From ex-post to ex-ante: does European Internet regulation go telecom-style?

 

make internet great again

3 new consultations opened

Today the European Commission published its well-awaited public consultation on the Digital Services Package. The deadline to respond is 8 September 2020. The consultation revolves around the following topics:

– How to effectively keep users safer online?
– Reviewing the liability regime of digital services acting as intermediaries?
– What issues derive from the gatekeeper power of digital platforms?
– Other emerging issues and opportunities, including online advertising and smart contracts
– How to address challenges around the situation of self-employed individuals offering services through online platforms?
– What governance to reinforce or to complete the Single Market for digital services?

Internal Market Commissioner Thierry Breton explains that the Commission: “want[s] to propose clear rules before the end of the year to define the responsibilities of platforms in protecting our citizens and values, without making them liable for all content. Certain fundamental rules must apply to everyone, from the smallest online shop to the major platforms. We are also thinking about specific rules for gatekeeper platforms.

Platform regulation: from ex-post to ex-ante?

Remarkably, the European Commission also asks for feedback on its policy options on (i) ex ante regulatory instrument of very large online platforms acting as gatekeepers and (ii) deepening the Internal Market and clarifying responsibilities for digital services. Both “roadmap consultations” are open until 30 June.

The policy options (i) and (ii) are particularly relevant because, for the first time from years 2000, the European Commission is now seriously considering to envisage ex-ante regulation over dominant online platforms. In the EU economic power in the Internet has never been regulated so far, on the assumption that the digital economy started from scratch and therefore new operators should be simply encouraged and facilitated, without the need to tackle (pre-existing) dominant position or essential facilities which could prevent competition from flourishing. Therefore, ex ante competition rules have never be considered fit for the Internet, unlike telecoms, where, by contrast,  ex ante regulation has been regularly applied to challenge the economic power exercised by European incumbents (such as Deutsche Telekom Orange, Telefonica ecc.) which were still holding their legacy telephony networks.

The discrepancy  between Internet and telecom economic power regulation has been challenged at a given time, when Internet operators have started to compete with telecoms on the same markets of the latter such as calls and messages, and some OTT have even become, at global level, truly giants.

Thus, if the envisaged reform goes through,  European Internet regulation may become now more similar to the telecom framework, confirming a trend which was advocated by European telecom operators, which frequently complained about the lack a playing level field with Internet giants.

The similarity with telecom is correct as a matter of principle, however regulating dominant online platforms with ex ante rules will be a much more complicated task.

Firstly, unlike telecoms, Internet giants are truly global operators and therefore they are used and expert in escaping national jurisdictions. Therefore, creating new remedies over online platforms would require an ad hoc enforcement system, possibly centralized with the European Commission or a new European agency. The disappointing experience gathered with the GDPR decentralized enforcement system may be worth.

Secondly, while dominance in the telecom sector has been normally founded on the legacy telephony network, in the online market dominance is much more sophisticated: it is about network effects, lock-in behaviours, data possession and, to some aspect, pure market and financial size. Economic analysis will be much more difficult than for telecom practice then.

Platform liability regime also to be investigated

The investigation of the Commission will also concern platform liability: while the 2000 regime (dictated by Directive 2000/31) recognized immunity to platforms vis-à-vis the actions of third parties, the new framework could create a distinction between:

– pure hosting providers, for which the original immunity regime will be maintained; and
– large platform offering content hosting + content presentation applications + generalized profile tracking + horizontal integration between different services, which brings them well beyond pure hosting. A new special responsibility for such operators may stem mainly from such complex business model.

 

 

The European audiovisual sector and geo-blocking: is it time for a European reform on the style of roaming?

geo blocco rai papa

The fragmentation of the European audiovisual market

In a few weeks the European Commission will return to a controversial issue, that is, the persistent geographical segmentation of the European audiovisual market. In Europe access to audiovisual content has always been segmented, country by country, by the main sector’s operators (producers and studios, distributors, free-to-air and pay-TV broadcasters, etc.) as a result of commercial agreements based a strictly territorial logic. In fact, licenses for the exploitation of audiovisual content are not granted on a continental level, but on a strictly territorial basis, normally corresponding to a country (or more linguistically homogeneous countries, such as the United Kingdom and Ireland for instance).

