AT&T and Verizon lose bid to maintain secrecy of French interconnection deals

AT&T(s t) and Verizon(s vz) have failed in their attempt to block the French telecoms regulator from examining their secret interconnection agreements – deals that may be key to the erosion of net neutrality.

The regulator, ARCEP, is concerned that quiet battles between bandwidth providers and ISPs may in effect be degrading the quality of popular web services for French consumers — one specific case involves subscribers of the ISP Free getting lousy YouTube(s goog) performance. The worry is similar to that in the U.S., where a spat between ISP Verizon and bandwidth provider Cogent Communications is thought to have been messing up Netflix(s nflx) performance for Verizon’s customers.

This all comes down to net neutrality. Data carriage providers have traditionally carried each other’s traffic for free under so-called peering agreements, which have been essential to making sure all internet services get an equal chance for delivery at decent quality. Now, with high-bandwidth services such as video on the rise, consumer ISPs are seeing a chance to extract cash out of the internet backbone or bandwidth providers by charging them for delivering heavy traffic to the end user.

Shining a light

ARCEP said in late March that it didn’t want to introduce ex ante or pre-emptive interconnection regulation because it doesn’t know exactly what’s going on behind closed doors, and wants a clearer picture. It wanted to gather information about the technical and pricing terms of these commercial interconnection deals, so that it could do its job and settle net neutrality disputes between ISPs and the likes of Google as and when they arise.

Verizon and AT&T and their French subsidiaries struck back in June, claiming that ARCEP had no right to demand data when there was no “demonstrated link to competitive or consumer harm.” In other words, the companies were trying to argue that, because the regulator has no evidence of potential market failure, it shouldn’t be allowed to gather evidence of potential market failure.

It seems France’s highest administrative court, the eagle-eyed Conseil d’Etat, spotted the logical problem with this blocking attempt — on Wednesday it confirmed that ARCEP had the right to do its job.

As ARCEP put it:

“The Conseil d’Etat confirmed that ARCEP has the power to gather information in this way from ISPs and [web service providers]. The Court thereby also upheld ARCEP’s power to query all market undertakings, including those located outside the European Union whose business and/or activity could have a significant impact on internet users in France.”

Now, popcorn in hand, let’s see what ARCEP digs up. I think it’s fair to say the results will be of interest to regulators around the world – as well as to us, the humble internet users who are the mercy of these backroom interconnection deals.