HomeInsightsPortability: A Year On

As 2016 draws to an end, we consider the status of the proposal for a Regulation on the cross-border portability of online content services.

The proposal, which was published a year ago, on 9 December 2015, was one of the first in the European Commission’s Digital Single Market strategy.  Following the Commission’s proposal, the co-legislators – the Council of the European Union and the European Parliament – have now each internally agreed on a negotiating position. The first trilogue, where the three EU institutions negotiate, took place on 8 December 2016.

The purpose of the proposed Regulation is to enable subscribers to online content services, such as Netflix and Spotify, to access their services while temporarily present in a Member State other than in which they are ordinarily resident. In short, it will do so by requiring service providers to provide portability, put in place a legal fiction to the effect that copyright is only implicated in the subscriber’s member state of residence and ban any contractual terms which are contrary to the portability obligation and legal fiction. We have written more about the Commission’s proposal here.

After the Commission’s proposal, the co-legislators began considering the text. The Council reached an agreement on the main principles in May 2016.

The Council

The Council took a number of slightly different positions than the Commission. The key issues are the following:

  • Scope: In the Commission’s Proposal, “online content service” is broadly defined to cover all pay services, whether linear or on-demand, and most free services, which provide national portability. The Council proposes to cover all pay services and to let free services opt-in to portability, should they wish, provided that they comply with the requirement for effective authentication/verification.
  • Temporarily present: Clarity on this point is crucial for the application of the Regulation. The definition in the Commission’s Proposal is the vague: means a presence of a subscriber in a Member State other than the Member State of residence”. The Council tightened this up by adding at the end of the Commission’s definition: “for a limited period of time”.
  • Verification/Authentication: The Commission’s Proposal provides that rightholders may require online content services to employ effective means to ensure the service is provided in accordance with the Regulation. The Council would require online content services to make use of effective means to verify Member State of residence, thereby (i) removing the onus on rightholders to require platforms to do so; and (ii) narrowing the definition to focus solely on verification of Member State of residence. The Council’s draft specifies a number of verification means, including periodic IP checking to identify the Member State where the subscriber accesses and uses the service, while allowing for agreement on the use of other means. The Council’s draft also permits service providers and rightholders to agree not to verify.

The Council’s agreement on main principles is available here.

The Parliament

Finally, on 29 November 2016, the Committee on Legal Affairs of the European Parliament (JURI) agreed on the negotiating position of the Parliament. This followed a public hearing on the matter in April, which focused, primarily on the distinction between pay and free services and on the issue of verification of member state of residence and temporary presence.

The key issues arising from the Parliaments agreed position are as follows:

  • Portability Obligation: The Parliament is proposing two significant additions to the portability obligation: (i) While the Commission’s proposal and Council’s position are silent on this point, the Parliament explicitly proposes that service providers may not charge for the portability function. (ii) The Commission and Council positions include an explicit recognition that the quality of the service delivered while exercising portability does not have to be guaranteed by a service provider. However, the Parliament proposes the introduction of an additional obligation relating to the quality of the service: “The provider shall however ensure that the quality provided is not below the standard of the Member State where the subscriber is temporarily present.” Recital 19 clarifies that this is to be interpreted as relating to “objective issues”, such as varying levels of infrastructure.
  • Contractual Override: The Parliament’s position introduces an additional ban on contractual overrides, as follows: Contractual provisions limiting the portability to a specific time period shall be deemed unenforceable.”
  • Verification/Authentication: The Parliament wants to roll back the verification scheme proposed by the Council. First, it proposes that service providers must verify by reference to a closed list of means of verification – thus excluding agreement between rightholders and service providers on means not on the list. Secondly, it permits use of one means of verification only if Member State of residence can be identified reliably using a single means. The only technical means included in the list is “random checking of Internet Protocol (IP) address…without geolocating or tracking of the subscriber”.
  • Data: Data collated in the course of verification, the Parliament proposes, may only be held until verification is completed and may only be used for verification. The data may not be shared with rightholders or other third parties. While included out of best intentions to protect personal data, it will prevent both service providers and licensors to ascertain actual uptake and use of portability by end users/subscribers.

What happens now?

Once the three parties have agreed a text, in the course of the trilogue, the text needs to be approved by the plenary of the European Parliament as well as the Council. We expect a finalised text in the first half of 2017, with a transition period of 12 months, most likely.