Content still king? EU targets online content services

The popularity of non-linear TV, music streaming, e-books and other online content services is increasing. In their aim to create Digital Single Market, European authorities intend to anticipate the developments on content and content-related markets by means of specific regulations, and to stimulate cross-border use of content (see also our earlier blog). From various angles, a wide range of content services are increasingly subject to new regulations and directives. This blog addresses the most recent developments in the regulatory framework surrounding online content services.

Cross-border portability of online content

The first step towards a single market for online content services was the entry into force of the Regulation on cross-border portability of online content services (the “Content Portability Regulation”) on 1 April 2018. Providers of paid online content services, such as Netflix, Spotify and Ziggo Go, are now required to make content available to subscribers who are temporarily present in another member state than the one in which the content service was purchased (the “Member State of residence”). An exact definition of the term “temporarily present” is however not provided. It is primarily up to content providers to decide on that point.

In practice, this means that subscribers to, for instance, Netflix must have access during their holidays (i) to the same content; (ii) on the same devices (smartphone, tablet or laptop); (iii) with the same functions (streaming, downloading); and (iv) for the same number of users as in the Netherlands. Content providers may not charge any extra costs for providing this access. Because networks for fixed and mobile Internet abroad are often not the same as those in the Member State of residence, content providers are not required to guarantee the same level of quality everywhere. Also, end users themselves are responsible for access to the Internet abroad and for the possible costs involved.

Under the Content Portability Regulation, content providers are obliged to verify what a subscriber’s Member State of residence is during the term of the contract (Article 5). In principle, providers of unpaid content services, such as YouTube and Dumpert, are not subject to these obligations (Article 6), as the European legislature considered it too drastic for them to identify the place of residence of users. However, such parties may voluntarily declare the Regulation applicable to them in order to also profit from the exemption from copyrights clearance offered by the Regulation.

The new content portability rules in fact circumvent the current copyright regime, in which licences for the transmission of content are usually granted on a territorial basis. No clearance of copyrights is required to make content temporarily available outside the Member State for which providers of content have a licence. Any form of long-term cross-border provision of content falls, however, outside the scope of the Content Portability Regulation. The EU legislature intends to address this in upcoming regulations (see below).

Geo-blocking and copyright-protected content

Another recent regulation aimed at stimulating cross-border use of services is the Regulation on addressing unjustified geo-blocking (“Geo-blocking Regulation”) which will enter into force on 3 December 2018. The impact of the Geo-blocking Regulation on online content services will, nonetheless, be limited. As explained in our earlier blog, copyright-protected works fall outside the scope of the Geo-blocking Regulation. Specifically, this means that in case of digital sale of music and video services, e-books, computer games, etc., distinctions in sales and access conditions may still be made on the basis of nationality or place of residence of the end user.

Although unilateral geo-blocking measures in relation to digital content services are still permitted (for the time being), a number of comments should be made in that regard. First, the European Commission has already opened several investigations into bilateral geo-blocking measures on content-related markets. Film producer Paramount, for instance, committed in 2016 in response to objections from the Commission, that it would no longer stipulate clauses in film licence agreements which require broadcasting organisations, such as Sky UK, to block access to film content for consumers from other Member States.

The Commission is currently investigating computer game producer Valve and distributors of computer games regarding their use of activation keys, which may geographically divide the distribution of computer games. Insofar geo-blocking results from distribution agreements between suppliers and distributors, classic competition law can be invoked to limit the possibilities for companies that operate on content-related markets to divide the distribution of content services along the borders of different Member States.

It is furthermore important that the effect of the Geo-Blocking Regulation will be evaluated in two years’ time. It will be expressly considered during the evaluation whether the scope of the regulation should be expanded to include (digital) copyright-protected works. It is conceivable that after the introduction of the new copyright rules, there will no longer be any reason to exclude copyright-protected works from the geo-blocking rules.

Upcoming changes

As part of the upcoming modernisation of the copyright rules, a Regulation was proposed aimed at facilitating the access of sector-wide cross-border (online) content. The objective of the Regulation on online transmissions of broadcasting organisations and retransmissions of television and radio programmes is to simplify EU-wide clearance of copyrights for online (ancillary) services of broadcasting organisations by applying the “country of origin principle”, according to which the relevant copyright clearance act takes place solely in the Member State where the broadcasting organisation is established. The Regulation furthermore provides for a system of mandatory collective management facilitating the clearance of rights for retransmission services by operators of telecom networks (except for cable networks, to which such a scheme already applies). Negotiations between various European institutions on the exact details and scope of the Regulation are ongoing. Over the past few months, both the European Parliament and the Council have made amendments to restrict the loosening of clearance of rights to certain categories of broadcasts.

Also with regard to the substance of content, upcoming rules aim to anticipate on changes. The proposal on the revision of the Audiovisual Media Services Directive, for instance, addresses the protection of minors and prevention of hate speech in audiovisual media. The new Directive on copyrights in the digital single market in its turn relates to harmonisation of the use of online audiovisual works, e.g. for educational and cultural purposes.

Content services and zero rating

Finally, a related development is taking place in the field of net neutrality. The Regulation on net neutrality (“Net Neutrality Regulation”) and the accompanying guidelines of BEREC are now two years in force. According to a report by BEREC of late 2017, the net neutrality rules are being coherently applied by national authorities. BEREC nevertheless saw reason in March of this year to organise a new public consultation round to ask market players for their input on (in particular) the application of the zero rating provision. Zero rating is a form of positive price discrimination in which certain services can be used without data consumption being affected.

In practice, the current guidelines offer only vague tools to assess whether or not zero rating practices contravene the non-discrimination principle or end user rights as incorporated in the Net Neutrality Regulation. This leads to a strong case-by-case analysis and a risk of divergences in enforcement policies of national authorities.

The Netherlands Authority for Consumers & Markets (“ACM”) is not afraid of applying the net neutrality rules in practice. After a Dutch District Court found that the stricter Dutch legislation (which prohibits all forms of price discrimination) conflicted with EU law, the ACM ruled that T-Mobile’s Data-free music service is permitted under the European rules. Interest group Bits for Freedom disagrees with ACM’s finding and recently announced it will appeal ACM’s decision. It would therefore appear that the discussion whether or not zero-rating disadvantages small providers of content platforms, as Bits for Freedom alleges, has therefore by no means reached its conclusion yet.

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