Europe set to level playing field for operators in OTT battle

The European Commission is set to release new rules in September, which will aim to tighten up how OTT’s such as WhatsApp and Skype are regulated in the European markets, according to the Financial Times.

How Over-The-Top players are regulated has been a point of contention within the European markets in recent years, as it does fall into a grey area currently. Although operators are under guidance from the European Commission regarding SMS and traditional voice calling, these rules do not directly address the services offered by the OTT’s, such as Facebook’s WhatsApp, which remain a major competitive threat to operators. According to the FT, this grey area will be addressed in September, when the commission will release new rules focusing on how OTT’s comply with security requests from the state, and also how customer data can be monetized.

According to the reports, the commission will make an initial announcement in September, before providing more clarity in a separate review of the EU’s “ePrivacy” law later in the year. This is one of a number of moves across the industry to redefine regulation in light of how quickly technology has advanced over the last few years. French authorities for example, will decide in September whether Google, Viber and Skype should be registered as a telecoms provider, a move which has the potential for widespread ripples.

The reports will come as good news to various players in the telco industry, who have not been happy with the light-touch regulation which is in place for the OTT’s. Back in 2014, Spanish giant Telefónica complained there wasn’t a level playing field, as the OTT’s do not have to comply with the EU’s regulation on issues such as user rights, antitrust, security, net neutrality or Significant Market Power (SMP) obligations. The complaint, which is largely a fair one, was built on the idea that if OTT’s offer similar, or almost identical, services, they should be held accountable to the same rules.

These complaints were furthered last year, as a group of European operators, including Orange, Deutsche Telekom, Telefónica and KPN, wrote to the President of the European Commission urging changes to the regulatory landscape to enable the telcos to better compete with the new waves of OTT’s. While the telcos have been held accountable to strict regulation in recent years to ensure competition and a fair deal to the consumer, the growth in popularity for OTT’s has proved to be a tough time for the industry.

Only recently Ofcom released its Communications Market Report 2016 which added weight to the claims OTT’s are becoming increasingly popular across various demographics. The report claims the number of people who are now using instant messaging services such as WhatsApp is up from 28% to 43% in the UK. This surge in popularity has seemingly come at the expense of more traditional means of communication, such as SMS and email, which demonstrated a decline of eight and seven percentage points respectively. These stats highlight the growth of the OTT’s is likely to continue, as well as the plight of the operators.

While it has not been confirmed whether the regulations will be changed in the near future, a problem which could be faced by the European Commission may focus around investments in network infrastructure. Over recent months there have been a number of mergers which have been rejected by the European Commission, most notably O2 and Three in the UK, with the reasoning relating to competition.

Should the level of competition drop in any markets, the need for telcos to continue investment in their own infrastructures to remain competitive would also drop. This is a concern of the European Commission, though the growth of OTT’s could inadvertently have the same impact. OTT’s are certainly providing cheaper services to the consumer, though the result is a decrease in revenues for the telcos which could impact the investments which are made elsewhere within an operators business.

The report from the FT remains officially unconfirmed for the moment, though it should not be seen as a surprise should it be true. The issue over OTT regulation has been bubbling away for some time, and considering the telecommunications industry is one of the heavier hitters in terms of lobbying, pressure would have likely been exerting on the commission for some time.

UPDATE: 15/08/2016 15:30. Nathalie Vandystadt, Spokesperson for the Digital Single Market at the European Commission responded to Telecoms.com’s request for comment with the following:

The Commission is indeed working on an update of EU telecoms rules under its Digital Single Market strategy. The upcoming reform of the EU telecoms framework should incentivise and leverage more private investment in next generation networks, provide regulatory predictability and the right conditions for all operators to invest. The Commission has been looking into the growing importance of online players that provide similar or equivalent services to traditional communication services.The Commission is looking into to what extent people can consider OTT services like WhatsApp and Skype to be functional substitutes for services provided by traditional telecoms operators, and is considering whether scope of the current EU rules needs to be adapted, to ensure adequate levels of consumer protection and ensure that regulation does not distort competition. This does not necessarily mean treating all communications services the same for all purposes. We will present our reform of the EU telecoms framework in September.