Diane Coyle, Vice Chairman
Dyddiad: 28.11.2011Diweddarwyd: 27.11.2012 am 10.20

Four out of five people think that internet access is a fundamental right, according to a recent World Service poll in 26 different countries.

Why do people say that? Because they have seen that the internet enables truly open channels of information that are beyond political or commercial interference. No one 'owns' the internet.

Yet it is not something we should take for granted. The history of all other media has been of a fight for consolidation and control over the flow of information to the public. The internet could go the same way.

To avoid this, we need to resolve a debate about what policy wonks call 'net neutrality'. The term disguises a fundamental question: should your internet service provider be able to vary the quality of service you get from different websites, depending on the level of payment they receive from those sites?

Last week, Ofcom published a document setting out their approach to this issue.

It didn't cause a storm in the press, and there isn't a public fuss about this at all just yet.

But don't let that convince you it doesn't matter - imagine trying to start a public debate about banking regulation or the ethics of tabloid journalism five years ago.

If the wrong approach is taken to net neutrality, the result would be bad for consumers and bad for economic growth.

That would make no sense. The government has rightly identified the need to improve the speed and capacity of Britain's broadband network partly in order to help promote growth.

The difficulty comes from working out who should pay for that, and how.

Internet service providers (ISPs) feel they are being unfairly blamed by consumers for a sub-standard internet experience due to network congestion or poor coverage. They need to pay to upgrade to the speeds that consumers expect, so they are considering asking the content companies, whose services – like the BBC's iPlayer – drive web traffic, to pay for a faster service for their content.

Advocates of the open internet call this a limit to free expression, arguing the open approach has worked well so far for the economy and society as a whole, promoting new and exciting services by keeping barriers to entry and expansion low.

Ofcom has not until now taken an active role in the debate, waiting instead to see whether the changes proposed by ISPs will affect consumers before they intervene, and relying on consumers' willingness to switch broadband providers if they are unhappy.

One problem is that we know people don't often switch – not least because broadband is so often bundled in with phone and other services. They may not have or understand the information they need to switch, so relying on this as a protection for the open internet is flawed.

Ofcom see this risk very clearly, and say they want ISPs to provide greater transparency to consumers about the policies they will employ to manage internet traffic. We particularly welcome Ofcom's suggestion that if ISPs offer a service to consumers which they describe as 'internet access', this service should be unrestricted, allowing the consumer to access any lawful service.

But Ofcom also quotes evidence that consumers often make bad decisions if they have to draw their own conclusions on the basis of complex technical information, and conclude that they 'would like to see ISPs approach this challenge creatively'.

So a lot hangs on whether ISPs are up to that challenge, and whether and in what form Ofcom are prepared to intervene. For the minute, Ofcom have not explained how they will judge whether or not innovation is being thwarted (the test, they say, of whether there is a problem). Nor have they explained how they would define a minimum 'best efforts' internet service if they needed to regulate to secure this as a minimum standard for all.

There is no doubt that there is a cost to upgrading to the new fibre or 4G networks which will deliver faster internet access, but the burden need not fall entirely on ISPs. Consumers and content providers already have some incentives to contribute to the costs of building the network. Consumers may be willing to pay for some of those costs if there is a reason to do so – for example if they want bandwidth-hungry online content such as internet TV. Content providers will keep investing in technology which gives consumers a slicker experience and reduces the bandwidth that they need to use.

It might also suit some content providers to pay telecoms operators to deliver their content faster than everyone else's. But it might not suit smaller start-ups, who can't afford to pay.

If a 'two-tier' system emerges, that would have a dramatic impact for users, with some content arriving quickly and some slowly. Moreover, one unintended effect might be that ISPs are less incentivised to build out new super-fast networks, where bandwidth is far less of an issue if they have locked all the bigger content providers into paying for preferential service within an inferior network. Either way, consumers would lose out.

Ofcom say they 'do not have a general objection to models of competition where vertically integrated operators do not provide open access to their networks, provided that there is genuine competition and rivalry among the firms.' Further, they say, 'in such circumstances, we do not necessarily regard the blocking of services provided by competing providers, or discrimination against competing services, as being anti-competitive'. They do consider that blocking and discrimination is 'highly undesirable', but they expect the market to address this on its own. They accept that the internet deserves special attention from regulators, given the risk of reducing innovation, but it does not look like they necessarily feel a two-tier internet would have that damaging an effect.

Both as an economist and as a BBC Trustee, I believe that keeping the internet open is crucial. It is the only way in which all businesses will be free to innovate and deliver the choice consumers expect – not just what's currently popular or profitable.

As things stand, both the industry and Ofcom support the idea of a code of conduct for ISPs. Ofcom's version would be limited to a set of rules about consumer transparency. The BBC believes the code should go further.

As a minimum, we believe this should have clear principles stating that they will not block legal content or unfairly prioritise different types of content for their own commercial reasons. Beyond that, we would like to see a 'principle of equivalence', which requires ISPs to offer any sort of preferential treatment to all content providers at the same rate – to prevent them signing up only the big players at discounted rates. And ideally, we would like to see them supplying the sort of real-time information to consumers about broadband speed and performance that would allow the public to get hold of truly reliable independent advice about switching.

Without this sort of added edge, the risk is that self-regulatory rules like this are open to wide variety of different interpretations and are difficult to enforce.

I hope Ofcom will be closely involved in the work needed to help make sure any industry code of conduct is robust. And I hope they will keep a close eye on the development of the market and do more to explain in advance what their contingency plan will look like if things start to go wrong. Otherwise the regulation of this market might turn out to be too little, too late.

The recent failures of banking regulation show us exactly what can happen when an issue is ignored; what's at stake is a fundamental right for both businesses and consumers.

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