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Net Neutrality and the Disruption Engine

· September 10, 2013

I am not the first, and I won’t be the last, to point out that the Internet is one big disruption engine. It allows the micro-multinational to compete with the multinational without the enormous capital investment that would once have been required in distribution, production, marketing and more.

This disruption engine depends on the ability of the new guy to be able to connect to the Internet, the network of networks, and then be seen by all Internet users. This fluidity powers the process of creative disruption. It is for this reason that the rules for the open Internet, the rules of the road, are key.

Those in the know that have followed the debate on this topic in the European Union and the US for years will know that net neutrality is on trial again in both regions: yesterday, in the US, a federal court heard Verizon’s challenge to the FCC order and in the EU the European Commission is expected to adopt a regulation on telecommunications this week, including (we hope) provisions on net neutrality.

The net neutrality provisions are just one element of legislation to be proposed by the European Commission. Its package also includes measures on spectrum, the single market, wholesale products and, maybe, roaming.

Recent CCIA work illustrates why regulatory safeguards are good for innovators, consumers and telecoms firms.

Firstly, one of our surveys shows that in most European countries consumers stay with their ISP for 10 years or more. Given that the market for broadband is not as dynamic as you might imagine, consumers do not ‘police’ ISP behaviour. This problem is getting worse as the level of switching providers has reduced by half in the last 5 years, possibly due to the increase in bundled service packages. In fact, fully 62 percent of EU27 consumers have never considered switching to another provider.

Secondly, why do consumers pay for broadband? It is not because it looks nice. Our survey of 3,098 consumers in Italy, France and Germany confirms that the reason consumers pay for broadband is to access content, applications and services and that the most common reason [43%] that consumers upgrade to a faster, more expensive, connection is to improve their Internet experience and to use high bandwidth services such as online video and TV.

Of those upgraders 49% are video uploaders, 41% download video games, 52% upload large files, 43% watch live TV online and 40% make video call, whereas only 23% of those who have online shopping as a key activity have upgraded. Brands such as Skype, Xbox live, PlayStation, iTunes, Netflix and YouTube also motivate upgrades. It is clear that high bandwidth services are key to the long-term broadband infrastructure investment case.

A rising demand for bandwidth is good for telecommunications firms. Rising capacity is good for consumers and businesses. Today’s online service providers will eventually get disrupted. Let’s fuel this virtuous circle while ensuring that the disruption engine goes full steam ahead.

James Waterworth is the Vice President of CCIA Europe. 

European Union

DisCo is dedicated to examining technology and policy at a global scale.  Developments in the European Union play a considerable role in shaping both European and global technology markets.  EU regulations related to copyright, competition, privacy, innovation, and trade all affect the international development of technology and tech markets.