Month: October 2014

From hyperlinks to embedded videos: not a copyright infringement, EU court says

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A landmark decision has been adopted by the Court of Justice of the European Union (CJEU) in the matter of Internet and copyright. The new case concerns embedding a video without the consent of the right-holder, also for commercial purposes.  According to the CJEU, this behavior does not constitute an infringement of copyright law when the video is already publicly available in the Internet, since no additional public is reached by way of the embedding, and provided that the work is not altered in any way.

The decision of the Court echoes a similar case, the Svensson case, which concerned hyperlinks. Also in this case, while admitting that hyperlinks constitute a kind of “communication to the public” according to the copyright framework, the court said that no infringement occurred since the linked content was already available in the web and therefore the hyperlink was not deemed to distribute the work to a “new public”.

My understanding of the case is that the video must be public because of the intention of the right-holder, who eventually uploaded on a public platform (such as Youtube, as in the most of the case). The parallel with the Svensson case lies lies in these terms. By contrast, should the video be present on a platform without the consent of the right-holder, I would say that embedding should not be allowed or further clarification is needed.

The CJEU made its decision by way of a simple order, i.e. an intermediary act which is easier to be adopted instead of a formal decision. The reasons for the choice to use such an instrument could be that the judges considered the case very easy and did not find necessary to pass through the formal procedure provided for a final decision. This means that some uncertainty may still submits whether the case is definitively closed here or not.

Whether it was an easy case or not, it is a matter of opinions. From the point of view of common sense, it is obvious that the behaviour at stake could not be seen as a copyright infringement. However, the current copyright framework is less obvious than people believe, since these rules have been normally conceived and applied in the traditional analogue off-line world, and therefore any further application in the Internet regularly results in dramas. Also because of the deliberate litigation strategy of most of the copyright-holders.

Whatever the judge believe, this is an important decision in the matter of copyright, because developing the Svensson rationale in order to solve other copyright issues may costitute an important signal for the incoming reform of copyright by the new European Commission entry into force as from November 1st, 2014.

The order of the CJEU (dated October 21, 2014) can be found here for the time being, since it has not been published yet on the website of the court. It will be published only at the end of October, and only in French (formal language of the CJEU) and German (language of the proceeding).

The new relevant market recommendation: Kroes playing the last (deregulatory) trump

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The European Commission has published the new recommendation on relevant markets, i.e. the document which will guide the national regulators (“NRAs”) in assessing competition in the EU and imposing regulatory remedies such as access to networks, price control, non-discrimination and so on. The European Commission made various substantial changes to the previous recommendation, including withdrawing markets 1 and 2 on retail fixed telephone access and wholesale fixed call origination. While ETNO, the incumbents’ association, has welcomed the new recommendation as a further step on the way of a possible deregulation of the European market, ECTA, representing the alternative operators, has showed some worries but also recognized that some clarifications go in the right direction. Thus, both associations (whose telcos members are mostly affected by the new rules) remained relatively prudent and have not dramatized too much in positive and negative terms.

According to Commissioner Kroes, the partial deregulation inflated by the new recommendation reflects the increasing competition in the market. This opinion is not shared by everyone however: the European regulatory agency Berec stated in an opinion that the deregulatory measures appear to be a bit premature.

When at beginning of 2014 a first draft of the recommendation was published, alternative operators were dramatically alarmed because it was clear that Kroes effectively intended to pursue a deregulatory agenda. Thus, after reactions and critical comments also by other Commissions’s departments and institutions associated to the legislative process, such as Berec and Cocom, the entire reform has been revised. While the reduction of relevant markets remained unchanged, important clarifications have been inserted in the Explanatory Note (the annexed text providing practical guidance) in a way to ensure sufficient flexibility and empowering NRAs to continue to adopt regulation to target competitive problems, also in areas where the Commission wished deregulation.

