Ad blocking has been on the rise for a number of years. The 2015 Ad Blocking Report claims that ad blocking is estimated to cost publishers $22 billion in 2015, the year in which it has grown 41% compared to the previous year. At the same time, ad blocking penetration stood at 15% in the USA and 25% in Germany. And it keeps growing.
While ad blocking as a problem has so far concentrated on the users and their deployment of blocking software on the perriphery, several sources (see e.g. FT article) have recently reported that EU mobile operators intend to introduce network-wide advertisement blocking. One of the first credible threats came in February 2016 from the mobile operator Three. They rely on a technology produced by an Israeli company called Shine.
Blocking ads on mobile networks seems to be a result of increasing frustration of mobile operators who see ad networks enjoy increasing profits without the need to invest in the infrastructure. Mobile internet ad spending is set to stand at about $100 billion in 2016 with a projected increase in the years to come and network operators seem to want a share of that cake. Platforms which rely on ads, such as Google, on the other hand, argue that blocking makes no sense since content production which they engage in also requires investment and relies heavily on income generated by advertising.
Do network-wide ad-blocks violate the principle of net neutrality?
First, net neutrality is a complex set of problems that tends to get oversimplified and politicized. In reality, few understand it properly and even fewer have a grasp of the relationship that law has to technology. To put it in very simple terms, net neutrality is a principle which commands Internet Service Providers to treat all traffic equally, irrespective of the type, content, platform, application, etc. It can be understood as a principle that describes how Internet operates at present (it possesesnon-discriminatory properties) but it can also be understood as a regulatory principle (legislation is needed to protect net neutrality). Often the two come together in a (rather political) claim that, since the Internet is “neutral”, legislation is needed to addressed real or perceived threats to that neutrality. Importantly, the regulation of interconnection and peering is, by definition, not covered by net neutrality. In other words, net neutrality only controls what is happening on the “last mile“, between an ISP and the user. It says nothing about how ISPs regulate their own interconnection to other providers. Such relationships are only subject to contract law and competition law.
There are, at present, two opposing camps in relation to how net neutrality ought to be regulated. One is claiming that net neutrality is necessary to preserve the free and open Internet such as we know it while the other is saying that introducing legislation to protect net neutrality hampers investment and is a solution in search of a problem. This author tends to agree with the latter view.
The US and the EU have different views on net neutrality. While the US introduced a relatively strong form of net neutraluty in 2014, the EU opted for the weak one in its 2015 telecoms reform (effective from 30 April 2016). The EU version allows for fast lanes, as long as there is no discrimination in the main internet pipe.
How would EU rules react to the ad blocking problem? The key provision is Article 3(3) in the new Regulation:
Providers of internet access services shall treat all traffic equally, when providing internet access services, without discrimination, restriction or interference, and irrespective of the sender and receiver, the content accessed or distributed, the applications or services used or provided, or the terminal equipment used.
The first subparagraph shall not prevent providers of internet access services from implementing reasonable traffic management measures. In order to be deemed to be reasonable, such measures shall be transparent, non-discriminatory and proportionate, and shall not be based on commercial considerations but on objectively different technical quality of service requirements of specific categories of traffic. Such measures shall not monitor the specific content and shall not be maintained for longer than necessary.
Providers of internet access services shall not engage in traffic management measures going beyond those set out in the second subparagraph, and in particular shall not block, slow down, alter, restrict, interfere with, degrade or discriminate between specific content, applications or services, or specific categories thereof, except as necessary, and only for as long as necessary, in order to:
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comply with Union legislative acts, or national legislation that complies with Union law, to which the provider of internet access services is subject, or with measures that comply with Union law giving effect to such Union legislative acts or national legislation, including with orders by courts or public authorities vested with relevant powers;
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preserve the integrity and security of the network, of services provided via that network, and of the terminal equipment of end-users;
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prevent impending network congestion and mitigate the effects of exceptional or temporary network congestion, provided that equivalent categories of traffic are treated equally.
This provision makes it obvious that “discrimination, restriction or interference” is not allowed but also that “reasonable traffic management rules” is. Such traffic management must be “transparent, non-discriminatory and proportionate” and cannot be based on “commercial considerations”.
There is mounting evidence that mobile ads do gobble data and slow traffic (see here and here). Ender Analysis released a report in March 2016, claiming that between 18% and 79% of traffic is attributed to mobile ads. All that is required, in other words, is for the operator to show that ad traffic is causing disturbances in network traffic. This would almost certainly be allowed to stand even if the ultimate motive is commercial, i.e. if the real drive is an increase share of mobile ad revenues.
The key to understanding this problem is in the nature of the ads in question. Mobile ads are demanding on traffic and integrated with the content. They bring data congestion, security and privacy risks. As such, they would fit perfectly within letter b) (integrity and security of network). The Ender report further says “On the basis of this investigation, an estimate that says advertising accounts for half of all data used by publisher pages on iPhones does not look unreasonable. Publisher mobile pages are bloated, and advertising is an enormous part of that.”
It is entirely possible that network-wide ad blocking may have implications that arise out of contract law, advertising law or unfair competition law. In the view of this author (although there are also opposing views) blocking ads on a network basis is not a net neutrality issue and is easily justified by reasons of traffic management. A preliminary answer will be provided by Body of European Regulators for Electronic Communications (BEREC), who is supposed to published their draft net neutrality guidelines at some point in June 2016. The final answer will almost certainly have to wait for a Court of Justice reference.
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