radiobruxelleslibera
Innocenzo Genna's blog on European telecom and Internet regulation & policies – @InnoGenna
Stop with expensive after-sale service calls
The cost of a call to an after-sales telephone number must not exceed the cost of a standard call. This is what decided the European Court of the European Union in decision rendered today in a case of a German consumers association (Zentrale zur Bekämpfung unlauteren Wettbewerbs Frankfurt am Main) against a retailer (Comtech GmbH) which was to charge expensive tariffs open customers calling the after-sale service telephone number.
The practice of charging unfair and expensive telephone tariffs to people requiring after- sale assistance is quite common and particularly detested by consumers. Traditional and online retailers, airlines, insurance and financial companies, utilities, may be particularly nasty in this respect. The paradox is that the expensive tariffs did not encourage companies to be efficient and customer-friendly. The intervention of the European court has therefore stopped an unfair practice that national authorities were not able to control, apparently.
Under the relevant rules (Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights) Member States must ensure that where a trader operates a telephone line for the purpose of being contacted in relation to contracts concluded with consumers, consumers are not to be bound to pay more than the basic rate for calls to that line. However, the concept of a ‘basic rate’ is not defined by the directive.
To solve this issue, the European court stated that the concept of ‘basic rate’ must be interpreted as meaning that call charges relating to a contract concluded with a trader to a telephone helpline operated by the trader may not exceed the cost of a call to a standard geographic landline or mobile telephone line. According to the Court, in everyday language ‘the basic rate’ refers to the standard cost of a call. Both the context in which that concept occurs in the directive and the purpose of that directive, namely to ensure a high level of consumer protection, confirm that the concept must be understood in that ordinary sense of the term.
While the case concern an internal dispute, it will interesting to see whether further cases may arise when after-sales services are rendered to customers resident in another Member State. The matter needs to be followed up.
What the European institutions will not say about the disguised end of roaming surcharges: the end of mobile competition and the rise of mobile tariffs
BREAKING NEWS: DURING THE NIGHT THE TRILOGUE AGREED UPON EURO 7,7 EURO/GIGA TO FALL UP TO 2,5 EURO/GIGA IN THE NEXT YEARS. I REGRETTABLY CONFIRM THE VIEWS EXPRESSED IN MY BELOW POST
In the night of January 31, 2017 representatives of European Parliament, Council and Commission are set to agree on the maximum levels (so-called “wholesale roaming caps”) mobile operators can charge each other for access to their networks in order to allow customers to use services when traveling abroad without paying roaming surcharges (so called roaming like at home).
While everybody agrees that the end of roaming surcharges will be beneficial for all consumers, it is sad to see that the selected mechanism will affect competition and allow a rapid increase of mobile tariffs everywhere in Europe. This is due to the high level of wholesale roaming caps that will be agreed tonight, which is expected to be between 7 and 8,50 Euro per Gigabyte (and with a weak glide path). Since most of retail tariffs in Europe offer one Gigabyte for 1 or 2 euro, it is evident that most operators will not be able to recover their costs when providing roaming to their customers. In order to prevent losses, they should be increasing domestic retail offers, or even stopping providing roaming services. Others may invoke a sustainability mechanism allowing them to continue to apply roaming surcharges in order to be able to pay the wholesale roaming caps.
Big mobile operators will be less affected by the level of wholesale roaming surcharges, thanks to the ability to compensate reciprocally the roaming traffic in the frame of established bilateral agreements (someone call them cartels). However, thanks to the struggles and pains by small and competitive mobile and MVNO operators, big mobile ones will have less competitive pressure and may start to increase price back, as it is already happening by the way.
Even worst: because of a complex mechanism provide by arts. 4.2. and 4.3. of Regulation 2016/2286 (the implementing rules enacted by the European commission last December to regulate in details this matter), the highest the level of wholesale caps, the fewer the roaming traffic exempted by surcharges that users my benefit in case they have an unlimited Internet plan or a pre-paid sim card.
The European institutions are aware of this poisoned effect of the “end of roaming”, however they have not been able to agree on lower wholesale caps due to various reasons.
