As new technologies emerge, and are treated differently across jurisdictions, businesses need to stay alert to changes in the regulatory landscape

The chief disruptors in telecoms today are found in new media companies – businesses that often did not originate in the telecoms sector but who are increasingly challenging the incumbent players, and which most people associate with the technology rather than the telecoms sector.

But is it possible to distinguish between these two sectors in today’s changing environment? An environment that is characterised by the traditional telecommunications firms muscling in on the content side of the market (such as BT in the UK) and the new players fighting their way into the telecommunications sector by offering connectivity services to consumers.

Unarguably the biggest telecoms trend in recent years has been the rise of IP-based networks and the corresponding separation of services from the underlying physical telecoms infrastructure. Telecoms was once a monopoly or oligopoly market; vast up-front investments were required to enter (just think about all those radio masts), and once the infrastructure existed, there was little incentive for another company to build competing physical networks, lest the market cannibalised itself. The corollary of owning the infrastructure meant that the telecommunications providers had control over the provision of services over that network – phone calls, for example.

This monopoly/oligopoly structure has changed. Yes, competition authorities in many countries have been regulating and breaking up these dominant players for several years (although in fewer countries than you may think, as analysis in our Telecommunications Laws of the World handbook attests), but new forms of telecommunications services are subverting the sector even further, and they are doing so on a global basis.

Specifically, over-the-top (OTT) services leverage the connectivity provided by pre-existing infrastructure to offer services to end customers. Just think of how WhatsApp and WeChat have eroded text messaging or how voice calls can now be made using Skype or Facetime (and with video to boot).

The old behemoths of telecommunications are certainly still relevant – after all, the new entrants still rely on traditional infrastructure to carry the data for their services – but it is increasingly difficult for them to unbundle the use of infrastructure from services such as TV access, with resulting impacts on their revenue not least because the margins tend to be much larger for the latter.

So what does this mean from a legal perspective? For starters, it may be no surprise that there are question marks over how relevant old laws are for this new environment. Within Europe for example, ‘traditional’ telecommunications players and the ‘new’ OTT upstarts are at present governed by different rules: standard voice and SMS services – which involve the ‘conveyance of signals over a network’ – are typically understood to be governed by the Electronic Communications Framework Directive, whereas OTT services are governed by the E-Commerce Directive.

As recently as September 2016, the Commission published some proposals which will, for the first time, regulate OTT services which rely on telephone numbers (like SkypeOut) in the same way as conventional services, and will also introduce some (light) regulation even on OTT services that don’t use telephone numbers – although there are issues with their proposal on the definitions here, covering which OTT services will and will not be caught at all.

What this means in practice is that, just as the market shares of ‘traditional’ telecommunications players are being eroded by the new entrants, they are also subject to higher regulatory burden (on reducing roaming rates, for instance, or the price of mobile call termination, or in the new Open Internet Regulation which mandates net neutrality and restricts the ability of telecoms operators to offer certain types of retail offer); this operates as a double-squeeze on their margins.

At present, and until the Commission’s recent proposal (described above) is enacted, we have a very complicated regulatory position in Europe. A higher level of consumer protection exists for standard voice and SMS services than for OTT services and yet, complicating matters further, some national regulatory authorities (including ARCEP in France and CNMC Spain) have deemed that OTT services do involve the ‘conveyance of signals’, meaning the new entrants are subject to the more onerous regulatory regime found in the Electronic Communications Framework Directive.

If this sounds complicated, just imagine how OTT service providers arrive at a decision on how to discharge their regulatory obligations when, say, they are providing services for customers who live on the border of – and frequently travel between – France (with a higher regulatory burden) and Germany (which does not)? Should they adopt the more onerous regulatory standards across both countries and thus erode their profits, or should they risk a regulatory reprimand in France (which can result in ARCEP suspending the communications’ provider’s right to provide services)

This is just a snapshot of the problems within Europe – a continent with some of the most advanced, and most liberal, telecoms regulation in the world. Elsewhere, Russia is seeking to regulate VoIP services, and there are huge complications around providing OTT services in countries with a highly restrictive telecommunications regulatory framework. Many of the Gulf countries, for instance, ban or limit usage of OTT services but have found these restrictions being flouted by end-customers through the use of encryption technologies such as VPNs.

All these signs point towards a significant overhaul of the way national regulatory authorities seek to regulate telecommunications services globally and it is therefore no surprise that over 140 countries have adopted policies, plans and digital agendas in respect of national broadband (of which OTT services will no doubt feature a large part).

DLA Piper’s Telecommunications Laws of the World handbook will give you an insight into the patchwork of laws and regulations governing the provision of telecommunications services across the globe. And with legislation constantly developing as new technologies emerge, we will be updating the site to keep pace with the rapidly evolving regulatory landscape.