deceptive designs US lawmakers

Internet vs. telecommunication services: differences that matter for users’ rights

The emergence of the internet has brought new opportunities for people to exercise their rights but also new regulatory questions, particularly with respect to telecommunications rules. In our first post in a series on Over-the-Top (OTT) services, we gave a brief introduction to the issues at stake in regulating these services. Here we explore why differences in technology and context matter when developing new regulatory models.

Is it appropriate for lawmakers to apply legacy telecommunications rules to new “OTT” internet services? This is an important question for human rights. As we’ve previously argued, the manner in which we regulate the platform and services we use for communicating and exercising our rights affects our enjoyment of them. If a government were to require a license for every “communications platform” to function, for example, it would have a profound impact on our freedom of expression, since it would affect how we use any personal webpage, forum, or independent media venue that allows comments or the exchange of information.

To help lawmakers and telecom regulators considering the question, we explore below important differences between classic telecommunications technologies and internet services.

A broad assertion of “regulatory inequality” is not a reason to regulate

A common argument in discussions on this issue is that there is currently “regulatory inequality among telecom networks and internet services, and corresponding alleged negative economic consequences for telecoms that must guide policy-making. Telecom service providers are often required to comply with specific obligations around taxation or revenue share, contributions to universal service obligation funds, telecom network investment targets/mandates, pricing regulations, and must-carry obligations, while in many cases, internet services are not. Some in the telecom industry argue that policy ought to “correct” this inequality.

However, “inequality” is not the salient factor lawmakers ought to consider in policy-making. To make an aptly tailored regulatory regime for new services, they should instead consider:

  • Technological differences. Telecom service providers offer voice calling and text messaging directly, while internet services run on the top layer of the network as standalone services. The services are offered in a different context, even if they sometimes serve the same function for end users.
  • Differences in rationale for regulation. There are public interest reasons for the regulations applied to telecom service providers, arising from the fact that they are provided exclusive licenses, and get government permission to exploit public goods in the form of radio spectrum and right-of-way. Public interest reasons for regulating internet services, however, may be different.

Regulators should not be concerned about achieving some form of regulatory parity between telecommunications networks and internet services. Instead, they should be concerned about what regulations are truly suitable for each.

Comparing the “playing fields” for telecom services and internet applications

Telecoms networks: exploit scarce resources, have “economy of scale” advantages, high barriers to entry, lack of competition

As we note above, there are strong public interest reasons for regulating telecommunications services and imposing specific obligations (such as “must carry,” neutrality, regulated pricing, etc.) For instance, telecommunications industries exploit scarce resources that belong to the “eminent domain” of states, namely telecommunications spectrum, and in some cases, infrastructure that was built by governments. This earlier thinking of “scarcity” in broadcast spectrum is key to understanding the “must carry” regulations for telecommunications and cable TV, and the “content quotas” imposed on audiovisual service providers. There is a public interest in protecting freedom of expression in all its facets, as well as pluralism via “positive discrimination,” where private players are granted exclusive or semi-exclusive rights to use public resources such as radio-frequency spectrum and common telecom physical infrastructure.

Additionally, the exploitation of public resources by telecommunications operators implies an economic advantage that is there from the beginning and that justifies regulations entailing investment quotas, universal service obligations, social tariffs, etc. This advantage is economy of scale. For instance, during the telecommunications deregulation in the 1990s in Latin America, telecommunications operators acquired privatized essential facilities that formerly belonged to the state, and were provided long-term concessions and territories for their exclusive exploitation. This led to competitive advantages in different countries.

This is particularly true today when “triple-play” or “convergent” operators are appearing throughout the world. Not every company will be able to offer such efficient communications “bundles” or “packs”; meaning that the telecommunications markets have high barriers to entry and therefore are prone to cartelization and concentration (lack of competition).

Internet services: abundance of resources, low barriers to entry, high competition

Meanwhile, internet applications involve a different context. Firstly, the internet is defined by abundance, not scarcity. Even though there are services and protocols that can sometimes serve the same function as telecommunications technologies (instant messaging, Voice over IP, video on demand, etc.), the reasons for regulating their use are different. The case has not been made for licensing-style regulatory intervention in the name of supporting either diversity or competition.

On the internet, anyone who has access to the network can benefit from its neutral and open characteristics. Freedom and consumer choice determine what kind of content or service is popular. Moreover, since there are no fixed quotas or quantitative limitations for content, actors who have difficulty getting their own media outlets, or whose dissident or minority viewpoints deter broadcasters, can reach interested communities on the internet. This includes, but is not limited to: indigenous populations, citizen journalists, LGBTI collectives, localized / multilingual content creators, artists outside the copyright-driven production scheme, and others.

In conclusion, the barrier of entry to the communications “market” on the internet is low enough that almost any interested party can operate a communications service or a media outlet, effectively supporting democratization of speech by enabling any reader or user to also be a content creator.

Should regulators regard internet services and telecom services as competitive “substitutes”?

The short answer is no. In theory, economic actors “compete” to sell products or services that may offer similar value, and could serve as substitutes for one another. However, users are migrating in their choice of technologies rather than in the use of products or services; telecommunications services and services based on internet protocols are so different that they could barely be considered competing “substitutes.”

Consider SMS vs. internet messaging apps like Viber, Signal, WhatsApp, or Snapchat; their business models are different (metered consumption and billing vs. data exploitation); the technology they use is different; the barrier of entry to the market is different (and therefore the offering of alternatives is different); and their degree of availability to the public is different (there are messaging platforms that are open for everyone to use while others are closed or exclusive). Not having access to one of them does not imply endangering the right to communication; while not having access to SMS or basic telecommunications services (including access to the internet, for instance) leaves the user with very little or no available substitutes.

Human rights are at risk

A plain adaptation of pre-existing rules and obligations to new internet services could harm users’ rights. For example, it might entail the obligation to register any site that deals with user interaction as an information intermediary. Last year, Argentina’s National Communications Entity issued a set of principles for the regulation of convergent telecommunications. Principle number 13 proposes the obligation to register “intermediation applications” with the government. This is would chill free expression since any service that allows for user comments would be forced to comply. Similarly, there are obligations related to data retention for telecommunications services in some countries (like Peru) that should not automatically be transplanted to online services. Mandatory data retention in telecommunications services is already harmful for privacy rights. Requiring the same for internet intermediaries, especially without nuances, would increase the risks exponentially, since internet services would be required to keep even more data about us that they already do.

This is why special rapporteurs on freedom of expression at the United Nations have said that rules governing traditional media should not be directly transferred to the internet, but rather need to be specifically designed for it.

In our next post, we will explore how countries around the world are responding to these regulatory debates impacting the open internet. Stay tuned.