The European Commission, in lack of credibility, needs to officially declare the end of roaming at all costs, no matter for the side effects. President Juncker took a personal political initiative on this matter in order to be able to set an historical precedent and imposed the end of roaming by way of legislation, although the offices of the Commission (especially the one sin DG Connect) were well aware of the side effects of this result and have been working in order to minimise them. Nevertheless, the political pressure prevailed over reality and basic economics.
The Council, i.e. the governments, is splitted but, at the end, is caught by some Member States (France and Germany) who want to protect their mobile market and oligopoly therein while others (the Mediterranean countries) are willing to continue to monetize some cash brought by summer tourists.
The Parliament has been much more fighting and one should recognize that the rapporteur, the Finnish Miapetra Kumpula-Natri, has been trying to propose more competitive wholesale caps (starting at 4 Euro per Gigabyte in 2017 and down to one Euro in 2020) together with the shadow rapporteurs of the other political parties. The EPP issued a crystal clear press release making clear that wholesale caps should be below retail tariffs, not above.
However, even these commendable efforts have been vain due the intransigence of Council and Commission.
The European data retention ruling and the struggle about national surveillance laws
Various Member States, Italy in primis, will have to revise their legislation about conditions and duration of obligations upon ISPs and telecoms to keep record of Internet traffic and telephony conversations. The telecom industry will seek opportunities to diminish such obligations, which normally require huge capex investments in data retention equipments and exhausting communications with public prosecutors. Finally, civil rights organizations will attack in courts existing data retention legislations on the assumption that they are in contrast with the European jurisprudence. All this will happen in a scenario where national governments tend, in contrast with the above, to reinforce internal surveillance for antiterrorism- reasons, rather than relaxing the public security regime.
The above are the main effects of today’s CJEU ruling on a joint-case concerning the legitimacy of data retention laws in EU Member States.
This court decision follows the previous 2014 ruling about the annulment of the European Data Retention Directive. In that case, the CJEU just pointed out the relation between fundamental rights, data protection and retention of personal data by ISP and telecom operators, with the final result that the directive was annulled. The same principles are now applied directly in the context of national legislations on data retention, without major changes.
To tell the true, following the 2014 ruling most of European countries started a review of respective legislations in the matter of data retention, however with the prevailing result to keep alive the existing legislations (save for some minor adaptations). In some countries, however, the local constitutional courts rendered rulings annulling their data retention legislation. Few countries remained completely inactive, amongst them Italy. Today’s ruling will make even more difficult this wait and see strategy.
The main conclusions of todays’ ruling are:
· Member States may not impose a general obligation to retain data on providers of electronic communication services
· Data retention is admissible under EU law only in instances where it is targeted, limited to what is strictly necessary, and subject to conditions (e.g. prior review by an independent authority, localization of data, etc).
The reasoning of the CJEU is streamlined hereinbelow:
· EU law precludes national legislation prescribing general and indiscriminate retention of data.
· Data retention constitute a serious interference with citizens fundamental rights and as such can only be utilised in the fight against serious crime.
· Legislation prescribing a general and indiscriminate retention of data does not require there to be any relationship between the data which must be retained and a threat to public security.
· Such national legislation therefore exceeds the limits of what is strictly necessary and cannot be considered to be justified within a democratic society, as required by the directive, read in the light of the Charter.
· The EU acquis does not however preclude national data retention laws, provided that the retention of data is: (i) Limited to what is strictly necessary (in terms of categories of data retained, persons targeted, retention period, etc); (ii) Defined in clear and precise national legislation; (iii) Constrained by meaningful procedural safeguards; (iv) Based on objective evidence.
· Concerning access to data, Member States must introduce objective criteria in order to define the circumstances and conditions under which the competent national authorities are to be granted access to the data.
· It is essential that access to retained data should, except in cases of urgency, be subject to prior review carried out by a court or an independent authority.
· National data retention legislation must make provision for that data to be retained within the EU owing to its sensitivity.
