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Friday, 5 December 2014

Zero-Rating Violates Slovenian Net Neutrality Law

In late 2013 Telekom Slovenije offered zero-rated content and services as part of its mobile data plans, where specific types of traffic were exempted from data caps and could be used without any volume limits (or the limits were significantly higher than those of the data caps). Its offer included HBO GO and UEFA Champions League video streaming services, as well as its own cloud data storage service (TViN Shramba). A few months later the operator expanded the offer with a popular music streaming service Deezer. 

The competition authority and sector regulator seem to believe that Telekom with its zero-rated offers has not breached net neutrality and competition laws. In contrast, our analysis reveals that zero-rated content, services or applications provided or used via internet access services have been forbidden since January 2013. 

Net neutrality weakened by industry lobbying and inactive regulator


Slovenia as the second European Union member state — after the Netherlands — adopted net neutrality rules in its Electronic Communications Act in December 2012, which came into force on 15 January 2013. Net neutrality as a principle was defined as (unofficial translation) “a principle that all internet traffic on a public communications network is treated equally, independent of its content, application, service, device, source and purpose of communication” (Article 3, paragraph 37), while the rules were stipulated in Article 203.

The electronic communications industry fiercely opposed the adoption of net neutrality rules. Its efforts were partially successful and resulted in watering down of provisions related to content, service or application discrimination. In response to lobbying by the industry, the National Assembly in the second reading removed an explicit prohibition of price discrimination from Article 203, paragraph 5. 

A regulator, the Agency for Communications Networks and Services (AKOS), led by a former industry executive, has not been an advocate of net neutrality. Instead, it has taken a pro-industry stance on net neutrality and has not opposed attempts to weaken or even remove net neutrality provisions from the law. It is not surprising that it has not paid much attention to its imposition. Therefore, despite solid net neutrality legal protection, in practical terms this has not led to much of a difference. 

Spreading of discriminative practices


By zero-rating spreading in Europe, it has become evident why the Slovenian electronic communications industry lobbied so fiercely to weaken the net neutrality rules and remove provisions prohibiting price discrimination. This has been a part of a Europe wide orchestrated action against net neutrality.

Why is zero-rating discriminative? With such offers internet access providers (IAPs) are favouring their own or their internet partners’ content, services or applications by “zero-rating” associated data volumes — not counting them against end users’ data caps (ie monthly data volume allowance).

Zero-rated mobile traffic falls into a broader category of discrimination, where IAPs discriminate against certain content, services or applications, either by throttling (ie degrading transmission quality) or blocking them entirely. All traffic is handled equally until a data cap is exceeded. After that zero-rated traffic continues as before, while all other traffic is throttled or blocked. However, traffic may be differentiated even before the data cap is exceeded by prioritisation of zero-rated traffic and/or discriminatory degradation of open internet traffic. Zero-rating is thus also a quality of service issue (QoS). In specific zero-rated offers, IAPs may provide access only to selected content, services or applications, sometimes based on sponsorships or premium payments. 

With zero-rating IAPs may throttle or block certain kind of traffic in order to protect their own or their partners’ content, services or applications over those of competitors. They may also provide enhanced QoS to content, service or application providers in order to increase their wholesale revenues. With such discrimination IAPs may violate net neutrality and competition laws.

Violation of net neutrality principle 


As long as different types of traffic are treated equally the net neutrality principle as enshrined in the Electronic Communications Act (Article 3, paragraph 37) is not violated. Product differentiation in terms of different quality at different prices is in general compatible with this principle, if limited to differentiation in speeds, service availability or time delays (ie latency). It is similar in case of data volume limits. By contrast, providing access only to selected sets of content, services or applications represents differentiation that violates the net neutrality principle.

In case of zero-rating, once a data cap is exceeded traffic differentiation begins as open internet traffic is either throttled or blocked. Traffic differentiation may also be performed before data cap is exceeded by prioritisation of zero-rated and degradation of open internet traffic. This leads to selected IAP’s own or its partners’ traffic being favoured over other traffic. That is clearly discrimination between different types of traffic and violation of the net neutrality principle, as the respective internet traffic on a public communications network is not treated equally and independent of its content, service, application, source and purpose of communication. 

