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UK - Developing economic benefits from Internet self-regulation - the UK experience


Confederation of British Industry

  • UK Department for Business, Enterprise & Regulatory Reform,
  • Nominet UK,
  • London Internet Exchange (LINX),
  • Confederation of British Industry
Additional Information

The low barriers to entry of many internet markets allow user communities to be comprised of many service providers; at the same time, however, some common infrastructure resources are necessarily operated by single entities. To facilitate service innovation within the context of fast-moving technological change, the UK government decided that many economic policy goals would be best achieved through a system of market competition and self-regulation for governing the day-to-day functioning of internet infrastructure arrangements, rather than legislation.

Self-regulatory bodies are able to tailor their operational standards to the specific market and internet users they serve. Nevertheless, such bodies in the UK are still subject to the underlying framework of national laws (e.g. data protection, fair trading, consumer protection etc), and the government seeks to ensure that their service provision is above and beyond the general standards of national law. In this way, they remove the direct costs of regulation from the taxpayer, allowing policy-makers to focus on creating an environment that supports investment in Internet-based activities.A key factor in this regard is the positions such self-regulatory bodies often hold and the effect this might have on competition.

Organisations have dealt with this through providing inclusive and transparent decision-making with their members and stakeholders – including government. This workshop will examine two areas of self regulation – country-level domain names and traffic peering – some of the best practices that have been developed by the two self-regulatory bodies in these areas, and the economic issues and benefits that have been raised.The first example will be presented by Nominet, the UK’s not-for-profit the .uk registry. As of June 2007, there were over 6 million .uk registrations, with an annual growth of over 18%,[1] provided by over 3,000 providers of domain-name registration services. Growth has been facilitated by the competitive market, which has driven down the cost of registration, and by Nominet’s open nature. At the same time, Nominet has developed transparent and inclusive policy development processes.

It has a Policy Advisory Body (PAB) consisting of eight members from its membership and up to eight appointed members from various stakeholder groups that makes policy recommendations to Nominet’s Board. Nominet also publishes email lists and agenda items for the Body’s meetings to facilitate wider membership consultation and discussion of issues before the PAB and the Board. The session will focus on case studies of successful policies developed through multi-stakeholder consultation. Nominet’s policy to balance the interests of law enforcement and customer privacy in WHOIS lookup data release processes will be examined. The relationship between pricing structures for web-domains and broader growth of internet-based activities will also be covered.

Another example of self regulation will be presented by LINX, founded in 1994 to provide a peering exchange point for companies involved in distributing internet traffic and now the world’s second-largest internet exchange point, handling on average over 150 gigabytes per second of traffic. LINX’s members collectively own the company and each has a single vote at its annual general meeting in matters relating to finance, corporate governance and regulation allowing the members to collectively guide the direction of the organisation. Members also elect the LINX non-executive board of directors. Since its creation, the market for peering exchanges has become more competitive. In response, LINX developed the LINX Accredited Internet Technician training programme, a regulatory and public affairs service and a dispute-resolution service between its members.

This presentation will highlight how LINX helps ISPs to interconnect and peer internet traffic in a way that increases capacity and acts as a major downward pressure on transit costs while avoiding the need for centralised control of the fluctuating demands of this technically complex area.A key issue in both these cases is the degree to which, while market competition and self-regulation allow service innovation based on lower cost, the intensity of competition means that little real value-adding has been able to be gained because margins have been low.

The CBI is currently developing a scorecard of the effectiveness of the UK regulatory environment for IT services as a means for enabling UK businesses to add value in building international competitiveness. This will be used by the Discussant to examine the ways in which the .uk registration and the traffic peering self-regulatory systems could be further developed to enable greater value-adding.