Telecoms & Media. EU s Digital Single Market edges closer. Global interview panel covering key economies led by Laurent Garzaniti

Transcription

1 Volume 2 Issue 4 Telecoms & Media Global interview panel covering key economies led by Laurent Garzaniti EU s Digital Single Market edges closer Regulatory developments Major cases Business models 2015 trends Europe North America Asia-Pacific Latin America

2 Publisher: Gideon Roberton Senior business development manager: Adam Sargent Product manager: Rachel Nurse Marketing assistant: Sophie Pallier Head of production: Adam Myers Editorial coordinator: Eve Ryle-Hodges Subeditor: Janina Godowska Designer: Nathan Clark Cover: Songglod/iStock/Thinkstock No photocopying. CLA and other agency licensing systems do not apply. For an authorised copy contact Adam Sargent, tel: Welcome to GTDT: Market Intelligence. This issue focuses on global telecoms markets. Getting the Deal Through invites leading practitioners to reflect on evolving legal and regulatory landscapes. Through engaging and analytical interviews, featuring a uniform set of questions to aid in jurisdictional comparison, Market Intelligence offers readers a highly accessible take on the crucial issues of the day and an opportunity to discover more about the people behind the most interesting cases and deals. This publication is intended to provide general information on law and policy. The information and opinions which it contains are not intended to provide legal advice, and should not be treated as a substitute for specific advice concerning particular situations (where appropriate, from local advisers). Market Intelligence is available in print and online at Getting the Deal Through London August 2015 Published by Law Business Research Ltd 87 Lancaster Road London, W11 1QQ, UK Law Business Research Tel: Fax: Law Business Research Ltd ISSN: Strategic Research Sponsor of the ABA Section of International Law Printed and distributed by Encompass Print Solutions Tel: In this issue Global Trends...2 Austria...6 Belgium...12 Brazil...17 China...23 European Union...28 France...34 Germany...42 Hong Kong...49 India...54 Ireland...60 Italy...66 Netherlands...73 Russia...77 Spain...82 United Kingdom...90 United States...97

3 Helen Kelly TELECOMS & MEDIA IN IRELAND Helen Kelly is a partner and head of the telecommunications group and the EU, competition and regulatory group at Matheson. She advises on mergers and acquisitions in the telecommunications sector including merger control filings to the Competition and Consumer Protection Commission (CCPC) and the European Commission as well as multijurisdictional filings. She also advises on competition and regulatory issues under the EU Regulatory Framework including spectrum licensing, rights of access, interconnection, infrastructure sharing, number portability, consultations with the telecommunications regulator in Ireland, the Commission for Communications Regulation (ComReg) and the European Commission, regulatory dispute and complaints, and challenging the regulators decisions in the courts. Darach Connolly is an associate in the EU, competition and regulatory group at Matheson. He specialises in advising on EU and Irish competition law, as well as regulatory law, public procurement law, merger control law and state aid law. Darach has made notifications and submissions to the European Commission, the CCPC and also in dealing with ComReg and the Data Protection Commissioner. He is a member of the Irish Society for European Law. Matheson s telecommunications group is consistently recognised by international legal directories as a leading adviser to organisations involved in the telecommunications sector and related regulated sectors. 60

4 Compliance continues to be a key priority for ComReg. Photo:christobolo/iStock/Thinkstock GTDT: What were the key developments in communications and media regulation in your jurisdiction last year? Helen Kelly & Darach Connolly: Last year saw three major developments in communications and media regulation in the Irish market. First, a new media merger regime came into effect on 31 October 2014 under the Competition and Consumer Protection Act (2014 Act). The long-awaited changes introduced will have a significant effect on future market consolidation of media businesses. Second, there has been consolidation in the communications sector with concrete plans for new entry. Mobile network operator Three Ireland (Three), part of Hutchison Whampoa, acquired Telefónica Ireland Limited (O2 Ireland) following an extensive Phase II investigation by the European Commission of the four-to-three merger; and UPC and Carphone Warehouse are to enter the Irish market at the mobile virtual network operator (MVNO) level as a result of Three s merger commitments. The European Commission also cleared a joint venture between the state-owned electricity supplier and Vodafone to build a fibre-to-the-building broadband network using existing electricity infrastructure. Third, compliance continues to be a key priority for the Commission for Communications Regulation (ComReg). In the past 12 months, it opened 90 compliance investigations and imposed significant fines in the area of premium rate services (PRS). In one case, ComReg ordered a refund of 390,000 to 12,000 PRS customers. The newly established Competition and Consumer Protection Commission (CCPC) also brought enforcement actions against four telecommunications companies in June 2015 where the compliance issue involved breaches of consumer legislation regarding cancellation terms. GTDT: Does sector-specific regulation as opposed to the general competition regime play a significant role in your jurisdiction? Is this expected to change? HK & DC: Yes. While the CCPC is the statutory body charged with the protection of competition and consumer affairs and sole responsibility for merger approval in non-eumr cases, ComReg is responsible for the regulation of the electronic communications sector. ComReg has co-competition powers with the CCPC that enable it to pursue issues arising in the electronic communications sector under competition law and to take action in respect of anti-competitive agreements and abuse of dominance. The main Irish legislation governing the provision of electronic communication services (ECS) and electronic communication networks (ECN) is contained in the Communications Regulation Acts , while secondary regulations transpose the European telecoms regulatory package. Under the Irish telecom regulatory regime, there is a general right to provide an ECN or an ECS as long as certain conditions are complied GTDT: Market Intelligence Telecoms & Media 61

