Latest Event Updates

The European Commission stops easy consolidation in the telecom markets

Posted on Updated on

6862_paella

The European Commission has started a Phase II investigation regarding an envisaged concentration in the Spanish telecommunications market, regarding the acquisition of Jazztel (a pure fixed operator) by Orange (a Spanish subsidiary of the French incumbent delivering both fixed and mobile services). The decision to open the investigation has been published via a PR.

This case it quite interesting because it is the first time that the competitions offices of the European Commission raise doubts about a merger between altnets in a fixed market. Normally concerns have been raised frequently only in the mobile market (although deals have been finally authorized with remedies) or in the fixed market, when the merger concerned the incumbent (like in the Nordic markets). So far, a pure merge between fixed alternative operators did not encounter any particular issue (for instance, some fixed operators have been bought by Vodafone, recently in Germany).

Why DG COMP is taking now a different views?

Firstly, the Spanish fixed market is highly concentrated, with few independent ISPs competing amongst them and with the incumbent. Spain is similar to France and Portugal, where similar level of market consolidation already exist, but less to Italy, Germany and UK, where there are still plenty of operators (especially in the UK). Thus, a national merger in a high concentrated market creates a competition alert for the European Commission.

Secondly, the Spanish market is driven by triple/quadruple play offers. Therefore, the reduction of competition resulting from the merger may not be compensated by potential new entrants, unless the latter may also compete on the mobile side. This is however unlikely, since the number of mobile operators is limited by frequency scarcity, and there is no effective obligation to grant MVNO access to competitors.

How could it end up?

It is difficult to believe that the European Commission will ban the proposed merger, one should however wonder which remedy could be proposed to let the operation to go through. There might be various hypothesis:

- a MVNO access obligation on the merged entity (such as happened in the latest mobile mergers in Germany, ireland and Austria)

- a light fixed access obligation on the merged entity (this would be a leading case, then)

- a request to the Spanish telecom regulator CMT to promptly review market regulation, with possible outcome resulting in regulation over incumbent Telefonica (or other operators operators, if a collective dominance is found).

Whatever will be the result, the signal launched by the offices of DG COMP is clear: against the political mantra whereby the European telecom sector needs consolidation – at all cost – to increase margins and profits, the antitrust supervisor reminds that competition and consumer interest cannot be affected at all. This is not a change of view by the side of DG COMP, which also with Almunia was reluctant to authorize national mergers (instead of cross-borders ones), although they did it at the end. The new Competition chief, the Danish Vestager, seems to say that the time of political compromises is ended and that competition is not a matter to be driven by politicians.

Que viva roaming (until 2020 and even further)

Posted on Updated on

leo-cullum-i-love-the-convenience-but-the-roaming-charges-are-killing-me-new-yorker-cartoon

Roaming surcharges within the EU should end one day, but we do not know when exactly. For the time being, European citizens will continue to pay roaming surcharges abroad at least until 2020 and even further, despite the fact that European medias have frequently reported, in the last months, about the imminent end of international roaming.

In April 2014 the European Parliament, amending the Single Telecom Market (“STM”) of Commissioner Kroes, proposed to definitively abolish roaming surcharges by end of 2015. The Parliament’s proposal was then submitted to the Council, i.e. the body that within the European Union represents the governments of the Member States, however an agreement was not found until now. A next meeting of the Council is scheduled for November 27, 2014, however most signals indicate that the national governments will just discuss about the progress of the negotiations, while no decision is expected to be taken.

