13 February 2024

Ofcom has quietly taken advantage of Brexit


In a little-noticed statement, Ofcom updated its approach to net neutrality regulation last year. This is an interesting tale of a regulator taking advantage of Brexit freedoms, even when the Government fails to go the whole hog. The issue is a tad technical, but stick with me for a moment. 

Net neutrality refers to rules that prevent internet service providers (ISPs) from discriminating in the delivery of web traffic. In practice, this means the likes of BT, Virgin, or Vodafone cannot block, slow down or speed up any particular type of content or service.

Advocates claim these rules are necessary to ensure the internet remains free, open and accessible. However, critics have long argued that they are unnecessary (as ISPs have no incentive to limit your access to the web) and undermine legitimate efforts to manage network traffic and offer innovative deals to consumers. 

The UK has an intriguing history with net neutrality, as I explored in IEA’s Expanding the Web report. In the early 2010s, the UK Government and Ofcom firmly opposed net neutrality rules. They argued that when it comes to competition between ISPs (e.g. Openreach, Virgin, Starlink), transparency requirements and self-regulation were sufficient to protect consumers.

By all accounts, they were right. A study in 2015 undertaken by the independent consultancy WIK found that the ‘competitive pressures seem to be working’ to prevent ISPs from blocking or throttling legal content and/or applications’. This objection came to nothing, however. In 2016, the UK was required to adopt the European Union’s Open Internet Access Regulation, which mandates net neutrality.

So, in sum, the UK never wanted or needed this regulation, was forced to accept it as part of EU membership, and has retained it post-Brexit.

This is where things get more interesting. The regulations themselves remain on the statute books. However, there is now some significant flexibility in interpretation. When the UK was a member of the EU, Ofcom had to follow prescriptive rules set by the Body of European Regulators for Electronic Communications. Now, post-Brexit, Ofcom has updated its approach.

Ofcom will now allow ISPs to offer a more comprehensive array of services. This includes premium quality retail offerings and specialised services prioritising specific applications or content. In practice, this could help the development of driverless cars (that require low latency and high reliability) and virtual reality headsets or enable priority for emergency services.

Ofcom will also permit ISPs to use more advanced traffic management techniques in congested contexts like public transport or major events. It will even allow zero-rating, whereby certain websites are not counted towards a customer’s overall data allowance. This means users will be provided free access to the likes of educational resources and essential Government websites.

These changes mean the internet market is becoming much less one-size-fits-all. Under the previous rules, all ISPs were required by law to offer an identical service, limiting experimentation and innovation. Earlier efforts to diversify were blocked, such as Vodafone’s plan to provide unlimited mobile streaming packages with lower-quality compressed video. This sort of package and many other specialised services are now possible.

The industry has welcomed these changes. For example, Maria Grazia Pecorari, Vodafone’s UK Wholesale & Strategy Director, wrote a blog post saying, ‘we couldn’t be more supportive’.  However, Pecorari also writes that the Government could go further by withdrawing the net neutrality rules from the statute books and leaving Ofcom to decide specific requirements.

Ofcom also notes that more extensive reform of the rules ‘is a decision for Government and Parliament’. One significant opportunity requiring legislative change is allowing ISPs to charge major content providers (like Amazon, Google and Netflix) for express access to their networks. This would transform internet delivery into a two-sided market (like newspapers with advertising revenue and reader subscriptions). Evidence shows that this additional revenue would help unlock investment into broadband infrastructure, supporting the government’s ‘levelling up’ goals for rural internet access.

Whatever one’s view on Brexit, it is evident that the Government should take advantage of every opportunity to improve the lives of the British people. Regulators are often criticised for imposing unnecessary economic burdens, but here we have a rare example of an organisation taking advantage of Brexit to provide greater regulatory flexibility. Let’s hope the Government notices and goes to the next step.

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Matthew Lesh is Director of Public Policy and Communications at the Institute of Economic Affairs.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.