Month: September 2016

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.

 

Europe and copyright: turning back the clock

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What’s the opposite for modernization? Regression? Turning back the clock? Whatever the word may be, the copyright reform (here the leak) which is going likely to be proposed on September 15 by the European Commission does not seem a modernization at all. The main purpose of this initiative seems, despite the ambitions showed in the past, just to countervail the growing power of main OTTs and social platforms vis-à-vis publishers and content industry by empowering the latters with some special negotiation powers. It is very doubtful that this purpose will be ever achieved and the collateral damages may be higher than expected.

The feared provisions on ancillary copyright will grant to publishers a 20-years right about their news and content. In countries like Germany and Spain where a similar attempt was already done, Google (the real objective of these legislative initiatives) reacted by de-indexing the publishers’ news, which then preferred to waive the rights in order not to be obscurated from the search. This means that there we have a problem of competition, not regulation. Now, the proposal by Commissioner Oettinger aims at avoiding such an humiliation but, again, Google will not be obliged to negotiate and could be able to get granted the publication right for free. By contrast, other Internet operators, start-up, emerging social platforms and blogs will face the uncertainty. They may be required to pay the publishers without having the same capability of Google of monetizing the news and without the same negotiation power vis-à-vis the publishers (in Italian: cornuti e mazziati).

It will be interesting to see how publishers may think to use their new weapon against Facebook, a platform which is becoming much more powerful than Google news in aggregating and making availble news.

Beside that, the European Commission is seeking to force hosting sites (Youtube and others) to monitor user-uploads for similarity to works where media companies claim copyright, and empower those companies to prevent the upload from working. Again, also in this case the Commission is granting a specific industry sector (the content and media industry) a tool to balance the negotiation battle with OTTs and big platforms, but it is not clear whether this system will ever work and what could be the collateral damage. To make an example, while Google & Co may negotiate whatever with the content industry while granting the minimum, other operators will not be able to do it. The same issue applies when dealing with sophisticated identification systems: Google/Youtube can put in place such systems, others probably not.

Meanwhile, photographers are left at risk of being sued for copyright infringement by architects when they take a photo with a building in the background; the Commission has passed up the opportunity to introduce a so-called “panorama” exception to fix this problem.

Taken together, these issues point to a legislative proposal which contains little progressive measures for digital citizens and providers of innovative online services. It is regrettable to remember that when announcing its much-lauded Digital Single Market strategy in 2015, the European Commission committed to empower the Internet as an engine of European economic growth. But in today’s copyright “modernisation” proposal, the Commission has instead rocked the legal foundations of Europe’s digital economy – namely the intermediary liability safe harbours of the E-Commerce Directive – and has put a chill on information society innovation.

One may hope that European Parliament and the EU Council will attentively scrutinise and amend the legislative proposal in the coming months.

A detailed analysis of the leaked reform can be found here.

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PS: amongst so much darkness, a light of hope. The proposed directive sets fort the right for artists to be duly informed by publishers about the commercial results of their licensed works and, in case of unexpected and extraordinary success, to get an additional compensation. This is a remarkable improvement for young and unknown artists like me 🙂

 

Why it is so difficult (but not impossible) to get rid of roaming surcharges

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It’s today’s news that the European Commission has withdrawn, upon request of the President’s office, the proposed measure implementing the roaming phasing-out prescribed by the EU Regulation 2015/2120 which amended the Roaming Regulation 531/2012. The draft measure imposed a minimum obligation of 90 days (per year) to abolish roaming surcharges. Beyond that limit, mobile operators may (it’s their discretion) confirm to abolish roaming surcharges or continue to apply them, although within some caps (4 cents for voice calls and 0,85 cents for Megabyte). This minimum obligation, called also as “fair usage” have attracted criticism by politicians and consumers claiming that the end of roaming surcharges is not achieved yet in Europe.