The geo-blocking and the Internet

This practice is clearly in friction with the spirit of the European single market. Consequently and unfortunately, European users can access, in principle, only to schedules and television programs designed for the country where they reside. Users trying to overcome these limitations through the Internet, so as to be able to access content available in other European countries, are frequently blocked by technological measures, the so-called geo-blocking, prepared ad hoc by sector operators. Geo-blocking allows to identify the country from which an access attempt originates and to block it if it comes from a country other than the one for which the content is intended: by doing so, a geographical segmentation is artificially created in the Internet, despite the ubiquity of the network. This is common experience for many users, who may find, instead of the desired film on the Internet, a black screen with the words “this content is not available in your country for copyright reasons“. It has even happened recently with the new “Parlement” series dedicated to the European Parliament, geo-blocked and available only in France.

The geo-blocking regulation and the exception for the audiovisual sector

The geographical segmentation of the European audiovisual market constitutes a derogation from the European economic freedoms on which the EU integration is based. This derogation regime was also confirmed by the recent 2018/302 regulation on geo-blocking, which since March 2018 has instead prohibited unjustified geographic blockages and other forms of discrimination based on nationality, residence or establishment. The exception granted only to the content industry reveals how power relations work in Brussels. However, the same EU regulation provides that within 2 years from the entry into force, the European Commission must examine the effects in the market and, eventually, examine whether to expand its ambit of application to copyrighted content such as films, TV series, live sports, electronic books, software and online games. The pronouncement, expected in March 2020 but then postponed due to the Covid19 emergency, could arrive before this summer.

Geo-blocking and consumers

The theme of geo-blocking of audiovisual content has always created discontent and protests by European citizens and consumers, used to seeing the internal borders of the common market fall as a result of liberalization and technology. The problem was only mitigated for the so-called “content portability”, allowing the user who has taken out a subscription to an audiovisual service in one European country to be able to use it even when he is in another European country, provided that such use is temporary, when the user is abroad for work, study or vacation reasons (Regulation 2017/1128). But this is a niche market, while for the “bulk” of the matter, that is, the free choice of audiovisual content at the user’s home, there has never been any progress. The frustrating aspect of the story is that geo-blocking is opposed to users willing to pay for legal offers (and who are therefore incentivized, as a reaction to the block, to turn to illegal offers). Moreover, geo-blocking can also be applied when access to content is free: in 2015, for example, I was unable to attend from Brussels the online live broadcast on the opening of the Holy Door in the Vatican, precisely because the RAI Internet portal , which transmitted it to the country, did not make it accessible abroad.

Users don’t just hate geo-blocking: the most savvy people overcome the problem through the use of VPN (virtual private network) with which they camouflage their real location. This is an apparently easy trick to implement, but which presents drawbacks, in particular the cost (over 100 Euros per year), possible countermeasures by broadcasters and a general slowdown in Internet traffic. Other users transport the national decoder abroad and join the so-called gray market, by which they regularly pay for the television service while being formally in violation of the contractual (localization) clauses of the broadcaster. To give an example, in Brussels for years there has been a thriving gray market of Sky Italia, with acclaimed and famous installers of the Italian parable, although the TV services of Sky Italia were contractually limited to Italian residents.

Unfortunately, as already mentioned, many users react to geo-blocking by turning to illegal offers and thus reinforce the phenomenon of online piracy. This is regrettable behavior but somehow encouraged and caused by the questionable functioning of the audiovisual market, which does not provide users with what they would like to pay legally.

Should a reform of the European audiovisual market be possible?

The European Commission will therefore have to decide whether to perpetuate this system, or to make some openings and launch a debate for a possible revision. It will not be easy, because the content industry has always strenuously defended geo-blocking and the territoriality of the audiovisual market as a real matter of survival, claiming that the economic exploitation of copyright (which is the basis of licenses) can only be based on strict territorial exclusivities. According to the content industry, without such territorial exclusivities, and the relative geo-blocking to make it effective on the Internet, the audiovisual market would not work or, at least, the European sector would risk being crushed by the overwhelming power of the Hollywood studios.

In support of the thesis of the rigid territoriality of the audiovisual market, some (non-independent) studies have been produced which, in fact, faithfully reflect this market reality and report the absolute unwillingness of operators to change the system. However, these are partisan studies that merely reflect existing business models, but that say nothing about the possibility of creating different scenarios, in the interest of consumers and European culture.

The European precedents of market integration and liberalization

The history of the European common market offers numerous examples of liberalizations that seemed unworkable because certain strictly national business models were thought to be structural and unchangeable. There is plenty of cases in the markets of goods (cars, luxury, food ecc) and services. Amongst other cases, telecommunications is a relevant benchmark. For years the prices of the fundamental communication services (calls and messages) have been very high due to a structural and geographical limitation of the offer, but subsequently, thanks to the liberalizations, competition has allowed the arrival of new operators and technologies, which have contributed to lowering tariffs and breaking down barriers (including geographical ones). Of course, for some operators, in particular the historical telecom, the margins have decreased compared to the times of the monopoly or oligopoly (but here we enter another vexata quaestio, whether it is the task of the legislator to guarantee unchanging margins to certain operators).

Mutatis mutandis, the reformability of a rigid and consolidated system such as that of the audiovisual market, up to now strictly territorial, cannot therefore be excluded. It should come as no surprise that the main players in the sector are against it, because change is never welcome when the status quo allows, at least for some, to control the entire production chain and profits. But, remembering what happened with the music market – reluctant to change and then overwhelmed by peer-to-peer in 2000 – it would be better to intervene in time before technology blows up the entire system, and instead try to accompany the sector towards a path of modernization. The European Commission should therefore begin to consider whether a European market can be created where users can have access to any audiovisual content without geographical restrictions. This would be a meritorious initiative, given that the possibility of accessing content intended for an audience culturally and linguistically different from one’s own is a great form of enrichment for the European consumer, and it promotes precisely the linguistic and cultural pluralism that Europe is called to protect and encourage.

The inconsistencies behind the territorial exclusivities

A revision of the rules governing the European audiovisual sector is possible because the same economic and cultural arguments that are put forward to justify the territorial exclusivites and geographical segmentation are in fact flawed by numerous inconsistencies.

  1. Territorial exclusivities should by assessed sector by sector, not a dogma  

First of all, the ratio of territorial exclusivity cannot be considered as a general principle, but should be examined in detail, by type of service or type of content. The audiovisual case is in fact different from online games, streaming is different from VOD and sporting events follow exploitation and remuneration dynamics other than films. To give a concrete example, territorial exclusivities could play a positive role at the time of the production of a film and for its distribution à la carte, but they are much less understandable when the same film must be included in a subscription bundle. In other words, a case by case analysis is needed, not a dogmatic judgment. But there is more: if is true, according to public data, that the current demand for cross-border content in Europe would be in the order of 5-10%, the risk that this new public could deeply undermine economic models, on which the audiovisual industry is based, appears remote, making absolute territorial exclusivity a disproportionate remedy.

       2. Territorial exclusivity does not help European industry

Secondly, there is no evidence that the current European audiovisual structure, based on territorial exclusives, serves to protect the European cultural industry compared to the American one, and that therefore any change would be destabilizing for the European culture. This argument only reveals that there is a problem of weakness in the European audiovisual sector, but it does not explain the causes, which could instead lie in the system itself, given that after so many years of territorial exclusivity the European audiovisual industry has never managed to growth globally. This inferiority situation has now moved to the Internet, where the new big global content producers are always American, but they are called Netflix and Amazon. This is further confirmation of the fact that the current European audiovisual organization, based on geographical fragmentation, is certainly not helping the European industry to grow and compare itself with global players. From this we can only deduce, therefore, that the European audiovisual system should certainly be reformed, albeit with all precautions, but certainly not defended.

       3. Territorial exclusivity does help, instead, non- European players

Third, the current system of territorial exclusives seems to benefit the large global audiovisual networks, which are American, rather than European producers. Hollywood studios certainly could not afford to geo-block their films in the 50 states of the USA, but they could instead do so in the 27 EU member states, thus being able to maximize profits more in Europe than in their home. On the other hand, it seems surreal that the system of territoriality, invoked to defend the European cultural exception, is profitably used in Europe by American networks. Why must these extra-European operators be granted the privilege of territorial exclusives, when the relative productions (with investments, related activities and taxation) take place somewhere in California? Mystery. Wouldn’t it make sense to limit geoblocking only to those film productions that were genuinely produced in Europe and therefore need some “protection”?

      4. Geo-blocking should not be applied upon EU-financed content

Fourth. The issue of European aid raises concerns. Many European productions are financed and facilitated through financial support programs (Media, for example), yet these productions are subject to geo-blocking. Would European citizens not have the right to have unlimited access to products that are financed with European taxpayers’ money? And wouldn’t it make sense to eliminate geo-blocking for those European productions that already receive protection, as they are included in the mandatory European programming quotas?

The roaming reform as a benchmark for the audiovisual sector

The foregoing highlights that the topic of European cultural defense is only apparently persuasive, but in truth it reveals, upon careful analysis, strong contradictions. Therefore, the European Commission would do well to open a debate to evaluate hypotheses and solutions to modernize the sector and rethink the audiovisual policy, in order to guarantee a wider and unconditional access to content on a European basis. However, it is a matter of understanding how to establish such a process of change, given the vigorous resistance of the sector.

Some precedents already experienced in the European home can help us. A relevant case is that of international roaming, a sector that has, and above all had, prior to the 2017 reform, strong affinities with copyright: in fact, even in the mobile market most operators have an interest in artificially segmenting the European market with bilateral and reciprocal agreements (the equivalent of territorial exclusivities in the audiovisual sector) in order to maximize profits by raising wholesale and retail rates (similarly to what happens in the audiovisual sector with territorial exclusivities). When Commissioner Reding’s first proposal for a reform of roaming was announced in 2006, mobile operators rejected it claiming that the territorial structure of the mobile network market could not support such a change. The European Commission did not give up and implemented the reform, on the one hand by eliminating the advantage of geographical segmentation (through the imposition of ceilings on wholesale and retail prices), on the other by ensuring that regulatory intervention was gradual and not immediate, thus giving the industry time to adapt. About 15 years later, we know that the elimination of roaming charges has therefore been possible and that it is, moreover, one of the reforms (launched from Brussels) that is most appreciated and recognized by European citizens.

But it is still a process to be analyzed carefully, because the Commission’s regulatory intervention in the roaming matter has revealed that a purely retail measure (the elimination of roaming charges) can have a different competitive impact depending on the characteristics of the operators involved (network operators, MVNO, reseller, etc.), so much so that the current European roaming regime is still under scrutiny for precisely this reason. In the case of the audiovisual sector this means, as already mentioned above, that it will be necessary to analyze the ratio of the territorial exclusivities by type of service and not in general, taking into account the characteristics of each sector and therefore applying the proportionality criterion accordingly.

Conclusions

In conclusion, the fact that the audiovisual industry operates according to a rigid system of territorial exclusivities is certainly a fact, but this does not mean that the system cannot be changed. As mentioned, the history of European integration provides numerous examples of business that have converted from purely national and / or oligopolistic models to open and pan-European systems. These reforms did not showed up “out of the blue”, but a step-by-step approach was normally applied, such as with the liberalization of telecommunications and the elimination of roaming charges. The gradualness has made possible to achieve objectives that the industry considered otherwise unimaginable. These are successful examples of the modernizing activity of the European Union which constitute an excellent basis for opening the debate also for the audiovisual sector.

 

The European data protection authorities intervene about corona-virus

Schermata 2020-03-16 alle 19.09.41

Among the nonsense that we hear these days in the fight against Covid19, there is the one whereby current European rules on privacy and protection of personal data would weaken governments’ fight against epidemics. Someone proposes to get rid of these useless frills and embrace foreign experiences, for example the Chinese one, where the government is able to pervasively control the behavior of citizens thanks to the power to track their physical movements and online activities. But we also talk about applications successfully used in other Asian countries, in particular South Korea and Singapore. The Israeli model is also under observation. However, these are all very different cases, where the compression of privacy took place in different ways and which would require an ad hoc analysis to assess their potential illiberality.

However, as regards Europe is concerned, there might be a suspicion that the complaint against privacy actually hides different types of flaws, that is, the difficulty of rapidly adopting the necessary measures to deal with the seriousness of the pandemic.

In the truth, current European privacy and data protection rules (namely the E-privacy directive* and the GDPR regulation**) already allow for exceptions regarding national security, including public health.

As regards the GDPR, its recital no. 16 excludes from its ambit of application “activities concerning national security“, where national security can be well referred to exceptional public health emergencies like a pandemics. Furthermore, arts. 6 and 9 of the GDPR specify the legal grounds for exceptional national measures.

Art. 6(1) GDPR lays down the grounds for lawful processing, specifying that it can happen when: “(d) processing is necessary in order to protect the vital interests of the data subject or of another natural person; (e) processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller“. 

