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Telecoms firms brace for EU 'net neutrality' vote to limit service fees

By Foo Yun Chee

BRUSSELS (Reuters) - European lawmakers will vote on proposals this week that could severely curtail the ability of telecoms operators to mine a potentially lucrative source of revenue - charging content providers more to deliver their services at faster speeds.

The EU recommendations would enshrine net neutrality, which means Internet service providers must treat all traffic equally regardless of the source or content, in European Union law applicable across 28 countries.

They would also set restrictions on the kind of online services for which Internet providers can charge extra.

The European Parliament will vote on the recommendations at noon on Thursday. Lawmakers, facing re-election in May, are under pressure to pass consumer-friendly measures, but the package is a radical one - particularly compared to a compromise agreed by a European Parliament committee earlier this month - that will have a big impact on industry.

If accepted, the proposals would put Europe ahead of the United States - where a U.S. court struck down federal rules on net neutrality in January following a challenge by Verizon Communications - and come as a blow to telecoms firms faced with their fifth consecutive year of revenue decline.

Telecoms operators have seen their profits badly hit by price competition in their traditional business of simply providing phone and Internet access to consumers and are now fighting for a share of the profits from popular and bandwidth-hungry services such as video streaming and music downloads.

Just last week U.S. streaming video services company Netflix called on Internet service providers such as U.S. broadband provider Comcast to give free network connections to content companies, saying this was key to ensuring net neutrality.

But the telecoms companies have spent billions building networks for such services and want to be able to charge for different services and speeds, which would also enable them to invest in continual service upgrades.

Luigi Gambardella, head of the European Telecommunications Network Operators' Association (ETNO), said the EU lawmakers' proposals were "technically intrusive rules" which would threaten the Internet.

"All those businesses and organizations who now rely on services requiring high quality experience, like HD video on demand or telemedicine will be affected," he said.

"What is the most worrying, the European internet will have to be managed in a completely different way than the rest of the world. Which would clearly harm the competitiveness of the European digital economy," he said.

ETNO members include Orange, Telecom Italia, Deutsche Telekom and Telefonica.

The current proposal, put forward by Socialist and Green party MEPs, says: "(Specialized) services shall only be offered if the network capacity is sufficient to provide them in addition to Internet access services and they are not to the detriment of the availability or quality of Internet access services."

Internet activists say regulators and lawmakers should act to prevent the creation of a two-tier Internet and must clarify the kind of online services for which Internet providers can charge extra.

European Commission spokesman for telecoms policy Ryan Heath said: "We are committed to net neutrality, to non-discrimination between packets of data on the Internet. We think our proposal achieves that."

The proposals need the blessing of the EU's 28 governments before they can become law. Currently only the Netherlands and Slovenia have net neutrality legislation in place.

(Reporting by Foo Yun Chee; Editing by Sophie Walker)

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