By Jonathan Jacob Nadler, a partner in US-based law firm Squire Patton Boggs’ Telecommunications Group

The summer of 2015 may come to be remembered as the net neutrality summer. 

On 12 June, the US Federal Communications Commission’s Open Internet Order became legally effective. 

Eighteen days later, the European Parliament, Council and Commission reached agreement regarding proposed EU-wide net neutrality rules.

There are many strong similarities between the internet regulatory regimes that are emerging on both sides of the Atlantic. 

Both regimes will prevent ISPs from entering paid prioritisation agreements, blocking website and throttling online traffic. 

Both regimes will allow to ISP engage in reasonable network management. 

And both regimes will provide for strong enforcement action by national regulatory authorities.

But there are some very significant differences.

Market environment

The communications market environments in the US and Europe are very different. 

In the US, regulatory policy has favoured facilities-based competition. 

As a result, consumers typically must choose between two wireline broadband internet access providers:  their telephone company or their cable operator. 

By contrast, European regulators have sought to promote vigorous services-based competition. 

Consequently, European internet users can choose among a larger number of providers. 

Paradoxically, European internet users have experienced significantly greater levels of access restriction. 

Indeed, a 2012 study conducted by the European regulators body, BEREC, found that in Europe one-fifth of all wireline Internet connections, and one-third of all wireless internet connections, experienced blocking or throttling. 

By contrast, the FCC has been able to identify only a handful of cases in which ISPs have actually violated network neutrality principles.

Adoption process

The proposed EU rules are the result of a long and deliberative process, including extensive use of independent researchers. 

This helped forge a broad-based consensus regarding the scope and content of the rules.

The US process, by contrast, was highly politicised. 

Indeed, the FCC jettisoned the modest rules it had initially proposed after President Barack Obama publicly called on the legally independent agency to adopt the “strongest possible” network neutrality regime. 

The two Republicans on the five-member commission both strongly opposed the decision, as has virtually every Republican member of Congress.

Substantive differences

Although the European Commission hailed the proposed European rules as “strongest and most comprehensive open Internet rules in the world”, they do not go as far as the FCC regime. 

For example, the European rules would allow “zero rating” – the practice in which an ISP allows its customers to access certain applications without incurring any data charges. 

The FCC, by contrast, will prohibit any zero rating plan that it determines “unreasonably interferes with or unreasonably disadvantages” end users’ ability to access, and “edge providers’” ability to make available, content, applications or services.

The two regimes also differ in the treatment of “specialised services”. 

The European regime will expressly allow ISPs to provide preferential treatment to entities that seek to offer “innovative services” likes IPTV, high definition videoconferencing, and telemedicine, provided “they do not harm the quality and availability of the open internet.” 

The FCC, by contrast, adopted a narrow definition of what it now calls “non-broadband internet access services”. 

In order to qualify, a service must be a specific application that cannot be used “to reach large parts of the Internet” and must “use some form of network management to isolate the capacity” used to provide the service. 

Even then, however, the FCC reserves the right to take enforcement action against any service that it concludes is the “function equivalent” of broadband Internet access services, is being used to evade the agency’s Open Internet Rules or is undermining “investment, innovation, competition, and end-user benefits”.

Where do we go from here?

In Europe, the proposed rules still need to be approved by the Parliament and Council. 

While some members of Parliament have expressed opposition, the rules are expected to become law by 30 April 2016 and will be binding on all Member States. 

In the US, by contrast, the FCC’s rules are currently being challenged by most of the major ISPs. 

The primary issue is whether the FCC has the legal authority to “re-classify” broadband internet access service as a “telecommunications” service subject to the type of public utility regulation originally intended for monopoly telephone companies. 

Oral argument, before the federal Court of Appeals, is scheduled for 4 December, with a decision likely next spring. 

While the FCC made a significant effort to adopt rules that can withstand judicial challenge, there is a significant possibility that – as it has done twice before – the court will strike down at least a portion of the FCC’s network neutrality rules.

Despite efforts on both sides of the Atlantic to resolve the network neutrality issue, continued uncertainty seems inevitable. 

In Europe, there is talk of future changes to the rules to restrict “specialised services” and “zero rating”. 

Meanwhile in the US, if the FCC’s rules are upheld by the courts, Congress could adopt legislation that loosens some of the restrictions.

Numerous disputes are also likely to arise as regulators seek to apply sometimes vague rules to specific factual situations in this very dynamic sector. 

The lack of a clear, stable, uniform regulatory regime could deter network participants – whether infrastructure providers or applications creators – from making the substantial investment necessary to foster the continued growth of the internet.

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