Regulation around net neutrality has so far focused almost exclusively on internet access services, leaving other links of the value chain unexplored. However the French regulator ARCEP became the first to consider whether devices and operating systems are a weak-link in achieving an open internet. BEREC, the body of European regulators has also since carried out a similar exercise. It is currently too early to assess whether any of this will result in regulatory intervention, however both reports signal regulators’ intention to monitor these issues in the future. Any appetite for regulatory intervention should become clearer in 2018.
ARCEP identified potential bottlenecks earlier this year
ARCEP’s intention to monitor devices and operating systems in the context of net neutrality has been evident for some time. To coincide with the publication of its annual report on the state of the internet in France, the regulator also issued its first assessment of the influence devices have on internet openness in May 2017. In the report, ARCEP identified potential bottlenecks originated by devices, along four main types:
Those resulting from the characteristics of the device being used (physical fixed or mobile device);
Those attributed to software developments;
Those resulting from operating systems' and app stores' editorial policies; and
Those resulting from device suppliers' business models.
The report resulted in ARCEP deciding to extend the study by carrying out workshops and further consultations, with the view to issue a second report during 2018.
France appears to be leaning towards regulatory intervention
Off the back of the first report, and following workshops held in the last few months, ARCEP is now engaging in a more detailed consultation exercise which centres around three themes:
What would be the ideal way of making content and services available online?
Here, ARCEP aims to find out whether the current model of app stores is serving the market efficiently (both from the side of content providers and consumers), and whether there is room for alternative app stores.What explains the past success or failure of devices and OS? What questions do future interfaces raise?
Here, ARCEP seeks input on what is changing in the competitive conditions affecting the market for devices and operating systems, and where the balance lies between security and openness of devices to third parties.What are the impediments to switching devices or OS?
ARCEP considers the difficulties encountered when switching OS, and whether there are identical problems on fixed and mobile devices. It also seeks to understand whether data portability is likely to be effective in reducing obstacles, and which business models could reduce tie-up to a given OS.
The May 2017 report and the recently opened consultation show that, for ARCEP, it is still more a time for questions, rather than one for answers. However, its increased pace of activity in this area suggest the regulator will not shy away from introducing regulation for devices manufacturers and operating system, should it find sufficient evidence for the need to do so.
ARCEP’s consultation will close on 10 January 2018, with the view to release a report on 15 February 2018. This could serve as the starting point for regulatory measures to be introduced at the national or European level.
BEREC’s report touches on similar issues, though no further action is proposed
More recently, BEREC also acknowledged that devices and operating systems are a segment in the connectivity value chain which requires deeper scrutiny with regard to its effects on internet openness. The body issued a draft report on this topic in October 2017.
BEREC’s report bears striking similarities with ARCEP’s earlier study, in that both identify potential risks within that link of the value chain; and both note that operating systems are becoming an increasingly concentrated and duopolistic market, strongly intertwined with the market for devices, and nurturing strong network effects which are pushing users to adopt either Apple’s iOS or Google’s Android system for their devices.
Contrary to ARCEP, BEREC does not envisage taking any further action for the time being. It considers this as a purely speculative exercise, and notes that the limitations identified are, for the time being, “purely hypothetical”. BEREC only makes a generic reference to a potential follow-up report to be issued in the coming years and suggests that light-touch options based on transparency, i.e. the publication of collected or crowdsourced data, could be an appropriate option to explore, so that consumers are able to make informed choices.