Art. 9 GDPR allows processing of sensitive data (including sanitary data) when given circumstances occur: ” (g) processing is necessary for reasons of substantial public interest, on the basis of Union or Member State law which shall be proportionate to the aim pursued, respect the essence of the right to data protection and provide for suitable and specific measures to safeguard the fundamental rights and the interests of the data subject; (h) processing is necessary for the purposes of preventive or occupational medicine, for the assessment of the working capacity of the employee, medical diagnosis, the provision of health or social care or treatment or the management of health or social care systems and services on the basis of Union or Member State law or pursuant to contract with a health professional and subject to the conditions and safeguards referred to in paragraph 3; (i) processing is necessary for reasons of public interest in the area of public health, such as protecting against serious cross-border threats to health or ensuring high standards of quality and safety of health care and of medicinal products or medical devices, on the basis of Union or Member State law which provides for suitable and specific measures to safeguard the rights and freedoms of the data subject, in particular professional secrecy“.

A useful role is played also by art. 15(1) of the e-privacy Directive, which appears particularly relevant when authorities need to process individual location data, when the aggregated ones are not sufficient or suitable for tracing individuals potentially contagious: “1. Member States may adopt legislative measures to restrict the scope of the rights and obligations provided for in Article5, Article 6, Article 8(1), (2), (3) and (4), and Article 9 of this Directive when such restriction constitutes a necessary, appropriate and proportionate measure within a democratic societyto safeguard national security (i.e. State security), defence, public security….“.

Thus, According to these above rules, European governments are therefore authorized, on the basis of objective and non-arbitrary conditions, to take exceptional measures allowing national authorities, in particular health authorities, to have access to sensitive data, such as health data, as well as other useful data to protect public health. These European principles should have been normally implemented in national legislative framework. Therefore there is no need to break a privacy rule to protect public health, since the possibility of adopting exceptional measures, limiting or sacrificing the privacy of citizens (in the terms specified below), already exists.

This may mean that we already had a “Chinese” system at home and we hadn’t even noticed it? Not exactly. I don’t know enough about the Chinese model to judge it, but as far as Europe is concerned, it must be said that European framework allows Member States to take exceptional initiatives to protect public health provided that some guarantees are granted too counter-balance the limitation/sacrifice imposed upon citizens’ rights. Such exceptional measures must therefore be necessary, appropriate and proportionate to the context of a democratic society, which means – in practical terms and having in mind a pandemics scenario – that they must be limited to the scope pursued, and they must be transitory. Judicial review must be possible.

It follows from the above that any collected data, for example those on location, cannot be used for purposes other than that of protecting public health and, once the exceptional situation is exhausted, they must be destroyed. There should therefore be no fear that a government, once acquired the data about “where I have been that day” for public health reasons, may then use the same data for different purposes (unless it already has a different and appropriate legal basis to do it). If this happens, the citizen would have good legal instruments to defend himself in court. In any case, such obligation has to fulfil the general requirements of necessity and proportionality whereas especially the latter requires a certain degree of limitation to the amount of data that may be disclosed, e.g. by limiting it to traffic/location data of the past 2-3 weeks and only of people that have been in contact with an infected COVID-19 patient.

The European Data Protection Board (EDPB)***, the European forum that brings together all the European privacy authorities, just intervened on this point. The EDPB wanted to stigmatize the fact that “Data protection rules (such as GDPR) do not hinder measures taken in the fight against the coronavirus pandemic” by stressing that the GDPR already provides for the legal criteria that allow employers and to competent health authorities to process personal data in the context of epidemics, without the need to obtain the (famous) consent of the interested party.

In other words, an effective fight against epidemics does not require any definitive limitation or sacrifice in terms of protection of privacy and personal data. This limitation/sacrifice can take place, but it must be limited in time and cannot be abused by the State. Herein lies the difference between the European Union, whose citizens are guaranteed by rules confirm the foundations of the rule of law even in exceptional situations, from other countries where the difference between routine and emergency could instead be very slight.

* Directive 2009/136/EC which came into force in May 2011, concerns the processing of personal data and the protection of privacy in the electronic communications sector. It is usually referred to as the “E-privacy Directive” and is an amendment of Directive 2002/58/EC.

** General Data Protection Regulation (GDPR): Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC

*** The European Data Protection Board (EDPB) is an independent European body, which contributes to the consistent application of data protection rules throughout the European Economic Area (EEA), and promotes cooperation between the EEA’s data protection authorities.

