Reform net neutrality rules to unlock innovation and new mobile network investment, report says

• Out-dated net neutrality rules are stifling innovation and hampering 5G rollout according to a major new report for Virgin Media O2 

• Despite mobile operators investing billions of pounds to deploy new 4G and 5G networks, the UK is at risk of falling behind international peers with consumers and businesses missing out from the full benefits of 5G 

• Rules stymie improvements to the customer experience of apps providing things as diverse as maps or payments services, and could prevent AI from reaching its full potential in the UK 

• Reform to net neutrality rules could unlock hundreds of millions of pounds per year 

Net neutrality rules are stunting innovation, network investment and could prevent agentic AI from reaching its full potential in the UK according to “Net Fatality”, a major new report from Stephen Howard of Communications Chambers for Virgin Media O2. 

The rules, which require telecoms providers to treat all traffic equally, were originally intended to protect consumers. However, the decade-old legislation, set in a different era of connectivity, is now preventing operators from launching new services and stymieing innovation.  

Reforming the rules could unlock a new wave of innovation worth hundreds of millions of pounds to the economy the report finds, as well as helping unleash new investment in networks, including in advanced 5G.  

It warns that alongside limiting innovative new services, consumers could experience worse quality services in future. 

Agentic AI is set to unlock significant productivity gains for businesses and consumer benefits, with telecommunication networks essential to its success. However, today’s rules hinder operators’ ability to effectively prioritise traffic when networks are congested, preventing the UK from getting the most out of game-changing agentic technology.  

The report identifies a series of real-world use cases that reforming net-neutrality rules could unlock including: 

• Apps offering essential services for SMEs: which could include an enhanced payment service to support small businesses operating in busy areas like festivals or food markets. This would ensure they can rapidly and reliably process payments even at times of network congestion  

• Providing reliability and performance in the moments that matter: allowing operators to use customer insights or customer preferences to prioritise time-sensitive apps such as map based navigation, requests for taxis outside of major venues or connecting to an electric car charging station in the depths of a multi-storey car park 

• Allow more effective service prioritisation: for example, enabling a user to readily prioritise an important video call over other apps using their connection 

The mobile market is intensely competitive but needs substantial private sector investment to meet government connectivity targets. Net neutrality reform would support operators in extending 5G deployment to realise the most advanced features of this technology, maximise its potential and thereby help deliver on the government’s ambitions.  

Reforming the rules would unlock a new wave of innovation by encouraging operators and startups to develop services which give customers greater control and address common connectivity pain-points.  

Lutz Schüler, CEO of Virgin Media O2 said “Outdated net neutrality rules limit innovation and hold back the full benefits of the infrastructure we’re building. We’re not able to help customers by prioritising taxi and map apps when travelling home at night and can’t prioritise payment apps for sole traders in crowded markets. No one is winning. 

“New technologies like Agentic AI will improve the online experience and we’re investing £700m this year in our mobile network to boost connectivity across the UK, but with network traffic growing relentlessly we won’t get the most out of it without much-needed reform.  

“To unleash private sector investment, improve consumer and business services, and deliver the UK’s 5G ambition, government should use its mobile market review to remove these antiquated roadblocks to innovation so we can bring about better connectivity and services for all.”  

Stephen Howard of Communications Chambers said: “The UK will get the telecoms industry it regulates for – the question is whether that’s one embracing innovation, technological advances and new opportunities, or one that’s stymied by out-of-date rules.  

“If we want a mobile sector pushing the boundaries with the latest technologies and services like 5G and agentic AI, then we need modern regulation that’s fit for purpose, with rules that preserve the open internet, but which give operators the freedom to get creative and experiment.” 

Virgin Media O2 is one of the UK’s largest private sector investors, deploying more than £2bn a year in its networks and services. This includes investing around £700m annually in its mobile network through its Mobile Transformation Plan to enhance reliability, speed and coverage. 

Over the next three years, the business is forecasting double digit annual growth in network demand, driven by greater data consumption per customer, increasing numbers of 5G‑enabled devices and greater demand for upload capacity. 

NOTES TO EDS 

Read the full report here. 

TRIO OF USE CASES FROM REPORT  

Creating a better experience in a data-heavy AI world 

Current net neutrality rules require all traffic to be treated equally, even to the detriment of network capacity and performance, and contrary to the wishes of the customer being served. This is particularly relevant with the advent of agentic AI, which is likely to generate considerable traffic of its own. 

For example, an electrician on a video call with a customer discussing a fault would not want that call disrupted by their agentic AI running diagnostics on the same fault in the background. Although the customer may want both actions to take place, current network rules do not let them decide which should take priority in the moment. Without this flexibility, the customer experience will suffer – which will discourage adoption of this important new technology and undermine productivity growth. 

Reform of net neutrality rules would offer customers greater choice and control over their own data traffic. 

Unlocking innovation for UK  

The rules leave telcos unable to fully harness the novel capabilities provided by technologies like 5G and network slicing to deliver premium, tailored services to customers. 

Barriers and constraints around specialised service status could prevent developers from even considering innovation in the UK, leading them instead to build and launch new products in countries where regulatory frameworks are more supportive. 

Many of these innovations would assist small businesses. For example, vendors operating in busy market and event environments may increasingly rely on mobile connectivity to carry out critical tasks such as processing payments, where even short delays can lead to long queues and lost sales. 

Current net neutrality rules hamper operators – and even customers themselves – from prioritising these time-sensitive services. Reforming the rules would unlock apps providing essential capabilities like payment services, supporting productivity, customer experience and economic activity.  

Moments that Matter 

Mobile network capacity is a finite resource, limited by available spectrum.  

When lots of people are using it at once, some prioritisation is needed to ensure the most important services work reliably. However, current net neutrality rules require all traffic to be treated equally, making it very difficult for networks – or even customers themselves – to prioritise what matters most.  

Examples of time-sensitive apps which could be impacted include: 

• Making a parking payment or charging an electric vehicle in a concrete car park, where a reliable connection is essential and failure can disrupt entire journeys. 

• Someone leaving a busy venue late at night needing to contact a driver from their chosen ride-hailing app, where most customers would accept delays to social media uploads in exchange for a faster, more reliable connection to their taxi. 

In these moments, prioritisation would clearly improve outcomes, but today’s rules impede it.