Explanatory Memorandum to COM(2015)627 - Ensuring the cross-border portability of online content services in the internal market - EU monitor

EU monitor
Wednesday, June 3, 2020
calendar

Explanatory Memorandum to COM(2015)627 - Ensuring the cross-border portability of online content services in the internal market

Please note

This page contains a limited version of this dossier in the EU Monitor.



1. CONTEXT OF THE PROPOSAL

Reasons for and objectives of the proposal

The internet has become a key content distribution channel. In 2014, 49 % of European internet users accessed music, video and games online 1 and this is expected to grow in the future. Tablets and smartphones further facilitate such uses with 51% of individuals in the EU using a mobile device to connect to the internet 2 .

The rapid take up of online content services and increasing use of portable devices, including across borders, means that Europeans today expect to use online content services from wherever they are in the Union. One of the key objectives of the Commission's Digital Single Market strategy 3 is to allow for wider online access to works by users across the EU.

Cross-border portability concerns online content services to which consumers have lawful access, or content that they purchased or rented online in their country of residence and to which they want to continue to have access when travelling in the EU. Consumer demand for the cross-border portability of online content services is substantial and expected to grow 4 . However, when people travel in the EU, they frequently cannot enjoy such cross-border portability or can do so only to a limited extent. The absence of, or problems with, cross-border portability of online content services in the EU results from the licensing practices of right holders and/or the commercial practices of service providers.

This proposal aims to remove barriers to cross-border portability so that the needs of users can be met more effectively as well as promoting innovation for the benefit of consumers, service providers and right holders. The proposal introduces a common approach in the Union while maintaining a high level of protection for right holders. In doing so, it contributes to the functioning of the internal market as an area without internal borders, where the freedom to provide and to receive services shall be ensured.

Consistency with existing policy provisions in the policy area

The Digital Single Market Strategy puts forward a range of initiatives with the objective of creating an internal market for digital content and services. This proposal is among the first of the initiatives under the Strategy. It will be followed by other initiatives in the areas identified in the Strategy, including in the domain of copyright. Removing the obstacles to cross-border portability is a first significant step that addresses a specific obstacle to cross-border access to content which is important for consumers. A targeted early intervention in this area is also timely given that consumers are nearing the date where there will be an end to roaming charges for travelers within the EU 5 .

This proposal aims to establish where, for the purposes of cross-border portability within the scope of this proposal, the act of exploitation of works and other protected subject matter takes place for the purposes of Directive 96/9/EC 6 , Directive 2001/29/EC 7 , Directive 2006/115/EC 8 and Directive 2009/24/EC 9 .

The proposal complements Directive 2006/123/EC on services in the internal market 10 and Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market 11 .

This proposal also contributes to the improvement of the cross-border reach of audiovisual media services and hence complements Directive 2010/13/EU 12 .

Consistency with other Union policies

According to Article 167 of the Treaty on the Functioning of the European Union (TFEU), the Union shall take cultural aspects into account in its action under the Treaties. This proposal would enhance access to cultural content as it would allow consumers to have a better experience of the content through easier access while travelling in the EU.

This proposal contributes to promoting the interests of consumers and thus is consistent with the EU policies in the field of consumer protection and Article 169 TFEU.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

Legal basis

The proposal is based on Article 114 TFEU. This Article confers on the EU the power to adopt measures which have as their object the establishment and functioning of the internal market. This includes the freedom to provide and to receive services.

The online content services within the scope of the proposal predominantly rely on copyright and related rights that have been harmonised at Union level. The EU has harmonised the area of copyright as regards the rights which are relevant for online dissemination of works and other protected subject matter (notably the rights of reproduction, communication to the public and making available).

The present initiative concerns the exercise of these harmonised rights across borders as concerns cross-border portability of online content services. As this would affect the rights harmonised by the EU copyright framework, it would have to rely on Article 114 TFEU as a legal base where the proposed instrument is a regulation.

Certain elements of online content services, such as sporting events, news and political debate, are not necessarily protected by copyright. However, when such content is included in transmissions by any means including by broadcasting organisations, right holders can invoke related rights harmonised at EU level such as the right of reproduction or the right of making available. Moreover, transmissions of sporting events, news and current events are often accompanied by copyright-protected elements such as opening or closing video sequences or accompanying music. Such elements fall under the EU harmonised framework. Also, certain aspects of such transmissions relating to events of major importance for society or of high interest to the public have been harmonised by Directive 2010/13/EU. In order to fully deliver to consumers the benefits of cross-border portability it is important to include all elements of such transmissions in the proposal.

