III.2.1. Commercial conditions of Internet access services (Article 3(2) of the TSM Regulation)

74. Over the following paragraphs a general assessment is made of the characteristics of the offers referred to, taking into account the provisions of the TSM Regulation and the Net Neutrality Guidelines.

75. As was evident from the description of the offers made above, there is clear differentiation between the price of general Internet access included in the basic offers and the price of specific offers with zero-rating or similar characteristics, insofar as the price associated with traffic included in these specific offers tends to be much lower (or even zero in the case of zero-rating applications/content). It should be noted, by way of example, and in order to facilitate comparison, that the "Smart Net" offers are sold at the promotional price of 4.99 euros per month, including VAT, for 10 GB, while acquiring an additional allowance of the same amount - 10 GB - of Internet to be used without any restriction on the MEO network (in bundles with mobile phone and post-paid mobile tariffs) has a price of 19.99 euros per month, including VAT. Similarly, in the case of NOS, customers are able to acquire additional data packages for Internet access in a general manner, for example the price associated with a 15 GB allowance in some packages is 24.99 euros per month, including VAT (it should be recalled that the base price for the NOS "Indie" offer, which already includes 3 GB, and an additional 20 GB allowance for specific applications, as well as the subscription television service and fixed IAS, is 49.99 euros per month, including VAT).

76. Notwithstanding the greater or lesser tariff differentiation, it is necessary to assess whether the commercial practices described have a detrimental effect on users and on the functioning of the Internet itself and whether, as a result, they are sufficiently important to warrant regulatory intervention.

77. In this context, it should be recalled that, in the scope of the Annual Report, and in relation to the criteria adopted by IAS providers in selecting which applications and content to include in zero-rating and similar offers, two providers indicated that they served the target audience of these offers (young people), having chosen the most popular applications according to the preferences expressed by users of this market segment, although they did not give any details about how these preferences were determined. One of the providers also pointed out the lack of commercial links or relations between themselves and the final owners of the applications concerned (with the exception of the applications which they themselves had developed), whereas a single provider mentioned the existence of some partnerships with content and application providers in order to provide services with lower costs to end-users. This IAS provider nevertheless clarified that although the agreements were concluded in order to differentiate their offer, none of them imposes exclusivity on any of the parties.

78. It is also necessary to take into account the market positions of IAS providers and content and application providers party to the offers under analysis.

79. With regard to IAS providers, although there may be differences in their relative market positions, the introduction of offers with the characteristics of those mentioned above cannot be expected to produce significant changes in these positions. In fact, the introduction of new offers by all IAS providers seems to attest to their ability to react to changes in supply and demand, but their similarity and some simultaneity in the launching of these offers make it unlikely that these offers will be disruptive. Whereas the existence of preferential agreements with some content and application providers could provide one IAS provider with a strategic advantage over the others, this does not appear to be the case, given the non-exclusivity of the agreements concluded and, above all, if the conditions governing the agreements can be replicated. Under these circumstances, it is likely that any IAS providers would be able to conclude similar agreements, so this situation does not appear to be an obstacle to the free development of the market. In fact, the applications and contents that are covered by the different zero-rating offers or similar offers are, in the most part, common to the different IAS providers (with the exception of the provider's own applications and contents).

80. As regards the content and application providers involved in these offers, it should be noted that the selection of certain specific applications/content may have an effective impact on the application/content market and its development, since end-users may be influenced towards a preference for one particular application/content over another, simply because one is offered free of charge (where traffic is not counted against the general traffic cap) or at a substantially lower unit price. Ultimately, this situation could, in the long run, contribute to a reduction in the options available in the market, since providers who are under-represented in the offers of IAS providers could be eliminated. On this point, there are at least two factors that must be taken into consideration to determine the real relevance of the offers in question in terms of the development of the application/content market:

i. the existence of additional allowances for Internet access which, due to their configuration, provide a viable alternative to guarantee indiscriminate access to applications/contents not included in the specific offers of IAS providers; and

ii. the possibility that content and application providers have, where their products are not included in the specific offers of IAS providers, to request the inclusion of their applications/contents, or the possibility that users themselves are able to put requests to IAS providers for the inclusion of given content and application providers in their specific offers.

