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SIAE, the ultimate monopoly

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The Italian antitrust authority has opened an investigation over SIAE, the old-fashioned incumbent holding a legal monopoly position in the Italian market for copyright management. The authority believes that SIAE may have committed some abuses even beyond its monopoly rights with the scope to “exclude all competition in the (investigated) markets, hindering the activities of new entrants and so reducing the freedom of the authors and editors to choose which collecting society to be member of or request services to”.

Whatever will be the outcome of this competition proceeding, the Italian market of copyright management remains something unique in Europe. Unlike other EU countries, where liberalization has been inflated at various levels, in Italy SIAE still enjoys a legal monopoly granted on the basis of a law of 1941 (that is to say during the fascism and even before the attack of Pearl Harbour). The various attempts to open this market has been vain so-far : in 2016 the competition authority signaled to the government that this monopoly should be drastically revised, while competitors have filed complaints with the European Commission. Everything has been ineffective so far: on one side, the Italian government ignored the advice of the competition authority and recently even reinforced the legal monopoly, despite the fact that an option for liberalization was offered while transposing EC Directive 26/2014 on the harmonization of collecting societies in the online music market; on the other side, the European Commission remained officially silent and di not act so-far, despite the fact that SIAE’s competitors have been advocating an intervention on the basis of EU rules and complaints are pending.

The Italian legal monopoly of copyright management is a blatant violation of freedom of services rules and of the Bolkestein directive, since it prevents operators lawfully authorized and operating in the EU to enter into the Italian copyright management market. In other words, when music in Italy is played, streamed or broadcasted, only SIAE is entitled to collect the copyright fee from the users and pay it to the authors. Because of this monopoly status, SIAE has no real incentive to be efficient, cheap and rapid, because authors have no clear legal right to access to competing services. Despite to that, in the last years some operators have entered the market in the hope that the government would have liberalized this business (and thus almost 8000 authors have left SIAE for competitors). SIAE is reacting suing them in front of courts and, because of the recent confirmation of the legal monopoly regime by the Italian government, it may have the real chance to bring the clock back to 1941. So, the legal situation is grey and only a clear intervention by a deus ex machina, that is to say the European Commission, could clarify the scenario.

The position of the Italian government is confused and difficult to understand: the competent ministry, Dario Franceschini of the Partito Democratico of the former premier Matteo Renzi, has shown mixed feeling regarding monopoly and liberalization. Various voices in the party have been advocating a drastic reform of SIAE, also considering the vocation of Renzi to close down (rottamare) the most embarrassing legacies in Italy. Despite of that and nothwitstanding the conflict with EU basic rules, and disregarding the European benchmark showing that the liberalization is the norm, the Ministry Franceschini backed an antistorical, reactionary view of the copyright management market: only one guy, SIAE, can legally make business there, others must stay out.

The start of an antitrust proceedings today is the first consequence of this position, further news may come from Brussels soon.

Stop with expensive after-sale service calls

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The cost of a call to an after-sales telephone number must not exceed the cost of a standard call. This is what decided the European Court of the European Union in decision rendered today in a case of a German consumers association (Zentrale zur Bekämpfung unlauteren Wettbewerbs Frankfurt am Main) against a retailer (Comtech GmbH) which was to charge expensive tariffs open customers calling the after-sale service telephone number.

The practice of charging unfair and expensive telephone tariffs to people requiring after- sale assistance is quite common and particularly detested by consumers. Traditional and online retailers, airlines, insurance and financial companies, utilities, may be particularly nasty in this respect.  The paradox is that the expensive tariffs did not encourage companies to be efficient and customer-friendly. The intervention of the European court has therefore stopped an unfair practice that national authorities were not able to control, apparently.

Under the relevant rules (Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights) Member States must ensure that where a trader operates a telephone line for the purpose of being contacted in relation to contracts concluded with consumers, consumers are not to be bound to pay more than the basic rate for calls to that line. However, the concept of a ‘basic rate’ is not defined by the directive.

To solve this issue, the European court stated  that the concept of ‘basic rate’ must be interpreted as meaning that call charges relating to a contract concluded with a trader to a telephone helpline operated by the trader may not exceed the cost of a call to a standard geographic landline or mobile telephone line. According to the Court, in everyday language ‘the basic rate’ refers to the standard cost of a call. Both the context in which that concept occurs in the directive and the purpose of that directive, namely to ensure a high level of consumer protection, confirm that the concept must be understood in that ordinary sense of the term.

