By a decision dated September 15, 2020, the European court has confirmed that zero-rating practices are banned under regulation 2015/2120 (the “Regulation”) that has introduced net neutrality provisions into the European framework. 

What’s zero-rating?

Zero-rating is a commercial practice, quite common in the mobile market, consisting of providing Internet access at no cost under certain conditions, such as by permitting access to only certain websites/services or by subsidizing the service with advertising or by exempting certain websites from the data allowance. This special commercial practice has been hardly challenged by net neutrality supporters because it may empower telecom operator to discriminate Internet services and providers, so as to influence the decisions and habits of consumers.

The most common zero-rating practices consists in permitting users to access, without costs, communication services or socials selected by the mobile operators on the basis of commercial deals with the concerned Internet providers. However, the most famous case of zerorating was the so-called “Facebook Zero”,  whereby mobile providers, in collaboration with Facebook, waived data charges for accessing the social network on phones via a stripped-down text-only version of its mobile website. This initiative was undertaken mostly in Africa.

Zero-rating under European rules

The outcome of the current European decision was not foregone, because zero-rating practices are not clearly and expressly ruled in the Regulation, unlike specialized services and network management practices for which very detailed provisions exist, such as art. 3§5 for specialized services and art. 3§3 for network management practices respectively. By contrast, the Regulation never mentions the term “zero-rating”. However, zero-rating was considered to be forbidden thanks to the combined reading of art 3, §§1 and 2, according to which:

(art. 3) 1. End-users shall have the right to access and distribute information and content, use and provide applications and services, and use terminal equipment of their choice, irrespective of the end-user’s or provider’s location or the location, origin or destination of the information, content, application or service, via their internet access service. This paragraph is without prejudice to Union law, or national law that complies with Union law, related to the lawfulness of the content, applications or services.

2. Agreements between providers of internet access services and end-users on commercial and technical conditions and the characteristics of internet access services such as price, data volumes or speed, and any commercial practices conducted by providers of internet access services, shall not limit the exercise of the rights of end-users laid down in paragraph 1.

The reasons why the Regulation does not explicitly define zero-rating, while trying however to protect the users’s  interests that could be affected by these practices, is mainly historical. When the European Commission’s proposal was tabled in 2013 there was little awareness about zero-rating and its implications with the Internet rights of users. For some authors zero-rating was just a matter of competition rather than a net neutrality issue. The importance to include zero-rating into the net neutrality reform arose later, when the proposal was discussed in the later stages of the legislative procedure. This is the reason why the Regulation did not end up with a detailed definition of zero-rating.

Today’s European court decision is therefore important because it eliminates doubts, if any, that arts. 3 §§1 and 2 of the Regulation are aimed at targeting, inter alia, zero-rating practices.

The role of Berec 

It is worth-noting that Berec, the European agency grouping the national telecoms sector, in 2016 adopted guidelines making clear that zero-rating practices fall within the ambit of application of the above rules. According to Berec, however, not all zero-rating practices are prohibited in principle: it is up to the national regulator or courts to make an assessment abut the impact on users’ rights, based on various market circumstances (including, in particular, size and market share of the ISP and the OTT which have made the zero-rating deal). In facts, courts in Slovenia and the Netherlands have ruled that Article 3 of the Regulation does not contain a total prohibition of price differentiation by way of zero-rating offers. These countries were relevant because their national net neutrality legislation prohibited zero-rating practices in a radical way, while the Regulation, as interpreted by Berec, leaves room for discretionary enforcement. 

In general, since the entry into force of the regulation various mobile operators had been fined by national regulators for undertaking prohibited zero-rating practices, however legal uncertainty existed.

In 2019 the European Commission published a report and a study analyzing the implementation of the Regulation in the European member States, also with reference to zero-rating practices, which were quite common by mobile operators.

The case decided by the EU Court

In the present case, the Hungarian subsisdiary of Telenor, Telenor Magyarország Zrt., was fined by the local authority because of 2 controversial zerorating packages. The concerned tariffs consisted in the fact that the data traffic generated by certain specific applications and services did not count towards the consumption of the data volume purchased by customers. In addition, once that volume of data had been used up, those customers could continue to use those specific applications and services without restriction, while measures blocking or slowing down data traffic were applied to the other available applications and services.

The decision of the European court does not contradict Berec’s view whereby not all zero-rating practices are prohibited in principle. The court has simply confirmed that art. 3 §§1 and 2 of the Regulation is a correct legal basis to enforce the zero-rating prohibition, but it leaves discretion to implementing authorities whether the concrete circumstances of the cases are sufficient to prohibit practices and impose fines.

Impact on the market

Mobile operators had clearly hoped in a different ruling, possibly minimizing the powers of national authorities to prohibit zero-rating practices. By contrast, today’s European court decision seems to confirm the status quo, by which the Regulation is a legal basis for the prohibition and national authorities have discretion to enforce it on the basis of factual circumstances, in particular by taking into consideration size and market shares of the concerned operators. This means that a dominant operator such a T-Mobile or Vodafone will unlikely have zero-rating tariff approved, while a small mobile operator or an MVNO may have more chances.

It is questionable whether GAFAs and big OTT may be winner or loser in this context. In my opinion, the new European ruling does not affect them that much. It is true that online platforms support in general net neutrality, however even in a non-neutral environment (that is to say an Internet with zerorating practices) GAFAs and dominant online operators, thanks to their economic power, will be well placed to negotiate such agreements with telcos.