Zero-Rating Practices in Broadband Markets
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Zero-rating practices in broadband markets Report by Competition EUROPEAN COMMISSION Directorate-General for Competition E-mail: [email protected] European Commission B-1049 Brussels [Cataloguenumber] Zero-rating practices in broadband markets Final report February 2017 Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): 00 800 6 7 8 9 10 11 (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE The information and views set out in this report are those of the author(s) and do not necessarily reflect the official opinion of the Commission. The Commission does not guarantee the accuracy of the data included in this study. Neither the Commission nor any person acting on the Commission’s behalf may be held responsible for the use which may be made of the information contained therein. 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Prepared by: DotEcon Ltd 17 Welbeck Street London W1G 9XJ www.dotecon.com Content Content 1 Introduction ............................................................................................................................................. 1 2 Research into zero-rating practices in Europe ............................................................................. 5 2.1 Summary of results on current zero-rated offers .............................................................. 8 2.2 Survey of regulators and competition authorities ......................................................... 21 3 Case studies ........................................................................................................................................... 29 3.1 Bulgaria .......................................................................................................................................... 30 3.2 Germany ........................................................................................................................................ 42 3.3 Portugal ......................................................................................................................................... 54 3.4 Sweden .......................................................................................................................................... 68 3.5 United Kingdom ......................................................................................................................... 78 3.6 Non-European case study – USA .......................................................................................... 89 4 Summary of key findings from our research ............................................................................103 4.1 Zero-rating in mobile markets .............................................................................................103 4.2 Zero-rating in fixed markets .................................................................................................105 5 Potential benefits and costs from zero-rating .........................................................................107 5.1 Potential benefits from zero-rating ...................................................................................107 5.2 Potential harmful effects from zero-rating .....................................................................113 5.3 Summary .....................................................................................................................................122 6 Framework for competition assessment ...................................................................................123 6.1 Competition assessment must reflect the internet ecosystem ...............................125 6.2 Elements to be considered when assessing the potential impact on competition between ISPs .....................................................................................................................................128 6.3 Elements to be considered when assessing the potential impact on competition between CAPs...................................................................................................................................132 6.4 Materiality of effects ................................................................................................................136 6.5 Summary .....................................................................................................................................138 Annex A Brief summaries of the reviewed literature ................................................................139 Annex B National laws, regulation and case-law on zero-rating ..........................................172 Annex C References ..............................................................................................................................181 i Executive Summary Executive Summary Zero-rating – the practice of excluding some traffic from overall data caps – has received a considerable amount of attention in the debate about net neutrality. Applying different charges depending on the type of traffic may be considered as incompatible with the principle of treating all data the same, and therefore with the net neutrality principle. However, others have pointed out the potential benefits associated with zero-rating, such as promoting broadband access and access to services through lowering costs and enabling product and price differentiation. European net neutrality rules permit zero-rating (under certain conditions), and data plans including zero-rated offers are available in most Member States, mostly in the mobile market. In this report, we present the results of research undertaken on current and historic zero-rated offers in Europe, including a survey of national regulatory and competition authorities. As zero-rating is capable of affecting end users’ inter-related choices of internet service provider and the content they access, it can have an impact on competition between internet service providers (ISPs) and content and application providers (CAPs). Based on the findings from our research, and on a review of the economic and legal literature on zero-rating, we also set out an initial framework for the competition assessment of zero-rating practices. Zero-rating may At the most basic level, zero-rating will reduce the cost of accessing affect choice of ISP particular types of content via a particular ISP. Zero-rating affects and choice of the traffic-related cost of using a service. The effective discount content offered by zero-rating depends on the importance of traffic-related costs relative to the total cost faced by the user for accessing the content. It should be expected to affect: • the decision whether or not to obtain access; • the choice of access provider; and • the choice of content and the amount of data consumption overall. The impact on user choice depends on several factors, including consumer patterns and the magnitude of the effective discount relative to the difference in value the user places on different types of services. Though the actual impact that zero-rating has on user choices, and the factors that determine the magnitude of any such effect, are crucial for an assessment of the costs and benefits of zero-rating, there is little information about the strength of the different effects and their impact on market outcomes. ii Executive Summary Zero-rating is more Our research of zero-rating in Europe shows that the practice tends common in mobile to be much more prominent in the case of mobile than fixed markets, and is broadband services. In fact, we are only aware of one zero-rated growing from an initially low level offer by a fixed operator across Europe – BT zero-rating its BT TV service in the UK. This is simply because most fixed broadband plans are uncapped, which means that all traffic is effectively zero- rated, whilst mobile broadband plans typically have data caps. Zero-rating in mobile markets is becoming more prevalent across Europe as well as the USA. There was little zero-rating prior to 2012, but it is now increasingly common, perhaps as a result of the greater clarity about permitted practices flowing from the Telecoms Single Market (TSM) regulations1 and the BEREC guidelines on the implementation of net neutrality principles.2 The number of zero-rated offers varies significantly between European countries, and there does not appear to be any geographical or economic patterns in the use of zero-rating. Evidence from our detailed case studies partially supports the hypothesis that zero-rating should be more common in countries where data caps are tighter – the case study countries with the lowest data caps, Portugal and Bulgaria, both have a large number of zero-rated tariffs. However, there are also exceptions, such