While the case concern an internal dispute, it will interesting to see whether further cases may arise when after-sales services are rendered to customers resident in another Member State. The matter needs to be followed up.

What the European institutions will not say about the disguised end of roaming surcharges: the end of mobile competition and the rise of mobile tariffs

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BREAKING NEWS: DURING THE NIGHT THE TRILOGUE AGREED UPON EURO 7,7 EURO/GIGA TO FALL UP TO 2,5 EURO/GIGA IN THE NEXT YEARS. I REGRETTABLY CONFIRM THE VIEWS EXPRESSED IN MY BELOW POST

In the night of January 31, 2017 representatives of European Parliament, Council and Commission are set to agree on the maximum levels (so-called “wholesale roaming caps”) mobile operators can charge each other for access to their networks in order to allow customers to use services when traveling abroad without paying roaming surcharges (so called roaming like at home).

While everybody agrees that the end of roaming surcharges will be beneficial for all consumers, it is sad to see that the selected mechanism will affect competition and allow a rapid increase of mobile tariffs everywhere in Europe. This is due to the high level of wholesale roaming caps that will be agreed tonight, which is expected to be between 7 and 8,50 Euro per Gigabyte (and with a weak glide path). Since most of retail tariffs in Europe offer one Gigabyte for 1 or 2 euro, it is evident that most operators will not be able to recover their costs when providing roaming to their customers. In order to prevent losses, they should be increasing domestic retail offers, or even stopping providing roaming services. Others may invoke a sustainability mechanism allowing them to continue to apply roaming surcharges in order to be able to pay the wholesale roaming caps.

Big mobile operators will be less affected by the level of wholesale roaming surcharges, thanks to the ability to compensate reciprocally the roaming traffic in the frame of established bilateral agreements (someone call them cartels). However, thanks to the struggles and pains by small and competitive mobile and MVNO operators, big mobile ones will have less competitive pressure and may start to increase price back, as it is already happening by the way.

Even worst: because of a complex mechanism provide by arts. 4.2. and 4.3. of Regulation 2016/2286 (the implementing rules enacted by the European commission last December to regulate in details this matter), the highest the level of wholesale caps, the fewer the roaming traffic exempted  by surcharges that users my benefit in case they have an unlimited Internet plan or a pre-paid sim card.

The European institutions are aware of this poisoned effect of the “end of roaming”, however they have not been able to agree on lower wholesale caps due to various reasons.

The European Commission, in lack of credibility, needs to officially declare the end of roaming at all costs, no matter for the side effects. President Juncker took a personal political initiative on this matter in order to be able to set an historical precedent and imposed the end of roaming by way of legislation, although the offices of the Commission (especially the one sin DG Connect) were well aware of the side effects of this result and have been working in order to minimise them. Nevertheless, the political pressure prevailed over reality and basic economics.

The Council, i.e. the governments, is splitted but, at the end, is caught by some Member States (France and Germany) who want to protect their mobile market and oligopoly therein while others (the Mediterranean countries) are willing to continue to monetize some cash brought by summer tourists.

The Parliament has been much more fighting and one should recognize that the rapporteur, the Finnish Miapetra Kumpula-Natri, has been trying to propose more competitive wholesale caps (starting at 4 Euro per Gigabyte in 2017 and down to one Euro in 2020) together with the shadow rapporteurs of the other political parties. The EPP issued a crystal clear press release making clear that wholesale caps should be below retail tariffs, not above.

However, even these commendable efforts have been vain due the intransigence of Council and Commission.

The European data retention ruling and the struggle about national surveillance laws

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Various Member States, Italy in primis, will have to revise their legislation about conditions and duration of obligations upon ISPs and telecoms to keep record of Internet traffic and telephony conversations. The telecom industry will seek opportunities to diminish such obligations, which normally require huge capex investments in data retention equipments and exhausting communications with public prosecutors. Finally, civil rights organizations will attack in courts existing data retention legislations on the assumption that they are in contrast with the European jurisprudence. All this will happen in a scenario where national governments tend, in contrast with the above, to reinforce internal surveillance for antiterrorism- reasons, rather than relaxing the public security regime.

The above are the main effects of today’s CJEU ruling on a joint-case concerning the legitimacy of data retention laws in EU Member States.

