Research Notes

EC President Juncker’s office confirms that BEREC agreement with Indian telecom regulator could violate EU law. Why is BEREC making an agreement with one of the world’s most corrupt and least connected countries?

Strand Consult has followed net neutrality regulation around the world for years. Working with leading academics in law, policy, economics, engineering, and communication, Strand Consult has published evidenced-based assessments of the policy. They key takeaway from the explosion of rulemaking and litigation across dozens of countries is that net neutrality policy is not driven by actual harm, but well-funded, highly-organized, ideologically-driven transnational activism, frequently which includes regulators themselves who purport to be independent.

The most recent example is the Body of European Regulators for Electronic Communications (BEREC) signing a Joint Statement and Memorandum of Understanding (MOU) for “mutual interest and reinforced cooperation” with the Telecom Regulatory of India (TRAI).  While regulators around the world share and collaborate, the BEREC agreement with TRAI exceeds BEREC’s authority and attempts to justify BEREC’s effort to implement an extreme version of net neutrality that exceeds the EU law. This research notes explains the apparent illegalities of the agreement as well as responses to Strand Consult from European President Jean Claude Juncker and BEREC Chair Johannes Gungl.

Problems with the BEREC/TRAI Agreement
Following are the 13 problems with Memorandum of Understanding between Telecom Authority of India (TRAI) and Body of European Regulators for Electronic Communications (BEREC) letter that BEREC has signed with TRAI:

1. EU law establishing BEREC 1211/2009 does not permit BEREC to conduct foreign policy, and BEREC’s agreement is tantamount to foreign policy, the shaping the international environment by projecting power abroad to secure economic, political, and strategic goods.

2. The EU law 2015/2120 does not instruct BEREC to make agreements with India to implement the law.

3. The EU law 2015/2120 ensures “open internet access”.  It does not contain the term “net neutrality”, and the two are not synonymous. When BEREC agrees to “ensure an univocal protection of net neutrality principles for internet access services”, it expressly violates EU law because not only are there no codified “net neutrality” principles, nor is there a single or “univocal” interpretation.

4. BEREC derives its position primarily from its “Guidelines on the Implementation by National Regulators of European Net Neutrality Rules.” These are voluntary, non-binding rules which BEREC likes to portray as the real regulation. Strand Consult’s report Net Neutrality in EU after 1 Year: Unintended Consequences for operators, content providers, and consumers documents in 117 pages the specific actions both by BEREC itself and national regulatory authorities (NRAs) that exceed the EU law.

5. In the MoU, BEREC agrees to many net neutrality principles which are not in the EU law. These principles remain highly litigated and contentious in EU countries. For example, the MoU equates open internet access and net neutrality, and it claims that net neutrality underpins the freedom of speech. There is no empirical proof linking net neutrality with the freedom of speech, but in any case, it improper for BEREC to make a normative statement on this highly politicized issue in which national regulators are being sued for making such egregious assessments.

6. BEREC references economic freedom and innovating without permission, but net neutrality denies telecom operators these rights by limiting the ways in which they can innovate.

7. The MoU declares that the success of the Internet today can be attributed to net neutrality. This is not an empirical statement. Net neutrality is an ideological construct first defined in 2002. The internet long preceded this concept.

8. The MoU claims that 5G could be implemented with net neutrality. However, Strand Consult’s analysis shows that net neutrality is a bomb under 5G. It’s no coincidence that the countries leading on 5G–the China, South Korea, Japan and the US—have either avoided or removed heavy-handed net neutrality laws.

9. The MoU states that the internet is a “common good”. The terminology has different meanings in economics and politics. It’s not clear that BEREC is authorized to make this ideological statement, but BEREC’s motivation is clear. BEREC wishes to assert an authority to regulate the internet beyond what the European Parliament has stipulated.

10. EU law says nothing about zero rating but BEREC has written reams about it, and it is the subject of much litigation. While the EU law allows BEREC to “intervene against agreements or commercial practices which, by reason of their scale, lead to situations where end-users’ choice is materially reduced”, but this requires an assessment taking into account market positions of the actors involved.  India has a complete ban on “differential pricing”, and this is likely what BEREC would like to implement in the EU. However, TRAI never made an empirical assessment before implementing its ban.

