The Telecommunications Modernisation Act – New Rules on Certain Over-The-Top Services in Germany
On 22 April 2021, the Bundestag passed a draft bill proposed by Germany’s federal government to modernise the law on telecommunications (Bundesrat Printed Paper 325/21). The Bundesrat, the upper house of the German parliament, approved the draft bill on 7 May 2021 by a narrow majority. The Act recasts the regulation of OTT-I services (instant messengers, webmail services, group chats etc.). As “interpersonal communications services”, these are now subject to the provisions of Germany’s Telecommunications Act (Telekommunikationsgesetz). The Telecommunications Modernisation Act (Telekommunikationsmodernisierungsgesetz) will come into force on 1 December 2021.
1. Overview of the revised Telecommunications Act
The Telecommunications Modernisation Act comprehensively revises and modernises the current Telecommunications Act. One goal of this is to transpose Directive (EU) 2018/1972 establishing the European Electronic Communications Code, from 2018, into German law (“EECC Directive”). The deadline for doing so expired in December 2020. The main aim of the EECC Directive – and therefore of modernising the Telecommunications Act – is to expand “very high capacity” data networks. The EECC Directive’s regulatory leeway is to be used to create special incentives to expand gigabyte networks. The draft bill focuses on co-investment and open access models. Further goals are to harmonise and improve consumer protection, as well as to create an enforceable “right to fast internet”, financed by a levy. The legal ordinance this necessitates will be available six months after the revised Telecommunications Act has come into force (section 157(3) and (4) of the Act).
In mid-2024, lessors will lose the option of apportioning TV cable fees to lessees. If a lessor gives instructions for fibre optics to be added to a building’s infrastructure, however, the lessor may in future pass its costs on to lessees as ancillary costs.
Two further draft bills back up this amendment.
- the draft Telecommunications and Telemedia Data Protection Act (Telekommunikations-Telemedien-Datenschutzgesetz; Bundestag Printed Paper 19/27441): this is intended to transfer the current data protection provisions in the Telecommunications Act and Telemedia Act (Telemediengesetz) to a separate act (the draft had its first reading in the Bundestag in late March 2021); and
- the draft Act Amending the Law on the Federal Office for the Protection of the Constitution (Gesetz zur Anpassung des Verfassungsschutzrechts; Bundestag Printed Paper 19/24785): this includes important changes for commercial telecommunications providers, such as to Germany’s Act on Restrictions on the Secrecy of Mail, Post and Telecommunications, also known as the “G-10 Act” (concerning trojan software used by the government); this draft had its first reading in the Bundestag in early May.
The Bundestag passed the Telecommunications Modernisation Act on 22 April 2021 (Bundesrat Printed Paper 325/21). The Bundesrat approved the law on 7 May 2021. The law is due to come into force on 1 December 2021.
With the Telecommunications Modernisation Act so called OTT-I services (instant messengers, webmail services etc.) are now also subject to regulation. In the following we will look at how this new regulation will impact over-the-top services (OTT services) in particular.
2. Current legal framework for OTT services
In the legal framework to date, the Telecommunications Act only covered certain OTT services. In contrast to classic telecommunications services, these are services rendered over the open internet. BEREC (Body of European Regulators for Electronic Communications) differentiates here between the following OTT service functions: OTT-0 services offer the functions of classic telecommunications services, such as telephone calls over the open internet through a SkypeOut function into the public switched telephone network (PSTN). OTT-I services facilitate individual and group communication in the form of language, images, videos or other data using the internet protocol only over the open internet, without offering content. These include instant messengers as well as webmail services. By contrast, OTT-II services include content elements, ranging from search engines and on-demand platforms to information portals.