5 with. No distinction is made as to the type of network or service (eg, mobile, fixed or satellite). The notification procedure for obtaining a general authorisation is straightforward and only involves the completion of a notification form. Operations can be commenced once a properly and fully completed notification has been received by ComReg. A notifying party is, however, immediately subject to the Irish regulatory regime and the conditions set out in the general authorisation. In the short term, we do not anticipate that the telecom regulatory regime will be significantly amended. GTDT: What is the attitude to net neutrality in your jurisdiction? HK & DC: While net neutrality remains a hotly debated topic between telecom and internet access providers, on the one hand, and consumer advocates on the other, to date it does not appear to have captured the public s imagination in Ireland. Nevertheless, within industry ie, telecoms, ISPs and online businesses we are seeing companies pay close attention to the negotiations at EU institutional level concerning the proposed changes to net neutrality, which will affect how companies manage their networks in the future. For its part, ComReg has not adopted a formal position on net neutrality and its protection is not enshrined in Irish legislation. Speaking to a parliamentary committee in September 2014, ComReg officials noted that they viewed the European Commission s proposed Connected Continent Regulation generally positively but cautioned that there was need for further debate on assured service quality, traffic management and discriminatory preference being given to certain applications or to certain categories of user. Additional questions were raised over whether net neutrality should be addressed by way of full harmonisation. Recently, stakeholders in the Irish telecom industry watched with interest the announcement on 30 June 2015, that the Council and Commission reached agreement on a regulation to abolish roaming charges and provide for open internet, a limited form of net neutrality, beginning in June However, the details of the regulation are not yet available and it is not clear from the wording of the announcement alone how specialised services will be treated given that it notes that end-users and providers of internet access will still be allowed to agree on different access speeds and data volumes. GTDT: What is the regulator s approach to over-the-top services? HK & DC: ComReg has not developed a formal position in relation to over-the-top (OTT) services and, for example, does not report unmanaged voice over broadband services by providers such as Skype. However, OTT services now account for a very high percentage of total fixed and mobile usage and figures from ComReg suggest data remains on an inexorable upward curve in Ireland, having quadrupled in the three years to This is in sharp contrast with the declining figures in the same period for SMS, which now finds itself in competition with OTT message services such as WhatsApp, Viber and Facebook Messenger. Such a rise is all the more remarkable given recent figures demonstrate that average revenue per user is down to 25 and total retail revenue is down about 100 million in the year to March As predicted, internet-based communication services are currently benefiting from surges in consumer growth, with just under 50 per cent of individuals in Ireland holding a Skype or a Facebook Messenger account and just over 50 per cent of WhatsApp account holders using it daily. In our view, the next few years will be shaped by the continued challenge of the internet giants (eg, Facebook, Apple and Google) seeking to cross over into the traditional telecom space. With increasingly dynamic performance and platforms available, the challenge for ComReg and telecoms operating in Ireland will be to ensure a smooth and safe delivery of those services by focusing on issues such as data protection, cybersecurity and ease of access. GTDT: Has there been any recent granting of spectrum? Are any significant grants planned in the near future? HK & DC: During 2012, ComReg conducted a major spectrum auction process and granted liberalised use licences to the then four mobile network operators operating in Ireland: Three, Vodafone, O2 Ireland and Meteor (owned by eircom) for liberalised use spectrum in the 800MHz, 900MHz and 1,80MHz bands. ComReg imposed spectrum caps as part of the auction process and issued the licences on a technology and service-neutral basis. The spectrum auction generated upfront revenue of approximately 481 million with additional usage fees in the period to 2030 expected to produce an additional revenue of 372 million. This was widely regarded as a successful revenue boost for the state. 62

