Digital Technologies and the scope of regulation: how does regulation apply to Over-the-Top players like Google and WhatsApp?

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The explosion of digital services delivered via telecommunication networks is creating a challenge for the old regulatory framework. Voice, text, photos-videos are offered by OTT (Over-the-Top) services via the availability of connectivity services by network operators on the Internet. We are talking about Skype, WhatsApp and Google on our smartphones, which are able to offer communication systems to costumers at a very low cost with extremely handling software.

By contrast, some problems arise by confusing terms and conditions, a lack of availability concerning emergency services and blurred personal data protection for users and end-users. This regulatory asymmetry is causing a significant distortion in market competition because Electronic Communication Providers are bearing the cost of this conflicting regulation. Thus, the key question is: how should the regulation of Over-The-Top (OTT) digital services be managed in the Internet age?

 

Over-the-Top Services (OTT): Definition and Market Perspective

First of all, OTT is: “the buzz expression for services carried over the networks, delivering value to customers, but without any carrier services provider being involved in planning, selling, provisioning, or servicing them – and of course without any traditional telco booking revenue directly from them”.

To have a broader idea, VoIP (Voice over the Internet Protocol) services across devices are constantly growing worldwide from 572 million in 2013 to over 1.5 billion at the end of 2018.  For instance, WhatsApp is expected to increase VoIP to allow use for its 600 million active users.

On the whole, it is a big threat for telecom operators by lowering their income from calls and SMS services; nevertheless, this is very convenient for users and consumers by expanding their product choice. In the EU, legislation to engage appropriate market regulation are almost obsolete, threatening the public interest as well failing to adequately protect consumers in a framework of distorted competition (Walden, 2013, Chapt. No.4).

 

Regulation and Legislation in EU: State of the Art

For telecommunications regulation in EU, it is necessary to start with the New Regulatory Framework (NRF) 2002/21/EC. This new formula is required for all forms of communication or transmission technology. Due to the fact that the old concept of telecommunication becomes obsolete, we are approaching to new definitions such as Electronic Communication Services (ECS). If the NRF establishes a unique regime for conveyance or conduit services, the area of content is regulated differently by EU law, which distinguishes between ‘audiovisual media services’ (AMS) and ‘information society services’ (ISS). Recital no.9 of the Directive provides that ISS are covered by the Electronic Commerce Directive (ECD) which includes services that are more than ‘wholly or mainly in the conveyance of signals’. By contrast, AMS deal with provision or exercise of editorial content.

According to Walden: “The boundary between this latter activity and the provision of electronic communication services is particularly blurred, given the potential variety of interpretations of the phrase “mainly in the conveyance of signals” (Walden, at 147). From one side, the ISS definition posits its limits concerning new business models into the digital market (e.g. OTTs). On the other side, the ECS definition has recently come under discussion by the Commission to remove ex ante specific obligations for traditional voice services, looking for progressive reduction of regulation and approaching on more competitive models. (See recital no. 1-6 and recommendation no. 3)

If interpreted narrowly, OTTs would not be considered an ECS because it does not consist of a ‘conveyance of signals’ which requires a transmission service that users must subscribe or have access to. In other words, we uncover a paradox: e-mail services provided by telecommunication operators belong to ECS, whilst email services supplied by OTT providers belong to ISS. From a consumer’s point of view however this service is exactly the same, when they have no interest about the different technical definitions that apply.

 

How Should the Regulation of Over-the-Top (OTT) Digital Services Be Managed in the Internet Age? Proposed Solutions

In seeking a solution to this, Commission Recommendation of 9.10.2014 illustrates the EU’s political stance on this issue. From this, we can identify three main solutions:

 

  • The assumption ‘conveyance of signals’ in ECS on the Framework Directive should either be modified or deleted. In line with the Recommendation on Relevant Markets we continue to search for a new definition that includes: services previously were ISS and are subsequently OTT; digital services  that are -at least apparently- provided for free; as well as traditional calls and SMS/MMS messaging;
  • Reasoning from a cross-sector perspective focused on privacy and data protection. General Data Protection Regulation (GDPR) should represent an alternative to resolve this challenge introducing several obligations described in the E-Privacy Directive (EDP). To be precise GDPR does not exclude ECS from its scope, so, both GDPR and EDP are referring to ECS. This double regime pushes up overlaps, uncertainty and lack of transparency for operators and users. According to art. 86 (1)-(2) of GDPR, almost some parts of EPD should be deleted;
  • Security obligations and guarantees (e.g. emergency calls, sector specific privacy rules, number portability, etc.) provided by Framework Directive to telecom operators should be maintained and incorporated into a new horizontal instrument. Providing horizontal guarantees to consumers and preventing regulatory arbitrage might be fundamental to restore fair competition between telecom operators and OTTs.

 

Finally, some scholars sustain that if network operators are suffering financial losses due to consumers switching from traditional services to OTTs – in absence of an immediate and proportionate measure to fix this situation – they could invest in market opportunities such as network sharing and making partnerships with providers.

 

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