NET NEUTRALITY: COMPARING FRANCE WITH OTHER RELEVANT JURISDICTIONS

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1 Riezlern Seminar on the Law of International Business Transactions February 2014 Sport- und Studienheim des Marburger Universitätsbundes Hirschegg/Kleinwalsertal/Austria NET NEUTRALITY: COMPARING FRANCE WITH OTHER RELEVANT JURISDICTIONS Bertrand du Marais Conseiller d État, Public Law Professor, Co-Chair, Master program in Law-Economics Université de Paris Ouest Nanterre La Défense, bertrand.du_marais[at]u-paris10.fr

2 Outline Introductory remarks: A worldwide crucial issue, a two sided market French response to net-neutrality The sector regulatory framework: ARCEP active policy The overarching legal framework: Coo-petition between regulators; issues regarding the highest constitutional level of norms and principles The political scene: the opposition between the regulators and the Government Concluding remarks from the French situation Some lessons from other OECD countries: US, UK, the Netherlands, Korea Concluding remarks bertrand.du_marais(at]u-paris10.fr 2

3 Introductory remarks Net neutrality: A worldwide crucial issue French AdlC definition: «the principle means that content must be allowed to circulate on the network without discrimination, whatever its origin, destination or type» (AdlC, 2012 Annual report summary, p.35). Why blocking or throttling some flows of data or on the contrary, why enhancing the Quality of Services? (W. Maxwell & N. Curien, Net neutrality in Europe: an economic and legal analysis, Concurrences, , p ) To face congestions, to fight against illegal contents, To get additional revenues, either from new services of higher value added services (Video on demand, IPTV or VoIP, with an end to end guarantee) or from anticompetitive practices, taking advantage of the specificity of the market) bertrand.du_marais(at]u-paris10.fr 3

4 Introductory remarks A two sided market Not an only D S market model but D-S-D: two different kinds of consumers should be necessarily linked by a single supplier (a single platform ) and double sided markets are characterized by three condistions: no contractual relationships between the two sides of the market The connection of the the2 sides through the platform generates positive cross-externalities (the more participants on the one side, the better for the other side participants) direct monetary flows are costly or technically impossible, so each side is unable to pass on to the other side any movement of prices pertaining to its own access to the platform Several examples (Credit card, etc.) In the realm of the Internet: Internet Content Providers (ICPs) - Content and Application Providers (CAPs) on the one side, and Internet users, on the oher side, should necessarily be connected through a Telco, which may alos be, or not, an Internet Access Provider (IAP) bertrand.du_marais(at]u-paris10.fr 4

5 Introductory remarks A fast changing market with an old billing framework The old billing framework: The best effort principle, Peering agreements, whenever there is no major discrepancy in the up and downstream flows of data: free of charge or Transport contracts IAP bills its Internauts, usually by a lump sum, and does not get revenues from the ICP-CAP Whereas we see a quickly changing business environment: No excess in capacity contrary to 2000s, even congestion (Korea) New 4G, deployment of very high speed Internet and of FTTH: many investments to be financed Therefore, the current situation is characterized by the content provision side being cross-subsidized by Internet users side bertrand.du_marais(at]u-paris10.fr 5

6 French response to net-neutrality : reminders French sector regulatory framework: coo-petition between regulators The regulatory matrix (or maze?): Sector regulators: coo-petition ARCEP for telecommunications and electronic communications network and services: Appeals to : either Appeal Court of Paris or Conseil d Etat CSA for audiovisual contents and services All appeals to the Conseil d Etat (To remember: CNIL: personal data & privacy watchdog) General competition authority (AdlC) : co-regulation Appeals to Appeal Court of Paris (Antitrust cases) or to Conseil d Etat (mergers) The general competition law applies, parallel to the sector competition framework. bertrand.du_marais(at]u-paris10.fr 6

7 French response to net-neutrality: reminders (ct d) A paradoxical situation: The sector regulator is in favor of users The Government is more in favor of the industry equilibrium (France Telecom) bertrand.du_marais(at]u-paris10.fr 7

8 The sector regulatory framework: ARCEP took an active policy and stand ARCEP principles See: ARCEP 2012 report to the Parliament and Government See Report to Parliament and the Government on Net Neutrality, Les Actes de l ARCEP, Paris, 20 September 2012, ARCEP supervision and enquiry powers: Decision on interconnection information n du 29 mars 2012, Confirmed by CE, 10 juillet 2013, Société AT&T Global Networks Services France & Société Verizon France, n , ARCEP Decision n of July 16, 2013, closing the Illiad (Free) v. Google (You Tube) case : assessment of the insufficient capacity of Free network bertrand.du_marais(at]u-paris10.fr 8

9 French response to net-neutrality: The overarching legal framework The general competition framework : Autorité de la concurrence (AdlC) decisions 12-D-18 of 20 September 2012 Cogent v. FT (Open Transit) bertrand.du_marais(at]u-paris10.fr 9

10 French response to net-neutrality: The overarching constitutional framework The Constitutional principles at stake Its June 12, 2009 decision DC called HADOPI 1 and October 6, 2010 decision M Pitté, QPC (French DNS System) principles are looming over the whole issue : blocking access to Internet is an infringement of freedom on opinion (of communication) bertrand.du_marais(at]u-paris10.fr 10

11 French response to net-neutrality: The political scene: the opposition between the regulators and the Government Transposition of EU 2009 regulation by Ordinance n of 24 August 2011, granting more power to ARCEP in terms of: dispute settlement, on information requirement The Sarkozy policy strategy: the net neutrality should not become a dogma. bertrand.du_marais(at]u-paris10.fr 11