This court decision follows the previous 2014 ruling about the annulment of the European Data Retention Directive. In that case, the CJEU just pointed out the relation between fundamental rights, data protection and retention of personal data by ISP and telecom operators, with the final result that the directive was annulled. The same principles are now applied directly in the context of national legislations on data retention, without major changes.

To tell the true, following the 2014 ruling most of European countries started a review of respective legislations in the matter of data retention, however with the prevailing result to keep alive the existing legislations (save for some minor adaptations). In some countries, however, the local constitutional courts rendered rulings annulling their data retention legislation. Few countries remained completely inactive, amongst them Italy. Today’s ruling will make even more difficult this wait and see strategy.

The main conclusions of todays’ ruling are:

· Member States may not impose a general obligation to retain data on providers of electronic communication services

· Data retention is admissible under EU law only in instances where it is targeted, limited to what is strictly necessary, and subject to conditions (e.g. prior review by an independent authority, localization of data, etc).

The reasoning of the CJEU is streamlined hereinbelow:

· EU law precludes national legislation prescribing general and indiscriminate retention of data.
· Data retention constitute a serious interference with citizens fundamental rights and as such can only be utilised in the fight against serious crime.
· Legislation prescribing a general and indiscriminate retention of data does not require there to be any relationship between the data which must be retained and a threat to public security.
· Such national legislation therefore exceeds the limits of what is strictly necessary and cannot be considered to be justified within a democratic society, as required by the directive, read in the light of the Charter.
· The EU acquis does not however preclude national data retention laws, provided that the retention of data is: (i) Limited to what is strictly necessary (in terms of categories of data retained, persons targeted, retention period, etc); (ii) Defined in clear and precise national legislation; (iii) Constrained by meaningful procedural safeguards; (iv) Based on objective evidence.
· Concerning access to data, Member States must introduce objective criteria in order to define the circumstances and conditions under which the competent national authorities are to be granted access to the data.
· It is essential that access to retained data should, except in cases of urgency, be subject to prior review carried out by a court or an independent authority.
· National data retention legislation must make provision for that data to be retained within the EU owing to its sensitivity.

 

What the end of Renzi government means for the Italian digital and ultra-broadband sector

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The resignation of Matteo Renzi following the defeat at the Constitutional Referendum of December 4th, 2016, creates the question as how Italy will ever fill the gap with other developed nations in the matter of digital services and ultra-broadband networks.

Whether you like him or not, there is no doubt that Matteo Renzi has been the first Italian premier showing a concrete interest vis-à-vis Internet and digital infrastructures, putting them at the core of the governmental policy. Before him, Italian governments have been merely dealing with television and broadcasting regulation, while the development of the digital sector was never a priority. The only serious concern of previous governments in the area of telecoms was the ownership of Telecom Italia, whether the company will become a subsidiary of whom. But no Italian premier ever took action or made pressure to force Telecom Italia to invest in high-speed networks. As a result, the traditional Italian telephony company has been relying, longer than other European incumbents, on the old-fashioned and depreciated copper telephony network rather than installing new fibers networks in massive way. No need for that.

With Matteo Renzi, the situation changed dramatically. It might be for a matter of age or personal experiences, the former mayor of Florence never liked very much Telecom Italia and its bills. Renzi launched an ambitious ultra-broadband plan to fill the gap in the vaste provincial and rural areas of Italy (the European Commission cleared the plan last June). Telecom Italia was offered to benefit of that plan and also to buy Metroweb, a company (controlled by Cassa Depositi e Prestiti) installing and offering ultra-broadband networks in big Italian cities. However, government and Telecom Italia did not find a common agreement on important conditions: while Renzi was aiming at strongly modernizing and re-shaping the Italian telecom market, Telecom Italia preferred to keep alive the copper network as much as possible and did not want to hear about structural separation of its network (a possible outcome when combining its network assets with Metroweb). Telecom Italia was probably thinking to be winning at the very end, thanks to the traditional instability and weakness of Italian governments, but it was wrong.

The stallo situation was “sparigliata” (broken) by the entry into the market of Enel, the Italian energy utility which launched a plan for ultra-broadband investments and offered to buy Metroweb. In the meanwhile, the Italian government granted a State-owned company, Infratel, the task to install ultra-broadband networks in rural areas. The emergence of new network operators changed dramatically the landscape: Telecom Italia ended up with “melina” and started to seriously invest in fibers.

