10 reasons not to trust BEREC on net neutrality. The EU process to create Open Internet guidelines lacks transparency, independence and credibility. See video of debate hosted by Slovenian telecom regulator which operators are suing over zero rating

The Body of European Regulators for Electronic Communications (BEREC) is collecting feedback on its proposed net neutrality guidelines through July 18. While BEREC may claim that it is taking public input, the truth is that the de facto guidelines were made long before the public consultation started. The consultation process is just a formality to make it look like BEREC listens to the people. Substantive change to the guidelines is unlikely, so the only way to undo BEREC’s illegality is to bring attention to its secret processes.

The rules adopted by the European Parliament and subsequent agreement by the European Commission and Council represent an important compromise not to unduly hamper freedom and innovation. At the time of the Parliamentary vote in October last year, amendments crafted by Google-sponsored net neutrality advocate Barbara van Schewick were rejected. However those provisions made their way into the BEREC interpretation through a series of closed door meetings. This represents not only an violation of the EU law, but a circumvention of the democratic process.

At the launch of the guidelines on June 6, BEREC Chair Willem Eschweiler pronounced, “We are not making new rules.” This is reminiscent of the Federal Communication Commission (FCC) Chair Tom Wheeler announcing his effort with the line, “We are not regulating the Internet”. The truth is in the contradiction. The real story is the opposite of what is said.

Last week Strand Consult participated in a stimulating workshop hosted by the Slovenian telecom regulator Akos. Strand Consult commends the Slovenian regulator for organizing the event, allowing the different perspectives to be presented, and making the proceedings public. It is a stark contrast to BEREC by which stakeholders are hand-picked to conform to pre-existing views, discussions held in secret, and proceedings are unavailable to the public.

Like Netherlands, Slovenia is the European country that took an extreme approach to net neutrality, legislating hard rules in 2012. However before the time of promulgation, a line item to ban pricing flexibility was removed. Hence zero rating is legal in Slovenia. However Akos has since selectively banned different practices, allowing the state-owned incumbent to zero rate the European Champions League and its proprietary service while prohibiting competitive operators from launching zero rated Slovenian content platforms and customer service applications. Unsurprisingly all of the telecom operators have sued the regulator for its patently arbitrary and capricious decisions. This small country is a microcosm of what to expect with net neutrality rules going forward: subjective regulatory decisions and subsequent litigation.

See John Strand discuss zero rating at the Slovenian workshop as well as the panel debate. John Strand also addresses the issue of specialized services followed by the panel debate. See also Aalborg University’s Roslyn Layton discusses why the EU and BEREC net neutrality rules fail to conform to the standards of a good policy.

It was clear however that none of the supporters of net neutrality—whether the EU, BEREC, Akos, or activists—could present facts or evidence as to why proactive net neutrality rules are necessary. Thus the decision to support Open Internet rules is based on emotion.

10 reasons not to trust BEREC on net neutrality
Some 50 countries now have hard net neutrality rules. But the fact of the matter is that hard rules don’t bring more clarity; they only lead to more dispute. The bottom line is that net neutrality rules undermine competition because they violate the Constitutional tenets of democratic society: the freedom of speech, enterprise, and contract. Moreover when operators are forbidden to manage their networks, they are in effect being deprived of their property, which amounts to government seizure. Here are 10 reasons why you should not trust the BEREC process. Journalists can fact check the following claims.

1. Lack of evidence for the need of rules and guidelines
The EU Open Internet law states that its purpose is to “Guarantee the internet as an engine of innovation”, but there is no proof that these rules create innovation. No regulator in any country has conducted any empirical assessment of whether the policy works to create innovation. In fact, a survey of the countries with hard net neutrality rules to date including Netherlands, Slovenia, and Latin America, shows that the level of third party innovation by local country providers declines once rules are imposed. The vast majority of the world’s internet innovation comes either from countries with soft rules or no rules. In the case of the USA, most of the leading apps have been created long before the FCC’s Open Internet Order.

