New Report Highlights How UK Net Neutrality Regulations Are Failing Consumers, Innovators, And Investors

Strand Consult's report "Net Neutrality regulation is failing UK consumers, innovators, and investors" looks at several areas impacted by net neutrality rules and finds that:

• Net neutrality regulations harm consumers;
• Net neutrality regulations slow 5G deployment and adoption;
• Net neutrality regulations deter innovation;
• Net neutrality regulations distort the broadband markets

The report concludes that it is time to review the UK's net neutrality regulations to ensure broadband internet policy is developed so that it can better improve consumer welfare, network investment and internet innovation.

Please find below some further details from the key findings of the report:

Net Neutrality (NN) regulation harms consumers.

NN regulation has made UK broadband internet less accessible, less relevant, and for some users, deprived them of more affordable products. During the pandemic, UK end users were blocked from accessing educational content via free data and zero rating programs. Ofcom had to suspend the misguided NN regulation so that people could learn online freely. Ofcom recognises the value of free access to education and proposes to change its guidance and enforcement practices. Ofcom also recognises that NN regulation unwittingly makes networks less efficient and more costly to build but is limited in what it can do. More substantive reform is required from the Government.

The UK never experienced harmful, systematic violations of NN, even before rules were imposed in 2015. At that time the UK was ahead of the European Union (EU) in internet regulation and already had rules to protect end users and internet access. Moreover, the major broadband providers had made voluntary commitments to Ofcom to ensure internet openness and transparency about network management practices and performance. Ofcom deserves commendation for recognition that NN regulation should be updated given technological development in broadband networks and the internet ecosystem globally. In any event, robust competition and a pro-consumer regulatory framework already exist in the UK to protect internet users and openness.

NN regulation slows 5G deployment and adoption.

NN regulation slows the realisation of the UK Government's 5G goals. No leading 5G nation has hard NN regulation. The UK lags global leaders in 5G, delaying the close of the digital divide and vital services for healthcare, creative industries, manufacturing, and transport. NN regulation impedes 5G investment, innovation, and adoption. Moreover, average revenue per user (APRU) for mobile subscribers has declined for more than a decade in part from NN regulation which restricts pricing and pro-consumer traffic management, prevents operators from managing networks efficiently, and makes the business case for 5G more difficult.

Updating NN regulation can deliver as much as £340 million annually in free cash flow, which can help the UK achieve its 2030 5G goals and close the 5G investment gap, estimated at £25 billion. The UK is not on par with leading 5G nations in per capita mobile wireless investment.

NN regulation deters innovation.

NN regulation was imposed with a promise of internet innovation. Yet Europe's share of internet innovation value has declined drastically since 2015, and today accounts for less than two percentof global internet value. Europe's total internet value is on track to be eclipsed by Africa next year. The UK, an early mover in internet innovation, has seen its progress slow since NN implementation. Before NN regulation, UK companies figured in the top 20 global internet companies, but none remain today. Of the top 243 internet companies globally, just 7 come from the UK. All but one of these firms was founded before the imposition of NN regulation. By contrast, the UK has witnessed an explosion in fintech innovation, an area not impacted by NN regulation. Global evidence shows that hard NN regulation does not confer an innovation advantage; soft rules are sufficient to protect openness and promote innovation. Indeed, countries with no NN regulation produce much internet innovation.

NN regulation distorts the broadband market.

Two-sided markets is a natural, commonly-accepted, and Nobel Prize-recognised explanation for economic relationships across the internet economy. It describes how broadband providers engage with end users and content/application providers to get both sides of the market on board. Diverse value propositions and pricing flexibility maximise participation on both sides.  However, NN regulation arbitrarily and illogically restricts broadband providers from having commercial relationships with one side of the market. This deprives the UK of dynamism. This report suggests that to be a global 5G leader, NN regulation should be removed, and the UK's prior and superior broadband regime be restored. The UK Government should seize the opportunity to modernise broad internet policy, improve outcomes for consumers, and unleash the growth potential of the UK internet economy.

Further Information And Opportunity to Request the Report

For further information about the report and its key findings, and the opportunity to request a copy of the report please contact Strand Consult.