Net Neutrality and Data Sponsorship: Can we have both?

I recently started working with my colleagues on data sponsorship and how this rather new business model can be supported by edge computing. When we presented initial findings, we were warned that data sponsorship might be against EU net neutrality regulation. But is it?

What is the Internet?

In 2021, the Internet is a set of technologies which allow Internet Service Providers (ISPs) to connect end-user to Content and Application Providers (CAPs). ISPs include both wired and mobile Internet providers, such as Telia, Telenor, Tele2 and Halebop. CAPs include Spotify, Netflix, Facebook, Amazon and others.

This is unlike the – rather romantic – view of the Internet of the 1990s, in which ISPs connected users, each user accessing the Internet on equal terms. Today, revenue flowing from end-users to CAPs – either directly via cash or indirectly via ad revenue – breaks this symmetry.

What is net neutrality?

In brief, net neutrality is a principle backed by EU regulation 2015/2120. Stated simply, ISP should treat all traffic equally. An ISP should not be able to “blackmail” Spotify by rate-limiting them and asking them for extorting fees in return for lifting the rate-limiting. Similarly, an ISP should not be able to “blackmail” a small start-up which challenges Spotify’s music streaming market position.

The ambition is to treat ISPs as a utility. Just as a water company cannot impose you a brand for your shower head, ISPs should not be able to use their market dominance to favor one CAP over another.

But the temptation for the ISPs must be irresistible.

What is data sponsorship?

Data sponsorship is an agreement between an ISP and a CAP, in which the CAP “subsidize” – i.e., pay the ISP – the traffic between the CAP’s end-users and the CAP. While mostly a commercial concept, data sponsorship incentivize ISPs and CAPs to collaborate technically and move content and applications closer to the user – what my research area is actually about. CAPs win by being able to increase quality and reduce latency, while ISPs win by reducing demand on their congested network backbones.

For example, Telia offers a subscription where end-users get free traffic to selected social media. By “free” we mean that said traffic does not count towards the monthly data limit of the end-user. Although we cannot expect data sponsorships to be public, we can safely assume that money is flowing from the “selected social media” to Telia.

Is data sponsorship compatible with net neutrality?

The simple answer: It’s complicated. 😄

The initial offer of Telia blocked all Internet traffic except selected social media, once the end-user reached their monthly data limit. In 2018, PTS – the Swedish telecom regulator – ruled this offer incompatible with EU net neutrality, a ruling which was upheld by the Supreme Administrative Court of Sweden. If you understand Swedish or are happy to copy-paste Swedish into Google Translate, the court ruling is an interesting read, with strong arguments from both sides. The court ruling can be summarized as follows: Technically at some point some traffic is blocked and some traffic is not, and this is done for non-technical reasons, hence the court found Telia in non-compliance with EU net neutrality.

Telia changed its offer to block all Internet traffic including selected social media, once the end-user reached their monthly data limit. However, the traffic between the end-users and social media still does not count towards the monthly data limit. We can safely operate under the assumption that money still flows from selected social media to Telia. While technically no traffic is discriminated – all traffic of an end-user is either blocked or not blocked – commercially selected social media is still positively discriminated from the rest of the Internet.

PTS confirmed that this form of data sponsorship is compatible with EU net neutrality.

The offer “Free surf on social media” […] has also been subject to supervision regarding whether the commercial practice of zero-rating is compatible with article 3.2 in the TSM-regulation. PTS dismissed the case in June 2019 after having found that the offer was open to all suppliers of content and that the offer did not limit the end-users rights under the TSM-regulation.

Is this the end story?

Net neutrality and data sponsorships are hot topics. The temptation for ISPs to diversify their revenue is still there. The temptation for dominant CAPs to maintain their dominance is still there. We can expect any of two things to happen:

  1. More data sponsorships will be signed which commercially discriminate traffic, but not technically.

  2. EU law will be updated to ban commercial discrimination of traffic.

The latter would have a huge impact on data sponsorship. Without incentives in place, data sponsorship might die all together, and collaboration between ISPs and CAPs will be reduced to swapping logos.

Whatever the legal future, I’m hoping that ISPs and CAPs will technically collaborate to bring content and applications closer to end-users, while at the same time reducing congestion on network backbones.