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Facebook, Google & Big Telecoms Want to Keep Violating Net Neutrality in Europe. Regulators Should Stop Them.

The E.U.’s top telecom regulator BEREC is set to issue new net neutrality rules, after the European Court of Justice found that discriminatory zero-rating plans such as T-Mobile’s StreamOn and Vodafone’s Pass violate Europe’s net neutrality law.

In a proceeding that has gotten almost no press attention, BEREC is deciding what the new rules should be for carriers that “zero-rate” some applications by exempting them from customers’ monthly data caps. These discriminatory schemes almost invariably favor the carrier’s own services or those of giant platforms like Facebook and YouTube.

What BEREC decides will affect millions of Europeans, and, if BEREC gets it right, will boost how much data people get every month while restoring competition online. Carriers will no longer be able to limit how people can use their data or push them to use apps from the dominant platforms.

BEREC, which is comprised of the national telecom regulators from across the EU, will vote on the new rules in June, but is under intense pressure from Facebook, Google, and big telecoms to leave in loopholes so discriminatory zero-rating can continue.

Discriminatory Zero-Rating Cements the Market Power of Dominant Platforms 

Zero-rating is a practice where a carrier does not count some online activity against a users’ data cap. For example, many European carriers offer plans that don't count the data you use on Facebook or Whatsapp against your data cap. 

Choosing which apps get zero-rated has a powerful effect on user behavior. Many people are wary of going over their cap, because that leads to steep fees or slow connections. As a result, people prefer zero-rated content over content that eats up their data. When data used on Facebook doesn’t count against the cap while data used to access an upstart competitor does, it’s easy to see why consumers will stick with Facebook even when the competitor offers a better product. 

At issue in the recent court decisions were so-called “open” zero rating plans, or plans that purported to zero-rate entire categories of apps such as music or video streaming. While these sorts of plans are theoretically open to all competitors for a given type of application, they typically include only a few applications.

These plans disproportionately benefit the biggest platforms because only the largest companies can afford to participate in many zero-rating plans. Joining zero-rating plans is technically difficult, time-intensive, and costly, especially for small competitors. For instance, services have to spend time and money to work closely with carriers on traffic identification. Whenever a company makes changes to its service, it has to go through the process again. That’s hard for everyone, but impossible for many startups, small players, and non-commercial speakers. 

Moreover, large carriers often don’t even reply to smaller companies that apply, and, even when they do, getting in isn’t easy. AudioMack, a music application that is growing rapidly in the U.S., wanted to get a foothold in Europe. The company looked into 34 zero-rating plans in Europe that are open to music apps. 25 carriers did not offer a way to apply or did not reply to AudioMack’s application. After ten months of work, it was included in 3 plans. Meanwhile, Apple Music was featured in 26, and Spotify was in 23. 

In addition, a 2019 Epicenter.Works study found that there were 186 different zero-rating offerings across Europe. Only the largest companies have the resources and clout to fully take advantage of these programs. In fact, the majority of zero-rated apps were only able to participate in at most three plans. Of the top 20 zero-rated apps in the E.U., only 3 are from Europe. The two-most zero-rated apps? WhatsApp and Facebook. 

That’s not just unfair, it cements the market power of the dominant platforms.

Source: 2019 Epicenter.Works Study

 

When Discriminatory Zero-Rating is Banned, Data Caps Go Up and Prices Come Down

Zero-rating is only attractive to consumers when data caps are low and data is expensive. When discriminatory zero-rating is banned, carriers respond by raising data caps and lowering the price of data. Startups get to focus on making better applications, rather than trying to get into zero-rating programs. And people get more data to use as they please.

For instance, a 2016 study compared €30-plans from European carriers that zero-rate video to those that didn’t. Those that didn’t zero-rate had data caps that were 8 times higher. When the Dutch regulator banned a carrier’s harmful zero-rating scheme, the company responded by doubling people’s data caps. 

We’ve already seen this happen with the 2021 court decisions. In late April, Germany’s telecom regulator said it was banning T-Mobile's StreamOn and Vodafone's Pass in the wake of the rulings. Vodafone’s response was to introduce plans with up to 25% higher data caps at the same price.

Banning harmful zero-rating also opens the door for innovative non-discriminatory zero-rating offers. For instance, in Canada where discriminatory zero-rating is banned, discount carrier Fido allows people to hit a “don’t count my data” button up to five times a month, setting off an hour where they can use unlimited data. That data can be used for any site, not just sites chosen by the carrier. 