In the meanwhile, there was a leak from the Presidency of the Commission, namely a letter sent by president Junker to all EU commissioners in which each of them was required “to examine all pending proposals in [your] area and to signal those which we should review together, for example because they have no realistic chance of being adopted in the near future, or because the degree of ambition achievable does not match the objectives sought.” Many observers have recognized that such kind of instructions will likely bring to the withdrawal of the STM proposal, including the roaming reform. In fact, many parts of the STM proposal are really controversial (net neutrality, spectrum) and also the roaming chapter is struggling to find a consensus. In addition, the entire STM proposal appears far from being able to establish a Single Market for telecoms, since the initial proposal of Kroes was weak and controversial, then it was drastically modified and down-watered by the European Parliament and the Council. Under such circumstances, and considering the letter addressed by the Presidency, the withdrawal of the STM proposal, including the roaming reform, appears quite likely.

If this will happen, roaming surcharges will continue to be regulated by Regulation 531/2012 (the so called Roaming III) providing for regulated caps (i.e. maximum level of prices that mobile operators may not exceed) until a review is made. It possible that the European Commission will start to work quite soon, by mid-2015. Since the new draft would require public consultation and opinions by other bodies, the Commission’s proposal is expected to be likely submitted to the Parliament and Council by mid-2016. The following legislative process with Council and Parliament should take at least 18 months year, which means that formal adoption may be expected – if we are lucky – by the end of 2018. I am saying that we need some good luck, because the legislative draft of the roaming reform may include also other subjects, like net neutrality, spectrum competition ecc, which may further delay negotiations and final adoption.

Should the new regulation adopted by end of 2018, the abolition of roaming will not be immediate, more likely a glide path from 12 to 24 months may be provided. Thus, roaming surcharges will likely continue to be applied until 2019/2020.

In addition, even in case of formal abolition, one could presume that substantial parts of international roaming will continue to survive in any case. In fact, the main stakeholders and Berec are currently discussing a mechanism named “fair use” whereby, whenever the international roaming will end, the abolition will only concern a predefined package of traffic (for example: 24 hors of traffic for voice, 1 Giga for data ecc). Should the communications exceed the fair usage package, then roaming surcharges will continue to apply.

To sum up, whatever the European institutions enthusiastically declare, the way to the end of roaming surcharges is still very long. The market could, however, find a solution before operators and regulators are able to propose something workable. Manufacturers such Apple and others may in the future offers data roaming packages at flat rate vai multi-carriers SIM or specific applications. Of course, it must be seen whether such providers will be able to negotiate affordable wholesale access agreements with mobile network operators and whether these offers may need special regulatory compliance. For sure, from now up to 2020 the market will invent something.

Broadband rural development: the “déjà vu” from the European Commission

Posted on Updated on

braodband_1503705c

While people are still speculating about what will be the approach of the new European Commission to boost investments in broadband, Mr. Oettinger – the (German) commissioner for the Digital Agenda – launched a provocative proposal via his blog: in order to boost investments in rural areas, one should limit consumers’ choice by restricting the possibility to switch to another operators (lock-in) and/or exempting investing operators from regulation. According to Oettinger “wouldn’t it be better to have the option of broadband with a longer contract, than not to have broadband at all?”.

For sure, this declaration will shake the debate in Brussels well before to see the concrete proposals tabled by the new Junker Commission. Truly speaking, Oettinger’s proposal only addresses rural areas where objective reasons (small density, wide territory) for investment actually exist; however it is clear that many operators (Deutsche Telekom in primis) will soon flag this idea as a general solution for the BB market.

The most surprising aspect of this declaration is that Oettinger consider his idea to be a”fresh” one, as he ignored the last 5 years of regulatory debate in the EU. Just to remind, during the Kroes’ mandate (2010-2014, RIP) the European Commission embraced the mantra that competition could be a little sacrificed in exchange of more investments. This mantra was reflected in a deregulatory agenda with took place via the new Relevant Market Recommendation, the new NGA recommendation, the Connected Continent proposal and so on. While Kroes’ proposals shaked a lot the regulatory and conference debates in Brussels, the real market was basically indifferent, since broadband penetration and investements in Europe remained quite stable. There were lot of fibers announcements (so-called fibers to the press release) but less in practice, and depending on the country. The main effect of Kroes’ policy was to migrate the investments from FTTH to FTTC (i.e. shortening the fiber deployment to the streets cabinets, rather then up to house-holdings), because many operators, mostly incumbents, found more convenient to invest less in fibers and continue to exploit the monopolistic profits of the last mile made of copper. That’s BB Kroes’ heritage in peanuts.

