Network Neutrality and Internet Market Fragmentation

Abstract

The debate on network neutrality concerns the ways in which Internet Service Providers (ISPs) can manage the traffic on their network, as gatekeepers of information between content providers and end-users on the Internet. The European institutions have chosen not to regulate network management by ISPs strictly, but rather have them make their network management transparent for end-users. Some Member States, however, are in the process of regulating network management beyond the transparency approach of the European framework, for instance by banning ISPs from blocking or degrading traffic on their networks. Such different regulatory approaches towards network management across borders lead to regulatory fragmentation that causes inefficiencies and threatens the Internal Market. This research first establishes the detrimental effect on the Internal Market of diverging network management regulation, and then assesses a number of responses the European Commission can endeavor to counteract this regulatory fragmentation. The paper subsequently recommends two non-exclusive approaches to mitigate regulatory fragmentation of network management. First, the Commission could open infringement proceedings against defecting Member States and argue that their national regulation encroaches on the independence of National Regulatory Authorities (NRAs). Second, the Commission could initiate harmonizing legislation following the art. 114 TFEU procedure - which will likely be upheld when challenged before the European Courts.

Keywords: network neutrality, internal market, EU law, harmonization, telecommunications law

JEL Classification: K23, L86, L96