Level Playing Field and the Scope of Regulatory Oversight

After attacking Net Neutrality head on for years, European Telcos over the last few months have shifted message to something a little bit different, namely the “level playing field” argument. The essence of the argument seems to be that since most telcos offer services that can be partially substituted using applications offered by online service providers, the regulatory burden on ‘functionally equivalent’ services is uneven. Therefore, the telcos argue, the playing field isn’t level.

At face value, it looks like there’s some merit in the argument: why, for example, would a telco need to connect every hospital, fire station and police station in the country so emergency numbers can be routed to the nearest one to the caller and carry information about who and where the caller is if Skype doesn’t have to? The answer of course is that these obligations also create value, and no one in their right minds would buy a pure IP Phone with Skype as the default voice service if they had no way to call the police or an ambulance after a roadside accident. Because these obligations deliver value to the end-user they create value for the telco as well.

Furthermore, as I pointed out in my previous blog post on the EC use of the term OTT, it’s very complicated to decide that one online service is functionally equivalent to operator voice or messaging: very often, these functions are only part of the service, and they are limited to users of said service. PSTN interconnection on the other hand creates a universal voice service that messaging apps, internet voice services and social networks are not a part of. This universal voice (and SMS) service is backed by a universal directory which allows all users to be reachable no matter where they are, and in turn allows them to reach all other users as long as they’re in the directory (ie. they have a phone number). This is the key differentiator that (in my opinion) destroys the level playing field argument altogether. If you tap into that universal phone network (whether through an online app or via the plain old telephone system) then you should be regulated and the obligations of that network should apply to you. If you don’t have access to that network, well, you shouldn’t.

This seems to be common sense, and is actually the position that BEREC (the European regulators’ working group) has put forward. It would result in a regulatory burden that would be no lighter for telcos, but extended to a few online players who interconnect with the voice network and are therefore functionally much closer to traditional voice and text messaging. An ever more forward looking approach would be to consider which parts of the voice and SMS services really need to be regulated still and possibly lighten the load on these. Not because online providers offer partially overlapping services, but because the market has expanded to include some of these and therefore some obligations might no longer be considered vital for market fairness (after all, when you can get text messaging for free with an app, preventing a player with a dominant position from price gouging to eliminate competition seems a little absurd…)

But that doesn’t seem to be the way the EC is looking at it, and it certainly isn’t what the telcos seem to be pushing for (although to be fair it should be noted that Orange has come out with a proposal (link) to deregulate voice and text and focus on access regulation.) The current telecoms framework consultation I mentioned in my earlier post on this seems biased towards pushing for all players to be regulated, and some regulators have actually openly said that that’s what they would do. The president of French regulator ARCEP was the most vocal about it. Here’s what he said in a recent interview in Rue89:

Our answer, to please the operators’ lobbies, could be to say: « since your competitors/partners, the GAFA [Google, Amazon, Facebook, Apple], the over the tops, are not subject to any framework, we will deregulate you completely.

Personally, I am not favorable to this race to the bottom. I much prefer an attitude which consists in reaching broadly, one which aims for an open internet that includes net neutrality but isn’t limited to that. An approach that does not preclude one day imposing rules on Internet players. It’s not about censoring the Internet, that’s not the topic, it’s about establishing basic principles (around privacy, taxation, fair relations with startups and SMEs…).

(The translation is mine, and yes, he did use both over the top and GAFA matter of factly.)

Putting aside for a minute the fact that the argument shifted so quickly from voice and telephony regulation to privacy, taxation and negotiation power in relation to size (three things that have never been part of the European regulators’ oversight), I’m wondering if the telco lobbyists aren’t getting their way: they know (as I pointed out recently) that no regulator would deliberately reduce their own scope of responsibilities, even if the reasons for specific parts of the regulation no longer exist. So instead they want regulators to expand their scope, regulate more broadly (and this, I should add, is completely opposite to the position of the European Commission that led to BEREC being created).

What would be the practical consequence of that? Instead of focusing their sights on a dozen players per country, the bulimic regulator would have to scrutinize dozens if not hundreds of players. With the likely consequence that scrutiny on the traditional players would be lowered as attention would be attracted elsewhere. Which is probably exactly what the telcos have told their lobbyists to push for…