Net Neutrality – an antepost bet?

Maria Goméz Rodríguez (Madrid/Catalonia) gave a student seminar on net neutrality, Ex ante or ex post control: Net Neutrality in Europe. She situated her research in the timeline of European telecommunications regulation (and spoke on the history of such), and compared ex ante (regulatory – in advance) approaches with ex post (competition / “antitrust” – after the event) approaches. Maria will be looking at jurisprudence on access (the Access Directive) and broadband in general, and hopes to offer some kind of prediction as to the future regulation of net neutrality in Europe. It’s a topic that is very badly covered, but I think it’s important, and was looking forward to this talk a lot.

We had an interesting question and answer session. Important points included the danger of regulatory flight (Delaware effect, arbitrage, etc), the balance between DG Competition and DG Information Society (and indeed the internal tensions between the telecoms and other elements of Information Society!), the prospect of root splitting and how it would affect the neutrality debate, the questions around what significant market power is (in this context), and the ‘wait and see’ approached preferred by many in the Commission, watching how the US debate turns out.

Some of those participating criticised the length of time that competition cases take (citing the Microsoft litigation,where the ‘problem’ was quite quaint by the time that a final resolution was close), and the lack of precision in defining net neutrality (which is of course connected with ascertaining a solution). (Maria used the OECD definitions – but there are still three of them!)

More on today’s privacy sessions later this evening…

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4 thoughts on “Net Neutrality – an antepost bet?

  1. Daithi, lots of lobbying to be done to get us there. Though policitcal will to drive ‘sexy’ issues will prevail.

    The 2003 Framework is market oriented and relies on Ex Ante application. You’ll find Ex Post is rather problematic. I can share with you why. Delineation is important.

  2. Efficiency:

    Exclusive ex post competition law enforcement in the telecom sector is not efficient or effective because:
    Competition law is not designed to address structural problems or situations of entrenched market power (removes the effect rather than the cause).
    Competition law can only be applied once the abuse has been implemented and, therefore, the anti-competitive objective has been achieved – “the operation was successful but the patient died.”
    Decisions under competition law are binding only on parties to the action. Lack of 3rd party/wider effect leads to proliferation of proceedings on narrow issues and uneven application of rules.
    Competition law actions generally require an individual complaint: high financial burden for challengers and exposure to commercial retaliation.

    Competition remedies are limited in scope – mainly fines, orders to cease the abuse, and structural remedies.
    There have been only two excessive pricing cases in the history of EU competition law jurisprudence, and result was “rough justice” at best.

    Remedies unsuitable:

    Competition remedies do not produce prompt financial relief for wronged party: fines go to Government and there are no retroactive payments (cf. ex ante remedies, e.g., PPC retrospective payments). Court action is required to claim damages in competition law cases and may be difficult to prove.
    Forward-looking remedies (e.g. cost orientation, technical interconnection obligations, QoS standards) are difficult/impossible for non-specialist authorities to devise, monitor and enforce (see United Brands and Guidelines on Merger Remedies).
    Competition authorities do not have sufficient staff to monitor effective implementation of behavioural remedies.
    Competition remedies generally produce effects only among the parties to the proceeding, which can lead to distorted industry impact and confusion in the marketplace.
    Competition law is slow to respond to failure to implement remedies, and renewed proceedings are required in case of failure to comply. Also problematic: “loophole” effect.
    “Landmark precedent” approach is not well suited to an industry where anticompetitive abuses often involve minute infractions in massive volumes

    Timing is problematic:

    Competition law requires proof of market power abuses, in addition to dominance. This requirement imposes a higher burden of proof and increases the length of proceedings compared with ex ante regulation.
    Court backlogs, procedural issues and delaying tactics by the respondent can extend competition law proceedings (e.g., MCI’s F2M complaint and mobile roaming cases — three years and still running).
    Competition law does not generally impose binding deadlines for decision-making on abuse cases; ex ante regulation sets timeframes.
    Appeals generally suspend validity of competition law decisions (where appeal is against the imposition/amount of a penalty), whereas under the new Framework, appeals do not generally suspend regulators’ ex ante decisions.

    Harmonisation req’d:

    Competition authorities often lack sectoral expertise, and the issues are usually highly technical.
    Growing workload of competition authorities (application of Article 81 of the Treaty, more merger cases and possibly State Aid) will make it even more difficult to focus on telecoms cases.
    There is no pan-European harmonisation mechanism in place for general competition law, so no uniform approach to market definition, finding of dominance. By contrast, Article 7 of the Framework directive gives the Commission veto power over NRA draft decisions not in line with EC law.

    View:

    Ex ante and ex post regulation are complementary regulatory tools in the telecoms sector.
    Competition law can and should be used to prosecute anticompetitive behaviour that cannot be addressed efficiently or effectively by ex ante regulation.
    Competition law should be used in those markets that are not subject to ex ante regulation.

    Will Ex Ante be rolled back:

    Substitution of ex ante regulation by competition law enforcement depends on the effective resolution of structural problems currently affecting the sector.
    Competition law can only be successfully applied to “normalised” markets that are not predisposed to anticompetitive behaviour and effects.
    The only experiment to date with exclusive competition law enforcement in the telecom sector (New Zealand) was a major failure and should be a lesson to us all.
    Roll back of ex ante regulation is not simply a matter of time but a question of sustainable dynamic changes in the industry (e.g., future development of real inter-modal access competition).
    Competition Authorities will need greater resources and more creative remedial approaches if ex post regulation is to be effective.

    Quaere: Do academics consider markets and reality before making grandeous pronouncements?

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