The internet and the consumer: how to avoid killing a mosquito with a bazooka?

29 November 2011 Author: EIFonline

EIF’s dinner debate of 29 November focused on identifying and measuring the best possible outcomes for the consumer when it comes to their Internet access and the digital market. The speakers comprised both regulators (Ed Richards, CEO of Ofcom and Chris Fonteijn, Chair of the Board of BEREC) and the consumers (Monique Goyens, Director General at BEUC).

Access to telecommunications is of key importance for today’s consumer. After all, access has become crucial for people because of possible exclusion from social life (online communications with the government, friends, or one's employer.) For a market to be truly competitive there is a need for increased consumer information and consumer mobility. This is a prerequisite that is not spontaneously met in the telecom sector according to some.

Competition and choice are therefore at the heart of delivering good outcomes. In the UK, one of the main issues that prove this is so-called "switching". Commissioner Neelie Kroes recently mentioned that for competition in the broadband and telecommunications industries to work properly, consumers need to be able to make informed choices, but equally important, they also need to be able to switch operators easily and quickly. Research shows that in the UK this is problematic. 30% of consumers that want to switch have unwanted disruption of service, of which 13% does not have broadband for two full weeks. This is bad for the competitive process and the Internet economy as a whole. As such Oftel, the regulator for the UK telecommunications industry, will draft new proposals to address this for both individual and bundled services.

A second key element for good consumer outcomes is the need to have transparent product information that goes beyond pricing information and extends to the nature and the quality of the broadband service itself. For instance, consumers are often provided with a maximum speed, which can differ radically from the real throughput speed. 

Traffic management is an issue of a similar complexity and hard to explain to consumers. The way ISPs prioritize certain types of traffic to avoid congestion, should not become an anti-competitive element (such as blocking VOIP traffic), something which is at the heart of the network neutrality debate. Oftel have asked industry to look at what is best practice in communicating complex information to consumers in other sectors to facilitate this process.

Although great progress has been made on the policy side of consumer protection on innovation and competition, significantly less progress has been made in the areas of data and information. This could be one of the most profound issues of the next 20 years, as the Internet has changed the set of relationships between private companies and individuals and also between public bodies, the state and individuals. Current data protection frameworks must be updated and take into account these new developments.

New approaches towards consumer protection and competition are also recently becoming visible. For instance, in the Netherlands the Telecoms regulator Opta will next year be merged together with both the competition authority NMa and the consumer regulatory body to form one new integrated organization. This is a clear example of a direction change from an approach of pure regulation and pure competition to more emphasis on the consumer.

This shift in regulatory direction will place end-users much more in the forefront. The same can be seen in other areas of consumer protection. The issues that are most debated currently are how to provide consumers with a safe internet experience and include spam fighting, malware fighting and the general security of the Internet. In the area of online shopping similar regulatory trends are taking place. Recently the European Commission’s ban on vertical restraints (combined with related case law) has made a total ban on Internet sales by distributors virtually impossible. At the same time, competition authorities are looking into the issue of price transparency and the initial conclusion is that this could lead to enormous benefits for the consumer. And last but not least: e-commerce is developing well, but cross border e-commerce is not developing at the same pace. Could it be that it’s not the border but the distance that is scaring consumers away? As pointed out at EIF's debate: there are currently proposals on the table from the European Commission that deal with this issue but some say they are like killing a mosquito with a bazooka: you are not sure the mosquito is dead but you have created a lot of collateral damage.

In summary, competition can be a primary mechanism for good consumer outcomes, but targeted regulation on the demand side is also needed in that respect. That, combined with an obligation to provide information and a clear framework for consumers and businesses of the use of personal and public data, can only work if all organizations involved operate in conjunction. This will be the only way to create a credible approach to protect consumers online in the next years to come.


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