The Internet Distinction

“I could also see some countries following the Dutch example,” said Jacques de Greling, an analyst at Natixis, a French bank. “I believe there will be pressure from consumers to make it clear what they are buying, whether it is the full Internet or Internet-light.”

(Original at The New York Times)

By KEVIN O’BRIEN

June 22, 2011

BERLIN — The Netherlands on Wednesday became the first country in Europe, and only the second in the world, to enshrine the concept of network neutrality into national law by banning its mobile telephone operators from blocking or charging consumers extra for using Internet-based communications services like Skype or WhatsApp, a free text service.

[. . .]

Operators could still offer a range of mobile data tariffs with different download speeds and levels of service, but they would not be able to tie specific rates to the use of specific free Internet services.

Under the law, Dutch operators could be fined up to 10 percent of their annual sales for violations by the national telecommunications regulator, OPTA.

Patrick Nickolson, a spokesman for KPN, said that the measure could lead to higher broadband prices in the Netherlands because operators would be limited in their ability to structure differentiated data packages based on consumption.

“We regret that the Dutch Parliament didn’t take more time to consider this,” Mr. Nickolson said. “This will limit our ability to develop a new portfolio of tariffs and there is at least the risk of higher prices, because our options to differentiate will now be more limited.”

[. . .]

The Dutch restrictions on operators are the first in the 27-nation European Union. The European Commission and European Parliament have endorsed network neutrality guidelines but as yet have taken no legal action against operators that block or impose extra fees on consumers using services like Skype, the voice and video Internet service being acquired by Microsoft, and WhatsApp, a mobile software maker which is based in Santa Clara, California.

[. . .]

Maxime Verhagen, the Dutch deputy prime minister who supported the net neutrality restrictions, said that the new rules would ensure that Internet services were never threatened.

“The blocking of services or the imposition of a levy is a brake on innovation,” Mr. Verhagen said. “That’s not good for the economy. This measure guarantees a completely free Internet which both citizens and the providers of the online services can then rely on.”

Besides the Netherlands, only one country, Chile, has written network neutrality requirements into its telecommunications law. The Chilean law, which was approved in July 2010, only took effect in May.

[. . .]

The debate over net neutrality in the Netherlands erupted in May when Eelco Blok, the new chief executive of KPN, the former phone monopoly, announced plans to create a new set of mobile data tariffs that included charges on services like WhatsApp that allow smartphone users to avoid operator charges for sending text messages.

Use of the free text service has spread rapidly, eroding operator text revenues.

According to KPN, 85 percent of the company’s customers who use a Google Android phone downloaded WhatsApp onto their handsets from last August through April. As a result, KPN’s revenue from text messaging, which had risen 8 percent in the first quarter of 2010 from a year earlier, declined 13 percent in the first quarter of this year.

At a presentation to investors in London on May 10, analysts questioned where KPN had obtained the rapid adoption figures for WhatsApp. A midlevel KPN executive explained that the operator had deployed analytical software which uses a technology called deep packet inspection to scrutinize the communication habits of individual users.

The disclosure, widely reported in the Dutch news media, set off an uproar that fueled the legislative drive, which in less than two months culminated in lawmakers adopting the Continent’s first net neutrality measures with real teeth.