Research Notes

Why did BEREC invite Google’s top net neutrality lobbyist to write the telecom rules?

The process to write the implementation guidelines of EU’s Open Internet rules is led by a self-proclaimed net neutrality activist from a non-EU telecom regulator with the help of Google’s top de facto lobbyist from Silicon Valley.

The EU Director General for Competition or DG Comp has floundered for years to bring antitrust action against Google. In spite of half a dozen investigations over the last decade, no meaningful remedies have been exacted on the company. Nearing its 20th birthday, Google enjoys a monopoly not just in search and mobile operating systems, but significant market power in video, comparison shopping, web browsers, web analytics, maps, and email. But the EU only has itself to blame for Google’s monopolies in the these markets. Given the European Commission’s schizophrenic approach to telecom, Google is rational to create and take advantage of fiscal and regulatory arbitrage. While one branch of EU government attempts antitrust enforcement against Google, another strengthens the company’s power through Open Internet rulemaking, a policy that restricts how European providers and startups can compete against Google and serve European end users.

Competition itself would provide better discipline than antitrust enforcement, if EU officials allowed market forces to work. What sounds like a good idea on the surface – neutrality or openness – is actually a subterfuge on competition and a form of regulatory distortion. Hard rules on net neutrality mean that companies cannot engage in differentiation in price, service, or marketing, preventing any company from launching a competitive service to Google. Naturally, the company that garners the lion’s share of the world’s internet traffic wants neutrality because it cements the status quo. Unsuprisingly Google has been a key supporter of the policy and funds a cadre of activists. For Google, the payoff is clear: Its market share is high around the world, and even higher in those countries with net neutrality rules, as independent analytics tools show.

Unwittingly or not, the EU has enshrined Open Internet rules rules that cement Google’s market power. To be sure, the rules which come into effect on April 30 reflect a compromise across a range of political parties and the buy-in from various branches of government (Unlike the American rules which teeter on the partisan agreement of the President and 3 FCC commissioners). To maintain the balance between Brussels and the member states, the EU rules allow the Body of European Regulators of Electronic Communications, BEREC, to develop implementation guidelines to harmonize the policy across the 28 member states. BEREC has conducted a number of consultations on the topic over the years, attempting to maintain the appearance of an approach that would balance telecom operators’ need to recover costs on infrastructure with the demands from Google-funded advocates to provide network access for free. BEREC even designated two national regulators to lead the net neutrality conversation for the EU, the United Kingdom and Norway, a non-EU country.

Of any country with net neutrality rules, it is perhaps the UK which has done the most develop an evidenced-based framework for the policy. In addition Ofcom, the UK regulator, commissioned an independent report of the prevailing traffic management detection tools, but it found none of the tools reliable. Evidently, Ofcom could see Google advocates’ attempt to impose rules on legitimate commercial and technical practices (e.g. zero rating, congestion management) was nothing more than rent-seeking micro-regulation. Ofcom’s Ed Richards observed, “…over-prescriptive and detailed legislation may deliver the opposite of the intended effect; not more certainty but less, not the exercise of balanced objective judgement but the pursuit of skewed, self-interested litigation.” Ofcom thus prefers a focus on outcomes, not over-engineered rules. Perhaps a symptom of a larger UK dissatisfaction with Brussels, Ofcom appears to have fallen by the wayside in the BEREC process.

It is interesting then why a non-EU nation should have such an outsized influence in Brussels, and in particular, why Norway’s one-man army on net net neutrality, Frode Sorensen, has been appointed by BEREC. Norway has maintained a multistakeholder approach net neutrality since 2009, a successful effort that incorporates the views of stakeholders and upholds users’ and operators’ rights. As a consequence, net neutrality has essentially been a non-issue in Norway; there are no violations on record. Users get what they want, and at least until recently, telecom companies could operate under a reasonable regulatory framework.

But smooth sailing on the regulatory front does not necessarily translate to career advancement for regulators. If regulators actually succeed to create a competitive market, then they work themselves out of job. So there is always a professional motive to create the appearance of a problem to justify one’s existence. As such Frode, an otherwise unremarkable bureaucrat, has leveraged net neutrality dogma as a career stepping stone, and his position at a Scandinavian regulator buys him credibility in net neutrality activist circles.

