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6Here at ROCCO HQ we have been hearing a lot about the imminent Regulation of OTT. But the work has only really begun. Here’s our analysis of the BEREC plans for OTT.

During the 24th BEREC plenary meeting that took place on 1 and 2 October 2015 in Riga (Latvia), BEREC (Body of European Regulators for Electronic Communications) approved for public consultation a document called “Draft BEREC Report on OTT services”.

BEREC acknowledges that availability of OTT services is driving a dramatic change in the competitive dynamics and technology scenarios in communication markets, therefore its BEREC 2016 Work programme identifies the OTT development as a strategic area of investigation.

In particular, through this report BEREC focuses on the relation between OTT services and Electronic Communication Services (ECS), also considering that partnerships between ECS and OTT providers have become more common in recent years and the area will likely continue to evolve in different ways in the near future.

BEREC defines an OTT service as a

content, a service or an application that is provided to the end user over the open Internet

and it distinguishes three types of OTT services:

  • OTT-0 services: OTT services that qualify as ECS;
  • OTT-1 services: OTT services that do not qualify as ECS but do potentially compete with ECSs;
  • OTT-2 services: which encompasses the remaining category consisting of OTT services that are not an ECS and do not potentially compete with ECSs .

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As far as those definitions are concerned, BEREC highlights the following aspects:

  • OTT services“whether an OTT service qualifies as ECS does not depend on whether it potentially competes with ECSs. These are different things”.
  • OTT-0 services à

the relevance of the OTT-0 category is clear, since the ECN/S Framework applies to these services. Therefore, for regulators it is essential to know which services are OTT-0 services. Given the room for interpretation in the definition of ECS, this report does not answer that question but only gives an indication of what could be OTT-0 services”.

  • OTT-1 services:

“… because these services are not ECSs according to the current definition, the current ECN/S Framework does not apply…”.

  • OTT2 services:

“… these services are relevant for the ECN/S Framework because they use ECNs and are sometimes bundled with ECSs…

What is ECS:

the definition of ECS is primarily based on the principle of responsibility of the service provider for the conveyance of the signals. Providers of OTT services provided over the Internet may be partially responsible for the conveyance of the signal. A possible interpretation of this could be OTT voice services that have the possibility to make incoming and/or outgoing calls to the PATS. By buying the termination on the PATS, an interpretation of the definition of ECS could be that by buying termination and selling this to end users as part of a wider service, an OTT provider would be responsible for the termination and the transmission of signals that is part of it. This OTT provider could then be considered as an ECS.”

To identify whether an OTT-1 service potentially competes with an ECS, BEREC identifies the following indicators:

  1. technical criteria such as the devices, technical equipment, etc. required to use a certain OTT-1 service as compared to the technical equipment underlying an ECS. OTT-1 services are typically used with a personal computer or a mobile device (smartphone, tablet or notebook);
  2. market definition criteria such as demand-side and supply-side substitutability, and competition conditions. Demand-side substitutability refers to how the end user perceives the characteristics of the service, for which purpose it is being used and the level of prices. Supply substitutability refers to the ability of producers to switch their production to adjacent products or services;
  3. the impact on the relevant market players (market share, variety of offers, prices) and on the users (available offers, prices, other related services).

It’s interesting to note that BEREC states that at this stage OTT-2 issues are not in the scope of NRA’s (Regulators) competences.

In BEREC’s view the definition of ECS needs to be reviewed and clarified, in fact

it should be clarified and/or reconsidered in order to ensure that it keeps pace with the current technological developments… The lack of clarity in the definition of ECS opens the door to different interpretations that reduce the harmonisation between Member States and provide uncertainty to providers in the market or those that consider entering it… The review of ECN/S Framework is an opportunity to examine the validity of the definition taking into consideration the evolution of the services and the markets…

This lack of clarity has an impact on how Regulators treat OTT and ECS, and that’s why, according to BEREC,

a central theme in the discussion about OTT services are the differences in the regulatory treatment of ECS and OTT services

According to BEREC, it is estimated that the annual worldwide revenue of digital services – which for a large part consist of services provided over the Internet, so OTT services – is about €700 billion in 2015, about one percent of world GDP and a study of the Boston Consultancy Group reports that the value of the Internet and OTT services in Europe is at €2,600 to €3,700 annually per connected consumer. According to the same study, in Europe the Internet economy will contribute €880 billion, or nearly six percent, to the GDP of the EU in 2016


The Internet value chain

BEREC identifies three major entities that play a major role in the Internet value chain: Internet Service Providers (ISP), Content and applications providers (CAPs) end End Users.