Subsidiarity (for non-exclusive competence)

The portability of online content services is in its essence an issue of a cross-border nature. Moreover, as copyright and rights related to copyright have been harmonised at EU level, it is only the Union that can amend the legal framework. Member States, therefore, cannot intervene by legislation in order to ensure cross-border portability. Therefore, such action can only be taken at EU level.

In terms of effectiveness, only an EU intervention can ensure that conditions for consumers’ access to online content services do not vary across the European Union. EU action will also produce clear benefits to right holders and service providers by creating uniform conditions for the provision of cross-border portability of online content services across Europe. It will ensure greater legal certainty and would do away with the need to renegotiate the whole network of existing licences for the purposes of cross-border portability.

Proportionality

The proposal aims to facilitate the provision of the cross-border portability of the online content service (a provision localising the place of provision as well as the access to and use of the service) and imposes an obligation, under certain conditions, on the service provider to enable the cross-border portability. It does not extend beyond what is necessary to solve the identified problems. It does not substantially affect the licensing of rights and therefore has a limited effect on the business models of right holders and service providers. The proposal will not oblige right holders and service providers to renegotiate contracts as it will make unenforceable any provisions in contracts contrary to the obligation to provide for cross-border portability.

Moreover, the proposal does not impose on service providers any disproportionate cost. The proposal would not require that the provider of online content services takes any measures to ensure the quality of delivery of such services outside the Member State of residence of the subscriber. Also, the proposal would not oblige service providers that offer services free of charge to provide for cross-border portability where they do not verify the subscriber's Member State of residence as such requirement would involve a major change to the way they deliver their services and could involve disproportionate costs.

Choice of the instrument

A regulation would be directly applicable in Member States and would enter into force at the same time. This instrument would be the best to achieve the objective of ensuring the portability of online content across the EU. It would allow a uniform application of the portability rules across Member States and would guarantee that right holders and online service providers from different Member States are subject to the exact same rules.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

Ex-post evaluations/fitness checks of existing legislation

Not applicable.

Stakeholder consultations

A large public consultation on the review of EU copyright rules was conducted from December 2013 to March 2014. In the replies to the questions related to the territoriality of copyright, different groups of stakeholders explicitly raised the issue of cross-border portability. In 2013, the Commission conducted a stakeholder dialogue 'Licences for Europe' 13 . One working group focused specifically on the issue of cross-border portability.

In the first ten months of 2015, the Commission had extensive discussions with stakeholders (consumers, right holders, sports organisations, broadcasters, online service providers), including through specific stakeholders workshops, to assess the impact of a possible EU intervention in this area, including discussing the available options.

To summarise the views of the affected stakeholders concerning the proposal, consumers are generally in favour of improving cross-border access to online content, including the cross-border portability of online services; the content industry, representatives of right holders and service providers are not against cross-border portability of online content services but are usually in favour of industry-led solutions and soft law instruments as opposed to legal obligations in this area.

While a non-binding instrument such as a recommendation encouraging cross-border portability could support market developments in this area, the effectiveness of such instrument could be very limited. It would depend on the commercial decisions taken by the different market players. Thus it would not lead to homogeneous implementation and it would not be sufficient to ensure that EU consumers are offered the same conditions as regards the portability of online content services across the Union.

The proposal takes on board a number of concerns signalled by stakeholders, in particular: not imposing a duty to provide portability on those service providers that deliver services free of charge and without authentication of the consumer's Member State of residence; not obliging service providers to deliver the service across borders with the same quality in the delivery as in the Member State of residence; leaving for the parties to agree on the conditions for ensuring that the service is provided in accordance with the Regulation.

Collection and use of expertise

Legal 14 and economic 15 studies have been conducted in recent years on various aspects of the existing copyright rules, including as regards the territoriality of EU copyright rules as applied to online transmissions.

Further studies have been conducted on the impacts of digitisation on the production and distribution of content, as well as on the cross-border access to content 16 . Studies have also been carried out concerning sports 17 .

Impact assessment

An impact assessment was carried out for this proposal 18 . On 30 October 2015, the Regulatory Scrutiny Board gave a positive opinion to the impact assessment, on condition that certain elements of the report were improved. The final Impact Assessment takes these comments on board.