A threshold for discrimination is usually quite low. IAPs may keep open internet volume caps low and allow high volume consumption of own or partners’ content, services or applications. For example, Telekom Slovenije offers a mobile package with unlimited voice minutes, messaging, and 1 GB of data for € 23,95, and charges € 6 for each extra 1 GB of data. A package that additionally includes unlimited music streaming from Deezer costs only € 26,95. Both packages include 5 GB of zero-rated data storage in Telekom’s own cloud. When a monthly open internet-access data cap is exceeded, the access speed is throttled down to 64 kbps and charged at € 0,16 per MB (while zero-rated traffic continues as before — free of charge). A maximum data cap offered is 15 GB. In standalone mobile internet data plans, data caps are larger. A plan with the largest data cap (ie 40 GB for € 40,95) also includes zero-rated UEFA Champions League, HBO GO and 50 GB of data storage.

If zero-rating is allowed, this may lead to a conflict of interest and Telekom may have little or no commercial incentives to reduce open internet access data tariffs. Instead, it may encourage subscribers to use its own or its partners’ content, services or applications. Even worse, without proper competition and incentives, Telekom has recently even increased mobile tariffs and in certain packages reduced data caps. It may soon face even less competitive pressure to reduce tariffs as other Slovenian mobile IAPs are preparing their own zero-rated products.

Consumers may find zero-rating advantageous as they do not need to pay for extra traffic. However, IAPs limit their choice by selecting content, services or applications for them and deter them from using competitors’ products. This is contrary to net neutrality, where users of internet access services decide for themselves what to access.

Violation of Slovenian net neutrality law


As already shown, zero-rating violates the net neutrality principle by discriminating internet traffic — ie favouring the IAP’s own or its partners’ traffic over other traffic. In order to protect the net neutrality principle, the Electronic Communications Act summons IAPs to strive for protection and preservation of the open and neutral character of the internet. 

The Act further stipulates that IAPs shall not block, delay or throttle internet traffic at a level of individual content, service or application, or exercise measures for its degradation, except to protect networks against undue congestion and attacks, restrict unsolicited communications (ie spam), or obey court orders to block access to illegal content (Article 203, paragraph 3). 

Differentiation by blocking, delaying or throttling open internet traffic, which occurs once a data cap is exceeded and may likely occur even before that, represents discrimination between different types of traffic that violates Article 203, paragraph 3, as it does not fall into one of the exempt categories. 

Despite extensive lobbying by the electronic communication industry, zero-rating is still illegal in Slovenia. It also violates the provisions of Article 203, paragraph 5 (unofficial translation): “Services provided by network operators and internet service providers shall not be based on services or applications offered or used via internet access services.”

The term internet access service shall basically follow a definition as proposed by the Body of European Regulators of Electronic Communications (BEREC) in the Guidelines for the quality of services in the scope of net neutrality in 2012. However, it shall be interpreted broadly in order to prevent circumvention of the provisions of Article 203, paragraph 5. 

If access to content (ie websites), multiple services or applications is offered, this shall be considered as an internet access service. According to Article 203, paragraph 5, IAPs are not allowed to offer services that are based on content, services or applications provided or used via the internet access services. Therefore, taking into account the provisions of Articles 3 and 203, IAPs are not allowed to offer services consisting of access to (certain) content, services or applications, where the traffic is throttled or blocked. Likewise, they are not allowed to offer packages to access only a part of the internet. However, IAPs are allowed to offer separate services over the internet that are not included in packages and are charged separately. It follows that zero-rated products are not allowed in packages that also include internet access. Instead of service based differentiation, IAPs may differentiate their products for internet access in other ways, based on quality (as mentioned earlier) and data limits. 

Conclusions


By adopting net neutrality rules and banning zero-rating, Slovenia has imposed restrictions on IAPs in order to ensure open and non-discriminatory access to the internet for citizens, businesses and providers of (on-line) content, services or applications. IAPs shall refrain from any interference with or restriction to internet users' freedom to access and distribute content through services, applications and devices of their choice, unless such interference or restriction is strictly necessary and proportionate to mitigate network congestion, safeguard network integrity and safety, restrict unsolicited (commercial) communications (spam), or execute a court order. 

Despite strong legal protection of net neutrality, AKOS has not paid much attention to its imposition and turned a blind eye to supposedly illegal business practices of mobile IAPs, especially Telekom Slovenije. Therefore, the Electronic Communications Council (SEK) filed a complaint to AKOS in July 2014 alleging Telekom Slovenije to have violated net neutrality provisions with its zero-rated products. AKOS has not decided on the issue yet and is expected to come up with a decision any time soon. However, based on the regulator’s strong pro-industry stance the outcome is uncertain.

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