6 When the European Commission approved the acquisition of O2 Ireland by Three in May 2014, Three retained all O2 Ireland spectrum post-merger. Vodafone subsequently brought judicial review proceedings challenging the manner in which ComReg conducted its spectrum management role and, in particular, the allocation of spectrum, seeking to require ComReg to conduct a spectrum review. ComReg declined to undertake the spectrum review sought by Vodafone and the proceedings were subsequently struck out. While significant new grants of spectrum are not expected in the near future, ComReg is to publish a consultation on its spectrum strategy with its current thinking on the effective management and efficient use of the radio spectrum (including the making available of additional spectrum rights and trading of spectrum rights). GTDT: How has the debate about big data played out in your jurisdiction? What has the debate focused on? HK & DC: No new data protection legislation has been introduced in Ireland to deal specifically with big data, so the debate has focused on the application of existing data protection rules to each new way in which personal data are collected, stored, used and analysed. For instance, current data protection law requires that personal data is only used for specific purposes which, naturally, restricts the trend in big data to make use of data in previously unknown ways. This means that big data systems should ideally be set up with this purpose limitation in mind, with each new use of personal data generating its own risk profile. There have been discussions around the use of techniques to effectively anonymise or pseudonymise personal data as a solution to this, so that the data fall outside the scope of data protection rules, although achieving this can sometimes be difficult. While this may somewhat limit the ability to commercially exploit big data, the enforcement of data protection law in Ireland is not static, and is adaptable to each new innovation. The Irish Data Protection Commissioner takes a pragmatic approach to the treatment of big data and considers meaningful consultation with organisations operating in this space, including the many leading multinational technology companies based in Ireland, as essential to this strategy. However, wide-ranging changes to the EU data protection regime (to which Ireland is subject) are expected soon. The Edward Snowden allegations of large-scale access by US authorities of EU citizens personal data have brought the treatment Darach Connolly of big data to the fore of political discussion in Europe, including Ireland. Significant changes are likely to come about as a result of the EU General Data Protection Regulation, which is currently making its way through the EU legislative process. GTDT: What about media plurality? How have policymakers and regulators addressed this issue? HK & DC: Media plurality has long vexed Irish policymakers and is a popular topic of dispute in domestic current affairs with suggestions that media is controlled by too few parties and concerns about the role of the state broadcaster. Back in 2008, an expert group was instructed to report on the issue of media plurality in a merger control context to the Minister for Justice: the resulting Sreenan Report recommended a number of changes to the existing legislation. Almost seven years later, the 2014 Act adopted the majority of those recommendations and significantly altered the media merger rules. GTDT: Market Intelligence Telecoms & Media 63

7 What are the most important skills and qualities needed by an adviser in this area? THE INSIDE TRACK What were the most interesting or challenging cases you have dealt with in the past year? In the telecoms and media sectors, clients demand technical expertise, rigour in analysis leaving no stone unturned in terms of available options as well as commerciality and timeliness of advice. It is crucial that legal advisers understand their clients businesses and take a proactive approach in identifying issues that could be of relevance to a client s future business plans, and working through solutions to these issues with the client in advance of issues materialising. Matheson prides itself on delivering on these skills and qualities. What are the key things for the parties and their advisers to get right when dealing with a case in this area? First, understand the sector advisers need to be able to understand the challenges faced by business in the area and the policy drivers and priorities of regulators. Without doubt, the biggest telecommunications transaction in Ireland over the past few years was the acquisition by Three of O2, with Matheson advising Three. This was a hotly disputed four-to-three merger which involved a detailed Phase II investigation. Clearance was granted subject to several commitments including Three promising MVNO access for non-mvnos. ComReg was opposed to the transaction proceeding and there were several objections that had to be overcome. The subsequent High Court challenge by Vodafone to try to compel ComReg to carry out a spectrum review in light of the merger (as Three retained all O2 spectrum despite Vodafone objections) demonstrates the contentious nature of the Irish telecommunication market and the importance that mobile operators attach to their spectrum holdings. Helen Kelly & Darach Connolly Matheson Dublin While the CCPC will continue to adjudicate on media mergers from a competition perspective, the key changes provided for in the 2014 Act include: provision for online media businesses to be subject to the media merger rules for the first time; media mergers to be notified to both the CCPC and the Minister for Communications, regardless of turnover; a new statutory test enables the Minister for Communications to block media mergers which would be contrary to the public interest in protecting media plurality; the Broadcasting Authority of Ireland (BAI) will now play a formal role where the Minister for Communications opens a full investigation into a media merger; and, the relevant criteria by which the Minister for Communications must assess whether a media merger will be likely to affect plurality of media in the state are codified and include, inter alia, the undesirability of allowing one undertaking to hold significant interests within a sector of media business, the promotion of media plurality and the adequacy of the existing state funded broadcasters to protect the public interest in plurality of the media in the state. Future media mergers will face careful evaluation on public interest grounds as well as competition grounds. GTDT: Is the global trend for consolidation in the sector also visible in your jurisdiction? If so, what were the most prominent deals in the past year or so? HK & DC: Yes. There was a major consolidation in the telecoms sector in Ireland in 2014 with the merger of Three and 02 Ireland, a four-tothree merger scenario that was subject to a lengthy Phase II investigation by the European Commission and received clearance subject to certain conditions, including providing a package for two MVNOs to enter the market. The consolidation took place against a background of Ireland s severe economic crisis dating back to 2008, with a shrinking mobile market including falling average revenue per user and a requirement to make substantial investment in long-term evolution coverage, an area where Ireland was lagging behind its European counterparts. There was also a new joint venture between Vodafone and ESB, the state-owned electricity supplier, which will see fibre deployed on ESB s existing overhead and underground infrastructure. On the media side, there have been few competitively significant media mergers in the 64

