Diverging US-EU Internet trade visions

Scott Cleland Contributor
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U.S. and EU Internet trade policies continued to head in opposite directions last week.

Increasingly divergent U.S.-EU Internet policy visions complicate negotiations for the most forward-looking part of the nascent Transatlantic Trade and Investment Partnership (T-TIP).

Last week the European Parliament narrowly passed amendments adopting an uneconomic, anti-investment vision of net neutrality that is very different than the U.S. economic, pro-investment, net neutrality vision.

That vote is on top of two problematic European Parliament data protection votes that occurred a few weeks ago.

One made European data subject to EU law and favors EU data storage, to protect Europeans’ privacy, and to foster a European tech, cloud and Internet sector. The second called for a suspension of the U.S.-EU data protection safe harbor that lets U.S. firms self-certify their compliance with EU privacy law.

Per the Telegraph, a “bloc of left-wing” Members (socialists, greens and liberals), passed European Parliament amendments “that would ban extra charges for particular types of data such as video” in order to stop a “two-tier Internet” – i.e. public and private Internet tiers.

By banning European ISPs from charging more to provide video streaming services like Netflix and Google-YouTube quality assurance guarantees, the law effectively would set the price of transmitting downstream traffic at zero in Europe.

At core, the European Parliament has passed an uneconomic and anti-investment Internet commons policy; “traffic should be treated equally without discrimination, restriction or interference independent of the sender, receiver, type, content, device, service or application.”

European industry and other opponents argued that all Internet traffic is not the same or an equal burden on the network. Thus these natural differences require differential network management and pricing in order to offer quality assurances to different kinds of traffic.

Opponents also railed against a policy that would nonsensically: divorce costs from prices, eliminate profits necessary to fund investment in Europe’s lagging fixed and mobile broadband infrastructure and harm growth and jobs.

In stark contrast, in the U.S. last week, FCC Chairman Wheeler essentially confirmed an opposite Internet vision that would not subject the Internet backbone to inflexible net neutrality regulation like the European Parliament did.

A U.S. Court of Appeals decision in January ruled that the FCC’s prior attempt to price regulate broadband ISPs with an implicit zero price on downstream video traffic from a Netflix or YouTube was illegal common carrier regulation.

Allowing a two-sided Internet backbone market to evolve in the U.S. will better align costs with pricing and prevent unsustainable and destructive regulatory arbitrage of hugely asymmetric Internet traffic flows.

In addition, this market orientation naturally will not force consumers alone to fund Internet infrastructure or to subsidize Netflix and Google-YouTube, which together comprise half of all Internet downstream bandwidth in North America per Sandvine.

History has seen such starkly diverging visions for the future before.

An Aesop fable from over 2,500 years ago, the Ant and the Grasshopper, captures the age old wisdom of the need to prepare for the future. The ant worked hard to save enough food to survive the winter, while the grasshopper belittled the ant’s preparations by saying we have plenty of food now why worry about the winter?

Like Aesop’s diligent ant, America’s Internet policy is future-oriented in relying on sustainable market economics and real positive returns on investment over the long term. This has enabled America to lead the world in broadband investment and in mobile broadband LTE investment.

Like Aesop’s present-focused grasshopper, European Internet policy is focused on present consumption not providing for the future. A year ago the EU’s budget for 2014-2020 cut most all public funds available for upgrading Europe’s broadband infrastructure. That led to European laments that Europe is falling behind the U.S. in broadband Internet investment and innovation.

Rather than correcting this problem, this year the European Parliament vote on net neutrality made it worse. It effectively cut most all potential private funds available for upgrading Europe’s broadband infrastructure by drastically cutting profitable roaming fees and banning any revenues from American video streaming companies like Netflix and Google-YouTube for their outsized network usage.

In sum, negotiators of the nascent Transatlantic Trade and Investment Partnership face increasingly diverging visions for Internet trade and investment going forward.

The EU currently envisions net neutrality producing a public Internet commons focused on perfecting equal treatment among what already exists. That vision profoundly discourages private investment by demonizing profitable trade and economic investment as unwelcome and somehow harmful.

In contrast, the U.S. envisions net neutrality as ensuring that users have the freedom to access legal the content of their choice via a free and open Internet marketplace where competition and marketplace risk and opportunity provide a high-quality Internet infrastructure for today, and importantly for the future as well.

Hopefully, when the European Council reviews the European Parliament’s new pending net neutrality policy, it will see how uneconomic, unproductive and anti-investment it is for Europe, and how counter-productive it is for completing a successful Transatlantic Trade and Investment Partnership.

Hopefully, U.S. negotiators appreciate that the new EU Internet policy vision of an Internet-commons, combined with an EU data protection position on EU localization and no safe harbor would be a huge and lasting step backward for American Internet trade and investment.

Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, a research consultancy for Fortune 500 companies, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests.