The Court of Justice of the European Union: zero tariffs offered by operators for selected applications are against EU rules

On 15 September 2020, the Court of Justice of the European Union ruled on issues relating to the application of the principle of net neutrality to zero tariffs offered by operators. These tariff packages are typically offered for selected music apps, video viewing, or various messengers. The Court of Justice, to which the Hungarian court turned to receive clarification of the interpretation, ruled that zero tariffs for internet service packages allowing the use of only certain applications and services are incompatible with the Net Neutrality Regulation.

This is an important ruling that affects the whole European telecommunications market as well as internet content providers. For the first time, directly applicable net neutrality rules under the European regulation are applied in this area. Limits are set for operators when designing data tariffs for internet connections.

The ruling also suggests to providers of content that it is not possible to prioritise the operation of certain applications over other applications and services, which also has some overlap with the protection of competition.

What was the case in Hungary about?

Hungarian Telenor offered two packages of internet connection services called “MyChat” and “MyMusic”. The purpose of both packages was to allow customers to buy a certain amount of data and, in addition, to have free access to certain applications outside the amount of data purchased.

In the case of the “MyChat” package, the following online communication apps were accessible for free: Facebook, Facebook Messenger, Instagram, Twitter, Viber, and Whatsapp. In the case of the “MyMusic” package, free access related to the streaming music apps Apple Music, Deezer, Spotify and Tidal, and six radio services. At the same time, once the amount of data in the package was exhausted, customers could continue to use the listed applications without limitations. Other available apps and services were either blocked or slowed down.

The offered zero tariffs were reviewed by the Hungarian national regulator. Thereafter, the regulator decided that the measures introduced by those service packages were inconsistent with the obligation of equal and non-discriminatory treatment, as required by the Net Neutrality Regulation already mentioned above (namely, Article 3 (3)). In view of the above, the regulator ordered Telenor to stop offering these service packages. Since the whole case reached the Budapest court, the Hungarians decided to send a series of preliminary questions to the Court of Justice of the EU in order to clarify the interpretation of the rules in the Net Neutrality Regulation.

Reasoning of the Court

The task of the Court of Justice of the EU was, first of all, to answer whether the zero tariffs for certain applications limited the exercise of the end-users’ rights. The Court reasoned that such an assessment required taking into account, inter alia, the market position of the operator and the market power of the respective providers of content, applications, and services. Therefore, it was not a question of reducing the assessment of the operator’s agreements and commercial practices to individual agreements or commercial practices, but of assessing the overall trade policy.

The Court looks at the problem through the lens of the cumulative impact of these commercial practices. It considers the question whether this can lead to more frequent use of specific applications and services under the “zero tariff” than other available applications and services that the operator has not included in the package. It concludes that the more customers enter into agreements for the acquisition of such packages of services, the more likely it is that the cumulative impact of those agreements, in view of their scope, may lead to a significant reduction in the exercise of the end-users’ rights, or even undermine the very essence of those rights.

Furthermore, the Court has examined whether zero tariffs are contrary to the general obligation to treat all traffic in the same way, without discrimination, restriction or interference, and irrespective of its content or the applications or services used or provided. The Court acknowledged that, on the basis of the exceptions provided, it was permissible to adopt measures of adequate traffic management. However, that possibility is conditional, inter alia, on the fact that such measures must be based on “objectively different technical quality of service requirements” and not on the basis of “commercial considerations”. In the present case, the Court found that the zero tariff was supplemented by measures consisting of blocking or slowing down traffic, which made it technically difficult or even impossible to use applications and services not included in the tariff.

Those measures are therefore not based on objectively different technical quality of service requirements, but only on objectives of a commercial nature. The Court concluded that blocking or slowing down traffic based on commercial considerations was contrary to the mentioned prohibition of non-discrimination.

What next?

The commented ruling is the first to deal with the application of rules to specific data tariffs of operators. Further rulings may follow. A ruling on similar preliminary questions raised by German operators is awaited (cases of Telekom Deutschland and Vodafone).

The Court pointed out some not entirely obvious aspects of net neutrality. It stressed the need to assess commercial practices in terms of their cumulative impact on end-users’ rights. The principle of non-discrimination is of higher value than commercial considerations. Commercial considerations cannot be regarded as an objective criterion for traffic differentiation. The preference of only certain applications and services within the provided tariffs may be to the detriment of other providers of content. All these aspects need to be taken into account.

When creating tariffs and service packages, it is possible to build on the updated BEREC guidelines. According to those guidelines, it is possible to create offers and tariffs for a specific type of data services, such as streaming, or combine them with data tariffs. Offers that are not associated with specific applications or content services and the user has unlimited internet access for a limited time (e.g. at night or on the weekend) are considered generally acceptable. Offers with limited data are permitted if the user can purchase additional data.

The article was published on on 5 September 2020. (edited)

Operators Net neutrality CJEU

Upcoming events

Seminars, webcasts, business breakfasts and other events organized by Deloitte.

    Show morearrow-right