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Summary

On May 9, 2016, the Swedish regulator PTS announced it will examine some of the retail offers from mobile operators Telia and Three, which allow users to access a range of applications without the use of them impacting their data allowance.

The Swedish case is the first test for the recently approved (April 30, 2016) European regulation on net neutrality, which is strikingly silent on the issue of zero-rating, and could allow inconsistent treatment of this practice across the continent. Although it is hard to predict which stance the PTS will take, the case shows that common guidelines are urgently needed to provide consistency across EU countries. The Body of European Regulators for Electronic Communications (BEREC) should publish guidelines in the coming months.

Swedish media are up in arms, but customers could miss zero-rated offers

Three's offer allows users to stream music from services such as Spotify and SoundCloud, and Telia's offer targets social media such as Facebook, Instagram, WhatsApp, Twitter, and Kik. The regulation, which was approved by the EU Parliament in November last year but which only came into force recently, is strikingly silent on the issue of zero-rating. This means that frameworks that ban it in some countries (e.g. Netherlands, Slovenia) could coexist with frameworks in countries that allow zero-rating, as is currently the case. This has led critics to argue that the EC's rules enshrine the principle of net neutrality but in practice do not go far enough to protect it. BEREC is due to issue guidelines on how to best apply the new rules, but these are not likely to be published before August 2016.

It is also noteworthy that, in line with the provision of the regulation, the PTS has announced it will mainly look at how these offers impact operators' treatment of traffic, and the rules state that traffic has to be treated equally, regardless of the content and applications. If the regulator finds that there are no concerns about this aspect, it could give the green light to both offers, and set a precedent for future similar offers of other mobile operators.

The practice of zero-rating continues to be controversial and divisive. Leading Swedish broadcasters have voiced their concerns about the offers, particularly the one marketed by Telia (a company in which the Swedish government has a controlling stake of 37.3%) that is the result of a deal with Facebook and some other leading social networks. In the broadcasters' view, these offers will be a further incentive to use Facebook more than other applications and websites, thereby giving Facebook greater control over the way in which content is accessed. On the other hand, zero-rated offers are likely to be very appealing to Swedish consumers, who are notoriously hungry for data to the point that mobile operators' most successful offers include double-digits data bundles. Users are likely to be happy to save their data allowance while using popular social networks, and this might also not be bad news for other content providers because customers will also end up having more data left for other uses. The PTS will have to take account of all of these aspects when making its decision.

Appendix

Further reading

The Regulatory Position on Telco–OTT Partnerships, TE0007-000925 (July 2015)

"A wave of bans on zero-rating is pushing telcos to become dumb pipes," TE0007-000996 (February 2016)

"Facebook’s Internet.org initiative could clash with net neutrality rules," TE0007-000935 (August 2015)

Author

Luca Schiavoni, Senior Analyst, Regulation

luca.schiavoni@ovum.com

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