European Commission sends signals in favor of encryption

Schermata 2020-02-27 alle 09.10.14

The European bubble in Brussels is currently rumbling about a story concerning Instant Messaging. The European Commission is reported to have sent guidelines to its employees regarding the use of Instant Messaging (the various Whatsapp, Messengers, Skype, Telegram etc.) for service purposes. In summary, the European Commission recommended to its employees the use of open source applications – such as “Signal” for instance – for these communications which are not requiring a stricter level of security (in the latter case Eurocrats are instead obliged to use dedicated corporate communicated systems, included an adapted version of Skype for Business). So, the important news here is not so much the favor expressed to Signal as a default communication tool for all Eurocrats, but rather the disfavor directed towards the most popular alternatives consisting of Whatsapp and Messengers, both owned by Facebook.

The attack to Facebook has caused quite a stir. The Commission’s guidelines praise Signal’s characteristics in terms of security, confidentiality and privacy, due to its effective open source encryption system. Signal uses an encryption system that protects end-to-end communications, ensuring inviolability by third parties (hackers, criminals or onlookers of any kind) as well as by the operator itself. In other words, neither Signal nor third parties can access the content exchanged between users. However, one should consider that Signal encryption system was also adopted by Facebook for its Instant Messaging systems since 2016, therefore one would question why the European Commission does not take account of it in its guidelines. Where is the difference between Signal on one side, and Whatsapp/Messenger on the other side, provided that both platforms use the same encryption technology?

It looks like that the technical offices of the European Commission would not trust Facebook too much, even if the latter uses the best technology to protect its users’ communications. The guidelines are reported to allude to Facebook’s non-neutral position as a “monetizer” of data, to the various privacy incidents that have affected its reputation, and to its supposed inability to systematically solve these problems. Furthermore, there is the subject of the US jurisdiction (the Patriot Act) and therefore the power for the Trump administration to have easy access to data held by Facebook when US security requires it. There is enough to ask Eurocrats to move their communications, even if not necessarily confidential, to somewhere else.

So this is not a good story for Facebook and it is to be expected that the US company is already engaged to recover the damage. In this respect, it is worth-noting that the position of the European Commission is purely technical, not public and therefore unlikely to affect the immense Facebook market (73% of estimated global IM market share). The individuals involved by the guidelines are just the professionals of the Eurocracy – a small number of users but which nevertheless weighs in terms of reputation and credibility. Looking further, one wonders what the Commission’s next “technical” position may be given that the issue of security has become so important in Brussels. An important matter could be about ordinary e-mail. European officials only use their internal mail system, however they exchange tons of communications with external users in a market which is dominated by US platforms, from gmail (Google) to hotmail / outlook (Microsoft), for which privacy and US jurisdiction remain open issues.

Beyond the reputational incident for Facebook, this story is also surprising for another aspect: although the guidelines are a technical and non-public position, they however reflect the Commission’s endorsement towards an effective encryption system (i.e. the main characteristic of Signal). The issue of encryption is starting to be highly debated in Brussels: on the one hand encryption allows protection and safety for users, on the other it limits the possibility for law enforcement and police authorities to carry out their investigative activities. Traditional communication systems (phone calls and text messages) cannot be encrypted since law enforcement authorities have the legal power to have access over them, while Instant Messaging systems are not regulated. Some European governments would therefore like to ban encryption for Instant Messaging services, however a clear approach to the problem has not yet been formalized. This subject was also included in the European debate on the e-privacy regulation (the online side of the GDPR) but, as well all know, the entire procedure derailed so far. The European Commission will sooner or later have to take a position in this regard, taking into account, on the one hand the users’ interests (confidentiality, trust and security of communications), on the other hand the position of the Member States (and especially of their law enforcement agencies). However, after the endorsement granted to Signal with the recent guidelines, the “technical” position of the European Commission appears to be in favor of encryption, the “political” one ….. still has to be seen.

Despite Brexit, Britain leaves a formidable mark on the European telecom and digital market

Schermata 2020-01-31 alle 16.40.30

While abandoning the European Union, the United Kingdom leaves behind an important legacy with regards to telecom, digital markets and their regulation. Fact is, UK has been the European member State that has pushed the most for both liberalization of telecommunications and creation of a digital single market in Europe. This occurred in the early 1990s when UK began exporting to Europe these industrial policy processes that had already been implemented during the Thatcherian period: privatizations and liberalizations. At that time UK hosted (in London, normally) the European branches of almost all US and international telephone carriers, which saw in the European market a formidable ground for expansion. But even large international corporations, from banks to financial operators, many of which were established in the UK, were pushing for liberalization of European markets, as they wished to lower phone call prices in and between European countries, and find new connectivity services available.