OTT-0 services such as the SkypeOut service were categorised as telecommunications services no later than in the ECJ’s C-142/18 decision (the argument was that the SkypeOut service provider bears responsibility for the transmission of voice signals through the PSTN). As a general principle, by contrast, OTT-II services do not fall within the Telecommunications Act’s scopes. As telemedia services, they are instead governed by the Telemedia Act. For a long time there was a dispute as to how to categorise OTT-I services. The Bundesnetzagentur (Germany’s regulator for Electricity, Gas, Telecommunications, Post and Railway) likewise wanted to categorise these services as telecommunications services within the meaning of the Telecommunications Act. In 2015, the Cologne Administrative Court confirmed the Bundesnetzagentur’s view. In 2019, however, the European Court of Justice expressly rejected this (C-193/18). Web-based e-mail services such as Gmail, the Court of Justice held, do not constitute electronic telecommunications services (the argument was that third parties such as the internet access provider bear responsibility for signal transmission, rather than web-based e-mail service providers). But the judgment was issued with reference to the old EU Framework Directive on communications from 2002. This judgment is likely to be outdated, now that Germany’s Telecommunications Act has been revised.
3. Extension of the Telecommunications Act to OTT-I services
Besides the major reforms aimed at, the Telecommunications Act’s scope of application is extended to OTT-I services. Until now, the Telecommunications Act referred merely to the general term of “telecommunications service”. The revision to the Telecommunications Act adopts the EECC Directive’s new classification of telecom providers almost without alteration. This represents a major change. It means that in future the term “telecommunications service” will be determined primarily in functional and less in technical terms. From end-users’ perspective, it will be irrelevant whether the provider transmits the signal itself or whether it does so through an internet access service (section 3, no. 23 Telecommunications Act). For the end-user, the functionality will be equivalent.
In future, therefore, telecommunications services will include the following services (section 3, no. 61 Telecommunications Act):
- internet access services
- interpersonal communications services and
- services “consisting wholly or mainly in the conveyance of signals such as transmission services used for the provision of machine-to-machine services and for broadcasting”.
The new term “interpersonal communications service” (section 3, no. 24 Telecommunications Act) is likewise borrowed from the EECC Directive. This covers services offering direct “interpersonal and interactive exchange of information” through electronic communications networks between two or more persons determined by the sender of the communication, where these service are usually charged. So the Telecommunications Act now addresses “OTT-I services” expressly. The underlying draft of the Telecommunications Act expressly covers instant messenger services, webmail services, internet telephony services as well as group chats as cases to which the Act applies. Communication between a natural person and a legal entity can also fall within the new term’s scope. The requirement for this is that the legal entity be represented by a natural person, or that a post office box provided by the legal entity be used for the communication. The Act does not cover intelligent virtual assistants because in this case a natural person communicates with a machine. The purpose of the “interactive” criterion is for the Act to only cover communication processes where, from a technical perspective, the recipient of information has the option to reply. The Act is not supposed to cover linear services such as broadcasting, social networks or the provision of machine-to-machine services (here, data is automatically transferred between hard/software with only minor human involvement at most).
It should be noted, however, that only some OTT-I services are subject to the Telecommunications Act’s regulatory regime. For this purpose, the Act differentiates between number-based and number-independent telecommunications services (section 3, no. 37, 40 Telecommunications Act), i.e. between OTT-0 and OTT-I services. The reason for this is that (number-independent) OTT-I services are only supposed to be subject to obligations where there is a public interest in the application of specific regulatory obligations to all types of interpersonal telecommunications services, irrespective of whether a number is used. Only in selected areas is this the case.
The only services that continue to fall outside the scope of the Telecommunications Act as a general principle are OTT-II services.
4. Legal uncertainty despite new definition
The definition in the EECC Directive itself does not resolve the legal uncertainty that exists in many areas. The revision to the Telecommunications Act has not, unfortunately, taken the opportunity to clear up such uncertainties from the outset by structuring the Directive’s transposition accordingly.
One immediate problem is the criterion that services be charged. Many messenger services, for example are offered free of charge. The new legislation will need to be interpreted as meaning that financing through indirect revenue and “payment” with users’ own data are also to be included. This kind of economic, functional view harmonises with Article 3(1) Digital Content Directive (Directive [EU] 2019/770) and its transposition by section 327(3) German Civil Code (draft, not yet in force). According to this section, the fact that personal data are made available also means that the consumer contract includes charges.
