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Net neutrality and charging models

The Internet has proven to be a unique platform for innovation and economic growth and provides unprecedented opportunities for communication between people. Very few wish to return to the era before the Internet. For this reason, authorities are working to achieve net neutrality, with a view to preserve an open Internet. In this article we consider the relationship between net neutrality and traffic handling, followed by net neutrality and charging models.

By Frode Sørensen, Senior Advisor at the Norwegian Post and Telecommunications Authority

Norway and the international situation

In simple terms, net neutrality means that the Internet works the same for different users of the net, regardless of who you are. Norway has had guidelines on net neutrality since 2009, and these seem to be working well as a regulatory tool to preserve net neutrality for the citizens. Major political processes are currently under way in both Europe and America, with a view to regulating net neutrality.

In Brussels the process has been ongoing since the Commission published its proposed regulation in September 2013, via the European Parliament's resolution in April 2014, up to the present stage where the Council is working on the issue. Through the EEA Agreement, any regulation of net neutrality in Europe will also apply to Norway. It will probably be possible to have separate Norwegian guidelines that apply alongside the formal legislation.

In the US too the net neutrality rules are being reviewed, and media reports reveal that parties on either side of the Atlantic are keeping a close eye on each other's political process. In this dynamic situation Norwegians are following the developments on both the European and the American political arena, and the debate concerning our national regulation will naturally be affected by this. It is to be hoped that this influence also goes the other direction and that people outside Norway have noted that the Norwegian net neutrality rules are the oldest in Europe and may be worth looking into.

Net neutrality – equality and variation

Some people argue against net neutrality on the grounds that the Internet has never worked the same for all users, or for all types of usage, which is in itself true. However, the goal of net neutrality is not that all traffic should be handled identically – which would never be possible in practice. The aim is rather to preserve the Internet as an open platform for communication and avoid discrimination or fragmentation of the Internet.

A commonly used analogy for Internet communication is the road network. In this analogy net neutrality means that we want the same rules for all traffic on the "road network". But, as for the road network, there are various ways of accessing the Internet. Different technologies such as telephony networks, cable TV networks, fibre networks and mobile networks all have varying qualities and provide varying access speeds. It is also common practice for a single technology to operate at different speeds for various types of subscription. However, with regard to net neutrality, the point is that it is the user of the access that decides what their access is to be used for.

Continuing the analogy, inside the Internet too, the various "highways" have different capacities. The capacity is typically deployed by the Internet service provider, based on how much traffic there is to the various destinations. We, as users of Internet communication, can observe this by running speed tests via our own Internet access. In some cases disputes arise when the interconnection between the different providers' networks need upgrading. Until such disputes are settled, this can lead to short-term reduced speed when users communicate via these interconnections. But as long as all the different types of traffic are treated equally, this is not a violation of net neutrality.

Charging models for Internet access services

Internet service providers use differentiation of Internet access services as a natural part of their business model. We all benefit from well-functioning businesses that can offer a wide range of good, affordable communication services to the population. Today it is common for providers to charge users on the basis of capacity (speed) and/or volume, depending on the technological platform.

According to economic theory, offers of different qualities at different prices can help ensure that people with lower willingness to pay are also able to obtain a product. Product differentiation can be fully compatible with net neutrality, since different speed classes mean that the different products have varying quality. Differentiation based on other quality parameters such as time delay or service availability can also be used similarly. By contrast, services that provide access to selected sets of content or applications would be typical examples of differentiation that would violate net neutrality.

Nowadays it has also become common practice for subscriptions to be differentiated on the basis of volume limits. Again, as long as this is done independent of the traffic type, this does not provide grounds for concern in respect of net neutrality. However, in recent years providers in some countries have launched service offers where specific types of traffic are exempt from the data cap; in other words, these traffic types can be used without any volume limit, so-called zero-rating.

Norwegian guidelines and zero-rating

The Norwegian guidelines on net neutrality state quite clearly that "Internet users are entitled to an Internet connection that is free of discrimination with regard to type of application, service or content or based on sender or receiver address." This means that in the Norwegian market zero-rating would constitute a violation of the guidelines. At first glance it may appear that all traffic is handled equally in this charging model, but the fact is that once you have used your quota, the traffic that is exempted will be allowed to continue, while all other traffic will be throttled or blocked. This is clearly a case of discrimination between different types of traffic.

There are of course arguments in favour of zero-rating that make the method seem quite fair. As consumers, we may find it advantageous that we do not have to pay (extra) for a particular type of traffic. Nevertheless, zero-rating lead to selected traffic from the Internet service provider itself or affiliated providers being favoured above other traffic. And this is exactly the kind of situation net neutrality aims to avoid – allowing the Internet service provider to decide how we use the Internet. Instead, the Internet should remain an open, neutral platform for all types of communication.

The Norwegian Post and Telecommunications Authority (NPT) has long been working actively for net neutrality for the benefit of Norwegian consumers, organisations and businesses. The Internet is important to economy, cultural diversity, social life and democracy, and NPT therefore works to preserve the Internet as an open platform. Internet service providers should use methods other than discrimination of content and/or applications to differentiate their products. One possibility is differentiation on the basis of speed, in line with the Norwegian guidelines on net neutrality.