BEREC’s “evidence” for the need of rules amounts to two surveys. One is a review of the contract disclosures from European operators in 2011, noting that a minority of operators disclosed that they might restrict traffic under certain circumstances. However this is not the same as operators actually engaging in restrictions. BEREC never verified whether these restrictions ever occurred, how long they lasted, and if they did, whether there was any harm. Essentially BEREC’s justification for the need of rules today is based upon an extrapolation of contract information from 5 years ago.

BEREC’s second survey was conducted with users to see how they value net neutrality. The results showed that users, those who have even heard about the issue, had a more nuanced view of the topic. Above all, they stop caring about it when it means they have to pay more for Internet access. While these surveys are interesting, they do not constitute a fact-based foundation on which to build a sweeping ex ante regulatory regime.

A survey of the academic literature finds almost no empirical investigations, only theoretical. Of those, more than half of the articles say that net neutrality leads to ambiguous if negative results. The European Commission released a study concluding that digital innovation comes from the interplay of the ecosystem actors working together—networks, device makers, third party services and so on. And yet, the EU has adopted rules which prohibit a key part of the ecosystem from working with the others.

It may be the case net neutrality is now law in EU, but that does not mean that BEREC is justified to make extreme interpretations.

2. Lack of transparency
By the time a regulatory body issues its proposed guidelines, in practice, it has issued the final guidelines. The real work of making the BEREC guidelines went on behind closed doors following the European Parliament vote in October 2015. This is also corroborated by net neutrality analyst and proponent Chris Marsden who described the process as being conducted “largely in secret”.

It bears mention that Google-sponsored activists including Barbara van Schewick and Netflix and lobbied hard to have amendments added to the EU rules which would deliver extreme versions of net neutrality, but these were rejected by the European Parliament. However the provisions advocated in the rejected amendments are now in the guidelines. This is largely the work of Frode Sørensen, a self-proclaimed net neutrality activist, from Nkom the Norwegian telecom regulator who leads the BEREC process to create guidelines.

Following the Parliamentary vote, Frode distributed questions to hand-picked “stakeholders” designed to lend support for the rejected provisions which are now part of the guidelines and to participate in a closed door meeting on 15-16 December 2016. This can be evidenced by the response of European Digital Rights (eDRI) on 15 December where it responds to BEREC’s solicitation on the key provisions. eDRI, an organization sponsored in part by Google, purports to speak for end users and civil society. Its response to BEREC references van Schewick 6 times.

eDRI declares, “We think it is essential that BEREC hold an open consultation early in the process (underline by eDRI) to gather input from a broader range of stakeholders before drafting starts and before the final implementation guidelines are adopted. We therefore recommend BEREC hold the consultation in Spring 2016.” From eDRI’s perspective the call to have an “open consultation” for a “broader range of stakeholders” facilitates the participation of clicktivist campaigns by its partner SavetheInternet.eu, but the point is still well-taken. Even the pro-net neutrality participants Marsden and eDRI found the BEREC process to be secret, closed, and limited to only a few stakeholders.

Requests for information from BEREC about the 15-16 December meeting including the participants and agenda have been denied.

Ensuring the extreme version of net neutrality was further solidified in a secret “expert” meeting with Marsden and van Schewick in February in Rotterdam. The event was not open to the public nor the criteria for selecting the experts disclosed. BEREC’s websites notes the existence of a special packet of information made for the meeting, but the packet is not available on the website. Strand Consult has made multiple requests for the materials of the meeting, but BEREC has not responded.

In response to a question Strand Consult posed at the release of the guidelines on June 6, BEREC revealed that the “experts” were selected by Frode Sørensen and Henk Don of the ACM. The group comprises the collective “Friends of Frode” (FOF), those who are either professional net neutrality advocates funded in part by Google (van Schewick, Cooper); those who favor proactive regulatory intervention (Marsden); and a vendor to the European Parliament (Marcus). Henk Don said he was pleased with the “range of views” presented by the four FOF. But asking for intellectual diversity from the Dutch regulator with the most extreme net neutrality rules and the self-proclaimed activist regulator from Norway is like describing a rainbow as having colors that range from red to pink. Clearly the two authorities did not make a good faith effort to create a true discussion. The meeting was held to provide further input on how to deliver extreme net neutrality given the limitations of the EU law.