The final impact assessment examines the baseline scenario (no policy intervention) and three policy options. Option 1 consisted in guidance to stakeholders by the Commission encouraging online content service providers to provide for cross-border portability of their services across the EU. Option 2 entailed an EU intervention which would establish that the provision, access and use of an online content service in a cross-border portability mode would be deemed to occur in the consumer's Member State of residence. Option 3, in addition to the above mechanism, (i) would impose an obligation on providers of online content services to ensure cross-border portability of such services and (ii) would establish that any provisions in contracts limiting cross-border portability shall be unenforceable.

From the perspective of consumers, right holders and service providers, Option 3 would be the most effective in meeting the identified objective. Under the baseline scenario and Option 1, right holders in the audiovisual sector and, to a lesser extent, for premium sports content are likely to be reluctant to allow for the portability of their content. Under the baseline scenario, Options 1 and 2, service providers would continue to be able to restrict cross-border portability and many of them would continue to encounter problems (contractual restrictions) when wanting to offer it. Both right holders and service providers would have higher transaction costs to renegotiate their network of licensing agreements. Under these options, the transition to the cross-border portability would take longer. Also, these options would not ensure homogeneous services to consumers. Only Option 3 would effectively ensure that the cross-border portability feature is offered and the demand of consumers is met. Therefore, Option 3 was considered the best policy choice.

The preferred option would respond to consumers' expectations. Service providers would benefit from the mechanism establishing the localisation of the service for purposes of portability and be able to better respond to their customers' needs. As concerns content industries, the most affected, in terms of how the content is licensed, would be the audiovisual and premium sports content sectors. However, because the portability of online content services does not extend the range of users of the service and as such does not challenge the territorial exclusivity of licences, the impact on the industry is expected to be marginal.

Potential costs can be divided between those costs directly related to the intervention, i.e. service providers' costs of authentication of subscribers' Member State of residence, and costs which may arise but are only indirectly related to the intervention, i.e. costs of adapting licences to the new rules and service providers' costs related to adapting the technical infrastructure. Such technical costs directly linked to the intervention are not expected to be significant and could be absorbed in the routine software maintenance costs of service providers. It is difficult to estimate costs linked to contractual arrangements. However, the proposal will not require renegotiating the contracts. The proposal does not set requirements with regard to the quality of delivery of the service in a cross-border portability mode so it does not impose any costs in that respect (service providers remain free to do so voluntary or commit to it in contracts with consumers or right holders).

Regulatory fitness and simplification

The proposal applies equally to all enterprises, including micro-enterprises and SMEs. All enterprises can benefit from the mechanism establishing the localisation of the service for purposes of portability set out by the proposal. Exempting SMEs from the rules could undermine the efficiency of the measure, as many online service providers are SMEs. As the proposal does not entail any substantial costs, there is no need to minimise compliance costs for micro-enterprises or SMEs.

The proposal will have positive effects on competitiveness as it will help innovation in online content services and attract more consumers to them. The proposal will not have any impact on international trade.

The proposal will promote online use of content services. It concerns the online environment, because this is where the demand for portability predominantly arises. The proposal will promote innovation and progress in the market because it applies to all online content services, independently of the devices or technologies used. Therefore, the proposal takes account of new technological developments and is 'digital and internet ready'.

Fundamental rights

The proposal will have a limited impact on copyright as property right or on the freedom to conduct a business, as recognised in the European Charter of Fundamental Rights (Articles 16 and 17). The measure would be justified in view of the Treaty fundamental freedom to provide and receive services across borders. Restricting the above-mentioned freedoms (through the mechanism establishing the localisation of the service for purposes of portability, the obligation to offer cross-border portability as well as by rendering unenforceable any contractual provisions contrary to this obligation) would be justified in light of the objective of ensuring cross-border portability of online content services in the internal market.

4. BUDGETARY IMPLICATIONS

The proposal has no impact on the European Union budget.

5. OTHER ELEMENTS

Implementation plans and monitoring, evaluation and reporting arrangements

The process of monitoring the impacts of the proposal will consist of two phases.

The first phase will start right after the adoption of the legislative act and continue until the start of its application. It will focus on how the Regulation is put in place in the Member States by the market participants in order to ensure a consistent approach. The Commission will organise meetings with Member States representatives and the relevant stakeholders to see how to help the transition to the new rules.

The second phase would start from the date of the application of the Regulation and would focus on effects of the rules. This monitoring will pay particular attention to the impacts on SMEs and consumers.