The European Court of Justice Properly Found Discriminatory Zero-Rating Violates the E.U.’s Net Neutrality Law  

BEREC’s 2016 net neutrality guidelines warned that several kinds of zero-rating likely violated Europe’s net neutrality law, but they did not clearly prohibit them. Taking advantage of the lack of a clear prohibition, ISPs began offering many kinds of zero-rating plans, and regulators in most E.U. countries looked the other way. Those that did intervene mostly focused on plans that continued to stream zero-rated services to users even after they had gone over their data cap and weren’t able to use the rest of the internet. In September 2020, the European Court of Justice upheld these narrow enforcement actions, agreeing that those particular plans were unlawful. 

 The court next looked at whether the entire idea of selective or category-based zero-rating plans violates net neutrality. In three decisions released in September 2021, the court found that zero-rating schemes by Vodafone and T-Mobile violated Europe’s net neutrality law. Each case found the particular plan in question violated the law because counting data from one website but not another inherently treats some traffic differently “based on commercial considerations”, thereby violating the law. 

Those kinds of plans stand in contrast to non-discriminatory forms of zero-rating that treat all traffic equally, such as the Canadian carrier’s “don’t count my data button.” After India banned discriminatory zero-rating, an Indian carrier offered additional data at a reduced price during the Cricket World Cup. Subscribers receive an additional 2 GB of data per day--enough to watch every match online--but the data can be used for any website or application. These non-discriminatory forms of zero-rating can benefit consumers and generally don’t violate the law. Your cell carrier can still not count data usage against your cap at certain times of day or as a promotion; they just can’t force you to use that data on a specific site. 

BEREC’s Guidelines Are on the Right Track, But Need More Work 

In the wake of these decisions, BEREC needed to update their guidelines for zero-rating under the net neutrality law. On September 30, 2021, BEREC asked stakeholders to share their thoughts on how to interpret the decisions and what they mean for zero-rating in Europe. 

Not surprisingly, large telecoms and the biggest beneficiaries of the current schemes (Google and Facebook in particular) tried to convince BEREC that it did not need to make any changes. For example, Deutsche Telekom and other carriers argued that the court got it wrong and asked BEREC to ignore the decisions entirely. Others, like Vodafone and Facebook, instead argued that the decisions were limited to plans with the exact same features as in the cases at issue, i.e. plans that, like T-Mobile’s StreamOn, limited the speed of the zero-rated video or that, like Vodafone’s Pass, stopped the zero-rating when people traveled to another country or were using their phone as a hotspot. 

In March, BEREC published a first draft of its updated guidelines; for the most part, they got it right. BEREC declined to limit the scope of the rulings to the exact zero-rating plans the court reviewed. Instead, the draft guidelines state that plans that zero rate apps in a category explicitly violate the law. That means zero-rating plans like T-Mobile’s StreamOn or Vodafone’s Pass are clearly prohibited by the draft guidelines. 

To its credit, BEREC highlighted that application-agnostic zero-rating, where a carrier chooses not to count data against your cap regardless of what you use the data for, does not violate the law. 

However, the draft guidelines don’t clearly prohibit some zero-rating plans that are even more harmful than the clearly banned ones, as I pointed out in my official comments on the proposal (.pdf). That’s a problem because in the past carriers have only stopped bad practices when they were unequivocally prohibited.

Following the recommendation of ETNO, the trade association representing large telecom companies, the draft guidelines don’t clearly prohibit three harmful practices:

  1. Carriers zero-rating only their own apps and media services;
  2. Carriers getting paid by app providers to zero rate their app; and
  3. Carriers simply picking a popular service to zero-rate without striking an official agreement with that service.

This leads to absurd results. 

For example, T-Mobile’s StreamOn and Vodafone’s Pass could escape the express prohibitions in BEREC’s guidelines by removing all third-party apps from the program, while keeping their own applications in it. 

Thus, unless BEREC removes the ambiguity in the guidelines, carriers will likely engage in even worse forms of zero-rating, and force regulators to spend precious time and judicial resources litigating obvious violations of net neutrality.

There Is Still Time to Fix This 

Europe’s telecom regulators will adopt the final version of the guidelines at their meeting in Cyprus from June 8 to June 10. There, they can close these loopholes in the final version of the guidelines. Because carriers have shown a willingness to comply only with clear, brightline rules, it is crucial that BEREC clarify that all forms of discriminatory zero-rating violate the law. 

The court’s decisions are clear. The only question is whether BEREC will be able to resist the intense pressure from carriers and platforms to misapply the 2021 rulings so that they can continue practices that harm competition, innovation, and user choice.

Barbara van Schewick is one of the world’s leading experts on net neutrality, a professor at Stanford Law School, and the director of Stanford Law School’s Center for Internet and Society.

Thanks to Garrett Muscatel for his research and writing help with this post.

 

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