The reason why this deregulatory solution could work in rural areas is still not clear. Oettinger says that it worked in the energy sector, where in facts similar proposals were made for very depressed areas in emerging countries. Maybe he referred to some zones of Germany, where some local municipalities are providing electricity in small territories. We do not know exactly, since his post provides for little explanations about. Oettinger says that “in some limited cases, for new pipelines, companies can be exempted from the requirement to provide competitors with access to pipelines. This is only given if they can convince the EU Commission that without that exemption the investment would not have been made”.

In any case, broadband is a bit different from energy. Most rural areas in the EU are considered niches markets and are frequently covered by small, alternative operators of any kind, with different business models: fixed, wireless, satellites, privates, municipalities, dark fibers providers, ecc. There is no clear evidence that regulation may be The Obstacle for operators, especially incumbents, to invest. It seems more a problem of margins: a big operator like Deutsche Telekom, with 235.000 employes and related costs, needs to concentrate on rich areas. A small flexible operator may have the costs structure to try the venture in niche areas, and the same for municipalities which also have to pursue a public objective. The main players, by contrast, prefer to stay in metropolitan/high density areas for obvious reasons, irrespective of regulation.

The lesson coming from US confirms this scenario: the main US operators, such as AT&T and Verizon, have massively invested in areas where they had to counter the competitive presence of the cable operators (Comcast and TW) providing Internet access. Outside of these areas very little was made, including rural areas, despite the fact that broadband access is fully deregulated in US.

This proposal would therefore not change too much in European rural areas, however it will be welcomed by European incumbents as a first step to enhance deregulation and remonopolization of BB markets in general. Oettinger seems aware of this and tries to avoid too rapid conclusions: “The needs of a dense city with rich competition may be different to those of an unserved rural area“. Thus, It will mainly depend on the concept and ambit of “rural areas”. Somebody in Brussels will soon argue that Tiergarten as well as Villa Borghese should be regarded as rural areas – at the end, there is lot of green there.

A final comment: Oettinger seems to say that an expensive, maybe crap, and not changeable BB may be better than no BB at all. It could be. However, there might be better solutions, like using public funds, financing pure network infrastructures with access to any service providers, leaving to citizens the property of their last miles, ecc ecc. The debate is open.

How Obama’s view on net neutrality may influence the European net neutrality reform

Posted on Updated on

net-neutrality-1-620x400

The recent intervention of President Obama in the matter of net neutrality sounded like a bomb in the US ongoing reform of net neutrality. We all know that following the judicial case won by Verizon in January, FCC’s chief Tom Wheleer was in the process to revise the current NN system, searching for a solution which could meet the wishes of telcos and cables companies (asking for paid prioritization and commercial discrimination in general), while keeping for the FCCs some kind of final word. Lastly, he proposed a kind of “hybrid” solution that not everybody understood. Obama’s intervention has clearly shaked this scenario and chased pavements for new developments. Although the FCC is an independent body and does not have to follow instructions from the White House, we believe that Wheleer will have somehow to revise his draft proposal. The first result, for the time being, is that the reform has been postponed: FCC press secretary Kim Hart just announced that “there will be no vote on open internet rules in the December meeting agenda. That would mean rules would now be finalised in 2015.

Whatever the final outcome of the FCC reform will be, it is interesting to speculate how the new US scenario may somehow impact on the European debate about net neutrality.

