Net neutraility in the US and the EU

Europe has just proposed its own version of net neutrality law and critics are already tearing it apart. This article from The Economist compares it to the US version and broadly concludes that the European law is looser on net neutrality than the US, which will result in less innovation on the Internet. The article claims that the main reason for this difference between the two continents comes from the fact that in Europe, the balance of lobbying power is in favour of the large infrastructure (telco) companies instead of Internet platforms. In fact, European telcos - many of which are close to the government it is claimed - find eager listeners in regulatory bodies who are tired to witness the crushing success of American Internet giants on their continent. 

This view is quite superficial. First of all, I don't think that there is such a large difference across the two continents in their approaches to net neutrality: there are loopholes large enough in both laws as well as many uncertainties concerning details of implementation - The Economist ends their analysis acknowledging that the US law faces many hurdles still. Second, it is not clear that European telcos have more leverage with their governments than say AT&T (which has just managed to reassemble itself to control a large chunk of digital traffic), or say, Comcast and some other large cable networks. Third, expensive infrastructure for consumers is just as much a roadblock to innovation on the Internet than net neutrality - in fact, arguably more so. European broadband costs are much lower than equivalent service costs in the US and as a result Internet usage is way ahead in Europe compared to the US. Fourth, net neutrality is not an unambiguous good thing so that more of it is automatically better. Network management is complex and priority needs to be provided to some content to avoid congestion - finding the right balance is extremely complex. While some bandwidth needs to be guaranteed to poor new application providers, it makes sense for intense users to pay more for the infrastructure used. 

Innovation on the Internet has been dismal in Europe when compared to the US. This however, does not come from overregulation of the Internet but much more from the lack of appropriate financial infrastructure and the lack an investment friendly economic environment. Indeed, the gap in innovation across the two continents is also present in other industries, not just technology.

Adblocking on the rise

Adblocking became a real problem for advertisers last spring as the number of users installing such software rose to over 200 hundred million users across the planet (see article here). Early in the summer, I thought that this problem might matter for the long tail of content providers, largely sparing the big ad platforms (Google, Facebook, etc.). Not withstanding problems related to net neutrality, I thought that by and large the digital advertising market will remain the same as it is already concentrated in the hands of the large ad platforms.

Today, when infrastructure providers also consider adopting adbloking technology, it is clear that I couldn't have been more wrong. It is precisely the large ad platforms that might be hurt the most. Two particular events raise concerns. First, Digicel, a large mobile service operator decided to block ads on mobile phones. If other infrastucture providers follow a bitter negotiation can emerge, not unlike the one we saw emerging from time to time between cable operators and content providers (Comcast vs. Netflix or CBS vs. TWC). Such fights and the resulting settlements usually leave consumers worse off by introducing inefficieny in the market leading to high prices. The second event consists in Apple's large scale adoption of adblocking apps, some of which even block ads running within apps (e.g. Facebook's ads). Again, if a large platform like Apple blocks similarly large ad-based paltforms like Facebook and Google, then a lot of inefficiency can creep into the system.

There aren't only negative effects associated with these developments. The average quality of ads will rise partly due to the weeding out of really bad ads but also due to advertisers increased investment in ads that are relevant and impactful. Pages will load faster, a major concern for users that is driving in part the ad blocking trend. Still, adblocking may have just opened the next huge battle between large Internet platforms (just when we thought that patent wars might taper off as a result of a few reasonable settlements).