11. The EU law says nothing about “specialized services”, but BEREC has made an agreement to discuss it with India and find a way to regulate it under the concept of “fast lanes/slow lanes.”  The fast/slow language is manipulative, inflammatory language, and it is not a technically correct description the many technologies BEREC wishes to regulate.

12. There is no discussion of interconnection in the EU, but the MoU identifies it as an area for regulation.

13. The agreement notes that it invites “third party initiatives to amplify the monitoring of the market (through crowd-sourced measurement tools, signaling platforms…).” This is its fancy way to say that it makes an illicit cooperation with professional activists to create the appearance of public support for its efforts. As Strand Consult has documented, Europe’s NRAs report that mast majority of Europeans don’t know about net neutrality, let alone have an opinion. However, both BEREC and TRAI engage with well-funded activists to communicate their efforts. Strand Consult describes some 40 secret meetings between BEREC and net neutrality with activists over two years, meetings to which BEREC refuses to provide transparency.  Not only is it unseemly for regulators to engage in such blatantly politicing, it circumvents the democratic process. See Strand Consult’s research note BEREC’s net neutrality process is a black box. Strand Consult fights for transparency against telecom regulators that like to make net neutrality rules behind closed doors.

Gungl’s Response to Strand Consult
Strand Consult inquired to BEREC about the agreement and was pleased to receive a response from the Chair Johannes Gungl, head of Austria’s regulator. As to be expected, Gungl assured Strand Consult that its actions were in line with the EU law and it referred Strand Consult to other international agreements it made, for example general agreements to share knowledge on the keys aspects of BEREC’s work with the Euro-Mediterranean countries from 2012 and one with Eastern Europe countries in 2014. The Latin American agreement from 2017 focuses on broadband service quality, roaming cost methodologies, and over the top services and net neutrality.  The agreement with the Federal Communications Commission (FCC) was signed in 2012 and was extended in July 2018 for discussion on broadband investment and 5G. In 2012 FCC Chair Julius Genachowski made a speech to BEREC about net neutrality. The FCC has been through three rounds of litigation against its heavy-handed rules and has since stopped the misguided approach, restoring the enforcement of anticompetitive practices to the competition authorities. Given that the FCC knows so much about the topic, it would seem that the MoU should be extended to include a cost-benefit analysis on net neutrality, but no, BEREC seeks the most extreme country with whom to partner, India.

In any case, BEREC did not specific address Strand Consult’s questions on why it was necessary to make an agreement with the India on net neutrality. It is not the first time that BEREC fails to answer critical questions. Strand Consult documents several instances in which BEREC evades to answer and even blocks the transparency about its work that it I required to provide. In August 2017 Strand Consult sent 16 question on net neutrality to then BEREC President Sebastian Soriano who did not respond.

Gungl may be more polite than his predecessor, but it does not change the fact that he avoids to answer difficult questions. Under Gungl’s chairmanship, BEREC still suffers from a lack of transparency. BEREC could learn a lot from the US where there is an online ex parte system, requiring any outside communication to the FCC could influence policy, whether verbal or written, must be disclosed so that all could see.  Such a system would be an effective sunshine agent for BEREC, whose secret stakeholders get to hide behind the veil of “privacy” so that their comments and identity are not disclosed.

Why is BEREC making an agreement with India, one of the world’s most corrupt and least connected countries?
It is easy to see why BEREC wants to make an agreement on net neutrality with the Indian regulator. BEREC is looking for legitimacy for its extreme approach, and it hopes that by aligning with India, it will signal to India’s 1 million net neutrality activists that they are welcome to weigh in to Europe’s regulatory proceedings.  India has the world’s most restrictive net neutrality policy with a complete ban on differential pricing, outlawing any form of zero rating or other valuable flexible pricing practices. The regulator asserts that free, discounted and subsidized pricing is harmful and discriminatory, a position confirmed by India’s Telecom Secretary as the world’s strictest internet regulation.

Now that India’s policy has been in place for three years, it’s appropriate to review its effectiveness. Data from the International Telecommunications Union on internet penetration provides preliminary insight. From 2009-2014, India’s rate of internet adoption (year-over-year growth) averaged 38 percent, but after 2015, it plummeted to 13.6 percent in the most recent measure. Only 1 in 3 Indians is online today, a ratio that hasn’t budged since the policy took effect. Had adoption remained at its previous rate, there could be as many as 400 million more Indian internet users today, almost doubling the number of people online in just 4 years.

