The end of zero rating?

Person pointing at green text on screen1

The Court of Justice of the European Union has ruled in its first case on the interpretation of the EU's "open Internet" regulation — known by some as the "net neutrality" framework.

The Court was asked to consider the issue of "zero rating", in the context of two packages offered by Hungarian telco Telenor:

  • ‘My Chat’ is a package which enables subscribing customers, first, to purchase 1 GB of data and use it without restriction until that data has been used up, accessing freely the available applications and services. Moreover, the use of six specific online communication applications, namely Facebook, Facebook Messenger, Instagram, Twitter, Viber and Whatsapp, which are covered by a ‘zero tariff’, is not deducted from that 1 GB data limit. Secondly, the ‘My Chat’ package provides that once the 1 GB of data has been used up, subscribers may continue to use those six specific applications without restriction, whereas measures slowing down data traffic are applied to the other available applications and services.

  • ‘MyMusic’ is a package available in three different formats, ‘MyMusic Start’, ‘MyMusic Nonstop’ and ‘MyMusic Deezer’, respectively, which are accessible to customers with a pre-existing internet-access services package. Those formats enable subscribers, first, to listen to music online using four music streaming applications in particular – Apple Music, Deezer, Spotify and Tidal – and six radio services, and the use of those ‘zero tariff’ applications and services is not deducted from the data volume included in the format purchased. Secondly, the ‘MyMusic’ package provides that once that data volume has been used up, subscribers may continue to use those specific applications and services without restriction, whereas measures blocking or slowing down data traffic are applied to the other available applications and services.

In essence, users can buy a package which lets them use any services they want, up to their data allowance, but which lets them use certain, specific services as much as they like: traffic to and from those services does not count towards their data allowance. Once the user has used all of their data allowance, access to other services is blocked or degraded, but they can still access these specific services.

The CJEU was asked to look at four specific questions, which it condensed into one: is the approach to zero rating taken here compatible with either or both Articles 3(2) and Article 3(3) of the open Internet Regulation.

The Court's answer was that such a service is incompatible with both. The Court said that those services:

  • are incompatible with Article 3(2) of Regulation 2015/2120, read in conjunction with Article 3(1) of that regulation, where those packages, agreements, and measures blocking or slowing down traffic limit the exercise of end users’ rights, and

  • are incompatible with Article 3(3) of that regulation where those measures blocking or slowing down traffic are based on commercial considerations.

Article 3(2), in which the CJEU gives some room for manoeuvre

The Court limited its finding in respect of Article 3(2) to the situation in which the measures in question "limit the exercise of end users' rights".

The Court analysed whether this was the case for the measures here, and concluded that it was. However, its determination on this point is:

the conclusion of such agreements on a significant part of the market is liable to limit the exercise of end users’ rights, within the meaning of Article 3(2) of Regulation 2015/2120 (my emphasis)

Moreover, the Court felt that:

the greater the number of customers concluding subscription agreements to such packages, the more likely it is that, given its scale, the cumulative effect of those agreements will result in a significant limitation of the exercise of end users’ rights, or even undermine the very essence of end users’ rights

Does this give a provider scope to argue about the uptake of a particular package, and whether it is sufficiently limited that it poses no risk?

Or whether any limitation of rights is likely to be "significant"?

Or what if the "zero rated" services just consumed data at a lesser rate, rather than zero rate?

Or what if the user could pick which services fell within their zero rating bundle? (Although perhaps not appealing to communications providers, especially if they have commercial agreements with the zero-rated services.)

Possibly, if Article 3(2) was the only barrier to overcome.

But it's not. And the decision on Article 3(3) seems to be the nail in the coffin here, if zero rating leads to some services being degraded.

Article 3(3), in which it seems to take it away again

Even if a provider could find some way to wiggle around Article 3(2), the Court's ruling on Article 3(3) offers little assistance.

While providers can adopt "reasonable traffic-management measures", these must be based on "objectively different technical quality of service requirements of specific categories of traffic", and not on "commercial considerations".

Is there scope to argue that the kind of zero rating at issue here is not based on "commercial considerations"? Not really:

In particular, any measure of a provider of internet access services in respect of an end user [which is one of the zero rating approaches described above], which, without being based on such objective differences, results in the content, applications or services offered by the various content, applications or services providers not being treated equally and without discrimination, must be regarded as being based on such ‘commercial considerations’. (my emphasis)

Second, the Court reiterated the requirements of the Regulation, that the measures must be only a fixed period and must be limited to those necessary to comply with a legal obligation, to preserve the integrity and security of the network or to prevent or remedy network congestion.

The Court ruled that:

all measures consisting in blocking, slowing down, altering, restricting, interfering with, degrading or discriminating between specific applications or services cannot be considered reasonable within the meaning of the second subparagraph of Article 3(3) and must, therefore, in themselves be regarded as incompatible with [these requirements]

There is no need, the Court said, to assess the impact of the measures of end users' rights, because that is not a factor in assessing compliance with Article 3(3).

What does this mean?

I wish I had some thing pithy and wise to say here. But I don't.

On its face, the ruling appears to pose a considerable challenge to communications providers which currently offer zero rated services. And, while the ruling in terms of Article 3(2) seems to offer some room for manoeuvre, this appears to me to be taken away by the blunt finding in terms of Article 3(3) if the outcome would be blocking or degrading of services.

I suspect some operators will look to see what they can do within the parameters of the judgment. If they can find a way to continue to offer zero rated services without triggering Arts 3(2) and 3(3), they may well do so. For example, by zero rating certain services only while a user has credit which lets them also access other services, a provider may be able to argue that Article 3(2) is satisfied, and Article 3(3) is not triggered.

Or perhaps we’ll see an end to zero rating. Is this a bad thing? It depends on your perspective.

These packages are attractive to telcos and, presumably, are attractive to some customers too.

But, if you are trying to launch a competing service to one included in a zero rating bundle, and traffic to your service comes out of a user's data allowance while traffic to your competitor's service does not, well, you've got another barrier to entry to overcome.

We'll need to see how this pans out but, seemingly, this is a pretty clear strike against many current approaches to zero rating.

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