Judgment of the Court of Justice of the European Union on net neutrality and zero-rating

The judgment is available: here. The case submitted to the ECJ concerns two mobile telephony subscriptions of Telenor in Hungary. Both subscriptions had a data limit but the use of certain applications did not count towards data consumption. Such subscriptions are a species of so called 'zero-rated' subscriptions. In addition, both subscriptions severely slowed down the speed of data traffic once the data limit was reached, except for the zero-rated applications. The ECJ ruled that this type of zero-rated subscriptions is in violation of European rules on net neutrality.

Case and preliminary questions

As explained above, Telenor offered two types of zero-rated subscriptions. The first was the MyChat subscription. This subscription included a data limit of 1 Gb that could be used for all Internet applications. As soon as that limit was reached, the entire Internet access became considerably slower. However, the data traffic that belonged to certain social media and messaging applications did not count towards the data limit. In addition, once the data limit was reached, the speed of all data traffic was slowed down, except for the zero-rated applications. For the MyMusic subscription most of the same applied, except that the data limit varied for that subscription. The ECJ summarises the packages as having the following two characteristics:

“packages made available by a provider of internet access services through agreements concluded with end users, and under which (i) end users may purchase a tariff entitling them to use a specific volume of data without restriction, without any deduction being made from that data volume for using certain specific applications and services covered by ‘a zero tariff’ and (ii) once that data volume has been used up, those end users may continue to use those specific applications and services without restriction, while measures blocking or slowing down traffic are applied to the other applications and services available”.

The Hungarian National Media Authority had published decisions that both subscriptions allegedly violated European network neutrality rules. Following an appeal by Telenor, the Hungarian court referred four questions to the ECJ for a preliminary ruling. The ECJ held that those four questions should be examined together and summarised the question as follows:

“the referring court asks, in essence, whether Article 3 of Regulation 2015/2120 must be interpreted as meaning that packages [such as those] made available by [Telenor] […], are incompatible with Article 3(2) of Regulation 2015/2120, read in conjunction with Article 3(1) of that regulation, and, alternatively or cumulatively, with Article 3(3) thereof.”

Relevant legislation

The key legislation for this conclusion is Regulation 2015/2120/EU of the European Parliament and of the Council of 25 November 2015 laying down measures on open Internet access (the 'Net Neutrality Regulation'). Where relevant the Net Neutrality Regulation provides:

“Whereas:

(7) In order to exercise their rights to access and distribute information and content and to use and provide applications and services of their choice, end-users should be free to agree with providers of internet access services on tariffs for specific data volumes and speeds of the internet access service. Such agreements, as well as any commercial practices of providers of internet access services, should not limit the exercise of those rights and thus circumvent provisions of this Regulation safeguarding open internet access. National regulatory and other competent authorities should be empowered to intervene against agreements or commercial practices which, by reason of their scale, lead to situations where end-users’ choice is materially reduced in practice. To this end, the assessment of agreements and commercial practices should, inter alia, take into account the respective market positions of those providers of internet access services, and of the providers of content, applications and services, that are involved. National regulatory and other competent authorities should be required, as part of their monitoring and enforcement function, to intervene when agreements or commercial practices would result in the undermining of the essence of the end-users’ rights.

(8) When providing internet access services, providers of those services should treat all traffic equally, without discrimination, restriction or interference, independently of its sender or receiver, content, application or service, or terminal equipment. According to general principles of Union law and settled case-law, comparable situations should not be treated differently and different situations should not be treated in the same way unless such treatment is objectively justified. […]

Article 3

Safeguarding of open internet access

1. End-users shall have the right to access and distribute information and content, use and provide applications and services, and use terminal equipment of their choice, irrespective of the end-user’s or provider’s location or the location, origin or destination of the information, content, application or service, via their internet access service. […]

2. Agreements between providers of internet access services and end-users on commercial and technical conditions and the characteristics of internet access services such as price, data volumes or speed, and any commercial practices conducted by providers of internet access services, shall not limit the exercise of the rights of end-users laid down in paragraph 1.

3. Providers of internet access services shall treat all traffic equally, when providing internet access services, without discrimination, restriction or interference, and irrespective of the sender and receiver, the content accessed or distributed, the applications or services used or provided, or the terminal equipment used.

The first subparagraph shall not prevent providers of internet access services from implementing reasonable traffic management measures. In order to be deemed to be reasonable, such measures shall be transparent, non-discriminatory and proportionate, and shall not be based on commercial considerations but on objectively different technical quality of service requirements of specific categories of traffic. Such measures shall not monitor the specific content and shall not be maintained for longer than necessary.

Providers of internet access services shall not engage in traffic management measures going beyond those set out in the second subparagraph, and in particular shall not block, slow down, alter, restrict, interfere with, degrade or discriminate between specific content, applications or services, or specific categories thereof, except as necessary. […]”

Legal background Article 3 Net Neutrality Regulation

Before analysing whether the packages violate Article 3 of the Net Neutrality Regulation, the ECJ first specifies how national regulatory authorities should assess those packages. The ECJ holds that national regulatory authorities should determine on a case-by-case basis whether the conduct of a given provider of such packages falls within the scope of Article 3(2) or Article 3(3) of that regulation, or both provisions cumulatively. If the package falls within the scope of both provisions cumulatively, the authorities may perform the assessment with one or other of those provisions. The ECJ also rules that if such an authority determines that Article 3(3) was violated, the authority may refrain from determining whether that conduct is also incompatible with Article 3(2) of that regulation.

