Christine Zulehner - Titular Professor of the Innovation & Regulation in Digital Services Chair - Professeure Titulaire de la Chaire Innovation & Régulation des Services Numériques.
 
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Net neutrality

The operation of Internet was based on the separation of three levels of functions of the network:

- the physical network,
- the logic network where the communications are established and their ensured interworking,
- the applications and the services.

Where the previous model of the digital communication networks, was the centralization of operation and services management, the Internet allows a large variety of applications and services to be operated at the edge / termination of the network. This mode of services operation allowed the development of economic models in which the use of the network and offering of services could be financed by the players at the edge of the network: typically according to the model of the bi-sided market by a combination between consumers, services providers and advertisers.

The development of Internet, and especially the need for financing the deployment of new infrastructures, raises the question to really know who pays for what, and to whom? The operators of infrastructure, in particular, intend to get enough revenues from the whole Internet economy to finance the deployment and operation of their infrastructure used in any case to deliver the services. The situation becomes critical when :
- on the one hand, the network comes to saturation and it is necessary to adapt the whole economy to the optimization of the use of the network and with the jump of required investment for the traffic flow in strong growth and,
- on the other hand, the modes of use of the network are very differentiated, according to the necessary speed (from email to video), quality of service, security level of the transmission,?

The network operators argue for a new tariffing model for the use of the Net, which takes into account of the differentiated modes of use of the network. On their side, big players of the Internet (Google, Yahoo! Microsoft,?) consider that a rupture in ?the neutrality? of current tariffing model would be contrary with the basic principles of operation of the Net, in particular the freedom of access and use. The new tariffing models would raise the barrier of entry for innovating new entrants. Such a rupture, ?would give again the hand? to the network operators, when the Internet was initially a ?network of network? without centralized control, and which could moreover favour their own offers services.

The regulators have been asked to intervene. Wouldn’t the network operators be in a position to abuse of their market power, arguing constraints of network management? These debates put the regulators and law-makers in a dilemma: certain types of discrimination are considered as beneficial consumer welfare when others reveal anti-competitive practices. Does one need ex ante regulation to preserve the current operation of the Net, or ex post regulation constitutes the best answer to a complex regulation?

The debate was born in the US as from 2003 (Tim Woo) where certain examples of discrimination or proposal for a discrimination were denounced as abusive (Madison River Telephone blocking the access of its network to the VoIP services of Vonage, Verizon prohibiting its Boadband customers to use this service to connect a server,?). The decision of the Supreme Court in 2005 to authorize the companies of cable to propose an access differentiated to their infrastructure really made emerge the debate.

In Europe, the debate is less intense and one considers until today that the Net neutrality is not a regulatory question. In November 2007, the Commission proposals on the services and electronic communications authorized the discrimination of the products in so far as the conditions of the competition are observed.

To contribute to the comprehension of this debate, the Innovation and Regulation Chair organized on May 29, 2007 a seminar on “Net Neutrality” which brought together American and European experts.

Intervening during a meeting organized by the Chair on December 13th, 2008, Nicholas Economides, completed the understanding of the Net Neutrality debate by a two-sided market analysis of the Internet.

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This post is also available in: French