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Net Neutrality and Israeli Antitrust Law

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by

Ori Kaufman

on 14 January 2016

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Transcript of Net Neutrality and Israeli Antitrust Law

Debate
The debate over net neutrality is, generally, a communication policy one:

*Proponents of "open access" believe that it is a structural
safeguard measure
against the
erosion
of internet neutrality as we experience it today- all data is treated the same, and the internet is a democratic environment for any meassage.

*Critics claim that regulation is
unnecessary
and would likely
hinder
the pace of broadband deployment and innovation- "if it ain't broke, don't fix it!".

"mandating net neutrality would be likely to reduce economic welfare"- Hahn & Wallsten

Is it Legal?
Is This even an Antitrust Issue? isn't it a Question of Communications regulatory policy?
Should Internet Access-Tiering and Preferential Agreements in Israel be considered a Restrictive Trade Practice?
Net Neutrality
The principle that internet service providers should enable access to all content and applications regardless of the source, and without favoring or blocking particular products or websites
What is it Exactly?
Ori Kaufman
Term coined by Prof. Tim Wu, Columbia Law School
It's Hardly self defining, and might be a bit complicated. mainly, the debate is over two questions*:

1.Whether different content suppliers (such as Google, Netflix etc.) should be able to obtain
more bandwidth
, and thus higher speeds, for a given amount of content, by
paying internet providers more
?

2.Whether certain suppliers are being
discriminated against
by internet providers, or
excluded altogether
, for either economic or noneconomic reasons?
So what do Internet Providers want?
Basically, they want to charge service providers (such as Skype, Whatsapp, Netflix etc.)
more money
for supplying them with internet "fast lanes" for their data
OR
the may want to
block, slow down or degrade
the quality of their services
In
The US
, the FCC (Federal Communication Commission) has adopted rules
in favor of net neutrality
in 2015.

In The Netherlands, Brazil, Chile, Slovenia and some other countries there are laws
protecting
this principle.


Things are
BAD
What
about
Israel?
In 2011 and 2014 Israel has amended its Communications Act (Bezeq and Transmissions) from 1982 so that it is illegal for any internet provider to: "limit or block, even by setting tariffs:
1. A costumers possibility to use any service or application provided over the internet..."

Chapter 51C
Loopholes
in
the
Israeli
Law
?
The Law contains a
vague exception
which allows internet providers to "reasonably and fairly manage their network". Since these firms have a substantial
technological advantage
over the regulators, and the law has
never
been enforced by the Israeli Communication Ministry, they may turn the "exception" to the common rule.
The Law doesn't forbid internet providers and content suppliers from signing preferential agreements or taking access-tiering measures.

*Hovenkamp
*Ryanzilber
A
Preferential Agreement
is an agreement between an internet provider and a content provider to ensures that, in times of heavy internet data traffic, the internet provider will
prefer
data packets from the content supplier and keep its data speed stable ("you get your
regular
X speed permanently, no matter what").
Access-Tiering
is the practice of creating paid "fast lanes" over the internet network so that an internet provider could allocate a
completely separate and uninterrupted lane
for a paying content provider.
Why Could this be a Serious Problem?
Sometimes
: "Net neutrality is
not exclusively nor even predominantly and antitrust problem
. antitrust my occasionally become relevant when vertical integration by internet service providers leads to exclusion of or discrimination against competing downstream content [...] Net neutrality concerns can raise competition issues when old technology firms such as cable companies attempt to protect their position by restraining the development of newer technology internet broadband." - Hovenkamp

Yes
: "[...] [t]he net neutrality controversy is
best understood as a classic antitrust dispute
about “vertical leveraging”"-Nuechterlein

Should we encourage or prevent preferential agreements and access-tiering solely due to antitrust reasons? is a per-se illegality of those practices price regulation?
If Preferential Agreements and Access-Tiering are Antitrust concerns, and even restrictive trade practices (
I'm not sure yet
), does the Israeli Antitrust Authority have good tools for addressing them in the Israeli Antitrust Act (1988)?
Declared as an internet provider monopoly by the Israeli Antitrust Authority in 2004 (over 63% of the market)
Are possible preferential agreements and access-tiering only means of
stifling competition
and strengtheing Yes or Hot's
Duopoly
?
If Bezeq and Hot both
engage
in preferential agreements or access-tiering only with their affiliates, or
refrain
from using these practice altogether, should this be considered a
tacit collusion
? (Conducive Conditions)
Duopoly (economies of scale)
Regulating conduct of an oligopoly: What should be the
scope
of prohibition (if any)?

Articles 26, 31
Will the market self-correct? are those practices contradicting the
Schumpeterain
theory of "creative destruction"?
Restricting mergers?

The Antitrust Authority approved a Bezeq-Yes merger in 2014, limiting their ability to "limit or block", but did not per-se prohibit
preferential agreements or access-tiering.


Chapter C
Regulating conduct of monopolies: What should be the
scope
of prohibition (if any)?

Article 29
If Bezeq will refrain from initiating preferential agreements or access-tiering with Netflix or Cellcom TV, or will only deal for a very high price, is it an
Unreasonable Refusal to deal or Abuse of position
?
Should
exclusivity agreements
between Bezeq/ Hot and Netflix/Cellcom TV/ new competitors be allowed?
Summary: I wish to determine what should be the basic antitrust approach towards future preferential agreements and access-tiering schemes

Thank you for your time.

I'd like to hear your thoughts, comments and questions
Full transcript