81. As regards (i), it is necessary to take into account the specific offers of each IAS provider and, based on the general data allowance for Internet access included in the offer, to assess whether this could be considered sufficient to guarantee unconditional use of the Internet access service. In this context, while recognizing that there are several situations in which the allowance provided for general use is up to 30 times less than the allowance provided for specific applications, it is necessary to highlight not only the lack of objective data on this subject, but also the subjectivity associated with this assessment, as each user has a specific usage profile, so it is not possible to formulate an unambiguous conclusion that is applicable to all users. Indeed, although unrestricted use of the Internet access service can be satisfied through a lower allowance of general Internet access, since usage corresponds, in reality, to the applications/contents selected by IAS providers in their specific offers, there will be other users for whom free use of the service would entail a higher allowance of general access to the Internet, possibly at least identical to that available from the IAS providers under their specific offers.

82. From the survey carried out of the offers of IAS providers, a significant level of variability is found in the characteristics of mobile Internet access offers, in particular with regard to the allowances and caps of Internet access included. As an example, it is recalled that MEO's basic offers, which can be supplemented with "Smart Net" offers, vary significantly in terms of Internet access caps, which can range from 200 MB to 30 GB a month, depending on the offer in question. It is also worth mentioning that users have the option of purchasing additional internet access allowances, which can be added to their base tariff, ranging from 500 MB (4.99 euros per month) to up to 30 GB (29.99 euros per month)¹. Similarly, VODAFONE and NOS also have offers that are characterized by the variability of the Internet caps, with additional allowances sold for access to the Internet, which users can purchase to add to their base tariff.

83. However, it is also important to recall the trends that have been observed most recently, which have seen not only the emergence of specific offers with zero-rating characteristics, as now under examination, but also an apparent increase in caps on Internet access available in the base offers. In fact, although most allowances included in the offers did not exceed 1 GB a relatively short time ago, there is currently a proliferation of offers with allowances included in the most significant base offers, as detailed in the previous point (and as shown in the following tables). While it appears that there is a tendency towards a continued increase in Internet access caps included in the basic offers, which mitigates any limitations on use which might arise from a lower general cap, it must be ensured that this trend continues, and also that there is greater approximation between general data allowances and specific data allowances.

Unit: GB
Source: ANACOM, provider websites

Unit: GB
Source: ANACOM, provider websites

84. At the same time, the availability of certain applications/content in specific offers with zero-rating or similar characteristics means that use of the general allowance included in base offers will tend to focus on applications/contents that have far lower levels of usage, assuming that the applications/content in specific offers have been selected based on user preferences, as has been indicated by the IAS providers (i.e. comprising applications/content which would have been previously sought by users); this means that the general traffic allowance can be lower, notwithstanding situations of use which deviate significantly from the standard patterns of use (as referenced above).

85. In the light of the above and of the available data, there does not appear to be strong evidence to date suggesting that the specific offers made available by IAS providers constitute a barrier to the sustainable and innovative development of the Internet and do not prevent users from exercising their rights of choice and freedom in the way they use their contracted Internet access services.

86. As regards the possibility that content and application providers not included in the specific offers of IAS providers may request inclusion of their applications/content, or the possibility that users themselves can ask the IAS providers to include certain content and application providers in their specific offers, as referred to in point (ii) above, such possibilities could provide a means of ensuring fair and non-discriminatory treatment of traffic and of ensuring respect for the rights of end-users, insofar as they allow a wider range of specific offers from IAS providers and guarantee their openness to the right of choice of users. In this way, specific offers from IAS providers will also not be an obstacle to the development of the business of content and application providers which have not been initially selected for inclusion in the specific offers, as they offer equality in treatment. When it is ensured that other content and application providers can be included, the influence of greater mass take-up of offers with zero-rating or similar characteristics on the Internet ecosystem is somewhat limited, in particular as regards ongoing innovation and development of applications/content, limiting or even eliminating the effects which may discourage certain content and application providers to enter or exit the market.

87. The existence of this possibility may even address possible biases which may arise from situations where the general Internet access allowances included in the basic offers was insufficient to ensure the free and unrestricted use of the Internet access service. In fact, by making it possible for any content and application provider to be included in the specific offers of IAS providers (albeit respecting the general characteristics of the applications/contents already covered by a particular offer, for example general categories such as "communication" or "audio streaming"), an increase in transparency is achieved and a more neutral outcome accomplished than would otherwise be the case where a choice of content and application providers is restricted by the decisions made by IAS providers.