US telcos lobbying in the EU about net neutrality: an history of pioneers

In general, NN debates on both side of the Atlantic have been reciprocally linked, with the major US stakeholders massively lobbying the EU institutions (since 2006/2007, when the last European regulatory review started) with the aim to implement their NN vision in Europe and get, as a result, a favorable outcome to present back to the US, and so being able to influence the FCC. It is worth noting that the NN lobbying efforts of company like AT&T and Verizon in Europe and in the EU has been huge, considering that such companies have no residential business in the old continent and therefore should have nothing to gain there in terms of network management policies and so on.

Also US OTT (Google and so on) have been lobbying in Brussels for the same reasons of US telcos (but with different scopes). However, in the last years such efforts became less visible because of the complex relationships of such operators with NN principles.

European telcos have normally not made the vice-versa, i.e. lobbying in US in order to have a result to use in Brussels to influence European institutions. However, European incumbents, such as Deutsche Telekom, Telefonica and Telecom Italia, have frequently lobbied the EU institutions flagging the US deregulatory solution as the example to follow in Europe. Now that the wind has changed in Washington, both European and US incumbents will have to reconsider their tactics in front of the European institutions.

The European reform of net neutrality

Few limited NN provisions already existed in the current 2009 European regulatory framework. Successively, a more robust proposal of reform of net neutrality – welcomed by most telcos and incumbents operators – was tabled by the European Commission on September 2013 within the Connected Continent proposal. That draft is still pending but, it is worth-noting to say, the amendments tabled successively by the European Parliament and the views recently expressed by the Council have radically changed the initial scenario. The reform resulting out of the latest proposals, including the view of the Italian Presidency, seems much more close to the interests of citizens and libertarians: general and more robust non discrimination obligation; formal requirements for specialized services; guarantee for best effort Internet.

Since the views flagged by Obama mainly focus on re-classification (aka regulation) of the Internet, as well as prohibition of paid prioritization, it is interesting to see how such proposal may be reflected in the European draft reform.

(i) Re-classification of Internet

The idea to classify Internet as a “public utility” and therefore to potentially apply telephony rules to the Internet may be disruptive in US but non in the EU. This re-classification means, in US, that networks providing Internet access may be subject to regulation in general, not only for consumers scopes (net neutrality) but also for competition reasons, so as to become available for access request by other operators. This perspective is feared by US telcos which currently enjoy a local monopoly in the last mile for Internet access (but not for telephony), since their networks are rarely competing with each others in that segment, with the result that the ordinary US consumer has normally no possibility to choose and change ISP: he/she just have to take the sole telcos and/or cable arriving to the premises. In this respect, it is interesting to see that cable company Comcast welcomed that intervention of Obama, with a sole significant exception: “There is one important technical legal difference of opinion between the President and Comcast: we do not support reclassification of broadband as a telecommunications service under Title II.” So, the problem is there.

By contrast, the European 2009 framework for electronic communication services provides that all networks, irrespective whether fixed or mobile, supplying voice, data ecc, may be regulated if there is a competitive failure recognised by a national authority. This is the reason why access rules to networks such as ULL and bistream normally exist in the EU and allow a plurality of alternative operators to offer Internet and data connectivity also through some parts of the incumbent networks (the last mile). One could argue how this regulatory difference impacted on the developemnt of telecom networks in US and EU respectively. For sure, EU citizens enjoy more choice and better prices than US consumers, as recently claimed by the american press.

(ii) Paid prioritization

Obama objected the possibility for US ISP to provide “fast lanes” for specific specific services in exchange of remuneration, on the assumption that this discrimination would enable telcos and ISPs to pick the winner in the Internet market. The Internet should remain neutral, meaning that information and services (not bits!) should be treated in the same way, apart from some reasonable exceptions. This position is fundamentally important for the US market because, in the absence of competition in the last mile and without possibility for users to change ISP, any telco could de facto, by simply deprioritizing non-agreed services, limit the offer of online services which may be selected and enjoyed by consumers.