What the end of Renzi government means for the Italian digital and ultra-broadband sector
The resignation of Matteo Renzi following the defeat at the Constitutional Referendum of December 4th, 2016, creates the question as how Italy will ever fill the gap with other developed nations in the matter of digital services and ultra-broadband networks.
Whether you like him or not, there is no doubt that Matteo Renzi has been the first Italian premier showing a concrete interest vis-à-vis Internet and digital infrastructures, putting them at the core of the governmental policy. Before him, Italian governments have been merely dealing with television and broadcasting regulation, while the development of the digital sector was never a priority. The only serious concern of previous governments in the area of telecoms was the ownership of Telecom Italia, whether the company will become a subsidiary of whom. But no Italian premier ever took action or made pressure to force Telecom Italia to invest in high-speed networks. As a result, the traditional Italian telephony company has been relying, longer than other European incumbents, on the old-fashioned and depreciated copper telephony network rather than installing new fibers networks in massive way. No need for that.
With Matteo Renzi, the situation changed dramatically. It might be for a matter of age or personal experiences, the former mayor of Florence never liked very much Telecom Italia and its bills. Renzi launched an ambitious ultra-broadband plan to fill the gap in the vaste provincial and rural areas of Italy (the European Commission cleared the plan last June). Telecom Italia was offered to benefit of that plan and also to buy Metroweb, a company (controlled by Cassa Depositi e Prestiti) installing and offering ultra-broadband networks in big Italian cities. However, government and Telecom Italia did not find a common agreement on important conditions: while Renzi was aiming at strongly modernizing and re-shaping the Italian telecom market, Telecom Italia preferred to keep alive the copper network as much as possible and did not want to hear about structural separation of its network (a possible outcome when combining its network assets with Metroweb). Telecom Italia was probably thinking to be winning at the very end, thanks to the traditional instability and weakness of Italian governments, but it was wrong.
The stallo situation was “sparigliata” (broken) by the entry into the market of Enel, the Italian energy utility which launched a plan for ultra-broadband investments and offered to buy Metroweb. In the meanwhile, the Italian government granted a State-owned company, Infratel, the task to install ultra-broadband networks in rural areas. The emergence of new network operators changed dramatically the landscape: Telecom Italia ended up with “melina” and started to seriously invest in fibers.
Beside that, Renzi’s governments has been strongly intervening in the digital sector with various legislations in the matter of net neutrality, online platforms, sharing economy; they finally appointed as Digitalist Chief Diego Piacentini, a seconded senior executive of Amazon, to coordinate and make progress the digital agenda in Italy. The choice of Matteo Renzi’s about Diego Piacentini was challenged by someone because of potential conflicts of interests: nevertheless, no one could object the professional level of the Chief Digitalis and the need to coordinate the various Italian agencies competent for digital.
One would wonder whether the above was just a transitory acceleration and now Italy will fall back into traditional inertia. The main winner of the Constitutional Referendum, the 5-Stars Movement, has been traditionally relying on the Internet rather then other medias. However, despite some individual positions, it is not clear whether this political party has a concrete and coherent industrial policy for ultra-broadband and the digital sector in general. Irrespective whether they will become a force of government, the 5-Stars Movement and its leader, the comedian Beppe Grillo, should start to think about and say something to the people.
The confused international roaming saga in the EU (and the Finnish solution, hopefully)
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
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
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
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.
Why the telcos industry is so annoyed with Berec’s Guidelines on net neutrality
Kudos to Berec, the European agency of national regulators. Despite strong opposition and public campaign brought against by a large part of big European and US telcos, the agency resisted to pressures and substantially confirmed the well-expected Guidelines on net neutrality, a first draft of which had been already disclosed last June and was subject to very extensive public consultation. The Guidelines adopted on August 30, 2016 specify important practical details as well as the correct interpretation of the principles laid down by Regulation 2120/2015 in the matter of net neutrality. One should not forget that such regulation had been approved after long debates and fierce fight in Brussels and Strasbourg.