Below, we have set out the ECJ’s considerations regarding both paragraphs 2 and 3 of Article 3 of the Net Neutrality Regulation.

Article 3(2) Net Neutrality Regulation

The ECJ first observes that Article 3(1), read in conjunction with Article 3(2), provides that end users’ rights are intended to be exercised ‘via their internet access service’, and that Article 3(2) requires that such a service does not entail any limitation of the exercise of those rights. The ECJ then makes a distinction between two parts of Article 3(2): the first part relating to the agreement between the provider of internet access services and the end user and the second part which refers to the commercial practices of those providers.

With regard to the agreements, recital 7 of the Net Neutrality Regulation provides that on the one hand those agreements are an expression of the right of end users to freely choose a service based on its characteristics. On the other hand, however, such agreements should not limit the exercise of end users’ rights and thereby circumvent the Net Neutrality Regulation. The second part of Article 3(2) relates to the commercial practices which are “conducted” by the providers. As the word conducted implies, these practices do not reflect any kind of agreement between the provider and end user. These commercial practices may also not limit the exercise of end users’ rights.

The ECJ goes on to note that the “end users” referred to in the Net Neutrality Regulation are both consumers as well as professional entities such as undertakings or non-profit organisations (other than those providing communications services themselves). The term is also not limited to those parties requesting internet access, but also to parties who rely on internet access to provide content, applications and services. When national regulatory authorities assess whether internet access services violate Article 3(2), the ECJ holds that they must take these parties and their market positions into account.

Finally, the ECJ rules that the goal of the Net Neutrality Regulation was to allow regulatory authorities to assess the entirety of a provider’s agreements and commercial practices. Recital 7 of the Net Neutrality Regulation also explains that the scale of the possible limitation of end users’ rights is also of relevance. Therefore, the market position of the provider should be taken into account.

The ECJ then holds that the packages are likely to entail a limitation of the rights of end users set out in Article 3(1) of the Net Neutrality Regulation. The ECJ also finds that it is likely that these packages will increase the use of certain specific applications and services, namely the zero-rated applications and/or services. The ECJ thus concludes that such agreements, if concluded with a significant part of the market, are liable to limit the exercise of end users’ rights, within the meaning of Article 3(2) of the Net Neutrality Regulation.

Article 3(3) Net Neutrality Regulation

The ECJ then turns to Article 3(3) of the Net Neutrality Regulation. Article 3(3) of the Net Neutrality Regulation consists of three subparagraphs:

1) a general obligation for providers to treat traffic equally,

2) the possibility for providers to adopt reasonable traffic-management measures, provided that such measures are:

a. based on objectively different technical quality of service requirements of specific categories of traffic;

b. but not on commercial considerations; and

3) a prohibition to implement certain kinds of measures (three, exhaustively listed, exceptions exist).

The ECJ also holds that Article 3(3) does not require an assessment of the effect on end users’ rights.

Based on the characteristics of the package, the ECJ finds that the measures included in those packages block or slow down traffic related to the use of certain applications and services. The measures are applied in addition to the zero-rated applications and according to the ECJ make it technically more difficult if not impossible for end users to use other applications and services. The ECJ concludes that those measures appear to not be based on quality of service requirements but on commercial considerations. The ECJ has no evidence in the file that the measures would fall in any of the three exceptions exhaustively listed in the third subparagraph of Article 3(3).

Judgment ECJ

Based on all of the above, the ECJ concludes that the relevant zero rated products in this case: 1) are incompatible with Article 3(2) of Regulation 2015/2120, read in conjunction with Article 3(1) of that regulation, where those packages, agreements, and measures blocking or slowing down traffic limit the exercise of end users’ rights, and 2) are incompatible with Article 3(3) of that regulation where those measures blocking or slowing down traffic are based on commercial considerations. The decision is in line with the decisions that have been taken by regulators in a number of EU Member States (see our Study referred to below for further details).

Study Net Neutrality Regulation

In December 2018, Bird & Bird published a study for the European Commission on the implementation of the Net Neutrality Regulation. The study provides a factual overview and analysis of the implementation and effectiveness of the Net Neutrality Regulation in all EU Member States and Norway. The overview and analysis were achieved on the basis of a thorough data collection with the help of Bird & Bird's local teams, interviews with stakeholders, the interpretation of the survey results of the research partner Ecorys and analyses of the information on countries and legislation and regulations at EU level.

Pages 62-63 of the study analyse the position of national telecommunications regulators of several EU Member States. At the time of publication of the study, regulators in ten EU Member States had taken decisions prohibiting subscriptions similar to those offered by Telenor. The regulators in three other EU Member States had also indicated in other ways that such subscriptions violated the Net Neutrality Regulation. The ECJ’s judgment thus appears to be in line with the practice of the national telecommunications regulators.