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Ofcom, the UK telecoms regulator, launched an investigation into Three UK and Vodafone UK on March 6, 2018, to assess their compliance with the EU's net-neutrality rules, in particular regarding traffic management practices such as throttling and zero-rating. The results of the investigation are expected in June 2018.
Ofcom has confirmed that it will investigate the compliance of Three UK and Vodafone with the EU's Open Internet Access Regulation 2015. The investigation into Three UK will examine the practices of restricting tethering, restricting devices on which a SIM can be used, and traffic management practices such as throttling or slowing down certain types of traffic. On the other hand, Vodafone is being investigated over its traffic management practices relating to Vodafone Passes, and the transparency of exceptions to zero-rating within Vodafone Passes products. These passes allow users to have unlimited access to certain music, video, chat, or social applications, without the usage counting against their monthly data allowances.
The EU's Open Internet Access Regulation 2015 obliges ISPs to treat all traffic equally, without discrimination, restriction, or interference, and irrespective of the sender and receiver, the content accessed or distributed, the applications or services used or provided, or the terminal equipment used. The EU regulation also sets out transparency obligations on ISPs' traffic management policies. However, the regulation does not discuss zero-rating, but it does not explicitly prohibit it. BEREC has provided guidelines which further set out criteria for NRAs to assess zero-rating offers. The guidelines advise national regulators to deal with zero-rating on a case-by-case basis, and to make sure that once a user's monthly data allowance is exhausted the zero-rated service also stops being provided.
As part of the regulation, national regulators such as Ofcom are expected to monitor market developments and must report annually to the EC on compliance starting June 2017. Ofcom's first annual report to the EC found "no major" abuse of net neutrality by ISPs. The regulator only found a few offers from operators which may have fallen outside of the rules, although these were too brief or small to have any impact. For example, in November 2016, an unnamed operator launched a 4G product including zero-rated use of some messaging services, but the offer was limited and the operator itself was very small. It seems other mobile operators may have seen this as the green light to offer their own zero-rated services. According to Vodafone, O2 offers unlimited music streaming from five applications, Three UK offers unlimited streaming of four music and video apps, while EE offers six months' free use of Apple Music. However, Vodafone's offering of unlimited streaming from 21 applications is by far the most wide-ranging. As these are no longer one-off or limited occurrences, it is not surprising that Ofcom has decided to investigate them.
Regulators have to try to strike the right balance between allowing some pro-consumer practices and stopping discriminatory behavior that might hurt competition. As Vodafone's zero-rated services go against BEREC's guidelines by not stopping the zero-rated service once a customer's monthly data allowance is exhausted, this could prove to be a violation of net-neutrality rules. Having said this, in April 2017, a Dutch court allowed T-Mobile to continue to offer its zero-rated music service in the Netherlands. The offering was deemed nondiscriminatory because any music streaming service could participate in the scheme without charge. With regards to Three UK, under the EU guidelines, operators are allowed to adopt traffic management practices under certain exceptional circumstances such as maintaining integrity and security of the network or for reasonable congestion management that is proportionate, and exceptional or temporary. Three UK will need to satisfy Ofcom that its traffic management practices align with these exceptions.
Internet Openness Indicator, GLB005-000007 (January 2018)
The Experience in Europe of Implementing Net-Neutrality Rules, TE0007-001150 (June 2017)
"US net-neutrality policy was years in the making, and will continue being modified for many more," GLB005-000021 (January 2018)
"The Netherlands becomes first member state to scrap existing national net-neutrality law," TE0007-001159 (June 2017)
Sarah McBride, Analyst, Regulation
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US team - +1 646 957 8878
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