Client Alert

Net Neutrality: Zero Lives Left for Zero-Rating?

04 May 2022

On April 28, 2022, the German telecoms regulator Bundesnetzagentur (BNetzA) banned the zero-rating programs of two of the country’s largest cellular providers. A statement released by BNetzA called out Deutsche Telekom’s “StreamOn” and Vodafone’s “Vodafone Pass” for violating the net neutrality principles enshrined in European Union law. These principles, a decades-old global issue of contention, establish that internet service providers ought to treat all internet traffic the same, irrespective of origin and target.

A Logical Consequence of CJEU Case Law

Deutsche Telekom’s and Vodafone’s programs both implemented a so-called “zero-rating” regime. These regimes were applied to mobile phone plans featuring a capped high-speed data volume. In this context, customers subscribing to the zero-rating programs were able to use certain predefined online services (e.g., video or music streaming services) without consuming any of their data volume.

In its statement on the prohibition, BNetzA referred to a series of judgements by the European Court of Justice (CJEU) from 2021 that already concerned the programs at stake. In three almost word-for-word identical judgments (C-854/19, C-5/20, C-34/20), the CJEU had already established not only the incompatibility of these specific programs with the principles of net neutrality enshrined in the EU Open Internet Regulation (Regulation 2015/2021 of November 25, 2015), but also that the entire concept of zero-rating violates the equal treatment of data traffic as provided by Article 3 (3) of that Regulation.

These decisions had come as a surprise to some—likely including BNetzA itself. In its 2017 and 2018 decisions on the two programs, BNetzA itself had found that “StreamOn” and “Vodafone Pass” generally comply with the Open Internet Regulation and had only ordered Deutsche Telekom and Vodafone to remedy certain aspects of these programs that BNetzA found to be non-compliant. This was also based on the guidelines on implementation of the Open Internet Regulation by the Body of European Regulators for Electronic Communications (BEREC). While these guidelines are currently under review following the CJEU judgements mentioned above, the current version (in recital 42 ff.) generally permits zero-rating subject to a case-by-case assessment of factors such as transparency, non-discrimination, or fairness by national regulators. Nonetheless, last week’s BNetzA decisions are an expected response to the CJEU findings.

What’s next?

For the two affected carriers and their subscribers, BNetzA ordered a fairly lenient approach to implementation of its decision. Marketing of the zero-rating programs may continue until July 1, 2022, and all existing contracts (as well as those yet to be concluded) may keep utilizing them until March 31, 2023. BNetzA justifies this due to the large number of customers who will be affected by the changeover. “We’re putting a stop to the unequal treatment of data traffic associated with zero-rating options,” said Klaus Müller, BNetzA president, adding his expectation that providers will, in reaction to the regulator’s decision, offer tariffs with higher data volumes or cheaper mobile flat rates and thereby benefit consumers.

Finally, the BNetzA decisions will also have an effect on providers of online services participating in Deutsche Telekom’s and Vodafone’s zero-rating programs as content partners. For many of them, partnering with carriers offering zero-rating programs became a necessity if they wanted to ensure that their services benefit from zero-rated traffic just as much as those of their competitors. While the programs were generally open for all content partners, they came with certain technical and organizational requirements that may have been tough to handle, particularly for smaller content partners.

Finally, the BNetzA decisions may also be seen as a prelude to a more global enforcement shift regarding zero-rating across the EU. In its consultation to amend its guidelines on the Open Internet Regulation, BEREC is now explicitly recommending regulators to prohibit zero-rating tariffs (in recital 55). It can therefore be expected that other EU telecoms regulators will soon follow suit regarding zero-rating offers still available on their markets.

The authors thank research assistant Peter Jan Ritsema for his valuable contributions to this client alert.

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