It is not the first time that an important deregulatory boost announced by Commissioner Kroes ends up with moderate practical results. The reform of fibre networks regulation (i.e. the new NGA recommendation) as well the Single Market Package encountered the same destiny. In all cases Kroes is paying because of her iper-political top-down approach: in 2012 she endorsed a deregulatory agenda in order to meet the financial needs and claims of incumbents operators, but then she failed in finding the market evidence for this approach and, worstly, she missed the support by other Commission’s departments (DG COMP, ECFIN, CONS). Also other institutions such as Parliament, Berec and Council have been quite cold and critical vis-à-vis Kroes’ approach. As a result, all impressive deregulatory initiatives have been watered-down and, what’s worst, the market has encountered an increasing and continuing legal uncertainty. The roaming chaos is an example: the entire Roaming III Regulation (2012) has been affected even before entering fully into force (July 2014) , because the Single Market proposal (September 2013) contained incompatibile proposals.

The impact of the new recommendation will therefore depend on the practical implementation by the NRAs as well as by the attitude of the new commissioner in charge, Oettinger. The deregulation of markets 1 (retail access) and 2 (call origination) may provoke some increase of retail voice prices by deregulated incumbents, depending on the degree of competition in each national market and the ability to alternative operators to provide the same services via ULL or own networks. In this respect, the developments of potential competing OTT services shall be also monitored: it is a paradox, but big telcos such as Orange and Telefonica should thank Skype and Whatsapp for the deregulatory result.

Wholesale access networks was not deregulated, however the Commission loved to see the market to migrate to a model of virtual ULL concentrating all access investments (and related control over services) in the hands of incumbents. This scope was not completely achieved, as at the end the Explanatory Note stated that NRAs are expected to continue mandating physical ULL, because it is usually considered to be the most adequate access remedy, as it ensures alternative operators’ ability to differentiate their retail offers and innovate. The Commission however added that in situations where physical ULL is not technically or economically feasible, NRAs may mandate virtual access products (as some NRAs have already done in the EU).

To sum up, the deregulatory agenda of Commissioner Kroes ended up more in a slogan than a practical achievement. The incumbents industry thanks in any case, because even a vague deregulatory trend is helpful when facing financial analysts and bonds purchasers. However, the emerging opposition of NRAs and governments to the Commissions’ approach opens the doors to a season of future litigations, unless the new commissioner Oettinger will invent something new.

Net neutrality and competition rules are getting closer and closer

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The Competition Directorate of the European Commission announced to have closed an investigation about Internet connectivity market (peering and transit) without finding evidences for abuse of dominant position by the European incumbents which were investigated (likely Deutsche Telekom, Orange and Telefonica).

While the closing of the investigation is a good news for the investigated operators, the Commission makes clear that it will continue to monitor the market and that further interventions in the future are not excluded.

The investigation started after a complaint by a US carrier which contested the peering policies of main European incumbents. The complainant maintained that pricing conditions charged by telcos were abusive. A similar case shad been already dismissed by the French competition authority in 2012, while recognizing that peering policies of telcos may potentially give rise to concerns.

The case at stake has a clear link with net neutrality, although the DG COMP offices are very prudent and they intentionally avoid to mix up their case with the current debate on net neutrality pending in Brussels in the frame of Single digital Market proposal.

To better explain: incumbent telcos may potentially commit abusive practices because at the same time negotiate Internet traffic deals and control end users to which such traffic is directed or requested by (Youtube, Facebook ecc). This market is normally competitive because, should an operator rise the price in abusive way, other operators may simply change carriers, because Internet is made in this way: there are plenty of alternative routes. However, when the Internet traffic in question must be necessarily terminated upon end users (i.e. the subscriber holding the final terminal/device), then counterparts have no alternative: they must accept prices and conditions charged by the telcos controlling the connection to such end users (i.e. selling to them the Internet access). It is a kind of termination monopoly, like for voice.