Again, the above scenario should have a more limited impact in the EU, as far as the existing competition in the Internet access, guaranteed until now by access regulation, should prevent incumbents telcos and ISP from imposing to users a basket of preselected services. Should an incumbent ISP impose selected prioritized services to its consumers, they could theoretically switch to another ISP. It is worth-noting, however, that switching ISP is not as easy and automatic as people believe, since the consolidation of certain markets – in particular mobile, where ISP are going to be reduced from 4 to 3 network operators, which tend to have aligned commercial policies – may reduce this chance for consumers. However, the threat of loosing “switching” customers is still a concern for dominant ISPs in the EU and currently it constitutes the best working remedy against non-neutral commercial practices, at least in the fixed sector, where the plurality of ISPs is more enhanced.

The Connected Continent proposal mentions specialised services (i.e. the European equivalent to paid prioritization) and make them subject to specific definition and conditions, including the guarantee that best effort internet should not be affected. In other words, paid prioritization is part of the foreseeable European NN package and it is unlikely that it will disappear.  More likely, guarantees for the best effort will be reinforced as a consequence of the Obama’s position.

In any case, the competitive and regulated access scenario in the EU should minimize the detriment for users, unlike US.

Conclusions

To sum up, Obama’s intervention will have a strong political impact in the European NN debate, on one side because of the historical link between US and EU when debating about NN, and on the other side because an opinion coming from such a prominent person, even if non European, cannot be ignored so easily. Left-winding national governments and left-winding parties will have to take into account of the Obame’s view, even if it not completely confirmed by the FCC at the end. The influence of the Obama’s position will operate at very high political level, while the consequences in practice may be less significant than expected, because of the different regulatory and competitive scenario in US and the EU respectively.

From hyperlinks to embedded videos: not a copyright infringement, EU court says

Posted on Updated on

A landmark decision has been adopted by the Court of Justice of the European Union (CJEU) in the matter of Internet and copyright. The new case concerns embedding a video without the consent of the right-holder, also for commercial purposes.  According to the CJEU, this behavior does not constitute an infringement of copyright law when the video is already publicly available in the Internet, since no additional public is reached by way of the embedding, and provided that the work is not altered in any way.

The decision of the Court echoes a similar case, the Svensson case, which concerned hyperlinks. Also in this case, while admitting that hyperlinks constitute a kind of “communication to the public” according to the copyright framework, the court said that no infringement occurred since the linked content was already available in the web and therefore the hyperlink was not deemed to distribute the work to a “new public”.

My understanding of the case is that the video must be public because of the intention of the right-holder, who eventually uploaded on a public platform (such as Youtube, as in the most of the case). The parallel with the Svensson case lies lies in these terms. By contrast, should the video be present on a platform without the consent of the right-holder, I would say that embedding should not be allowed or further clarification is needed.

The CJEU made its decision by way of a simple order, i.e. an intermediary act which is easier to be adopted instead of a formal decision. The reasons for the choice to use such an instrument could be that the judges considered the case very easy and did not find necessary to pass through the formal procedure provided for a final decision. This means that some uncertainty may still submits whether the case is definitively closed here or not.

Whether it was an easy case or not, it is a matter of opinions. From the point of view of common sense, it is obvious that the behaviour at stake could not be seen as a copyright infringement. However, the current copyright framework is less obvious than people believe, since these rules have been normally conceived and applied in the traditional analogue off-line world, and therefore any further application in the Internet regularly results in dramas. Also because of the deliberate litigation strategy of most of the copyright-holders.

Whatever the judge believe, this is an important decision in the matter of copyright, because developing the Svensson rationale in order to solve other copyright issues may costitute an important signal for the incoming reform of copyright by the new European Commission entry into force as from November 1st, 2014.

The order of the CJEU (dated October 21, 2014) can be found here for the time being, since it has not been published yet on the website of the court. It will be published only at the end of October, and only in French (formal language of the CJEU) and German (language of the proceeding).

