Access Regulations 2016 (the “Net Neutrality Regulation”), which continues to provide the main legal framework for the UK’s net neutrality regime.

Policy makers on the continent view strict net neutrality regulations as necessary for ensuring that service providers do not arbitrarily discriminate against certain content and websites. However, if the net neutrality rules are defined and interpreted too strictly—as is currently the case in the EU and the UK—it can prevent Internet service providers from offering differentiated levels of service, prioritization of traffic for specialised services, and even offering certain services altogether.

Examples where ISPs need the flexibility to distinguish between and prioritise different traffic types include video calls in life-threatening emergencies, remote-assisted surgeries, automated vehicles, and flights where connectivity is limited. Without this ability to prioritize traffic, ISPs would be restricted in their capability to offer many services that benefit consumers and help drive innovation.

That is why Ofcom’s proposals to grant service providers more flexibility in applying open Internet rules while implementing proportionate transparency requirements and monitoring mechanisms are a step in the right direction. Adopting a pragmatic, market-friendly approach that grants ISPs greater flexibility in offering differentiated retail services and prioritizing traffic flows will improve consumer welfare, promote technological innovation, and enhance network efficiency.

Among the policies Ofcom suggests, its approach to three areas are particularly noteworthy.

First, Ofcom’s proposed flexibility regarding zero-rating offers is a step in the right direction. By allowing consumers to access certain online content without reducing their overall data allowance, zero-rating can benefit consumers, especially less affluent users on low-data plan. By allowing ISPs to provide most zero-rate content while implementing proportionate transparency measures and reporting requirements, Ofcom can help improve less affluent consumers’ access to information and the overall online experience.

Second, the UK’s current regulatory framework limits the ability of Internet service providers to offer different quality levels of online access for different consumer segments. When IPSs are allowed to customise retail offers, they can offer basic subscriptions at affordable prices while offering premium services for a higher fee. By allowing ISPs to prioritise traffic to different consumer segments, Ofcom can help service providers better serve consumers, save network costs, and build better networks in the long run.

Third, in light of rapidly changing communications technologies, Ofcom is right to recognize the need for flexible rules for specialised Internet services, such as, for instance, in the context of automated vehicles and remote surgery. Ofcom rightly recognizes that various Internet services—from Web browsing to augmented reality and virtual reality applications—can require divergent connectivity needs. Allowing ISPs to tailor retail offers based on consumer needs and technological requirements will enable them to offer more customized services, improving consumer welfare and network efficiency.

Although Ofcom’s proposed reforms constitute an excellent step in the right direction, Internet reforms will need to go further. The UK’s EU-derived Net Neutrality Regulation circumscribes the extent to which Ofcom can design effective Internet rules within the existing legal framework. That is why the UK Parliament and government should update or replace the regulation with a more permissive, market-friendly legal framework.

Ultimately, Internet service providers need greater freedom to prioritize different types of traffic flows and offer different categories of services based on consumer and business needs. Such flexibility will be even more crucial in the future due to emerging technologies with vastly different connectivity requirements—from remote sensing to edge computing and the metaverse—which will require ISPs to tailor the quality of their retail offerings accordingly. 

As the next generation of wireless technologies widens the gap between basic and more advanced online applications, regulatory agility will be crucial for enabling innovation and improving consumer welfare. By adopting a more pragmatic, flexible approach to digital regulation, the UK Parliament and government should lay the legal framework that allows the private sector to spearhead innovation and promote UK leadership in emerging technologies. 

See the full text of CEI’s response here."