88. In this context, it should be noted that, in relation to the "Smart Net" offers (and notwithstanding the lack of information on the options taken by the other IAS providers), MEO clarified that it was willing to include other content and could be contacted for this purpose by content and application providers. This information is also given on the provider's website.

89. It is also important to point out the situations where only applications/content belonging to the IAS provider are available in zero-rating or similar offers. Examples of such situations include "MEO Go", "MEO Cloud" and "MEO Drive" applications offered by MEO in various tariffs, as well as the "NOS Indie" offer, which includes NOS's own video streaming applications (N Play and NOS TV), and VODAFONE offers which include "Vodafone TV". There is a need to evaluate whether this differentiation, which favours the own content of the IAS provider, has, in practice, a restrictive impact on the behaviour of users and if this contributes to influence the development of the market as a whole and the development of the Internet itself.

90. In this respect, it must be taken into account the extent to which the applications/contents of the IAS providers are representative in relation to other applications/content. Using these examples, it is a question of examining the extent to which the own applications of MEO, NOS and VODAFONE, where included in a zero-rating offer, have advantages over other applications/contents in comparable categories, for example navigation applications. On a global scale, it is to be expected that the applications/content made available by these IAS providers will have a very low level of representation compared to the players in the global market, such as Google. In this context, the zero-rating of the specific applications mentioned in the previous points is not expected to significantly influence the development of the market. Nevertheless, this may occur in the case of less well-known applications/content which may be affected by non-inclusion in the offers of IAS providers under conditions equivalent to those of the provider’s own applications/content. However, even in these situations (which can be minimised where, subject to certain conditions, IAS providers allow users to add applications/contents of their choice to offers which include zero-rating or similar applications), it is important to bear in mind that general traffic allowances may also respond to any distortions that may exist, so that innovation is not jeopardised and that content and application providers are not given incentive to exit (or not enter) the market. To this end, it is very important that these allowances include sufficient volume of traffic to allow full access to the Internet, and all its content and applications, truly reflecting the interests and choices of users in a way that is not restricted by the offers themselves.

91. It is also necessary to assess the effect that these practices may have on users' rights, in particular whether they may entail a material reduction in their right of choice. In general, it is considered that one of the main factors supporting the choice of a certain application/content by users is essentially the functionality of the application itself, or the content provided. In this respect, even if a certain application is made available under zero-rating condition, there will be no incentive for take-up by the user if the application does not correspond to their needs. However, this will be a subjective assessment that may vary from individual to individual, so it is not possible to affirm in a general way that the zero-rating of a particular application/content does not influence user freedom of choice, and likewise it is not possible to affirm the contrary.

92. Furthermore, many users will be able to choose several similar applications from different content and application providers, and it is not unusual for applications with similar characteristics to be used by the same user and at the same terminal. For example, it is possible that even if users have a navigation/map application from the operator itself with zero-rating, they can continue to use another navigation application (e.g. "Waze") on the basis of the general Internet access allowance, provided that the volume of data is compatible with unrestricted use.

93. However, there are situations in which these general caps do not appear to provide access to the Internet on terms that are adequate and comparable to those which apply to content/applications covered by the zero-rating or similar schemes. One example is the availability of music streaming applications with unlimited traffic, associated with offers in which the overall traffic cap is very low, to the order of 200 MB or even 500 MB monthly. In this case, the general data allowance available will only enable the use of an application with similar characteristics - Spotify (based on the normal usage rate of this application) - for less than about 15 to 30 minutes/day (assuming no other content/application is accessed), which could clearly influence users to use the application belonging to the IAS provider.

94. ANACOM will continue to monitor this matter, seeking in particular to ascertain the motivations for the choice of users, and in particular whether the fact that an application/content is zero-rated is an essential factor for its choice; Nevertheless, IAS providers, in mobile Internet access, should reduce differences between general data caps and specific caps, in particular by increasing general data caps, even in cases where there are no specific data caps (only content/applications provided without traffic limits), in order to support the viability of effective Internet access.

Notes

nt_title

 
¹ Available at https://www.meo.pt/internet/internet-movel/telemovel/pos-pagos-unlimited https://www.meo.pt/internet/internet-movel/telemovel/pos-pagos-unlimited.