BEREC reckons that in this chain, ISPs play a particular role: “on the one hand, ISPs provide access to ECSs to end users and, on the other hand, they enable interaction between CAPs and end users. ISPs thus play the role of enablers or intermediaries, making possible the interaction between end users and CAPs. It must be emphasised that CAPs interact with end users on so-called content and application markets, but typically these interactions do not necessarily involve a direct connection and do not involve ECS markets. The physical link between CAPs and end users goes through the ECS markets with ISPs acting as an intermediary.”

But who are exactly the ECS?

According to Article 2 of the Framework Directive, ECS means

a service normally provided for remuneration which consists wholly or mainly in the conveyance of signals on electronic communications networks, including telecommunications services and transmission services in networks used for broadcasting, but exclude services providing, or exercising editorial control over, content transmitted using electronic communications networks and services; it does not include information society services, as defined in Article 1 of Directive 98/34/EC, which do not consist wholly or mainly in the conveyance of signals on electronic communications networks

Thus, according with the previous definition, there are three basic criteria according to which and ECS should:

  1. normally be provided for remuneration;
  2. consists wholly or mainly in the conveyance of signals;
  3. exclude services providing, or exercising editorial control over, content.


BEREC believes that the Regulatory Framework does not provide

clear-cut guidance on whether specific types of services fall within the ECS definition, the criteria provided being to some extent flexible and leaving its concrete interpretation to NRAs”.

Because of the evolution of new services such as OTT services,

the boundary between conveyance and content services becomes more blurred and makes the ECS definition more difficult to interpret”.

The lack of clarity about to what extent the current ECS definition covers some types of OTT services, different conclusions can be drawn regarding whether for example specific OTT voice services are qualified as ECS.

OTT services that are ECS or potentially compete with ECS (OTT-0 and OTT-1)

But how do NRAs currently deal with OTT services in their SMP analysis decisions?

Voice Service: BEREC highlights that as far as voice service is concerned,

as for the substitutability between OTT-0 or OTT-1 and ECSs, so far one NRA (NKOM) found OTT voice service with the capability to make calls to the PATS as a substitute for traditional voice services.16 Other NRAs (CNMC and ANACOM) considered that nomadic voice services17 (OTT-0) are also part of the voice market.

NRAs that do not find OTT-0/1 voice services a substitute to ECS are mainly of the opinion that there is no clear evidence at the moment that the use of OTT-0/1 voice services may impact the provision of traditional voice. Some of the reasons of the lack of substitutability provided by the NRAs are that end users perceive OTT services as having lower quality and security, lack of interoperability among OTT voice services i.e. the caller and called party have to be subscribed to the same service

Non-voice services:

Of those NRAs that regulate or considered to regulate the market for SMS termination (ARCEP, DBA, AGCOM), two NRAs (DBA, AGCOM) found that SMS can be substituted by mobile instant messaging and by emails. ARCEP did not find substitutes for SMS mainly because the interoperability is not fulfilled yet. A recent notification of a new market analysis decision on termination by ARCEP has however been withdrawn in January 2015 after an Article 7 Framework Directive phase II procedure. In this procedure the European Commission expressed serious doubts about the finding that there are no substitutes for SMS. ARCEP has indicated it will monitor the evolution of the market

As for OTT voice services (i.e. Skype, Viber, WhatsApp and Google Talk):

Nearly all NRAs consider these pure OTT voice services not to be an ECS and therefore would consider them OTT-1.

For OTT voice services that do offer the possibility to make calls to the PATS, like Viber Out most NRAs have the view that OTT voice services with the possibility to make outgoing calls to PATS are an ECS. Some NRAs either indicated they do not see these OTT voice services as an ECS or had not considered the question yet. Some NRAs indicated their views, as summarized in the preceding sentences, where preliminary as they were in the process of reviewing the issue. These responses are consistent with the ERG Common Position on VoIP from 2007 (see also page 16) that found most NRAs take the view that a VoIP service with outward connection to the PATS is an ECS

As for email services and instant messaging:

“Also for OTT email services there are different interpretations regarding the qualification as ECS. Most Member States do not consider email and instant messaging as ECS, some specific cases are described below.

In Finland, according to the preparatory legislative work (Government Bill 221/2013)19 of the Finnish Information Society Code, services such as email and instant messaging are ECS if the service provider participates in the transmission of the messages. According to this Government Bill, the transmission can cover the whole transmission of the messages from end-user to end-user or just a part of it.

In the Netherlands, the Trade and Industry Appeals Tribunal found in its ruling20 that email services such as Gmail and Hotmail cannot be considered as ECS. According to the Court, the providers of email services, such as Gmail or Hotmail, are usually not the party that conveys the signals that make up these email services. The court seems to have considered that it is the ISP that conveys the signals and not the provider of the email service, and customers have separate relations with both the ISP and the email provider. In other words: the customer acquires the conveyance of signals from the ISP and the email service from the email provider”

And what are the differences in the regulatory treatment of ECS and OTT services?