3. The discrepancies of the EU law versus the BEREC guidelines
There is no doubt that the EU Open Internet law is flawed, contradictory, and unfounded. For example it purports to “protect end-users” while enshrining provisions that effectively deny them competition. It claims to “guarantee the continued functioning of the internet ecosystem as an engine of innovation” while there is no evidence that such rules do anything of the sort. It recognizes the “freedom to conduct a business” and the freedom of operators and users to contract for services, but then abridges that freedom with a series of arcane and arbitrary distinctions of how broadband access can be offered. It also complicates the matter invoking the Charter of Fundamental Human Rights and then turning over enforcement to telecom authorities, regulators which are not adjudicators of human rights.

The EU rules do not make internet access cheaper, stimulate the ability offer new new services, or encourage the investment in network. But it does create potential revenue streams for lawyers, consultants, activists, and bureaucrats. As part of the Digital Agenda, it is legislation which utterly fails to achieve the stated goals of exiting the financial crisis and creating competition and jobs.

The EU net neutrality law says, “The objective of reasonable traffic management is to contribute to an efficient use of network resources and to an optimisation of overall transmission quality responding to the objectively different technical quality of service requirements of specific categories of traffic, and thus of the content, applications and services transmitted.“ To a normal person this would mean that the operator is managing the network to deliver the need functionality of the application to the end user. However the BEREC guidelines twist this into a labyrinth of regulations which make reasonable traffic management near impossible.

There are many discrepancies between the EU law and the BEREC interpretation. Significantly, the very name of the law and the guidelines differ. The law is promulgated for the “laying down measures concerning open internet access” but the guidelines are called “Implementation by National Regulators of European Net Neutrality Rules.” These terms are not interchangeable in a legal sense nor do they have shared definitions. BEREC uses “net neutrality” opportunistically so that it can call upon a range of its own documents which do not cohere to the EU law. Moreover the terms “zero rating” nor “specialized services” never appear in the EU law, but they comprise a significant part of the 43 pages of the BEREC guidelines. BEREC has indeed made new rules.

The EU rules prescribe a small playing field for BEREC, but the regulatory group has decided to abdicate its role to enforce existing rules and instead to write new rules which expand its role and authority considerably.

4. The BEREC process is driven largely by a single person
If we accept that the three branches of the EU government have made a net neutrality law, the role of BEREC to enforce law is perfunctory. Every EU member state has a set of communications laws along with the EU laws. It begs the question as to why BEREC even needs to conduct consultation processes, as such processes have already been duly undertaken as part of the official EU rules. The truth is that BEREC is conducting its consultation as a means to give it legitimacy to remake the EU law. The only reason that this is happening is because one person, Frode Sørensen, is driving the process.

The BEREC process is chaired by Frode Sørensen and Ben Wallis from Ofcom in the United Kingdom. Given that the UK voted to leave the EU last week after 40 years, it is not clear what role the UK will play going forward. However it is notable that Ofcom did not support extreme versions of net neutrality in the UK, and it will not be surprising if it rejects the EU’s dysfunctional approach to net neutrality along with other EU regulation which its citizens believe to undermine its sovereignty. A review of the various BEREC documents shows little involvement by the UK’s Wallis, as his participation appears to be ceremonial.

In any case, Frode Sørensen came to prominence in Norway as a so-called consumer advocate in a country with a soft approach to net neutrality. Participation in the regulatory regime by operators was voluntary and freedom to manage networks and price competitively was allowed. Strand Consult can find no net neutrality violations on record in Norway, and the country enjoys a high rate of investment in networks.

But the Norwegian regulator has allowed Frode Sørensen to use its website as a bully pulpit, promoting an extreme version of net neutrality that was not the official Norwegian policy. For example, Frode does not like zero rating, but it was never banned in Norway. Moreover Frode believes that the net neutrality legislation falls short of defining specialized services such that BEREC can regulate them. Now with his position in BEREC, Frode Sørensen has the opportunity to realize his vision of net neutrality, not the law the EU has promulgated.

The EU law attempts to confine the regulation. But where the legislation stops is where Frode Sørensen begins. He has had for years a vision to limit, if not prohibit, zero rating, specialized services, and price differentiation beyond speed and volume. He has worked meticulously to gather support for these measures, even though they contravene the will of the people as expressed by the EU law. But for die hard net neutrality activists, facts and the law do not matter. BEREC’s job may be to enforce the law, but with Frode at the helm, it is rewriting the law and delivering the rules that it believes are appropriate.