12 French response to net-neutrality: The political scene: the opposition between the regulators and the Government (Ct d) The current Government is in a rather awkward position : ideologically in favor of Netneutrality: CNNum, Rapport relative à l avis net neutralité N du 1er mars 2013, Paris, 1er mars 2013 BUT the real issue is industrial policy : FT situation and investment needs bertrand.du_marais(at]u-paris10.fr 12

13 French response to net-neutrality: Some conclusions A growing trends towards: the sector regulator s intervention Addressing the issue through the lenses of competition law The enlargement of the notion of net neutrality To devices neutrality to search neutrality : AdlC, Opinion No 10-A-29 of 14 December 2010, on the competitive operation of online advertising (Google) What about technological discrimination (the use of IPv6, of Applets, etc.)? bertrand.du_marais(at]u-paris10.fr 13

14 French response to net-neutrality: Some conclusions (Ct d) The paradox of the French current situation in economic terms From overinvestment (FT in 2000) to congestion As in the transport industry, the increase of supply capacity always, sooner or later, meets its demand up to congestion bertrand.du_marais(at]u-paris10.fr 14

15 Some lessons from other OECD countries: US, UK, the Netherland, Korea The response of public agencies is (obviously) related to: the competitive intensity of the related markets: FCC open internet rule, 2010: focused only on retail services, not on backbones UK: OfCom, the regulators, enforces light touch regulation which means that it stays relatively idle because BT is dominant and will stay dominant Korea: as in France, KCC much more active because highly competitive AND highly congested network: KCC Guidelines for Network neutrality and Internet traffic management in 2013 The Netherlands: in the middle because the duopoly in the networks is enforcing a really vibrant competition bertrand.du_marais(at]u-paris10.fr 15

16 Some lessons from other OECD countries: US, UK, the Netherland, Korea The response of public agencies is (obviously) related to : the national political traditions: France: very much hands on Contrary to US, UK, Korea: very much rely on selfregulation The Netherlands: first law on NN passed in 2013, although (or because) there is no political issue on the industry side, since there is no national operators. So the bill could make its way through Parliament due to NGO pressure bertrand.du_marais(at]u-paris10.fr 16

17 Conclusions The paradox of the current situation in economic terms (e.g. French case): Double sided market, but a link still exists between the two sides of the market since the pace of innovation (3G to 4G, FTTH, Very high bandwidth) still allows the ISPs to upgrade their marketing strategy parallel to the increase in traffic Highly integrated market, between ISP and CAP, especially in the satellite and mobile industry But the intensity of competition due to the entry of Free and its aggressive pricing strategy puts a high pressure on profit margins bertrand.du_marais(at]u-paris10.fr 17

18 Conclusions NN is not (yet) addressed within the general framework of regulated industry: common carriers, essential facility, etc. bertrand.du_marais(at]u-paris10.fr 18

19 Thank you and see you in Nanterre! bertrand.du_marais(at]u-paris10.fr 19

20 Some conclusions Some additional comments on the KCC Guidelines for Network neutrality and Internet traffic management as regard ARCEP 10 principles ARCEP: more «hands on», more detailed in the disclosure and information requirements bertrand.du_marais(at]u-paris10.fr 20

21 KCC 1.Objectives 2. Users rights Freedom of access ARCEP Similar 1st Proposal: same goal and scope. More detailed: include the hardware and the software Includes equality of treatment between streams (up and down) Larger in the scope: by kind of services: CAPs (9th proposal: taking account of CAPs role in Internet neutrality) devices (10th proposal: Increasing the neutrality of devices) Information on traffic management bertrand.du_marais(at]u-paris10.fr 21

22 KCC 3. Transparency in Internet traffic management Duty to disclose the management policy Compulsory end users information 4. No blocking 5. No unreasonable discrimination ARCEP 5th Proposal: same scope But more detailed as to the ISPs specific obligation in terms of information and contractual design bertrand.du_marais(at]u-paris10.fr 22

23 KCC 6. Reasonable traffic management Scope: 3 grounds for traffic management: Network security and stability ; To avoid temporary congestion; For law and order enforcement KCC powers: establishes the scope, conditions, procedures, methods of reasonable traffic management Reasonableness may be related to physical and/or technological criteria ARCEP 3rd Proposal: Supervising Internet traffic management mechanisms Scope: when ensuring access, no ground specified but ISP should comply with some compulsory principles: of relevance, proportionality, efficiency, nondiscrimination between parties and transparency 6th Proposal: Monitoring traffic management practices bertrand.du_marais(at]u-paris10.fr 23

24 KCC 7.Managed services Allowed unless degrade the best effort flow Monitoring power ARCEP 4th Proposal: managed services Allowed unless it degrades the quality of access And lest competition law and sector regulation are breached 6th proposal: monitoring traffic management practices 7th : Monitoring the quality of the Internet access service : ARCEP sets forth obligation of QoS disclosure 8th Monitoring the IP interconnection market Scope: ISPs and CAPs ARCEP set forth obligation of disclosure bertrand.du_marais(at]u-paris10.fr 24

25 KCC 8. Mutual cooperation Principle of good faith Consultative body Self regulation 10. Establishment and operation of a separate policy advisory body ARCEP ARCEP organizes and sometime directs the consultation process between stakeholders: 5th proposal: ARCEP calls for discussions between ISPs and Consumers associations, and organize a working group with DGCCRF 6th proposal: monitoring traffic management practices: ARCEP requires the parties to submit proposals bertrand.du_marais(at]u-paris10.fr 25

26 Thank you! bertrand.du_marais(at]u-paris10.fr 26

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