knowledge 28 September 2020 |

EU Court Considers Net Neutrality Law for First Time and Restricts Use of “Zero-Rating” Internet Packages

In recent years, net neutrality has become an increasingly important issue for both internet service providers (“ISPs”) and internet users. To address this issue, the European Union enacted the Net Neutrality Regulation, which entered into force in 2016.

Article 3(1) of the Net Neutrality Regulation grants internet end-users “the right to access and distribute information and content, use and provide applications and services…via their internet access service”.² In addition, ISPs may not limit end-users’ access and distribution rights through agreements and commercial practices.³ Lastly, internet traffic must be treated equally by ISPs, however, ISPs are permitted to put reasonable traffic management measures in place so long as they are transparent, non-discriminatory and proportionate as well as being based on technical requirements.⁴

A key element to the Net Neutrality Regulation is the requirement that ISPs shall not limit end users’ right to access and distribute information and shall treat all traffic equally.  This casts doubt on the legality of the practice known as “zero rating”, which typically involves an ISP excluding use of certain applications and services (e.g. Facebook, WhatsApp and Twitter) from customers’ data consumption limits.

From a competition perspective, zero rating raises a number of concerns as it allows ISPs to prioritise access to certain applications and/or services. For example, an ISP could apply a zero rating to data traffic associated with one music streaming application, creating an economic incentive for users to use that service over competing ones.

Notwithstanding the Net Neutrality Regulation’s requirement that all internet traffic be treated equally, a number of ISPs throughout the EU continued to offer plans which included zero rating.  

Background to the decision

The case arose from a finding by the Hungarian National Media and Communications Office that two of Telenor’s internet packages were not in compliance with the Net Neutrality Regulation. The packages at issue applied zero rating to specified applications and services, with the result that use of those applications and services did not affect end-users’ data limits, and once those data limits were exceeded, end-users could continue to access those specified applications and services without restriction. In contrast, internet traffic management measures would be put in place for other applications and services. These measures had the effect of slowing down or blocking traffic for other applications and services.

Telenor contested these findings in an action before the Budapest High Court which referred the case to the CJEU for guidance on the treatment of zero rating packages by national authorities and courts.

What did the CJEU decide?

The CJEU began by providing clarification on the interpretation of certain terms under the Net Neutrality Regulation. In particular, the CJEU noted that the term “end-user” “encompasses all legal entities or natural persons using or requesting a publicly available electronic communications service, other than those persons providing public communications networks or publicly available electronic communications services”.⁵ Consequently, this means that both consumers and businesses benefit from the internet access and distribution rights as well as the right to provide applications and services laid down by Article 3(1) of the Net Neutrality Regulation.

Therefore, any analysis of a possible prohibited limitation on end-user rights would have to consider not only the effects on end-users’ access and rights, but also the effects on end-users reliant on internet access to provide applications and services.⁶

The CJEU stated that the assessment of whether an end user’s rights had been limited in contravention of Article 3(2) “involves determining whether the agreements and commercial practices of such a provider lead, by reason of their ‘scale’, to situations where end users’ choice is materially reduced, taking into account, in particular, the respective market positions of the providers of internet access services and of the providers of content, applications and services that are involved.”⁷ In light of these factors, the CJEU concluded that an internet package which included zero rating for certain applications and services, and allowed unrestricted access only to those services once a certain data volume had been exhausted, is liable to restrict the rights contained in Article 3(1) of the Net Neutrality Regulation while also reducing use of other applications and services.⁸

As regards the limited exception contained in the Net Neutrality Regulation which allows ISPs to put in place reasonable traffic management measures, the CJEU found, in particular, that this exception could not apply in the instant case as the measures were discriminatory, and thus could not be considered to be reasonable.⁹

As a result of these findings, the CJEU concluded that the packages at issue were not in compliance with the Net Neutrality Regulation.

Conclusion

ISPs will need to ensure that all internet packages which they may offer are in compliance with the Net Neutrality Regulation, and in particular that they do not breach the restrictions on zero-rated contracts, irrespective of whether those contracts are with consumers or businesses.

In relation to Ireland, it is interesting to note that the Commission for Communications Regulation (“ComReg”), which is tasked with enforcing the Net Neutrality Regulation in Ireland, recently stated in a report on the implementation of the Net Neutrality Regulation in Ireland that it “found no evidence for the existence of relevant zero-rated services in Ireland”.¹⁰ This is in contrast to a similar report by ComReg from 2019 which stated that it was aware of zero-rating practices in Ireland.¹¹

These findings would therefore suggest that zero rating packages were, in any event, becoming less common prior to the CJEU’s judgment, which will no doubt further hasten their decline in the EU.

Also contributed by Niall FitzGerald and Ciarán Donohue.