5. Zero rating – neither allowed nor prohibited
Zero rating is nothing more than price flexibility. It is a business model enjoyed across every industry and even in the Internet itself. There would be no internet companies today if it were not for zero rating. Every Google search is zero rated by an advertisement. That is a third party subsidizes the cost so the end user does not have to pay. Alternatively the platform bears the cost. Around Europe today Tesla has installed free charging stations so that its customers enjoy zero-rated electricity.

One European Commission goal in the Digital Agenda is to increase the use of egovernment services. This could be achieved by zero rating all government platforms so that users could access essential government services for free. This would be a way to stimulate adoption in many parts of European where indicators lag.

In one of the many absurdities of the BEREC guidelines, Chair Eschweiler pronounced that zero rating is neither allowed nor prohibited. Instead BEREC offers six parameters on which such offers will be examined, after operators have taken the risk to create them. In practice, this is de facto regulation. No serious company will take the risk. As such BEREC effectively regulates something never mentioned in the EU rules and Frode succeeds to realize his vision of a neutral internet, regardless of rights and freedoms of users and providers to contract for what they want.

It bears mention that consumers almost never complain about zero rating, but Google-funded internet activists do. There’s one very good reason why Google’s activists will fight to the death against zero rating. Up to 40 percent of data on a mobile subscription is advertising. That’s money that Google earns on its apps and related ad serving technologies. In every other media (radio, TV, print etc), advertising works to lower end user cost, but pur net neutrality effectively prohibits that advertisers subsidize end users access costs. Instead users pay for ads they haven’t asked for and they don’t want. It is so surprise that hundreds of millions of people have downloaded ad blockers for digital self-defense and to lower their data cost. Operators would love to lower users data costs with a better advertising model and protect their users from malvertising embedded in ads but that would eat into Google’s revenue and create competition on the internet advertising market.

As Google is running the show in the US and EU and net neutrality is how it protects its market share, don’t expect that regulators will allow operators to create a more dynamic, competitive market for online advertising.

6. Specialized services – no one knows what it is (and BEREC’s guidelines are probably violate competition law)
Like much legislation, the EU law is an imperfect compromise. Many parliamentarians believe that they crafted the language which satisfies the Google-funded activists while placating operators with a soupcon of flexibility to make innovative offers and services. The premise of the law is reasonable: as long as basic, best-efforts internet access is provisioned, operators should be able to do what they want provided that they don’t degrade the Internet. Even Tim Wu wrote that “operators should police what they own.”

However the best effort Internet is not as good as an optimized private network for many applications. Consumers have a variety of tastes and preferences and will migrate to the places where they can get a customized experience. The thought of the potential of people being online but not using one of the mainline platforms is concerning, so activists and regulators want to ensure that competitors are walled off from opportunities to provide alternatives.

The EU law says nothing about specialized services, but not only does BEREC define it, it prescribes the very services that it will scrutinize. BEREC says that specific services VoLTE, IPTV, and real time health will be scrutinized if they are offered by operators as specialized services. This is blatant regulatory discrimination and contravenes the law’s provision of technological neutrality. Moreover by barring operators from participating in new markets, it appears that BEREC’s guidelines are violation EU competition law.

7. BEREC is abdicating its jurisdiction in telecom
The law and history of telecom regulation is largely about regulation to facilitate differential pricing for telephone service. Price differentiation has existed for decades in local calling versus long distance, in interstate versus intrastate communications, in business versus consumer services, and in low versus high-volume users. If net neutrality advocates support that the Internet should be a public utility like the telephone network, then it is ahistorical and illogical that differential pricing should not be applied to the Internet, especially if the goal is to make it affordable for the maximum number of users. Thus BEREC’s indirect attempt to curtail zero rating is the opposite of what telecom regulators are supposed to do.

Moreover it is unfortunate that the mobile industry and its customers are denied the pricing flexibility enjoyed by the energy and financial industries as Strand Consult has described in this research note.