The most important part of the Guidelines concerns the ability of ISPs to carry out so-called zero-rating and network management practices. Remarkably, Berec has not prohibited such commercial behaviors but, instead, decided to lay down a detailed list of conditions and circumstances that national regulators should now assess in order to adopt whatever decision in this matter (whether prohibition or authorization). The most remarkable condition indicated by Berec is that both zero-rating and network management practices should not be driven by commercial considerations, in other words they should not discriminate services so as to favor the ISP’s own Internet services (or these of a commercial partner) to the detriment of competitors. Instead, such practices should be “agnostic” and applicable to a generic categories of services, not to a specific service. To make a practical example: an ISP could use such practices to favor in general music-streaming, or VOIP, or all messaging platforms, while it could not discriminate in favor of just a specific Internet provider, e.g. the sole Spotify for music streaming; the sole Skype for VOIP; the sole WhatsApp for messaging; and so on.
One would wonder why the big telco industry is so annoyed (“big” comprises mobile and fixed dominant operators, with the exclusion then of MVNOs and alternative fixed operators). In fact, Berec i) did not prohibit anything, it is just saying that national regulators will have to assess and take a decision, on the basis of the criteria indicated in the Guidelines; ii) expressed favor vis-à-vis zero-rating and network management practices, while preferring them when provided in an “agnostic” way. So, what?
To understand the irritation of the big telco industry, one should think about the following.
First, the big telcos industry has been enormously lobbying in the past in order to have free hands in the matter of net neutrality and, to tell the truth, at beginning they were succesfull because the first draft of Regulation 2120/2015 (the one proposed by Commissioner Kroes in September 2013) provided such freedom in substantial terms. Thus, big telcos hoped to use that regulation to have large discretion in discriminating Internet services and traffic so as to supersede any national legislation contravening such power (such as the net neutrality laws in the Netherlands and in Slovenia for instance). However, after fierce fight in the Parliament and Council such discretional power was strongly limited, the provisions relating to zero-rating and network management practices were drafted in a more vague form and a clear reference to non-discrimination was made.
Despite of the above, the telco industry still hoped that Berec would issue Guidelines interpreting the Regulation in a way that zero-rating and network management practices would be simply allowed, also discriminating amongst commercial services, without further assessment by anyone. To the contrary, Berec laid down just criteria and referred the competence to decide on specific cases to the national regulators, which in the future will exercise a formidable power in this matter. This scenario is indigestible to big telcos which would prefer to avoid to discuss their commercial practices with national regulators (because in that case they also have to discuss with consumers associations).
Secondly, criteria and conditions laid down by Berec will have an important impact upon the heart of big telcos’ commercial strategy. Berec indicates that “non-agnostic” zero-rating and network management practices will likely to be forbidden by national regulators. This is a disastrous news for big telcos because discriminating Internet services (in order to favor own or partnered services) is what this telco industry has in mind since all the net neutrality battle and debate started (in 2005 in the EU).
Fact is, since margins of connectivity have been declining in the years because of technology and competition developments (especially with regard to the mobile sector), big telcos have been thinking to recover money by bundling connectivity with services by way of discriminatory practices, so as to receive additional fees at least from content and services providers (accused to use their networks for free: but this is another story). This claim has been normally presented as “innovation”, however it is difficult to understand how zero-rating or network management practices favoring a specific Internet service, to the detriment of others, could be seen as “innovative”. In other words, there is nothing of innovative in giving access to Spotify, WhatsApp or Facebook for free (i.e., discounting their traffic from data caps) or in clean uncongested way (which should be normal, by the way). Innovation means providing new services, rather than providing the same services in a more complex, expensive and byzantine way.
Luckily, Berec has rightly understood the issue. Kudos.
European Court tries to fix data retention bugs
The Advocate General Saugmandsgaard Øe of the Court of Justice of the European Union has delivered an opinion whereby it suggests that national Member States may enact general obligation on ISPs to retain personal data, provided that that that obligation be circumscribed by strict safeguards and that the scope of the legislation is to fight serious crimes (not whatever). The opinion has been rendered in cases regarding the compatibility with EU law of data retention legislation in Sweden and UK (Joined Cases C-203/15 Tele2 Sverige AB v Post-och telestyrelsen and C-698/15 Secretary of State for Home Department v Tom Watson and Others).