Beside that, Renzi’s governments has been strongly intervening in the digital sector with various legislations in the matter of net neutrality, online platforms, sharing economy; they finally appointed as Digitalist Chief Diego Piacentini, a seconded senior executive of Amazon, to coordinate and make progress the digital agenda in Italy. The choice of Matteo Renzi’s about Diego Piacentini was challenged by someone because of potential conflicts of interests: nevertheless, no one could object the professional level of the Chief Digitalis and the need to coordinate the various Italian agencies competent for digital.

One would wonder whether the above was just a transitory acceleration and now Italy will fall back into traditional inertia. The main winner of the Constitutional Referendum, the 5-Stars Movement, has been traditionally relying on the Internet rather then other medias. However, despite some individual positions, it is not clear whether this political party has a concrete and coherent industrial policy for ultra-broadband and the digital sector in general. Irrespective whether they will become a force of government, the 5-Stars Movement and its leader, the comedian Beppe Grillo, should start to think about and say something to the people.

The confused international roaming saga in the EU (and the Finnish solution, hopefully)

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UPDATE: on November 29, 2016 the ITRE committee of the European Parliament endorsed the proposal of MEP Kampala-Natri, with even lower prices for data.

Roaming surcharges will be definitively and completely abolished by mid-2017, according to a new proposal to be announced today by the European Commission, subject to an agreement to be found with Member States. The latter fear that full-end of roaming surcharges will allow any mobile operator to commercialize SIM cards everywhere in Europe (so-called “permanent roaming”) and they are reluctant to that, unless specific measures are established to avoid such cross-border competition. Remarkably, the Commission itself was also trying to avoid permanent roaming until yesterday, but then a corto-circuito happened amongst the wise minds of the Berlaymont (see below).

The end of roaming surcharges may sound good for European citizens, but the proposal at stake may be so disruptive for the European mobile market that many mobile operators (especially small mobile operators and MVNOs) may not be able to continue to provide roaming services abroad because they may incur unrecoverable losses (as explained below). As a consequence of that, most of these operators may be forced to stop providing roaming abroad, or they may decide to increase domestic retail tariffs. As said, most affected operators may be small mobile operators or MVNOs, that is to say the players that traditionally have been providing consumers with most competitive and innovative offers. It is a strange contrappasso that such operators may have to leave the market because of a regulation about the end international roaming, even if they never made profits with such surcharges (unlike big and dominant mobile operators).

The reason for this paradox is that mobile operators have to buy access from foreign networks when providing roaming services to their subscribers traveling abroad (so-called wholesale roaming access). However, such wholesale roaming tariffs are normally much higher than real costs and are in particular higher (by multiples) than domestic wholesale tariffs (the ones paid to provide domestic services in case of MVNO not having a mobile network). This lack of alignment between domestic and roaming wholesale costs becomes disruptive once roaming surcharges disappear by virtue of law and mobile operators have to guarantee the same retail tariff to their customers, irrespective if they are in the home country or abroad.

The only possibility to avoid this disaster would be to align domestic and roaming wholesale costs. The latter are currently capped by Regulation 531/2012, however the current caps are enormously higher than market reality. This is particularly relevant for data/internet data cap, since the current regulated wholesale roaming cap is Euro 50 for a Gigabyte. Last June the European Commission proposed to reduce such price to Euro 8,5 per Gigabyte– a price which however is still much higher than what consumers normally pay for domestic mobile services.

The Commission’s proposal is currently debated between the Parliament and Council. The Assembly’s rapporteur Miapetra Kumpula-Natri (a Finnish socialist MEP) yesterday September 20, 2016 tabled a proposal (still not available online) which honestly goes in the direction of fixing the problem, since she proposes 5 Euro per Gigabyte with a glide path bringing the roaming wholesale cap to 1 euro per Gigabyte in 2021, with a review starting in 2019. If this proposal will be agreed by others MEPs and by the Council, the end of roaming in Europe will not affect competition and consumers will get a double benefit: end of roaming surcharges and still a vibrant competitive mobile market. Kudos to Miapetra if she succeeds.