Detailed explanation of the specific provisions of the proposal

Article 1 specifies the objective and the scope of the proposal. The proposal will introduce a common approach to ensuring that subscribers to online content services in the Union, which are delivered on a portable basis, can receive these services when temporarily present in another Member State (cross-border portability).

Article 2 contains definitions. These definitions will need to be interpreted in a uniform manner in the EU. It defines a 'subscriber', i.e. a consumer who, on the basis of a contract for the provision of an online content service, may access and use such service in the Member State of his or her residence. A 'consumer' is defined as any natural person who, in contracts covered by this Regulation, is acting for purposes which are outside his or her trade, business, craft or profession.

Article 2 also provides for the definitions of a 'Member State of residence', 'temporarily present', 'online content service' and 'portable'. A 'Member State of residence' is the Member State in which the subscriber habitually resides. 'Temporarily present' means that a subscriber is present in a Member State other than his or her Member State of residence. An 'online content service' is covered by the proposal when: (i) the service is lawfully provided online in the Member State of residence; (ii) the service is provided on a portable basis; (iii) the service is an audiovisual media service within the meaning of Directive 2010/13/EU of the European Parliament and of the Council 19 or a service whose main feature is the provision of access to works, other subject matter or transmissions of broadcasting organisations. For the purpose of this Regulation 'portable' means that subscribers can effectively access and use the online content service in the Member State of residence without a limitation to a specific location. Two scenarios are covered as regards online content services: (i) services which are provided for payment of money (directly or indirectly); and (ii) services which are provided without payment of money provided that the subscriber's Member State of residence is verified by the service provider. An example of indirect payment is when a subscriber pays for a package of services which combines a telecommunications service and an online content service provided by another service provider. If a subscriber receives an online content service without payment of money, the provider will only be obliged to enable the subscriber to enjoy cross-border portability if the provider verifies the subscriber's Member State of residence. Therefore, if, for example, a consumer just accepts the terms and conditions of a free of charge online content service but does not register on a website of such service (and hence the provider does not verify the Member State of residence of such a consumer), the service provider will not be obliged to provide cross-border portability for such service.

Article 3 establishes the obligation for the provider to enable a subscriber to use the online content service while the subscriber is temporarily present in another Member State. This applies to the same content, on the same range and number of devices and the same range of functionalities as offered in the Member State of residence. However, this obligation does not extend to any quality requirements applicable to the delivery of such service when the service is provided in the Member State of residence. In cross-border portability scenarios, the provider shall not be liable if the quality of delivery of the service is lower, for instance due to limited internet connection. Nevertheless, if the provider expressly agrees to guarantee certain quality of delivery to subscribers while temporarily present in other Member States, the provider shall be bound by such agreement. Also, this Regulation will oblige the provider to inform the subscriber on the quality of delivery of the online content service when accessed and used in a Member State other than the Member State of residence.

Article 4 sets out a mechanism establishing the localisation of the service for purposes of portability: the provision as well as the access to and use of the service by a subscriber who is temporarily present in another Member State is deemed to occur solely in the Member State of residence. For the licensing of copyright and related rights, this means that the relevant copyright acts, which occur when the service is provided to consumers on a basis of cross-border portability, are deemed to occur solely in the Member State of residence. This provision applies for all other purposes linked to the provision of as well as the access to and use of the service in a cross-border portability mode.

Further, Article 5 sets out that any contractual terms contrary to the cross-border portability obligation, in particular those which limit either consumer's possibilities as to the cross-border portability of his or her online content services or service provider's ability to deliver it, shall be unenforceable. Further, any contractual terms contrary to the legal mechanism which enables service providers to comply with the cross-border portability obligation shall also be unenforceable. This applies to all contractual arrangements, including between right holders and service providers as well as between service providers and their customers. However, right holders may require that the service provider makes use of means in order to verify that the service is provided in conformity with the regulation. The proposal sets out a safeguard that such required means shall be reasonable and shall not go beyond what is necessary in order to achieve their purpose.

Article 6 provides that the processing of personal data carried out within the framework of the Regulation shall be carried out in compliance with Directive 95/46/EC and Directive 2002/58/EC.

Article 7 sets out that the Regulation shall also apply to any contracts concluded and rights acquired before the date of the application of the Regulation if they are relevant for the provision of the service, the access to or the use of the service.

Article 8 sets out that the Regulation shall apply six months after its publication in the Official Journal.