The new relevant market recommendation: Kroes playing the last (deregulatory) trump

Posted on Updated on

Neelie-Kroes-007

The European Commission has published the new recommendation on relevant markets, i.e. the document which will guide the national regulators (“NRAs”) in assessing competition in the EU and imposing regulatory remedies such as access to networks, price control, non-discrimination and so on. The European Commission made various substantial changes to the previous recommendation, including withdrawing markets 1 and 2 on retail fixed telephone access and wholesale fixed call origination. While ETNO, the incumbents’ association, has welcomed the new recommendation as a further step on the way of a possible deregulation of the European market, ECTA, representing the alternative operators, has showed some worries but also recognized that some clarifications go in the right direction. Thus, both associations (whose telcos members are mostly affected by the new rules) remained relatively prudent and have not dramatized too much in positive and negative terms.

According to Commissioner Kroes, the partial deregulation inflated by the new recommendation reflects the increasing competition in the market. This opinion is not shared by everyone however: the European regulatory agency Berec stated in an opinion that the deregulatory measures appear to be a bit premature.

When at beginning of 2014 a first draft of the recommendation was published, alternative operators were dramatically alarmed because it was clear that Kroes effectively intended to pursue a deregulatory agenda. Thus, after reactions and critical comments also by other Commissions’s departments and institutions associated to the legislative process, such as Berec and Cocom, the entire reform has been revised. While the reduction of relevant markets remained unchanged, important clarifications have been inserted in the Explanatory Note (the annexed text providing practical guidance) in a way to ensure sufficient flexibility and empowering NRAs to continue to adopt regulation to target competitive problems, also in areas where the Commission wished deregulation.

It is not the first time that an important deregulatory boost announced by Commissioner Kroes ends up with moderate practical results. The reform of fibre networks regulation (i.e. the new NGA recommendation) as well the Single Market Package encountered the same destiny. In all cases Kroes is paying because of her iper-political top-down approach: in 2012 she endorsed a deregulatory agenda in order to meet the financial needs and claims of incumbents operators, but then she failed in finding the market evidence for this approach and, worstly, she missed the support by other Commission’s departments (DG COMP, ECFIN, CONS). Also other institutions such as Parliament, Berec and Council have been quite cold and critical vis-à-vis Kroes’ approach. As a result, all impressive deregulatory initiatives have been watered-down and, what’s worst, the market has encountered an increasing and continuing legal uncertainty. The roaming chaos is an example: the entire Roaming III Regulation (2012) has been affected even before entering fully into force (July 2014) , because the Single Market proposal (September 2013) contained incompatibile proposals.

The impact of the new recommendation will therefore depend on the practical implementation by the NRAs as well as by the attitude of the new commissioner in charge, Oettinger. The deregulation of markets 1 (retail access) and 2 (call origination) may provoke some increase of retail voice prices by deregulated incumbents, depending on the degree of competition in each national market and the ability to alternative operators to provide the same services via ULL or own networks. In this respect, the developments of potential competing OTT services shall be also monitored: it is a paradox, but big telcos such as Orange and Telefonica should thank Skype and Whatsapp for the deregulatory result.

Wholesale access networks was not deregulated, however the Commission loved to see the market to migrate to a model of virtual ULL concentrating all access investments (and related control over services) in the hands of incumbents. This scope was not completely achieved, as at the end the Explanatory Note stated that NRAs are expected to continue mandating physical ULL, because it is usually considered to be the most adequate access remedy, as it ensures alternative operators’ ability to differentiate their retail offers and innovate. The Commission however added that in situations where physical ULL is not technically or economically feasible, NRAs may mandate virtual access products (as some NRAs have already done in the EU).

To sum up, the deregulatory agenda of Commissioner Kroes ended up more in a slogan than a practical achievement. The incumbents industry thanks in any case, because even a vague deregulatory trend is helpful when facing financial analysts and bonds purchasers. However, the emerging opposition of NRAs and governments to the Commissions’ approach opens the doors to a season of future litigations, unless the new commissioner Oettinger will invent something new.

