The US vs the EU on net neutrality
Alexandros Koronakis | 16.03.2015 | http://www.neurope.eu/
Professor Christopher Yoo (R) being interviewed by Alexandros Koronakis (L) at New Europe Studios on 5th March, 2015.
The issues of net neutrality and regulatory effects on the global market and innovation are looming, with the European policy makers examining ways to oversee the ever changing digital organism.
New Europe’s Director, Alexandros Koronakis sat down with Professor Christopher Yoo to discuss the most burning issues. Yoo is a professor of law & communication and computer information science at the University of Pennsylvania as well as the founding director of the University’s Center for Technology, Innovation and Competition. He is also the person to bring the term net neutrality to the masses.
Christopher Yoo: The first person to publish the words net neutrality was a gentleman by the name of Tim Woo in 2003. I was asked to write a reply to his article, and he then wrote a reply to mine. I suppose everything else flowed from there.
Alexandros Koronakis: Could you tell us a little bit about the Federal Communications Commission’s (FCC) net neutrality order?
CY: The FCC did something sort of surprising. The U.S. is one of the few countries in the world that did not apply old telephone rules to the Internet. I actually think that was a fundamentally good decision. On the 26th of February, the FCC decided to go in a very different direction. They decided to extend the old rules and pull back on certain provisions and not apply them.
They basically established three main principles; no blocking, no throttling, and no paid prioritization.
That became the default set of rules. The thing floating around that though is that it’s subject to exceptions for reasonable network management, for specialized services and interconnection—which means not just how a network treats traffic within its network but how networks connect together.
AK: So what do these specialized services entail and how does this affect the market?
CY: One of the interesting things about a lot of different services is that they require higher throughput rates—a good example are phones with LTE. If you use the voice function over LTE, which is a new service they are offering, they have to use it on dedicated bandwidth. Anyone who has made a Skype call and had really bad service knows it’s quite unpredictable. In reserving bandwidth you’re guaranteed to have a certain quality of calls and the LTE has standards and the only way you can meet that is by setting aside that bandwidth for one application; that is voice.
That is a good example of specialized service, but this is also used for video, extremely sensitive technology like financial transactions where a millisecond makes a difference.
AK: Could you tell us how FCC order may affect innovation?
CY: It is hard to tell because there is an exception for specialized services and that is a welcomed exception. But we don’t really understand what it means. It is undefined. There’s an exception for reasonable network management practices, but again, nobody knows what that really means. We are left to this period of uncertainty, and if you look at the last couple of times the FCC tried to regulate this its taken 3-4 years for the courts to sort out the challenges. So, we are not likely to know anytime soon. So, what is the problem?
Well, in the face of uncertainty everyone has to hire a bunch of lawyers and get legal advice on whether a new practice is likely to be legal or not. You have to seek that advice whether or not you think it may be legal.
An example is HBO GO, which allows people to watch HBO shows over the internet and on their phones. In the Netherlands, they had a special arrangement where watching HBO did not count against your data account, that was later struck down by the Dutch regulatory authorities as a violation of network neutrality. Similarly, this happened with a music streaming service that was struck down by the Slovenian authorities. All of the sudden we are starting to see that everyone who has a new business model will have to think ‘is the same thing going to happen to me?’
AK: That sounds like a bit of a paradox. Aren’t we supposed to protecting the providers?
CY: The problem with these FCC measures is that they have certain visions over how innovation is supposed to look and it’s very good at preserving innovation that is consistent with the same old things we have always seen. We have a hard time predicting what will happen on innovative new practices that really deviate from the way that the internet functioned in the past—and if those new business will get restrictions because of that.
AK: How does net neutrality affect Europe?
CY: One of the strangest things to me is that five or six years ago Europeans would always say network neutrality is an American issue – it is not going to affect us here. That is interesting though because Europe has a regime called unbundling, which means that if one content provider cannot get access, and then another ISP can show up almost instantly. Simply by leasing facilities by the original Telco, and it was always perceived in the past that to be sufficient for protecting innovative service providers who could not get the services they want.
You do not see a lot of demonstrated cases of these problems, in fact, you see providers prioritizing service—like gaming services above everything else. Even if it’s a small company, they have a high value of customers wanting a particular thing out of the network and so in that sense—in Europe you already see a proliferation of some of these business models and that would be shut off.
Europe is in a place where the EP has issued a decision and the council is reviewing it with a counter proposal—it’s an interesting question of whether the U.S. will influence their decision and deliberations. I think it sounded like the European government was proceeding in a healthy direction trying to find a compromise, a solution to continue to make certain specialized services possible. I only hope the U.S.’s decision does not interfere.
AK: What three recommendations would you have for EU regulators?
CY: The first is to try to preserve room for experimentation.
I mean the most important thing is that innovation needs breathing room and you need to create rules where you do not ask permission of the regulator before you do it.
You should not imagine all the things that could go wrong and prevent them from happening. I think the better way to style regulation is to allow people to try anything they want. So, the default rule is yes, not no, and then if problems show up step in after the fact.
The second piece of advice is do not assume that past performance predicts future results. In a way, we are captive of the old mindset from behind. People are talking about how important it is to preserve voice telephone calls… my children do not even use voice calls. If you look at the way young people use their phones it is completely different, they text everything. They do not use voicemail either. We have to understand this is going to constantly be updated, we did not have tablets five years ago and now everyone has one.
We do not know what the next big thing will be, so my reaction is to be humble about what you can do and predict. And design into the regulation the ability to back off as new things develop and make sure things are still possible.
The third thing I would say is more than anything else Europe would benefit from unleashing an entrepreneurial culture.There have been surveys of American youth that say 2/3 of them expect to start their own business sometime in their life.
For European youth, it is about half that. Not only are they reluctant to start new businesses, but if they fail at one they say ‘I am never going to do that again’.
In the U.S., if you are not failing, you are not trying. In fact, financial backers are more likely to support those who tried once and failed because they figured they learned something and took a chance, which is critical for the truth.