These modernization processes, however, were slowed down in continental Europe by historical incumbents (in Italy SIP, in France France Telecom; in Germany Deutsche Telekom etc.) normally owned by the national governments themselves. UK was different from them and therefore started to push for the first telecommunications liberalization directives (the ONP directives of the 90s) which led to the end of telephone monopolies in Europe and established the freedom to provide telephone and data services, and even to choose telephone set. Without UK, Europe would probably have been slow in liberalizing telecommunications, perpetuating gray telephones and high phone bills, as well as delaying the advent of the Internet.

The United Kingdom has also been one of the countries most attentive to telecom competition, enforcing the famous ULL (the “Unbundling of the Local Loop”, that is the rule that allows alternative operators to pass through the last mile of the incumbent operator, and thus provide final services to users) and even going so far as to impose the separation of the incumbent’s network (upon British Telecom). And in fact, United Kingdom is still now the most competitive European market at a retail level, with an incumbent market share well below 30% (in the rest of Europe it is on average around 40%). The British remedy for the separation of the telecom network was also proposed to the European partners and was actually included in the European regulatory framework of 2009, but with little practical application outside the UK, however.

UK was also in favour of light Internet regulation – in fact, in the early 2000s Internet was left largely deregulated except for a few basic rules of liability for ISPs and hosting providers (see Directive 2000/312/EC). This deregulation facilitated the boom in Internet services and the spread of digital technologies throughout Europe.

Finally, UK has been a great sponsor of the end of roaming surcharges in Europe.

All these reforms will remain and continue and produce their positive effects for European citizens and businesses, despite Brexit. However, new challenges are advancing: the emergence of online platforms and in particular global OTTs (the so-called GAFA: Google, Amazon, Facebook); cyber security issues; the race towards artificial intelligence; the need for technological sovereignty of the European Union towards the USA and China. The United Kingdom’s departure from the European Union weakens both players as the time for important choices approaches.

 

Why the European Court saved AirBnB and not Uber

logos-uber-airbnb-696x465

Despite a European political climate suggesting a restrictive interventions over online platforms, the European Court of Justice has issued an important decision on AirBnB, the popular online platform for short-term rentals, which goes instead to another direction, giving more confidence to the digital economy.

In a proceeding concerning a complaint by French hoteliers, claiming AirBnB’s duty to get a real estate agent license, the European judges ruled that this kind of platform does not operate a real estate service, but a simple Internet service. It may seem a trivial recognition, but had the second interpretation (that of the real estate service) prevailed, for AirBnB it would have been a blow, forcing the platform to comply with national (hoteling) legislations and related limitations: in practice, this is what happened a few years ago to Uber which, once it was declared to be a transport service by the European Court, had to profoundly adapt its business model, by closing UberPop (ie the intermediation of transport between private individuals) and concentrating on regularly authorized taxis. If the European Court had chosen this same approach for AirBnB, in practice by imposing the obligation for a license (for real estate agency), then the impact for the platform and competitors would have been considerable.

Why was AirBnB treated differently from Uber? Legally speaking, the court noted that Airbnb’s business model is not merely ancillary to an overall accommodation service and that such a service is not indispensable to the provision of accommodation services, as customers can use a number of alternative channels in that respect. Therefore, the Court defined the company as an “information society service”. More practically, the difference seems to lie in the lower pervasiveness of the AirBnB functions (compared to Uber): in particular, AirBnB does not set the contractual conditions of accommodation and the rates. Instead, those who use an Uber’s taxi service are subject to rules and prices set by Uber itself, not by the taxi driver.

But, beyond legal dissertations, is this a good sentence? The digital revolution has taught us that technological transformations disrupt established systems with winners and losers: with the advent of Uber, innovative entrepreneurship has won together with citizens dissatisfied with the traditional urban transport service, while the organizations of traditional taxi drivers have lost. The traditional licensing taxi system was not distroyed, however the emergence of new technologies and apps encouraged the modernization of the sector. This process has worked well, given that Uber, despite having failed in its European judgment, continues to operate and is not alone either, having to confront various competing platforms, some of which are even run by “converted” taxi drivers. The role of the European court was to set some limits to protect a series of interests, both for workers and users. In fact Uber, like its competitors, must move in the bridles of the various national legislations, with results that are not always consistent. This is why a new European intervention appears ineluctable, but this time a legislative one, rather than judicial.