There is a generally accepted standard of professionalism and independence that government employees separate their personal expression from official communication, but Nkom has rejected that notion. It allows Frode to engage in editorializing on the agency’s official website, an action that Strand Consult finds inappropriate because it distorts the line between Frode’s personal opinion (which has never been backed by real world evidence) and official Norwegian policy. Moreover it undermines the credibility of the regulator. To date it appears that Nkom allowed Frode to abuse his position as a bully pulpit because the Norwegian multistakeholder model allows the airing of diverse views but refrains from regulatory intervention unless real harm is demonstrated.

By giving Frode a platform, Nkom and now BEREC, have engaged in a form of appeasement, a means of making political or material concessions to an opponent in an attempt to avoid conflict. But having a sympathetic regulator is an arbitrage opportunity for rent-seekers such as Google and its advocacy organizations, and Frode has become popular with that community. He appears at a number of pro-net neutrality events and writes for pro net neutrality publications.

It’s not what you know, it’s who you know: Friends of Frode (FOF)
The saying “it’s not what you know, but who you know” has never been more true than when it comes to Open Internet rule making. Net neutrality policy is a textbook example of the knowing-doing gap, or activism winning over analytics. The European Parliament’s official reports do not conclude the need for hard rulemaking. DG Comp’s own investigation did not find evidence of abuse by operators in content and transit markets. And BEREC’s own conclusions don’t warrant further rulemaking, as many national regulatory authorities have asserted that they already have the power to address the concerns raised by net neutrality advocates. Nevertheless the rulemaking continues with the help of Frode and his friends.

In December 2015 BEREC indicated that it would conduct meetings in 2016 to develop guidelines for the implementation of the policy. It communicated that there would be an “expert meeting” but no date or prospective attendees were given. Because BEREC may have limited expertise on net neutrality and its enforcement (particularly because violations are rare), BEREC’s selection of experts is important, because BEREC itsef is supposed to be the expert. On the day before the meeting was to occur, BEREC issued a press release about the meeting noting that Frode would conduct a conversation with his friends: Barbara van Schewick, Chris Marsden, Alissa Cooper, and J. Scott Marcus.

Barbara van Schewick is reported to have had 150 meetings with US government officials in support of Open Internet rulemaking and is referenced at least 9 times in the FCC’s Open Internet Order. She has the record of any single person having the most meeting with the FCC regarding its 2015 Open Internet order, some 18 disclosures of meeting, one of which notes 10 separate meetings in a single week.Travelling from Palo Alto to Washington, or to Rotterdam as it were for the BEREC meeting, to meet with government officials so frequently is not the normal day to day work of a university professor, and certainly not within the budgets of most university departments. So it begs the question as to how and why van Schewick does it. Stanford’s Center for Internet and Society (CIS) was founded in 2001, and van Schewick was its first non-resident fellow the following year. In 2006 CIS received a $2 million gift from Google in 2006. The magazine Pro Publica, for “Journalism in the Public Interest” observed that CIS “was best known in its early days for work that benefitted Google’s cause, including research on net-neutrality issues, which Google has pushed for, and research on fair use, which allows some use of copyrighted material without permission from the author.”

The CIS website notes, “Like all donors to CIS, Google has agreed to provide funds as unrestricted gifts, for which there is no contractual agreement and no promised products, results, or deliverables. To avoid any conflict of interest, CIS avoids litigation if it involves Google. CIS does not accept corporate funding for its network neutrality-related work.” While the website disclosed that professor salaries and research is covered from the general fund, it is not clear how the significant travel for CIS’s “net neutrality-related work” is covered. The Stanford Law School reports that of its roughly $80 million annual budget for 2015-6, 45 percent will be paid from its endowment. It would be even more interesting if government entities have paid for van Schewick’s travel for the 150+ meetings (an average of 10 meetings per year), though this is doubtful. As such, if BEREC paid for the FOF junket to Rotterdam, it should disclose the terms of participation and why the “experts” were selected. Typically a public tender would be offered for such an opportunity.

In his blogs, Frode has referenced Van Schewick as justification for net neutrality rulemaking, though her work has been described as lawgeneering, psuedo-engineering with fancy lawyering on top. BEREC should take her recommendations with a grain of salt, as the rules she supported in the US may be found unlawful for the third time. The EU could find itself in precarious situation in which it has agreed to rules when the US has none. In fact the American FCC, now in its third time in court for illegal rulemaking, faces 9 lawsuits. In fact the legal instrument van Schewick supported, Title II, actually allows for the things she protests, namely paid prioritization. In oral arguments against the FCC, the federal judge likened paid prioritization to a “refrigerated boxcar on a railroad” and called it “utterly reasonable”.

