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France Rejects Plan to Block Online Ads France Rejects Plan by Internet Provider to Block Online Ads
(about 4 hours later)
PARIS — The French government on Monday ordered a major Internet service provider to stop blocking online advertisements, saying the company had no right to edit the contents of the Web for its users. PARIS — In a potential test case for Europe, the French government on Monday ordered a big Internet service provider to stop blocking online advertisements, saying the company had no right to edit the contents of the Web for users.
Fleur Pellerin, the minister for the digital economy, said she had persuaded the service provider, Free, to restore full access after meetings with French online publishing and advertising groups, which had complained about a loss of revenue. The dispute has turned into a gauge of how France, and perhaps the rest of Europe, will mediate a struggle between telecommunications providers against Internet companies like Google, which generate billions of dollars in revenue from traffic that travels freely on their networks.
Free had moved last week to block online ads for some of its users when it introduced a new version of its Internet access software. While some Internet users already use ad-blocking programs to rid their screens of annoying pop-ups and other online ads, the software upgrade from Free did this automatically. European telecommunications companies want a share of that money, saying they need it to finance investments in faster broadband networks — and, as the latest incident shows, they are willing to flex their muscles to get it.
“An Internet service provider cannot unilaterally implement such blocking,” Ms. Pellerin said at a news conference Monday. Advertising should not be treated differently from other kinds of Internet content, she said, adding: “This kind of blocking is inconsistent with a free and open Internet, to which I am very attached.” Until now, European regulators have taken a laissez-faire approach, in contrast to the U.S. Federal Communications Commission, which has imposed guidelines barring operators of fixed-line broadband networks from blocking access to sites providing lawful content.
While Ms. Pellerin said Free, which has 5.2 million broadband customers, had agreed to stop blocking ads by the end of the day, she said the company’s initiative had highlighted an important question: Who should pay for the infrastructure that telecommunications providers need to carry ever-growing volumes of Internet traffic? On Monday, Fleur Pellerin, the French minister for the digital economy, said she had persuaded the Internet service provider, Free, to restore full access. The company, which has long balked at carrying the huge volume of traffic from sites owned by Google without compensation, had moved last week to block online ads when it introduced a new version of its Internet access software.
Network operators like Free complain that much of the benefit of their investments has gone to Internet companies like Google, which generate billions of dollars worth of revenue from online advertising. The move by Free was widely seen here as a tactic to try to get Google to share some of its ad revenue with service providers. “An Internet service provider cannot unilaterally implement such blocking,” Ms. Pellerin said at a news conference Monday, after meetings with online publishing and advertising groups, which had complained about a possible loss of revenue.
Google was not represented at the meetings Monday with Ms. Pellerin. In an interesting twist, its case was effectively argued by other Web publishers, including French newspapers, even though these sites are separately seeking a revenue-sharing arrangement with Google, in a related dispute. While she acknowledged that it could be annoying “when five ads pop up on a site,” she added that advertising should not be treated differently from other kinds of content. “This kind of blocking is inconsistent with a free and open Internet, to which I am very attached.”
Free, which is controlled by a French technology entrepreneur, Xavier Niél, did not immediately respond to a request for comment. While rejecting the initiative by Free, Ms. Pellerin said it was legitimate for the company to raise the question of who should pay for expensive network upgrades to handle growing volumes of Internet traffic.
French Internet analysts said advertisements appearing on Google-owned sites or distributed by Google appeared to have been the only ones affected — fueling speculation that the move was a tactic to try to get Google to share some of its advertising revenue with Internet service providers. Google’s YouTube video-sharing site is the biggest bandwidth user among Internet companies.
Google was not represented at the meetings Monday with Ms. Pellerin. In an interesting twist, its case was effectively argued by other Web publishers, including French newspapers, even though these sites, in a related dispute, are seeking their own revenue-sharing arrangement with Google. Separately, French tax collectors are also looking into the company’s fiscal practices, under which it largely avoids paying corporate taxes in France by routing its ad revenue through Ireland, which has lower rates. One proposal that has been discussed would be to use receipts from a tax on Google to support local Web sites.
In yet another dispute involving Free and Google, the French telecommunications regulator is investigating complaints that the Internet provider has been discriminating against YouTube. In that case, a French consumer organization, UFC-Que Choisir, said it suspected that Free was limiting customer access to YouTube because of the high amount of bandwidth that the site consumed.
Ms. Pellerin said these issues would be examined separately. Still, the timing of Free’s move raised questions, given that it came only days before a scheduled meeting among Ms. Pellerin, Internet companies and telecommunications operators to discuss the financing and regulation of new, higher-speed networks.
“Should users be held hostage to these commercial negotiations? That is not obvious to me,” said Jérémie Zimmermann, a spokesman for La Quadrature du Net, a group that campaigns against restrictions on the Internet.
European telecommunications companies have the right to manage the flow of Internet content that travels on their networks, by favoring, for example, tiny e-mail messages over bandwidth-heavy videos. They say such network traffic control is essential, as online video takes up ever more of their capacity, especially at peak hours.
But Internet companies like Google say all traffic should be treated equally, an idea known as net neutrality.
In the United States, the Federal Communications Commission in 2010 imposed regulations requiring telecommunications companies to uphold this principle, at least in general terms. The decision stemmed from fears that without rules guaranteeing net neutrality, broadband providers could favor certain Internet content and reject other material, based on business agreements or even political whims.
These concerns were heightened by the unusual structure of the U.S. broadband business, in which telecommunications companies often have local monopolies or duopolies, giving consumers little choice over their provider.
In Europe, by contrast, broadband competition is rampant. Regulators at the European Commission in Brussels and at the national level have said this is sufficient to prevent abuses or censorship. If one service provider were to cut off access to certain content, regulators have said, consumers could simply switch to another network.
Competition has also driven down the price of access in Europe, but this means that network operators have less profit to invest in upgrades. The French government has estimated the cost of rolling out high-speed fiber-optic networks to 50 percent of the country’s territory at €25 billion, or about $33 billion, over 15 years.
Some European video sharing sites have contributed to the cost of equipment that Internet service providers need to carry huge volumes of video traffic. But Google, which has maintained a studied silence throughout the dispute with Free, has balked at subsidizing Internet service providers or online publishers.
UFC-Que Choisir said it hoped that the latest twist in the dispute between Free and Google had demonstrated the inadequacy of existing net neutrality protections. Instead, the group is campaigning for legislation.
“More than ever, the public authorities must act in 2013 to guarantee consumers a neutral, quality Internet,” wrote Alain Bazot, the president of UFC-Que Choisir.
Free, which is controlled by a French technology entrepreneur, Xavier Niel, has attracted 5.2 million broadband customers, roughly 25 percent of the French market, with a €20-a-month offer that undercut established providers like France Télécom, the former national phone monopoly. It is the second-largest broadband provider in France, after France Télécom.
While Mr. Niél is considered an outsider in French business circles, he drew closer to the establishment two years ago when, with two business partners, he bought a controlling stake in the newspaper Le Monde.
Free declined to comment on the meeting with Ms. Pellerin, who hinted that the company might still get something out of the dispute, despite her order to restore advertising.
“What is the financial incentive for operators to invest billions in their networks without seeing any return?” she said. “We have to put in place a win-win system.”