BEREC´s net neutrality guidelines will make it more difficult to launch new innovative services and will create a difficulty MVNOs and small and local content providers.

8. Quality of network vs. quality of phone
Much of the debate on net neutrality is about ensuring a good user experience, but both the EU and BEREC ignore the crucial factors which are most responsible for the quality of experience. It is a fact that at least 80 percent of the poor mobile experience is related to the user’s device, not the network.

In 2014, 8 European telecom regulators petitioned the EU to investigate the role of smartphones in the user experience. The regulators of Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway, and Sweden sent a formal letter to Daniel Calleja Crespo, Director General for Enterprise and Industry of the European Commission, requesting a labeling scheme for receiver performance in mobile phones Strand Consult describes that here.

Unfortunately for consumers, the EU chose not to focus on the smartphone consumers buy but instead to focus on net neutrality. The EU would rather hammer against European telecom operators which invest in networks in the EU rather that ruffle the feather of foreign mobile phone manufacturers which export their phones to Europe.

Strand Consult´s report The experienced mobile coverage – what is bogus and what are the facts? describes the challenges mobile phones create for consumers to realize a good network experience.

9. BEREC select stakeholders based on best arguments
It is clear from the BEREC guidelines that telecom regulators do not value the operators which invest, build, and run the networks which provide connectivity to Europe. The guidelines that BEREC has adopted conform to the provisions requested by groups such as Save the Internet, Access Now, and EDRi. They have succeeded to become the only stakeholders that matter in the EU net neutrality debate. Eschweiler confirmed this by answering a question at the event on June 6 regarding which stakeholders were allowed to participate in drafting the guidelines. He said that BEREC selects those which “have the best arguments.” Whether there is evidence for these arguments is evidently not a criterion. Moreover those stakeholders which have no voice, including children, the elderly, and the poor, are not included.

10. European Internet activists are sponsored by US Internet companies
Most journalists seemed to uninterested to explore the funding of Internet activists by the American Internet companies that drive EU policy making. However Strand Consult has reviewed the disclosures and tax returns of the leading advocates.

For example SavetheInternet.com is a project developed by the American net neutrality lobby Free Press. Over the years this group has received over $20 million to lobby on net neutrality. To create the European version, SavetheInternet.eu, source code was appropriated from the American SavetheInternet.com. The European project has thus delivered more than 57,000 computer-generated emails to European regulators in favor of extreme net neutrality. One of leading partners in the project is Access, a global organization advocating for net neutrality. According to its website, it has they have received more than $2.4 million from American internet companies, and $1.2 million alone from Google.

BEREC has demonstrated that it only takes professional activists seriously. They have succeeded to make the “best arguments” and thus, the activist arguments become the de facto rules. Cleary operators have not taken advantage of the process. They have not shown leadership or effective communication. If they have invested in any public relations or campaigns, it clearly has not worked. The rules show that operators’ needs and concerns are not important to EU policymakers.

The conclusion is very simple.
If you have followed this debate and if you’ve spent some time to familiarize yourself, EU net neutrality regulation is essentially feel good/look good policy. The EU tried to create rules which would seem like a win for the consumer—free internet and free roaming—while in truth these do nothing to create economic growth.

Google-sponsored internet activists have been shrewd to focus on BEREC because they can exploit the regulatory authorities to make de facto rules, regardless of what the Parliament, the will of the people, decides.

Europe’s telecoms operators which invest billions of euros in vital infrastructure have been ignored. And rather than focus on what actually creates 80 percent of the poor Internet experience—the mobile phone—policymakers focus on amorphous net neutrality rules.

BEREC’s conduct in the net neutrality process with its lack of evidence and transparency is undermining the credibility of telecom regulators. BEREC’s guidelines turn national regulators into arbiters of human rights and clicktivist-driven demands. This will become a problem for the EU and regulators going forward as they will likely be challenged in court for subjective judgements.

The net effect is that Europe has become the region where it is least attractive to invest in telecom networks – the challenges were visible at The FT ETNO Summit in October 2015.

To learn more about the status of network neutrality rules around the world and why activists succeed making rules that hurt consumers and innovation, see Strand Consult’s report Understanding Net Neutrality and Stakeholders’ Arguments.