BEREC reckons that it is for the legislator to define the goal of regulation and to make and assess the proportionality of the obligation and its scope BEREC mentions the elements that could be relevant when assessing proportionality of the scope of obligations:

Emergency calling

Article 26 of the Universal Service Directive obliges undertakings providing end users with an ECS for originating national calls to a number or numbers in a national numbering plan, to provide access to emergency services (‘112’) free of charge. Therefore, OTT-1 voice services, not being an ECS, do not have to provide access to emergency services…

The revised 2009 ECN/S Framework extended the scope of the emergency services obligation from the PATS to cover ECS which can originate calls to numbers in a national telephone numbering plan, but still did not make a blanket provision that all ECS (or all voice services) should be subject to the relevant obligation.


Article 20, 21 and 22 of the USD obliges providers of ECS to make their offers transparent.

The application of this obligation are about

“the balance between serving the consumer interest and the cost of compliance with these obligations.”

ECS providers are not exempted from the application of the Directive on Consumers Rights.

Obligations imposed by this Directive include:

“consumer information for contracts”, “formal requirements for off-premises contracts” and “for distance contracts, “right of withdrawal”

conditions. Also, Directive 93/13/EEC on unfair terms in consumer contracts is applicable to any contract concluded between a professional and a consumer, defined in a very similar manner than in the Directive on Consumers Rights.

The Directive on Consumer Rights and the Directive on unfair terms in consumer contracts are both applicable to OTT services and ECS providers but only when contracting with consumers.

The main conclusion of BEREC is that

“… in the forward-looking perspective of a new legal framework applying to the whole digital ecosystem, there may be a need for a thorough reconsideration of the current regulation for ECS and OTT services… In line with the above, a precondition to a consistent digital consumer protection throughout the EU would be that all NRAs should be entrusted with the same range of institutional tasks and powers so as to maximize the BEREC harmonising action in compliance with the internal market perspective.



But how do NRAs currently deal with OTT services in their SMP analysis decisions?

BEREC highlights that

the scope of OTT-2 related issues under debate is very broad. One could mention data protection, privacy, data portability, ownership of data, collaborative economy, interoperability, undue algorithmic discriminations, user discrimination (geoblocking), growing market power, lack of transparency, copyright, cybersecurity, cross border consumer protection etc. As it appears, in some cases, OTT-2 regulation may affect the situation of ECS providers.”

However, at this stage, such aspects and the related issues on relations between ECS and OTT-2 providers are not in the scope of NRA’s competences. However, according to BEREC

their impact on operator’s activity and position, in particular as regards their relationship with end users, may nevertheless need to be taken into account by regulators when analysing market situations… Other issues might fall within the scope of NRAs because of their connection with electronic communications regulation.”

BEREC recognizes that platform models at different levels of the Internet value chain may trigger a complex competitive dynamic in ECS markets.

On 24 September 2015 the Commission launched a public consultation that seeks evidence and input for the Commission’s comprehensive analysis of the role of online platforms.

In some Member States (i.e. France), national legislation has granted NRAs with the competence to request information from other providers not qualified as ECS.


Due to the current and expected evolution of these new services taking place on-line, the boundary between ECSs and the content services provided over electronic communication networks have become more and more blurred.

The Regulatory Framework does not provide clear-cut guidance on whether specific types of services fall within the ECS definition, the criteria provided being to some extent flexible and leaving its concrete interpretation to NRAs.

This situation becomes especially relevant with the evolution of OTT services, making the ECS definition more difficult to interpret. As it is unclear to what extent the current ECS definition covers some types of OTT services, different conclusions can be drawn regarding whether for example specific OTT services are qualified as ECS.

The general interpretation of NRAs is that some of OTT services qualify as ECS, for example OTT voice services that have the possibility to make outgoing and/or incoming calls to the PATS.

In this context, BEREC’s view the definition of ECS should be clarified and/or reconsidered in order to ensure that it keeps pace with the current technological developments.

BEREC identified that Article 5 of the Framework Directive provides NRAs competence to collect information, but that this is limited to collect data from ECN/S providers. However, some countries have implemented the ECN/S Framework in a way that gives NRAs power to gather all information from all relevant parties necessary for their task.

However, a majority of NRAs have no legal competence to request information from OTT-1/2 providers.

This can affect the work of NRAs for example in the execution of market analyses.

In BEREC’s view this issue should be addressed in the ECN/S Framework review.


Source: Quotes from BEREC

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