Britain's telecommunications regulator says its "preliminary view" is that "there is currently insufficient evidence to justify regulation to prohibit certain forms of traffic management." In other words, Ofcom sees no need for open Internet rules, given the agency's view that nothing has happened in United Kingdom cyberspace to merit them.

The "consultation," as Ofcom calls its new discussion piece, notes "the absence of complaints or concrete examples of discrimination" presented to the agency so far. Titled Traffic management and 'net neutrality', it comes following yesterday's record for British Internet consumption. The BBC reports that the England vs. Slovenia World Cup game generated 800,000 simultaneous streams—a "peak number watching at any one time."

Traffic Management also comes as the European Commission promises a big debate about net neutrality this summer.

Who bears the costs?

But what caught our eye about the piece—the equivalent of a Notice of Inquiry launched by our Federal Communications Commission—is its theory of Internet economics. The report plays down worries about the prospect of ISPs charging content and applications providers for access to Internet subscribers, or seeing this as a form of potential discrimination.

Ofcom's "initial view" is that a ban on this sort of practice, which our FCC is currently considering, "is unlikely to lead to efficient market outcomes."

"In simple terms," the UK commission continues, "it means that consumers [would] have to bear all of the costs in a 'two sided market' in which content and applications providers clearly benefit from access to consumers as well as vice versa."

What is a 'two sided market'? Within the context of the 'Net, Ofcom defines it as so:

The two sides consist of consumers purchasing internet connectivity on the one hand, and content, applications and service providers on the other. ISPs allow consumers to access content, applications and services, and the latter to access consumers. In theory, this should be a mutually beneficial arrangement. Satisfying the demand of each side depends in part on the participation of the other. For example, consumers would value internet connectivity more highly the more content and applications they can access. Similarly the value content providers find in offering online services increases with consumer internet take-up as it offers them a chance to reach larger numbers of consumers.

The trick in a market like this is for both sides to find the right balance, Ofcom suggests. If ISPs charge too much to consumers, they'll use broadband less. If ISPs overcharge content providers, that could chill investment in new applications and content.

So "in theory, the ISP is well-placed to act as an 'honest broker' bringing two sets of preferences together," the document contends.

Therefore, banning "voluntary commercial agreements" (as the telcos in the US call them), would only be appropriate "if there was evidence that consumers place value on additional services, applications and content significantly more than the service providers value access to consumers."

Ofcom adds that "it is not clear that such a prohibition would be proportionate. Indeed the introduction of wholesale charging could be consistent with an efficient market outcome."

What this analysis seems to assume is that if ISPs can't charge content and application providers like Google for access to their own subscribers, the burden of paying for Internet on-ramp access will fall directly on consumers in the form of subscription fees. Less able to sustain those additional costs than content providers, people might respond by buying or using less broadband, depressing the Internet investment economy.

But we can envision a very different scenario. If ISPs are allowed to charge content providers for better subscriber access, those content providers will transfer their new costs to consumers in a myriad of hidden ways: more ads, more exploitation of user data, and worst of all, more tiers of access that tithe the best thing about the 'Net right now—that consumers can upload content and create their own environments for very little money.

The question is how to regulate that economy so that the Internet's main virtue continues to thrive.

Any future scenario

Still, the regulator acknowledges that "some forms of discrimination could raise consumer concerns" and that "discriminatory practices by firms with substantial market power are likely to come under particularly close scrutiny."

But Ofcom says that this doesn't mean that governments actually have to do something to make net neutrality so. It's a "common understanding" among EU nations that an open and neutral Internet is desirable, the regulator notes. This could be achieved in a variety of ways, however, "not least appropriate forbearance from regulation. There is no obligation on national regulators to introduce restrictions on traffic management or other forms of network management."

The most proactive suggestion the document makes is that ISP network management and pricing practices should be as transparent as possible.

"We believe that, in any future commercial scenario," Ofcom writes, "it is critical that consumers should have access to meaningful information on policies that affect their experience including relevant traffic prioritisation, degradation or blocking policies being applied by their ISP and that they are able to factor this in when making purchasing and/or switching decisions."