The Advocate General’s intent seems to be a re-working of the famous decision of 2014 by which the European Court annulled the EU data retention Directive (directive 2006/24) on the grounds, inter alia, that it laid down a too general and far-reaching retention obligation contrary to human rights. Because of that decision, in Europe various national legislations on data retention have become potentially incompatibile with EU law, and in fact many of them have been revised or annulled.
With the present opinion the Advocate General seems to fix the issue that, even if the scope of a data retention legislation must be circumscribed to serious crimes, the obligation can be nevertheless drafted in a general way. Fact is, while storing and retaing personal data, ISPs cannot know – ex ante – whether such data refer to serious crimes or other less relevant criminal facts. Therefore, they can be obliged to retain all kind of data they process, however the access to them for criminal investigation shall be restriceted and subject to special guarantees.
If confirmed by the European Court, the reasoning of the present opinion can likely become the basis for a new directive on data retention.
Bye bye, zerorating
Berec, the European regulatory agency, has issued its draft guidelines on the implementation of net neutrality rules (namely the rules enacted by arts. 1-5 of Regulation 2015/2120). The move of Berec was well-expected because the new European net neutrality rules leave wide margins of appreciation and a clarification for a consistent enforcement by national regulators is needed. BECEC is accepting feedback from interested parties on the draft guidelines until 18 July 2016. The guidelines will be finalized and published in September 2016.
The most debated subject to be clarified by Berec was the one of zero-rating, i.e. the commercial practice whereby ISPs apply a price of zero to the data traffic associated with a particular application or category of applications (and the data does not count towards any data cap in place on the Internet subscription). Big telecom operators have defended this practice on the assumption that it could boost innovation (although the innovation would merely limited to a price scheme, not to new services). Consumers and civil rights associations are normally against, because zero-rating would, as a result, influence the user’s choice of Internet services on the mere ground of the cost of Internet connectivity. More recently, operators and associations gathered in the Netcompetition alliance have underlined the anticompetitive effects of zero-rating practices for alternative telcos and innovative Internet service providers, in addition to consumers.
It must ne noted that the European rules on net neutrality are quite ambiguous. While they never mention explicitly zero-rating, they guarantee (article 3.2. of the Regulation) a general commercial freedom for ISP and users to negotiate data caps agreements they want, provided, however, that the “free choice” by users is not substantially undermined (art. 3.1.).
Recital 7 of the Regulation is a bit more clear:
“National regulatory and other competent authorities should be empowered to intervene against agreements or commercial practices which, by reason of their scale, lead to situations where end-users’ choice is materially reduced in practice. To this end, the assessment of agreements and commercial practices should, inter alia, take into account the respective market positions of those providers of internet access services, and of the providers of content, applications and services, that are involved. National regulatory and other competent authorities should be required, as part of their monitoring and enforcement function, to intervene when agreements or commercial practices would result in the undermining of the essence of the end-users’ rights”.
Taking into account of the above, Berec has not banned zero-rating practice but have left to national regulators the task to carry on a case by case assessment. However, the criteria suggested and the circumstances to verify suggest that national regulators may have string poker and wide discretion to ban zero-rating behaviors in practice.
In particular, Berec is suggesting that when a zero-rating practice is aimed at privileging a single service or applications, at the detriment of other competing services/apps, this behavior should be considered unlawful. More precisely, Berec stressed that (§39):
“the zero price applied to the data traffic of the zero-rated music application (and the fact that the data traffic of the zero-rated music application does not count towards any data cap in place on the IAS) creates an economic incentive to use that music application instead of competing ones. The effects of such a practice applied to a specific application are more likely to “undermine the essence of the end-users’ rights” or lead to circumstances where “end-users’ choice is materially reduced in practice” (Recital 7) than when it is applied to an entire category of applications”.
Truly speaking, if national regulators will literally follow this rule (as I hope, by the way) the zero-rating business is dead. The sole incentive of zero-rating practices, for dominant ISPs and OTT, is discriminating competing services. There is no commercial rationale for an agnostic application, i.e., like Berec says in theory: “as long as the data volume and speed characteristics are applied in an application-agnostic way (applying equally to all applications), end-users’ rights are likely to be unaffected by these characteristics and conditions”.