Section 3, no. 24 Telecommunications Act does not cover services which enable interpersonal and interactive communication merely as a minor ancillary feature that is intrinsically linked to another service. The Act’s explanatory memorandum cites the chat function of an online game as an example. Whether a function constitutes an ancillary feature will depend on whether, on objective technical grounds, it cannot be used without the main service, or its integration is intended simply to circumvent telecommunications rules. Such categorisation is to be based on the perspective of an objective end user. In practice, this raises numerous issues, such as whether messenger services in social networks – e.g. Instagram Direct Messenger – are only a minor ancillary feature of the social network.
5. Rules applicable to OTT-I services
In addition to stipulations on interoperability, provisions on customer protection and public security are the primary ones to apply to OTT-I services. A number of duties are introduced. The following are given by way of example:
- the duty to ensure interoperability with other providers’ services if so directed by the Bundesnetzagentur (section 21(2) Telecommunications Act),
- the duty to provide consumers with information on standard terms and conditions for access to the services made available to end users and consumers, should consumers so request (section 52(1), no. 3 Telecommunications Act).
- comprehensive duties to inform customers (section 55(2) Telecommunications Act in conjunction with Annex VIII Part B EECC Directive),
- the duty to collect and store data to deal with requests for information from security agencies (section 172(3) Telecommunications Act),
- the duty to contribute to the financing of the “faster internet”,
- certain duties under the planned new Telecommunications and Telemedia Data Protection Act (see 1. above) and
- the duties under the planned new subsection 1a of section 2 of the G-10 Act to enable intelligence services to install technical devices and divert telecommunications; see likewise 1. above); these duties are far-reaching and controversial politically.
By integrating the Act to Safeguard Post and Telecommunications in Emergencies (Post- und Telekommunikationssicherstellungsgesetz) into section 184 et seq. Telecommunications Act, OTT-IT and OTT-II service providers (as well as others, of course) must comply with the duties to take precautions for emergencies set forth in the former Act to Safeguard Post and Telecommunications in Emergencies. These apply to providers of publically available telecommunications services where such services have more than 100,000 users. OTT-I services are telecommunications services, so offering such services to more than 100,000 users will trigger the duty to maintain voice-based communication services, internet access services, data transfer services and e-mail services in legally defined emergencies and to prioritise bodies with preferential rights (section 186(3) Telecommunications Act: public authorities, courts etc.). So providers of such services must expect that the Bundesnetzagentur will require them to provide extensive information, for example concepts on how to remedy disruption.
OTT-I services are exempted from the notification obligation under telecommunications law (in future: section 5 Telecommunications Act). On the other hand, the privacy of telecommunications already applies to OTT-I service providers through section 7(3), sentence 2 Telemedia Act (in future this will be regulated in section 3 of the draft Telecommunications and Telemedia Data Protection Act).
6. Evaluation of the amendments with regards to OTT services
Overall, a balanced approach was taken in recalibrating the regulation of OTT-I services within the revised Telecommunications Act. Limiting the scope of duties incumbent on OTT-I services is justified by their special features: in contrast to telecommunications services, OTT-I services do not need physical infrastructure; furthermore, it is easier to change provider. Tougher competition justifies less regulation.
7. What does this mean for businesses?
The modernised Telecommunications Act’s list of duties will only apply in part to OTT-I services. But companies will still need to check carefully whether their service might fall within the scope of the new Act’s application, which specific provisions will need to be complied with, and what penalties would be faced in the event of non-compliance. In particular, companies may incur considerable costs in implementing the duty to collect and store data under section 172(3) Telecommunications Act. One new point to note is that the Bundesnetzagentur can skim off any economic benefit derived from violations of the Telecommunications Act (section 208(1) of the Act). This is above and beyond the special control of abusive practices (in future, section 50 of the Act). This does not apply if and to the extent that any damages, fines or forfeiture compensate for the economic benefit obtained.