8 past five years, with only three media mergers notified in the 12 months to 1 July 2015: Sony Pictures acquisition of CSC Media, Scripps Network s acquisition of TVN and Discovery Network s acquisition of Setanta Asia. Why? A mix of poor economic outlook arising from the financial crisis, legacy consolidations and elements of regulatory uncertainty, in part clarified by the 2014 Act, have all contributed to the cautious investor sentiment. However, that approach is slated to change with Liberty Global set to acquire TV3, Ireland s first independent TV channel and other major media organisations expected to make acquisitions in the short to medium term. Another new entrant to the TV market in Ireland, UTV Media plc, launched an Irish TV channel (UTV Ireland) in January All in all, we expect further consolidation in Ireland s media industry in the coming years. GTDT: Have there been any major antitrust cases in the communications and media sectors in your jurisdiction recently? HK & DC: While the CCPC and ComReg are both charged with competition powers, there have been few major antitrust cases in the communications sector in Ireland. In 2012, the CCPC closed an investigation in the media sector into how RTÉ sells airtime to advertisers following a complaint by TV3. That case was closed after RTÉ proposed changes to how it sells TV advertising. More recently, in the postal sector in October 2014, the CCPC closed an investigation into the manner in which pricing for An Post s zonal pricing scheme for its publications service was implemented. The investigation was based on the preliminary view that An Post was likely dominant on the market for the delivery by post of newspapers and periodicals presented in bulk. Following amendment of An Post s pricing procedures, the CCPC closed the investigation without taking further action. GTDT: What is your outlook for regulation in the communications and media sectors in the next two to three years? Are any major changes expected in your jurisdiction? If so, what do you predict will be the impact on business? HK & DC: With continued dynamic development of the communications industry, we expect that regulatory change will be led from Brussels, particularly with the proposed Connected Continent package and plans for the Digital Single Market. The unending consumer need for broadband access and speed remains a big We expect further consolidation in Ireland s media industry in the coming years. challenge for traditional regulation in Ireland and it is clear that Ireland is minded to drive broadband penetration and ensure strong speeds are available through the NBS programme. In addition, we expect that further sectoral consolidation and a trend towards convergence of telecoms and TV services will remain a hot topic for both fixed and mobile providers eager to ensure that regulators adopt a more investorfriendly approach. For example, one condition of the successful acquisition by Three of O2 Ireland was a commitment by Three to support two MVNO entrants, one of which, UPC, we expect to see commence provision of quad-play with combined TV, broadband, phone and mobile offerings. Eircom already offer this service. Elsewhere, following a number of successful enforcement actions, we expect ComReg (and the CCPC) will be likely to deploy compliance investigations more regularly as regulators take a strong consumer-focused approach to ensuring a fair and competitive communications market. Business leaders should ensure that they not only understand their regulatory obligations but are able to demonstrate compliance if the need arises. The impact of the 2014 Act on the media regulatory landscape looks set to be robustly tested over the next two to three years, with possible industry shake-ups. Even though the possibility for retrospective application of the media merger rules was not provided for in the 2014 Act, the Minister for Communications will likely face a number of challenging decisions concerning proposed consolidations by businesses across media sectors. Key tests will involve the definition of markets given the impact of online and the convergence of platforms for traditional media. How the BAI performs in its new role (and whether the PCI or Press Ombudsman will be involved) is yet to be tested. In the meantime, we expect media business will seek to capitalise on improved market conditions. GTDT: Market Intelligence Telecoms & Media 65

9 Also available online Official Partner of the Latin American Corporate Counsel Association Strategic Research Sponsor of the ABA Section of International Law