UK minister: it would be wrong to hit Skype and WhatsApp when encouraging telecoms investment

Culture minister Ed Vaizey was asked specifically about whether it is fair that OTT providers can reach consumers over telecoms networks without sharing the cost of maintenance with the operators of the infrastructure during a House of Lords committee hearing on Monday.

In response Vaizey said that it would be wrong for the government to impose new regulatory requirements on OTT providers as part of measures to incentivise telecoms operators to invest in the new telecoms infrastructure necessary to support the growth of the digital economy.

"By providing this service which we all want to use we all need a smartphone and a mobile package in order to use that service so [OTT providers] are effectively helping to provide customers for the mobile operators and it is up to the telecoms operators not simply to plant their feet in the sand and say 'could you just regulate these organisations away while we update our business model and change our charging practices for consumers', I'm afraid that would be entirely the wrong approach," Vaizey said.

The minister also said that many OTT providers "make their own investments in their own infrastructure in order to provide a service for their consumers".

Vaizey said, though, that there is "a range of ways" the government can help encourage telecoms operators to invest in infrastructure.

"I have a lot of sympathy with telecoms operators that want to invest in their infrastructure and need to adapt their business model to enable them to make that investment but there are a whole host of things that impact on that investment model for telecoms operators, not least government regulation itself and we as the UK government want to make issues like planning for example much easier," Vaizey said.

Telecoms law experts Diane Mullenex and Tony Fielding of Pinsent Masons, the law firm behind Out-Law.com, said Vaizey’s comments are consistent with the UK’s open approach to telecoms, encouraging competition.

"In the race to roll out faster networks that can cope with the demands for data and access placed on them by popular OTT applications, mobile operators are required to invest heavily in innovation and infrastructure now and recoup their costs from customers over time," Mullenex said. "Likewise, the new EU law on net neutrality will mean that ISPs cannot protect their traditional revenues in manners that are hotly contested by relevant stakeholders; and in the UK, many of them have already agreed principles through a voluntary code of practice."

Fielding said: "The consideration of these issues are part of a much broader and holistic EU and regulatory context, particularly in view of the single digital market review being undertaken and will play themselves out. Both Ofcom and the European Commission have commenced strategic reviews in relation to OTT services and the regulatory framework that will result from these will be contentious and try to balance promoting competition and protecting consumers."

In the Lords' hearing Vaizey was also asked for his views on how new EU rules on roaming charges might impact on telecoms companies. Those rules will prohibit mobile network operators from imposing roaming charges from 15 June 2017 onwards other than where consumers exceed a "fair use" cap on the use of mobile data services abroad.

Vaizey said he supported the reforms and does not believe they will lead to a loss of revenue for those operators. He said operators will be able to generate revenues from consumers that would normally not use their mobile when abroad as a result of the roaming charges they face and pointed to existing cuts operators have already made to such charges in a bid to obtain a "competitive advantage".

"There are plenty of estimates that show that actually over the next 10 years the abolition of roaming charges could actually see a net increase in revenues for telecoms companies so I think broadly speaking the effect will be neutral and I think that what tips the balance is the clear advantage in favour of the consumer," Vaizey said.

Vaizey also said he believes the benefits to consumers from the new roaming charges regime would not be lost if the UK voted to leave the EU in the referendum planned for 2017.

The culture minister also gave his backing to the new 'net neutrality' rules that are set to be finalised by EU law makers this autumn. Those net neutrality rules will, from 30 April 2016, lay out strict conditions on when internet service providers (ISPs) can block or throttle the delivery of content requested by users of their network and will prevent "paid prioritisation" of content delivery online.

Vaizey described net neutrality as a "sensible practice to stop anti-competitive behaviour" and said he was pleased a "principles-based approach" had won support among the EU law makers and that the new regime had sufficient safeguards in it to prevent abuse.

"When we talk about net neutrality we are not saying that all traffic should be treated the same – all traffic is not treated the same at the moment and it is perfectly sensible that traffic, particularly for example as new services come on board, such as e-health services, that that traffic, if necessary, has special arrangements to ensure that it gets through," Vaizey said. "But that is different from what is known as paid prioritisation where businesses are effectively able to knock their competitors out of the way by doing a special deal."

The principles-based approach is important to "maintain flexibility" and "ensure we don't stifle innovation", he said.

The Lords' EU Internal Market, Infrastructure and Employment Sub-Committee also asked Vaizey to outline the UK government's views on whether radio spectrum use should be harmonised across the EU. He said that he broadly supports that approach but that "an element of flexibility" is required.

"It is important to keep an element of flexibility for two or three reasons," Vaizey said. "The first is ... I think we are very good at spectrum management [in the UK]. I think Ofcom does a superb job in ensuring that we make appropriate spectrum available in time for key uses and we don't want to be held back by the slowest carriage in the train so I think it is important that countries in the lead continue to have the ability to push forward and push ahead."

"Secondly, the use of spectrum can differ from country to country depending on topography and different countries, depending on how they want to configure services, may need to be more flexible in the use of their spectrum. And thirdly ... I think it is important that there is enough wiggle room that countries that do want to innovate, for example as we do on issues like the use of whitespaces, are free to put forward innovations without being held back too much… At the same time again with the vision of a European digital single market in front of us clearly where we can coordinate better, and where we can harmonise, then I am all in favour of it," he said.

Vaizey said though that he would be against "forced harmonisation", which he said would be the "top down imposition of spectrum regulations". He said he believes other major EU countries share that view.

"I think that would lose some of the best practice that exists in some of the leading country regulators and would also stifle some opportunities for innovation and indeed flexibility in individual member states," the minister said.