Net neutrality and competition rules are getting closer and closer

Posted on Updated on

JAM

The Competition Directorate of the European Commission announced to have closed an investigation about Internet connectivity market (peering and transit) without finding evidences for abuse of dominant position by the European incumbents which were investigated (likely Deutsche Telekom, Orange and Telefonica).

While the closing of the investigation is a good news for the investigated operators, the Commission makes clear that it will continue to monitor the market and that further interventions in the future are not excluded.

The investigation started after a complaint by a US carrier which contested the peering policies of main European incumbents. The complainant maintained that pricing conditions charged by telcos were abusive. A similar case shad been already dismissed by the French competition authority in 2012, while recognizing that peering policies of telcos may potentially give rise to concerns.

The case at stake has a clear link with net neutrality, although the DG COMP offices are very prudent and they intentionally avoid to mix up their case with the current debate on net neutrality pending in Brussels in the frame of Single digital Market proposal.

To better explain: incumbent telcos may potentially commit abusive practices because at the same time negotiate Internet traffic deals and control end users to which such traffic is directed or requested by (Youtube, Facebook ecc). This market is normally competitive because, should an operator rise the price in abusive way, other operators may simply change carriers, because Internet is made in this way: there are plenty of alternative routes. However, when the Internet traffic in question must be necessarily terminated upon end users (i.e. the subscriber holding the final terminal/device), then counterparts have no alternative: they must accept prices and conditions charged by the telcos controlling the connection to such end users (i.e. selling to them the Internet access). It is a kind of termination monopoly, like for voice.

In the case of the voice termination monopoly, the problem has been solved via regulation: termination must be obligatory ensured at cost-oriented prices. By contrast, in the internet sector termination is unregulated: however, competitive problems normally do not arise, because telcos operates cannot allow themselves to cut Internet traffic terminating to their clients, which otherwise may decide to change ISP in order to get the services they like (imagine a telco saying to his customer: “you will not get Youtube because Google does not pay me what I pretend to connect to your PC“) . However, it seems that peering commercial negotiations are becoming more and more difficult and some European incumbent are trying to charge more expensive prices when peering with counterparts. This may reflect an increasing weakness of competitive conditions in the European market and more strength for the incumbents, at least this may be their perspective. In Italy Telecom Italia decided to de-peer, i.e. they stopped peering at the Internet exchange point in Milan and requested everybody to peer directly with them by paying. The non-peering counterparts had therefore to deliver their traffic directed to Telecom Italia via a third transit operator, a system which may deteriorate the quality of the Internet traffic (because the routing is longer and more complex).

Interestingly, the PR of the European Commission makes clear that incumbent ISP may have interest in creating artificial traffic congestion: “The European telecoms operators which were investigated all provide internet access services to end users and often have an in-house internet transit division. This allows them to charge for interconnection capacity and, in the absence of commercial agreement with certain third party transit operators, may also have the effect that traffic from certain routes becomes congested at the point of entry into domestic networks, causing a deterioration in service quality“.

In other words, congestion for consuming-banwidth services like video streaming (Netflix) may be the result of a deliberate choice of the telco, not of scarcity of capacity. A telco may decide to reduce/limit interconnection capacity in order to force counterparts to pay more for peering. Thus, here the Commission is recognizing that incumbent ISPs may potentially create a net neutrality problem even where it should not exist.

It must be remind that in the recent times Netflix made various paid peering agreement (i.e. direct interconnection) with US ISPs like Verizon and Comcast in order to facilitate the delivery of their traffic to the related American subscribers. Although the details of the transactions ara not public, there was the suspects that Netflix was forced to made these agreement to respond to artificial congestions provocateur by the same ISPs.

The European Commission did not find abuses in the present investigation, however a clear signal has been sent to incumbents ISPs: their Internet peering policy will be closely monitored in the future.