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Longer ISP Lock-In Will Increase Investment, Says New EU Commissioner For Digital Economy (Op-Ed)

Günther Oettinger - Wikipedia

Günther Oettinger, the new EU Commissioner for Digital Economy, said in a recent interview just days after he took his new job, that ISPs need longer customer lock-ins to increase investments. Unlike his predecessor, Neelie Kroes, who fought to give EU a strong net neutrality law, much lower roaming fees, and many other consumer protections, it seems Mr. Oettinger is more preoccupied with ISPs making more money.

Despite his claim that longer lock-in would lead to more investments, which could be what the ISPs told him, in the history of business the opposite has usually been true. When a company has complete lock-in (monopoly), that company has no incentive to expand unless people are tired of it after many years of abuses and demand its government to force the monopoly to change.

On the other hand, when there is almost no lock-in, and there's much competition in the market, companies are forced to constantly invest. No company truly wants to invest in upgrades for its systems because it's the right thing to do; they usually do it because the competition forces them to try to keep up. This constant battle of "one-upping" each other leads to better services and lower prices for customers. Lock-in leads to poorer and poorer services over time, along with increased prices. People living in the U.S. probably know this best.

Oettinger said similar lock-in happens in the energy industry. (Oettinger was the EU Commissioner of Energy until two weeks ago, when a new EU Parliament and Commission mandate began.) It's interesting that he compared this proposal to how things work in the energy sector, because that sector is actually one where upgrades happen very slowly, and prices tend to rise over time, not fall, as it happens in most other industries where competition is strong and lock-in is weak.

If this is the kind of proposal Oettinger is going to make during his mandate, EU citizens should keep a very close eye on him. Otherwise, they risk losing much of the consumer-friendly changes to the Internet that Neelie Kroes managed to achieve during her mandate.

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  • dovah-chan
    It doesn't quite seem like he is threatening net neutrality. I think he just wants to extend the contractual obligation that customers sign when they join with an ISP. So if they discontinue the service before the contract terminates, they have to pay a fee. This is an incentive for customers to stay with their provider longer.

    To me, stuff like this is more like insurance for investors in european ISPs. It doesn't particularly infringe on any consumer rights in my opinion. Choosing an ISP is a very important decision so I would assume many educated consumers know which ones are good already so this would have not very much affect on net neutrality laws already put in place.

    Besides all the small local ISPs need money from investors to provide better services and infrastructure maintenance so instead of bringing rates up, they'll just increase the amount of time customers have to stay signed on in order to attract more investors. I think it's a fair compromise.
    Reply
  • Christopher1
    It doesn't quite seem like he is threatening net neutrality. I think he just wants to extend the contractual obligation that customers sign when they join with an ISP. So if they discontinue the service before the contract terminates, they have to pay a fee. This is an incentive for customers to stay with their provider longer.
    But locking them in makes true competition on prices and services less likely to happen, which will STIFLE innovation and DISCOURAGE investment because these companies now have a captive audience.
    No, just no. Limit the contracts periods to 2 months, max and force these ISP's to properly COMPETE like they should in the real world.
    Reply
  • qlum
    Can we have Nelie back, Günther Oettinger has been a train wreck from day 1.
    Reply
  • mavikt
    I'm looking forward to follow-up articles on this guy if he has any other crazy ideas. Unfortunately it's like "What happens in Brussels, stays in Brussels" (until they make crazy laws). It's very very very rare for individual EU Commissioner to make the headlines or even any appearance in any national news channel.
    Reply
  • soldier45
    Obamacare for the internet, no thanks.
    Reply
  • beppomarx
    I read this article and thought to myself "I have never in my life ever heard anything this stupid'

    Then I read Dovah-Chan's comment and it stole Mr. Oettinger's 5 seconds of fame. You now hold the trophy in my book.

    Large ISP's make money hand over foot. Any consumer in favor of locking themselves into one FOR THE SHEER REASON OF HOPING YOUR PROVIDER CAN BORROW MORE CAPITAL only means that you will be guaranteed to be paying the dividends on that money for the next 1 or 2 or 5 whatever years.

    While we're at it lets increase the standard cell phone contract to 5 years and hey- maybe if we put a contract on your health insurance, it would guarantee revenue and they in turn could provide better care because they know you'll pay regardless. Or pay your cancellation fee so they really won't have any risk at all. What an excellent plan, get you hooked in with a great sales pitch and not have any real need to expand because hey, you're already here all the work has been done. Wow it sounds better and better by the minute really. Just wow.
    Reply
  • Darkbreeze
    Clearly, somebody is in his pocket. I think it would be interesting to see what trends actually occurred to rates and services during his previous mandate using similar tactics. I'd be willing to bet there was a decrease in services and satisfaction along with a lot more money being made by the utilities involved.
    Reply
  • Anaxamenes
    In the US, we sign contracts to sign up for Comcast. It does nothing to encourage Comcast to invest in their infrastructure. There are reasons the US, inventor of the internet, lags behind many countries on the speed and reliability of our internet services and locking customers into contracts along with no competition are two of the big ones.

    My personal recommendation is to start Public Utilities that provide internet access. It works great for electricity as where I live, we have some of the cheapest in the US and probably the world. Support local jobs with a local public internet utility.
    Reply
  • Darkbreeze
    14565459 said:
    In the US, we sign contracts to sign up for Comcast. It does nothing to encourage Comcast to invest in their infrastructure. There are reasons the US, inventor of the internet, lags behind many countries on the speed and reliability of our internet services and locking customers into contracts along with no competition are two of the big ones.

    My personal recommendation is to start Public Utilities that provide internet access. It works great for electricity as where I live, we have some of the cheapest in the US and probably the world. Support local jobs with a local public internet utility.

    That wouldn't work as the big cable and phone companies own all the installed fiber. Any "utility" would have to purchase, lease or TAKE those lines and trunks, none of which are likely to happen in our lifetime. Some sort of improved satellite distribution might be viable if the "utility" could get the speeds comparable.
    Reply