Before going into details, one should make a few substantial precisions:

– the legal fair usage provision is set by in the Roaming Regulation 531/2012 (art. 6b) as amended by Regulation 2120/2015, thus the withdrawn measure (a subordinated legislative act) is just implementing a principle contained in the primary legislation;

– the Commission has always stated that roaming surcharges would have never been completely abolished, because the Commission itself wanted to avoid the so-called “permanent roaming”, that is to say a situation whereby consumers may roam abroad indefinitely, with the result that he/she could buy a sim card in a country and use it abroad without limitation of traffic of time. In such a scenario, a consumer could therefore choose, as mobile provider, any mobile operator in the EU, not just the ones of his country of residence. This option is considered by the EU, believe it or not, an abuse (see art. 3, par. 6, of Regulation 531/2012, as amended by Regulation 2120/2015);

– Commission and Parliament were very well aware of the above. Therefore, it is a bit curious that now they are complaining or regretting. My impression is that this matter may be used to get political visibility, despite the facts that correct decisions could have been taken earlier. The intervention of the Junker Cabinet is not accidental: the head of cabinet of the president is Martin Selmayr who, while serving Commissioner Reding in the mandate 2004-2008, proposed the end of roaming and builded his career on it;

– It is true, however, that in the past some EU Commissioners (especially Nellie Kroes, the predecessors of the current Digital Agenda Commissioner) and politicians have been publicly emphasizing so much their contribution to the roaming reform that they generated also the impression in the public opinion that the roaming surcharges would finish soon and completely. It was nor false neither completely true , but this is politics, folk!

The most puzzling part of this story is that people may think that the end of roaming is just a matter of political will and common sense, that roaming surcharges could finish by just agreeing and writing down a ban. The reality is different, it is not a matter of shaking hands: roaming surcharges exist because of market structures (and costs), therefore what the legislator can and should do is intervening upon such market structures in order to prevent the conditions for roaming surcharges to exist.

To be more clear: if mobile services have to be priced at the same tariffs without distinction at home (domestic services) and abroad (roaming services), also the underlining costs should be aligned. In fact, if the cost of productions of one minute of domestic voice is 1 Eurocent, in order to maintain that price abroad (as roaming services) also the costs abroad should be more or less the same. The “cost abroad” is the so called “wholesale roaming access”, that is to say the tariff the mobile operators pay when buy access to foreign mobile networks to permit their customers to roam over there. This is unavoidable, because no mobile operator, neither a large corporation like Vodafone, own 28 mobile networks throughout Europe.

But what happens instead? The reality is that domestic and roaming access costs are currently non-aligned, with roaming costs to be sometimes 10 or 15 times multiples of domestic costs! Under such conditions, it is not possible to abolish roaming surcharges: how could a mobile operator replicate abroad a domestic offer when the costs abroad are 10 or 15 tome higher? It would go under-costs.

Why this tremendous costs discrepancy exists? This is an historical sinn of dominant mobile operators (mainly Telefonica, DT, Telecom Italia, Orange and Vodafone, but not only) which have been using roaming access costs as a barrier against foreign operators trying to attack their domestic markets. If roaming access costs would be lower, a small mobile or MVNO operator from abroad could sell Sim Cards to the domestic market competing with local offers. This scenario is called “permanent roaming”: in other words, a customers could buy a Sim Card form whoever mobile operator in the EU and roam everywhere throughout the 28-countries Union. Big mobile operators want to avoid this scenario because they prefer to defend isolated and separated domestic mobile markets, where “competition” is limited by only 3 or 4 mobile operators holding the networks (due to scarcity of spectrum).

What is doing the European Commission against this? It’s a bit schizophrenic, to tell the true. One one side, the Commission is supporting the end of roaming surcharges, but on the other side it does not take the right measure to align domestic and roaming wholesale costs. In fact, in June 2016 the European Commission tabled a proposal for reducing wholesale costs which is clear insufficient to achieve the scope. To make an example, the roaming wholesale cap for Internet is 0,85 Eurocent per Megabyte, a figure which is much higher than retail domestic prices. Also the wholesale costs for voice (4 Eurocent) is disproportionated. This disgraced proposal is now in the hands of Parliament and Council which have the opportunity to take the right technical decision, i.e. lowering the wholesale roaming costs down to the level of domestic ones, rather than continuing with populist declarations and initiatives.