Of course, the rate of internet adoption has been slowing precipitously around the world because of lack of relevant content and the inapplicability of traditional advertising models to emerging  markets. According to internet analyst Mary Meeker, the “easy growth” of internet adoption ended in 2015. But she notes India as the exception, suggesting that the country with 1.3 billion people–of whom just a third access the internet–should still adopt the internet at a brisk rate.

In addition to significant personal and social benefits, internet adoption is important because it improves economic growth. The World Bank suggests that every 10 percent increase in internet penetration in developing countries increases GDP growth by 1.21 percent. Had India not discriminated in favor of a single form of access, it could have improved its GDP by as much as $125 billion today. India’s mobile broadband prices are less than half of the world average, but for a poor Indian, the effective price is two-three times higher because of the cost of a device and electricity.

It is odd that India now reject the economics that made it one of the world’s greatest success stories for mobile networks. Within a decade of unleashing market forces in India, mobile subscriptions increased 500-fold and prices dropped more than 95 percent.  The same flexible pricing that helped the country adopt mobile phones and 2G subscriptions, TRAI now bans for the internet. Meanwhile dozens of emerging countries have embraced free data mobile apps for basic communications, health, employment, government services, and so on. These countries enjoy an internet adoption rates significantly higher than India, now ranked at 143rd of 208 countries measured by the ITU for internet penetration.

EU nations Bulgaria, Romania and Greece still have a penetration below 70%.  It’s troubling that BEREC believes that partnering with India and agreeing to uphold the same principles would be good for the EU. Additionally troubling is why BEREC would make an agreement with one of the world’s most corrupt countries. Freedom House gives India a score of 41 of 100 for the Freedom of its Internet. Transparency International scores the country at 40 out of 100 for governmental transparency. Maybe BEREC wants to turn the EU into India where two-thirds of the population subsists on €10 per day or less.

Juncker’s Response to Strand Consult
On 13 July 2018 Strand Consult received a letter from the office of European Commission President Jean Claude Juncker. The letter explains that BEREC and DG Connect have regular exchanges with India on the mobile market in general and on 5G in which European and Indian universities collaborate. However, these are not topics in BEREC’s agreement with TRAI.  Instead of BEREC and India collaborating on how to implement 5G, BEREC collaborates on policy that limits innovation and investment in new services and technologies.

Juncker’s letter confirms Strand Consult’s assessment that BEREC cannot make foreign policy in telecommunications, and that any activities BEREC conducts with the Telecom Regulatory Authority of India must remain with the framework of EU law and BEREC’s circumscribed authority. The letter notes that under Article 2(e) of EC 1211/2009 BEREC is allowed “relations, discussions, and exchanges with third parties; and assist the Commission and NRAs in dissemination of regulatory best practices to third parties.” However, the letter notes, “BEREC’s international activities have to be in line with Union policies, in particular the Union’s polices on external relations in in the area of electronic communications. In particular, BEREC does not have power to present EU positions or to commit the EU to any obligations.”

It does not appear the European Commission requested BEREC to engage with the Indian authority or to conduct telecom policy outside the EU.

The implication for European operators
Not only does the EU law not discuss zero rating, the European Commission approves the practice. The topics of zero rating and specialized services should not even be described in BEREC’s guidelines.  Neither the European Parliament nor the European Commission ever instructed BEREC to make guidelines about these topics, much less to develop agreements on them with a third party nations, let alone to adhere to “core principles of net neutrality.”

Strand Consult’s findings are important for European operators because many are in adjudications and or litigations with EU regulators. The agreement with India demonstrates BEREC’s and European NRAs’ extreme and illegal interpretations of the EU law. BEREC’s imperious behavior on net neutrality is likely indicative of how it operates in other areas.  Operators should look for a pattern.

In 2019 the European Commission will review the net neutrality policy. Operators should emphasize that BEREC has ignored and disrespected the EU law and needs to be censured. The EC should formally remove BEREC’s net neutrality guidelines and nullify the TRAI agreement.

To request a free copy of Strand Consult’s correspondence with European Commission President Jean Claude Juncker and BEREC Chair Gungl, contact Strand Consult.

To learn more about Strand Consult’s report Net Neutrality in EU after 1 Year: Unintended Consequences for operators, content providers, and consumers, contact Strand Consult

Contact us to get a copy of the report

Request the report