Will the same happen also to AirBnB or will the current system of short-term online rentals, given the positive outcome of the sentence, be further consolidated? It is difficult to say because the European Court has focused on the specific object of the French judgment, avoiding instead to express itself on other general issues that the AirBnB model raises, such as: lessors using AirBnB should adapt to hotel regulations, and up to at what point? The municipalities could impose “quantitative” rules to contain the number of B&Bs hosted in city centers, in order not to perturb the social print of the  place? In the absence of ad hoc regulations from Brussels, probably these new cases will arrive, sooner or later, to analysis of the European judges.

A step ahead toward filtering over large social platforms?

 

Schermata 2019-10-03 alle 11.17.49

Facebook may be ordered, de facto, to monitor the activity of its users in order to prevent them to repeat posting identical or equivalent unlawful content. This is what the European court ruled today in a judgment referred by an Austrian court (Judgment in Case C-18/18 Eva Glawischnig-Piesczek v Facebook Ireland Limited) and concerning the request of a politician to remove various  comments and allegations published by a Facebook user which were harmful to her reputation. Since such comments and allegations were identical or had an equivalent content, the question was whether Facebook, after removing a first time, should keep an eye on future similar illicit behaviors.

The European court ruled in the positive way. It could sounds like a common sense decision in the normal world, but in the case of a social network such an obligation would imply an automated system able to intercept such illicit content and evaluate whether they are identical and/or equivalent. Basically, an AI filter or something very sophisticated would be needed. This is not a little thing in the matter of social networks because a kind of censorship activity would be delegated to a machine.

Today’s European decision may create an important shift from consolidated interpretation of the liability regime of hosting providers under the current European framework, that is to say the European Electronic Commerce Directive (Directive 2000/31). The current system provides per the so-called “notice and take down” mechanism (article 14), whereby an host provider such as Facebook is not liable for stored information if it has no knowledge of its illegal nature or if it acts expeditiously to remove or to disable access to that information as soon as it becomes aware of it. With the news decision, the mechanism may turn into a kind of “notice and stay down”, whereby Facebook would be liable for illicit content not notified to him, provided that they are identical or equivalent to previous notified ones. Facebook should be de facto aware of such future posts, something which sounds a bit peculiar, unless you ask Facebook to constantly check what users are doing on the platform.

This is a huge development in terms of liability regime by hosting providers, because it may imply a de facto monitoring obligation, in contradiction with art. 15 of the same directive which instead affirms that no monitoring obligation may be imposed on hosting providers. Fact is the court reminds that “the directive prohibits any requirement for the host provider to monitor generally information which it stores or to seek actively facts or circumstances indicating illegal activity”. However, the current judgment seems to undermine in practice such an obligation, by stating that Facebook should:

– remove illicit content posted on its social network, the content of which is identical to the content of information which was previously declared to be unlawful, or to block access to that information, irrespective of who requested the storage of that information;

–  do the same when the new/future content is just “equivalent” to content previously declared unlawful.  The “equivalence” assessment could be done via automated search tools and technologies, since a human intervention does not seems feasible.

This is a paramount decision which may influence the activity of the incoming European Commission, which was already considering to revise the liability regime of online intermediary and platforms via the announced Digital Service Act. Others may even invoke this case in relation to the potential filters which could be imposed when transposing art. 17 of the recent Copyright Directive in the matter of video-sharing.

In fact, one would have expected more cautions by the European court in rendering a decision which may impact on the freedom of speech of Internet users, whose content could now be intercepted and blocked by machines. However, today’s decision seem to refer to a necessary previous assessment by a national court, which should lay down all the needed guarantee and limits to protect the freedom of citizens to share information and opinion on social network. Of course, a bit more guidance by the EU Court for the national judges would have been appreciated, and this lack may be a reason for a new preliminary rulings sooner or later.

This is why today’s decision should not be regarded as  leading case allowing filtering on platforms on generic way. The European court recognized that a fair balancing of interests is required, this is why the (filters) obligation can be imposed only by a judge which should consider, inter alia, the proportionality of the measure taking into account the offensive effect of the illicit content, the rights of users to express their opinion, the capability of the concerned platform to install a monitoring software ecc.

Interestingly, the European court does not preclude that an “a stay down” order could be applicable on worldwide basis, that is to say on all national versions of Facebook.