In the case of the voice termination monopoly, the problem has been solved via regulation: termination must be obligatory ensured at cost-oriented prices. By contrast, in the internet sector termination is unregulated: however, competitive problems normally do not arise, because telcos operates cannot allow themselves to cut Internet traffic terminating to their clients, which otherwise may decide to change ISP in order to get the services they like (imagine a telco saying to his customer: “you will not get Youtube because Google does not pay me what I pretend to connect to your PC“) . However, it seems that peering commercial negotiations are becoming more and more difficult and some European incumbent are trying to charge more expensive prices when peering with counterparts. This may reflect an increasing weakness of competitive conditions in the European market and more strength for the incumbents, at least this may be their perspective. In Italy Telecom Italia decided to de-peer, i.e. they stopped peering at the Internet exchange point in Milan and requested everybody to peer directly with them by paying. The non-peering counterparts had therefore to deliver their traffic directed to Telecom Italia via a third transit operator, a system which may deteriorate the quality of the Internet traffic (because the routing is longer and more complex).

Interestingly, the PR of the European Commission makes clear that incumbent ISP may have interest in creating artificial traffic congestion: “The European telecoms operators which were investigated all provide internet access services to end users and often have an in-house internet transit division. This allows them to charge for interconnection capacity and, in the absence of commercial agreement with certain third party transit operators, may also have the effect that traffic from certain routes becomes congested at the point of entry into domestic networks, causing a deterioration in service quality“.

In other words, congestion for consuming-banwidth services like video streaming (Netflix) may be the result of a deliberate choice of the telco, not of scarcity of capacity. A telco may decide to reduce/limit interconnection capacity in order to force counterparts to pay more for peering. Thus, here the Commission is recognizing that incumbent ISPs may potentially create a net neutrality problem even where it should not exist.

It must be remind that in the recent times Netflix made various paid peering agreement (i.e. direct interconnection) with US ISPs like Verizon and Comcast in order to facilitate the delivery of their traffic to the related American subscribers. Although the details of the transactions ara not public, there was the suspects that Netflix was forced to made these agreement to respond to artificial congestions provocateur by the same ISPs.

The European Commission did not find abuses in the present investigation, however a clear signal has been sent to incumbents ISPs: their Internet peering policy will be closely monitored in the future.

Net neutrality in the age of bankers

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Should banks and financial institutions be considered like OTTs an therefore charged for the simple use of telecom networks and Internet?

This questione came to me today at the yearly FT-Etno conference, an event most self-referential than a birthday party. At the end of a panel discussion about telecom investments, some bankers were inquired about the net neutrality debate in the EU. Their frank response was: “Well, Internet is like a motorway, the owner of the infrastructure has control over it and therefore it must be entitled to charge the users depending of the traffic”.

The response of the bankers was not accidental, it was clearly aimed at supporting the traditional telco’s vision about net neutrality with regard to the possibility to charge OTTs and other Internet service provider (Google, Netflix, Apple ecc). However, the bankers probably underestimated the fact that the correct parallelism with motorways does not bring to their conclusions: by contrast, in the motorway business tolls are charged upon drivers, eventually depending on the size of the cars, not on transportation services or cars manufacturers. Companies like DHL (a service provider) or FIAT (a car manufacturer) do not have to contribute to the investment for the construction of the motorway: their cars (the equivalent of bits) just pay the toll at entrance and that’s all, they do not have to pay a double/additional bill just because just their business is passing through the motorways. In other words, the motorway business works exactly in the way NN supporters believe Internet should work: no fast/slow lanes, while charges are levied only upon users, eventually depending on their traffic usage, not on OTT, content providers just because their business is Internet-based.

One should not exaggerate too much against bankers and financial guys trying to explain how the Internet works, maybe it was just an accident. However, the idea according to which Internet providers should be charged for the simple fact that they run a business over the Internet open the doors to unthinkable (for the bankers) consequences: all the business of banks and financial institutions is ran over the Internet, billions of economic transactions and payments are managed thanks to networks of telcos and access providers. Should banks be charged for that? If one think that Google and other OTTs should pay, I believe that HSBC and financial institutions should do the same, for the same reasons…..