> Information Technology, Media and Electronic Communications

Facebook, Viber, YouTube, Netflix…soon subject to stricter regulation

Since the changes to the European regulatory framework for electronic communications in 2009, the ways users access electronic communications services and audiovisual content have changed a great deal. European Commission tries to keep up with it by proposing the latest amendments to the regulatory framework.

The times of communicating with each other using only publicly available telephone services (fixed or mobile) and short messaging services (SMS) offered by traditional telecom operators, are gone. The times of audiovisual content (movies, shows, sporting events broadcasts, series, serials, etc.) viewed only on traditional TV available thanks to cable, satellite and other operators, are gone, too.

A wide availability of the Internet (especially via mobile networks), increasing transmission capacities of electronic communications networks, and more frequent and intense connectivity of devices to the Internet have enabled the expansion of new web services, which more and more represent a competition to abovementioned traditional services or are supplementing them. We are talking about so-called OTT (over-the-top) services, today offered by some of the most vigorous companies in the information and communication technologies industry.

In fact, what are OTT services? If in traditional services – so-called managed services such as telephony and linear television — a service provider exercises significant control over fixed or mobile access network it uses to deliver services, OTT services are typically online services that are not provided using the service provider’s own communication networks or by leasing network capacities from public communications networks operators, but are using infrastructure of the Internet in a way that services are accessible to anyone with Internet access. OTT services are therefore generally provided without any involvement of a network operator who would oversee the services or content distribution.

OTT services are extending to different areas (sectors). Since a role of traditional telecommunications service providers had been intensively taken over by the providers of Internet telephony and instant messaging (eg. Skype, Viber, WhatsApp), a role of audiovisual content providers had been taken over by online video platforms providers (e.g. YouTube, Netflix) in a notable extent. In all of these services, we are talking about OTT services in a sense described above. OTT services also include many other online services, for example music streaming services (e.g. Spotify, Deezer, iTunes, Pandora), storage services and cloud data sharing (e.g. Dropbox, iCloud), and social networking services (Facebook, Google+, LinkedIn).

The growing presence of OTT services in the market has raised a number of interesting legal issues. One of the key questions is whether to – and to what extent – equalize conditions for operating in the market for these service providers on the one hand, and traditional providers of comparable services on the other.

Provision of traditional services (e.g. publicly available electronic communications services and audiovisual media services) is on the one hand subject to the so-called horizontal regulation which applies to all services (regardless of their nature, and therefore also to OTT services), and, in addition, to sectoral (vertical) regulation that imposes certain additional obligations and restrictions. Thus, for example, the provision of publicly available electronic communications services is subject also to the vertical regulation in the field of electronic communications (at a national level, we are talking about the Electronic Communications Act), while the provision of audiovisual media services (AVMS) is subject also to special regulation under the special directive, and – based on this – to the national AVMS act.

Provision of OTT services, on the other hand, generally has not been subject to any special sector-specific rules so far, but only to horizontal regulation. The consequence of the absence of sectoral (vertical) regulation that would cover OTT services is that traditional providers are subject to stricter regulation than OTT service providers in certain respects despite providing seemingly similar services. And here is the root of the problem: if traditional service providers and OTT service providers offer similar services, it would of course be expected both to be subjected to similar regulation. It would ensure a level playing field and fair competition among providers.

Discussions about whether to legally regulate OTT services and to what extent, and how to ensure equal market conditions have been ongoing for years now. Solutions that would ensure equal treatment of traditional and OTT service providers can go in two directions. The first option is to extend sectoral regulation to OTT services and try to resolve this issue in a way that where the regulation is linked to specific legal definition of services, such services are defined in a way that reflects the users’ view on what is substitutable and what is not. The second option is to consider loosening the regulation now covering traditional service providers in those parts where the regulation is stricter, and rely more on horizontal rules, which are not limited to a particular sector (e.g. rules on consumer protection, protection of personal data, electronic commerce).

For now, the provision of OTT services has not yet been given any special regulative attention in the EU and Slovenia. In its Digital Single Market Strategy for Europe, the European Commission identified a problem of different levels of legal regulation of comparable services, and the need to review the telecom rules based on ensuring the same competitive conditions for market participants that provide competitive services. In its strategy, the Commission also indicated the need to examine the system of rules related to audiovisual content, since it does not cover certain online services available on demand.

On the basis of these strategic guidelines, the Commission has already developed two proposals for amendments to existing directives in the field of electronic communications and AVMS. The European Electronic Communications Code proposal of 14 September 2016 extends the concept of electronic communications services so as to cover the OTT communication services as well and thus subject them to the same regulation as traditional services; while the proposal for amendment to a directive on AVMS of 25 May 2016 is expected to – to a limited extent – extend the AVMS services regulation to video-sharing platforms.

Jadek & Pensa Law Firm is closely following these developments and will report on them in detail in the future.