It is interesting to consider what panelists would have emerged if the experts had been selected by academic standing, rather than friend factor. A review of the 10,000 articles on net neutrality in Google Scholar shows that the top 200 articles have the lion’s share of citations. About 60 percent of the most-citd articles have negative conclusions about net neutrality. If BEREC had chosen its experts by academic standards and Google’s own measure, it would have selected among the following authors, noted with their accumulated citations for their papers on net neutrality.

1. Christopher Yoo 854
2. Tim Wu 700
3. Nicholas Economides 503
4. Barbara van Schewick 413
5. Robert Hahn 214
6. J. Gregory Sidak 205

Christopher Yoo is by far the expert on the topic, having been cited more than twice as much as Barbara van Schewick, but his conclusions don’t comport with Frode’s views. Nicholas Economides supports net neutrality but at least has the academic honesty to say that the policy can have ambiguous results. Wu, of course, coined the term net neutrality. Hahn and Sidak are two respected economists who demonstrate that net neutrality policy does not serve the ecosystem. The list would be rounded out by similar or nuanced conclusions from such well-cited economists as Mussachio (188), Hermalin/Katz (156), Kramer/Wieworra (152).

Marsden and Cooper are not the highest cited academics, but are noted net neutrality supporters as well as Ofcom critics. Cooper also has Google ties.

Marcus is the only independent on the panel, as he as conducted research on net neutrality at the request of the European Parliament. He was previously associated with Wik Consult which produced a survey commissioned by BEREC of Europeans on net neutrality. It revealed that consumers have a different understanding of net neutrality than the FOF, concluding essentially that if net neutrality means no zero rating, then they don’t want net neutrality.

Strand Consult’s opinion on the BEREC process for net neutrality
Strand Consult supports that expert testimony and academic evidence are an important part of net neutrality rulemaking. Strand Consult further supports that BEREC engage in a process to define guidelines for net neutrality, but it must be done with transparency and not behind closed doors. Transparency is not announcing a meeting on the day before it supposed to happen. Transparency is not having a secret documents. Transparency is not creating an expert panel of your friends without disclosing the criteria of the selection and terms of participation.

BEREC needs to take sufficient steps to communicate its proceedings. This should include but is not limited to agendas, minutes, presentations, written testimony, transcripts, and ex partes. Ideally BEREC would live stream its meeting rather them have them in closed doors where only the FOF can attend.

BEREC holds closed door meetings to make an Open Internet
One of the embarrasing spectacles of the American net neutrality process was the 300 page document of secret Open Internet rules on which FCC commissioners voted without release to the public. BEREC is on track to repeat this egregious violation of transparency. To bring transparency to the process, Strand Consult calls up BEREC and its supervisory authorities itself to do the following:

1. Release any draft documents on net neutrality guidelines now
2. Disclose the minutes and/or testimonies of the expert meeting on 25-26 February and other secret meetings
3. Disclose the criteria of which the experts were selected
4. Hold a supplementary panel of experts that reflects a proper accounting of the evidence and academic literature and/or hold an open and public process to solicit experts to develop the implementation guidelines
5. Conduct the expert meeting with a live stream and/or record the meeting and post online.

The hallmark of a telecom regulator is expert knowledge and political independence. Given that BEREC may have limited knowledge of net neutrality rulemaking and enforcement, its selection of “experts” is of vital importance. Moreover, the independence of BEREC is at issue, especially when a self-proclaimed net neutrality advocate from a non-EU country drives the process to develop implementation guidelines for the 28 nations of the EU. BEREC should take the necessary steps to demonstrate transparency and rectify any favoritism. This research note may be harsh, but on the other hand, if BEREC had conducted its efforts with the transparency, there would be no need for such a note. One journalist already expressed similar criticisms, calling all of the experts but Marcus “slacademics.”

Google is rational to conduct net neutrality advocacy to serve its corporate interest, but it is not the job of the telecom regulator and BEREC to develop policies which unduly reward Google by regulating its rivals.

To learn more about the status of net neutrality rules around the world and why activists succeed to make rules even with an absence of harm, order Strand Consult’s report Understanding Net Neutrality and Stakeholders’ Arguments.

Contact us to get a copy of the report

Request the report