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To explain the full story, one should recall that at beginning of September the European Commission proposed to oblige mobile operators to provide customers with “just” a minimum free-roaming traffic (so called “fair usage”) amounting to 90 days a year. This limitation was due to the high level of wholesale roaming cap (the mentioned 50 Euro, to be reduced to 8,5, per Gigabyte). Nevertheless, this proposal basically covered the needs of 99% of the European citizens, given that, according to official statistics, Europeans travel abroad 12 days a year on average. Thus, the excluded people (that 1% of European people traveling abroad more than 3 months a year) were basically businessmen, rock stars, fashion models and circus staff. Nevertheless, some politicians and consumers organizations complained for the 90 days fair use rules, probably more for a matter of principle than for real understanding of the matter.

The competent EU Commissioners, Ansip and Oettinger, have been defending the ratio of the fair use rule despite populist critics. However, on September 9 the Commission suddenly withdrew the proposal and only later we learned that the action was required by President Juncker. Speculations suggested that he was fearing to get some embarrassment during the imminent State of the Union speech in Strasbourg,  or maybe he thought that by doing so he could get a personal political recognition for the end of roaming, despite of the work done by his colleagues Ansip and Oettinger so far. Whatever the political explanation may be, Juncker promised a system enabling EU citizens/consumers to “travel around in Europe […] and feel at home everywhere in Europe thanks to the new roaming rules”. Basically, Juncker was promising permanent roaming, despite the fact the the European Commission have been working hard for months in order to avoid such result.

Remarkably, Juncker also affirmed that Erasums students, who may be abroad for a semester, would not get advantage of the 90-days fair use. Probably he did not know that Erasmus students do not suffer for roaming surcharges, because they are used to get a Sim Card in the country where they go to study for various reasons: being called/call new friends at local tariffs; having a customer relationship with a local mobile operator (to manage subscriptions, charging credit, getting a new Sim Card in case of lost or disfunction; accessing the customer care); benefiting of number portability; and so on. Regrettably, nobody informed Mr. Juncker about that.

The European court of justice risks to restrain Mr. Juncker’s enthusiasm on public WiFi

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The EU Court of Justice has issued its final ruling in the well-expected McFadden case regading the liability of a provider of public WiFi. Accoding to the European judges, the operator of a shop who offers a Wi-Fi network free of charge to the public is not liable for copyright infringements committed by users of that network.

The judgment makes commons sense, otherwise it would be impossibile to provide public wifi throughout Europe, no-one would feel able to take the risk. Nevertheless, the court says that a password (in order to identify the user) may be required by way of injunction in order to secure the network and balance the interest of copyright holders. The concrete impact of the latter requirement shall be still evaluated: the court is not saying that any Wi-Fi network must be secured, however this protection may be required on a case-by-case basis by way of judicial injunction or administrative order. Thus, it will be interesting to see how this CJEU ruling will be interpreted, in light of the recent declaration of President Juncker whereby the “main centers of public lifes” of towns and villages should be covered with public WiFi by 2020 (although most of the industry believes it to be more a “boutade” rather than something serious). Fact is, the more protection and identification instruments are imposed (also considering the features of the technology used), the less public WiFi can realistically develop. Therefore, should the protection requirement become common practice or even a legislative requirement, the expansion of free public WiFi will be at risk, contrary to Juncker’s declarations.

To remind that facts of the case:

  • Mc Fadden was running in Germany a lighting and sound system shop in which he offers access to a Wi-Fi network to the general public free of charge in order to draw the attention of potential customers to his goods and services;
  • After his network was used by third-parties to commit copyright infringements, an important copyright holder (Sony Music) sued McFadden in front of a German court claiming his indirect liability for the infringement for having failed to secure his network.

According to the CJEU:

  • making a Wi-Fi network available to the general public free of charge in order to draw the attention of potential customers to the goods and services of a shop constitutes an ‘information society service’ under the E-Commerce directive (2000/31/EC);
  • where the three conditions for Article 12 of the E-Commerce directive (mere conduit exception) are satisfied, a service provider such as Mc Fadden, who providers access to a communication network, may not be held liable;
  • consequently, the copyright holder is not entitled to claim compensation on the ground that the network was used by third parties to infringe its rights.
  • However, the E-Commerce directive does not preclude the copyright holder from seeking before a national authority or court to have such a service provider ordered to end, or prevent, any infringement of copyright committed by its customers.
  • In that context, an injunction ordering the internet connection to be secured by means of a password is a fair balance of rights at play.
  • Finally, as per Article 15 of the E-Commerce directive McFadden cannot be obliged to monitor all communications on his networks in search of copyright infringement, nor can termination of connections be considered a proportionate injunctive relief.