Thus, bye bye zero-rating.
The end of domestic mobile consolidation in the EU
Rumors say that tomorrow 4 of May (or later during the month) the European Commission will render a negative opinion (a prohibition, in other words) about the merge in UK between the mobile operators 02 (Telefonica) and Three (Hutchison Wampoa).
If confirmed, this move will not come unexpected because in many instances the Competition Directorate (DG Comp) of the European Commission has suggested that mobile consolidation in mobile domestic market is not welcomed. Instead, mobile operators should rather look at cross-border consolidation, creating pan-european operators able to compete in a cross-borders scenario that will become more and more actual when (and if) the roaming surcharges will be phased out in June 2017. At that point, European operators may be able to provide mobile subscriptions to be used in a plurality of European countries and, as a result, consumers my theoretically choose a foreign mobile operator even for domestic needs (this situation, named permanent roaming, is however contested and sometimes considered even “abusive”. This is another story, for now).
The UK precedent will create a fundamental landmark case for the European telecom sector and, as a consequence of that, it is unlikely the similar mergers (see for instance the current one in Italy between Three and Wind) will ever be approved in the future.
Concerned mobile operators will probably complain that the “4 to 3” consolidation is necessary in UK, like in Italy or France, to boost network investments. However, it is crystal clear that the European Commission has heard and carefully considered this argument, without finding, however, concrete evidence. If the investment argument was credible, the merging entity should have accepted the Commission’s desired remedy, that is to say the creation of a new mobile operator through the transfer of spectrum, network resources and customer base by the merging entities. Such new mobile operator should not have damaged the investment plan of the merged mobile operator. By disregarding this option, Hutchison and O2 have reinforced in the Commissions the suspect that the reduction of mobile operators is merely focussed on limiting competition and increasing margins (to the detriment of consumers).
For future guidance, one would hope that the European Commission will provide a robust reasoning for its decision. Such reasoning missed in a precedent case, the aborted merger in Denmark between Telenor and TeliaSonera, because the parties abandoned the transaction before getting a formal rejection. By contrast, now it would important that the Commission clarifies that competition conditions are more important than “magic numbers”, such as 3 or 4 operators. What really matters, for competition, is a market structure encouraging the players to really compete and gain new customers. In mobile markets this surely happens when markets shares are unbalanced and there are small players, mobile operators but also MVNO, fighting to increase their position.
This is the reason why also the envisaged merger in Italy between Wind and Hutchison is close to fail (a dead walking man, to be clear) . Fact is, following the potential merger the 3 Italian operators left, such as TIM, Vodafone and Three/Wind, would detain balanced markets shares – a scenario that, according to the European Commission, facilitate mutual collusion rather than competition.
Two items will probably remain opened after the (likely) rejection decision, tomorrow or in the next weeks:
1. did the European Commission sufficiently considered the MVNO remedies offered by the parties? It seems that DG COMP has never believed too much in MVNOs, disregarding the competitive pressures that such MVNOs may exercise over mobile operators. Indeed, DG COMP has the power to impose strong MVNO remedies, instead of imposing the creation of a new mobile operator, and the efficiency of such virtual operators rely on the mobile access conditions that the European Commission itself may decide.
2. In the future there will be a discrepancies between countries (Germany, Ireland and Austria) where mobile mergers have been approved thanks to the previous laissez-faire of DG COMP (when headed by Almunia) and countries where such mergers are going to be prohibited due to the stricter approach of the same DG COMP (now headed by Vestager). Should the European Commission start to think how to redress passed mistakes?
And what about #brexit? Many commentators may argue that the Commission’s decision my be seen as an attempt to please UK. I would say that this is just a coincidence: OFCOM and DG COMP have similar view about mobile consolidation, although the reason for each may be complex: OFCOM wants to keep 4 mobile operators to protect consumers and to avoid the need to intervene with regulation into the mobile market; DG COMP wants to boost pan-european consolidation, and the best way to do it is to forbid the domestic one.
