28
Thu, Mar
51 New Articles

Net Neutrality & Zero-Rating: Hungary Among First EU Member States to Apply New Regulation

Net Neutrality & Zero-Rating: Hungary Among First EU Member States to Apply New Regulation

Hungary
Tools
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

In December 2016, the Hungarian national electronic communications regulator (the NMHH) was among the first EU national regulatory authorities to apply the new EU Regulation 2015/2120 on net neutrality (the “Regulation”), then followed that up with a similar decision in January 2017. In these decisions, the NMHH followed the strict interpretation of the Regulation proposed by the Body of European Regulators for Electronic Communications (the “BEREC”). The NMHH’s decisions are part of a wider string of test cases springing up across the EU on how the Regulation is to be interpreted.

Net Neutrality

On November 25, 2015, the EU issued the Regulation, which lays down measures concerning open Internet access and addresses the concerns of net neutrality advocates. The Regulation enshrines common rules to safeguard the equal and non-discriminatory treatment of traffic, as well as ensuring that end-users have a right to access and distribute the content of their choice. The EU intended to put in place a system to guarantee the continued functioning of the Internet ecosystem as an engine of innovation. The Regulation’s form means that the rules are directly applicable and transposition into national law is not necessary. The Regulation entered into force on April 30, 2016.

Zero-Rating

A flash point in the ongoing debate on net neutrality is the issue of zero-rating. Zero-rating is when an ISP, often a mobile broadband provider, imposes a limit on data traffic by contract, yet allows unlimited use of one or more apps without their traffic counting towards this limit. Should this practice be allowed under the net neutrality principle? This is a divisive issue.

BEREC Guidelines

In anticipation of future discussions on interpretation of its text, the Regulation mandated that the BEREC issue guidelines for national authorities. 

According to the BEREC’s reading of the Regulation, zero-rating is not in and of itself a violation, and it may be allowed under certain circumstances. The BEREC adds that the number of applications zero-rated by the operator is a relevant factor, as are other considerations, such as whether the range and diversity of applications that end-users can choose from is materially reduced in practice. Under the BEREC’s approach, if just a single app’s traffic is zero-rated, then this is more likely to limit choice than if an entire category of apps (e.g., all music-streaming apps) is zero-rated. 

Most interestingly, however, the BEREC seems to interpret the Regulation strictly by making a harsh distinction between zero-rating before and after reaching a data traffic cap: “[A] zero-rating offer where all applications are blocked (or slowed down) once the data cap is reached except for the zero-rated application(s) would infringe [the Regulation].” 

The BEREC has been fiercely criticized for interpreting the Regulation so strictly. For example, in their contribution to the public consultation by BEREC, the GSM Association and the European Telecommunications Network Operators’ Association came to a very different conclusion. They believe that zero-rating could, in some cases, be extremely beneficial to the consumer (in particular in e-health or educational applications), and its harmfulness to competition should be assessed in light of the real benefits it brings to consumers. They also argue that if operators can price the data consumption of different apps differently, then this is beneficial to end users: the more choices the operators can offer, the better they can tailor the products to their customers’ preferences. However, if operators must cut off zero-rated apps when the data limit is reached (as the BEREC guidance requires), then in practice they would not be able to make retail offers based on such differential pricing.

NMHH

In its December and January decisions, the NMHH followed the BEREC’s narrow interpretation. Magyar Telekom offered its mobile customers unlimited video streaming through a wide array of apps, whereas Telenor allowed mobile consumers to use certain music-streaming and chat apps. Both operators slowed down the data speed after customers reached the monthly data cap but made exceptions for zero-rated services. According to the NMHH, this breached the Regulation. Both operators indicated that they are appealing the NMHH’s first-instance decision – and their dispute with the NMHH may well end up in court.

Similar cases are arising across the EU. Will the regulators and courts follow the BEREC’s strict approach to net neutrality, or will they take a flexible approach? In any case, their choice will have a fundamental impact on services provided over broadband Internet throughout the EU.

By Attila Komives, Senior Associate, Tibor Szanto, Counsel, and Felix Seuntjens, Allen & Overy

This Article was originally published in Issue 4.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

Firm's website.

Our Latest Issue