Zero Tariff v. Net Neutrality; ECJ deals a blow to Telekom’s Zero Tariff regime by holding it violated EU law of Net neutrality

European Court of Justice: The Bench of N. Wahl (Rapporteur), F. Biltgen (President) and J. Passer, JJ., held that Telekom’s Zero Tariff was violative of European rule of Net Neutrality.

 A ‘zero tariff’ option draws a distinction within internet traffic, on the basis of commercial considerations, by not counting towards the basic package traffic to partner applications. Consequently, such a commercial practice does not satisfy the general obligation of equal treatment of traffic, without discrimination or interference, as laid down in Article 3(3) of Regulation 2015/2120.

 Factual Fulcrum

Telekom, an information and communications technology undertaking, had been offering its end customers an add-on option in the form of a free ‘zero tariff’ option called ‘Stream On’ which allowed data volume consumed by audio and video streamed by Telekom’s content partners (e.g. Spotify, Netflix etc.) not to be counted towards the data volume included in the basic package. By activating the ‘Stream On’ tariff option, the end customer were to accept bandwidth being limited to a maximum of 1.7 Mbit/s for video streaming, irrespective of whether the videos were streamed by content partners or other providers and once that data volume get used up, the transmission speed would reduce.

The Federal Agency for Electricity, Gas, Telecommunications, Post and Rail Networks, Germany found that the tariff option concerned did not comply with the obligations arising from Article 3(3) of EU Regulation 2015/2120, since it was accompanied by a reduction in the data transmission speed for video streaming to a maximum of 1.7 Mbit/s. Hence, the Federal Agency prohibited Telekom from limiting bandwidth for video streaming covered by that tariff option and from using terms providing for a reduction in bandwidth in both contracts concluded with content providers and with end customers.

 Question Referred

 As the matter reached for annulment before the Administrative Court, Cologne, Germany, the referring Court opined that interpretation of EU regulation in this regard was required to settle the case. The referring Court asked, whether a limitation on bandwidth on account of the activation of a ‘zero tariff’ option, applied to video streaming, irrespective of whether it is streamed by partner operators or other content providers, is incompatible with the obligations arising from Article 3(3) of Regulation 2015/2120?

Zero-Tariff

A ‘zero tariff’ option is a commercial practice whereby an internet access provider applies a ‘zero tariff’, or a tariff that is more advantageous, to all or part of the data traffic associated with an application or category of specific applications, offered by partners of that access provider. Those data are therefore not counted towards the data volume purchased as part of the basic package. Such an option, offered in the context of limited packages, thus allows internet access providers to increase the attractiveness of their offer.

Net Neutrality Rule

As per European Union’s Net Neutrality rule ( enshrined under Article 3 of Regulation 2015/2120), end-users should have right to access and distribute information and content, and to use and provide applications and services without discrimination, via their internet access service. Similarly, it requires that reasonable traffic management measures applied by providers of internet access services should be transparent, non-discriminatory and proportionate, and should not be based on commercial considerations.

Under net neutrality rule, the service providers are prohibited from engaging in traffic management measures; in particular they shall not block, slow down, alter, restrict, interfere with, degrade or discriminate between specific content, applications or services, or specific categories except for a fixed period, in order

  • to comply with Union legislative acts, national legislation that complies with Union law or measures giving effect to such Union legislative acts or national legislation,
  • to preserve the integrity and security of the network, of services provided via that network, and of the terminal equipment of end users or
  • to prevent network congestion and mitigate the effects thereof.

Consideration of the questions referred

In Telenor Magyarország Zrt v. Nemzeti Média-és Hírközlési Hatóság Elnöke,  [2020] 4 WLR 155, it was held that though the service providers are allowed to adopt reasonable traffic management measures, however, such  measures must be based on ‘objectively different technical quality of service requirements of specific categories of traffic’, and not on ‘commercial considerations’. In particular, it was held that any measure of a provider of internet access services in respect of an end user 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’.

The Top Court opined that a ‘zero tariff’ option, such as that at issue in the main proceedings, draws a distinction within internet traffic, on the basis of commercial considerations, by not counting towards the basic package traffic to partner applications. Consequently, such a commercial practice does not satisfy the general obligation of equal treatment of traffic, without discrimination or interference, laid down in Article 3(3) of Regulation 2015/2120. The Court stated,

“It should be pointed out that  failure, which results from the very nature of such a tariff option on account of the incentive arising from it, persists irrespective of whether or not it is possible to continue freely to access the content provided by the partners of the internet access provider after the basic package has been used up.”

Lastly, noticing that the limitation on bandwidth was solely on account of the activation of the ‘zero tariff’ option, the Court held that the exceptions provided for management measures could not be taken into consideration since, according to Article 3(3), such measures could not be based on commercial strategies pursued by the internet access provider.

Verdict

In the light of the foregoing considerations, the Court held that since such a tariff option was contrary to the obligations arising from Article 3(3), that incompatibility remains, irrespective of the form or nature of the terms of use attached to the tariff options on offer, such as the limitation on bandwidth. Accordingly, the Court answered that Article 3 must be interpreted as meaning that a limitation on bandwidth, on account of the activation of a ‘zero tariff’ option, applied to video streaming, irrespective of whether it was streamed by partner operators or other content providers,  was incompatible with the obligations arising from Article 3(3).[Telekom Deutschland GmbH v. Bundesrepublik Deutschland, C‑34/20, decided on 02-09-2021]


Kamini Sharma, Editorial Assistant has reported this brief.

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