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A legal framework for OTT services in the European Union

After an intense debate, the European Commission issued the consolidated text of Directive 2010/13/EU, which covers the new situation regarding the provision of audiovisual network services including “Over the Top” (OTT) services.

Ángel García Castillejo*/Spain/September 2016

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The services available over the network or “Over the Top” (OTT) have been developed over the last decade in all areas of communications services, offering alternatives that are more or less refined and of a lesser or greater quality in competition with landline or mobile voice services (Skype, Tango, Viber or Whatsapp), instant messaging services such as Whatsapp or Telegram, and free-to-air or pay-per-use audiovisual services such as those offered by YouTube, Hulu, Netflix or HBO Now, among many others. These services in the audiovisual area have attracted the attention of European Union (EU) authorities to the point of giving rise to a proposal for a new draft of the European standard for audiovisual content.

The offer of services over the network continues to grow, and as a result traditional telecom operators are mutating into a new type of service provider. The traditional communications market has made a definite step towards convergence between telecommunications and audiovisual. The thrust of digital technology has transformed the structure of the market, with a new way to access services, thanks to the robust deployment of broadband infrastructure and end-user access to high speed internet. Without these elements, the development of OTT would not be graspable.

For example, according to some of the most recent studies in the United States among the bilingual Hispanic population, about 75% of users have subscribed to an OTT service and the trend is growing.

In the EU, following an intense debate in which various stakeholders in the audiovisual sector have had the opportunity to contribute their views on the necessary reforms to be introduced in the Directive for “Audiovisual Content Without Borders,” the end result was the consolidated text of Directive 2010/13/EU, which reflects on the new dynamic situation such as the provision of audiovisual services over the network, as in the case of “Over the Top” (OTT) services.

The proposal for a partial amendment of Directive 2010/13/EU supported by the European Commission reflects the new focus of the Commission regarding network or OTT services, platforms such as online markets, search engines, payment systems, social networks and exchange sites for videos and audiovisual content.

The proposal updates the common standards that have regulated the audiovisual media and guaranteed cultural diversity and the free circulation of content in the EU for almost 30 years. The Commission wishes to achieve a better balance of the standards that are presently applied to traditional broadcasters, those providing video on demand, and video exchange platforms, especially as regards the protection of children. This would supposedly involve the drafting of a new legal framework for the audiovisual sector which includes the promotion of European audiovisual production and a new, more flexible approach to audiovisual advertising regulations.

Thus, those platforms that organize and label a large number of videos will need to protect minors from harmful content (such as pornography or violence) and protect all citizens from incitement to hatred. Among the measures proposed is the creation of instruments for users to report and label harmful content and verification systems for user age and parental control. It has been proposed that a code of conduct is created for the sector, together with which national audiovisual regulators will have the power to apply rules which, depending on each country’s legislation, may also lead to the application of fines in cases of non-compliance.

A more active role has been assigned to audiovisual regulators, and the directive guarantees that such regulators will be truly independent of government and the industry in order to fully implement their duties. The role of the European Regulators Group for Audiovisual Media Services (ERGA), consisting of 28 national audiovisual regulators, has also been legally reinforced. This group will assess the co-regulatory codes of conduct and advise the European Commission.

In terms of audiovisual production, television broadcasting companies in Europe currently invest about 20% of their turnover in original content, while on-demand providers of OTT services invest less than 1%. The Commission seeks that these companies continue to set aside at least half of their broadcasting time to European productions and will force OTT providers to ensure that their schedules include at least 20% of European content. It is anticipated that Member States may ask the OTT content providers located in their countries to contribute financially to the production of European works.

In terms of advertising, a new regulatory approach will be adopted with regard to traditional television broadcasting companies. The revised Directive provides greater flexibility in schedules for the transmission of advertisements, maintaining the general limit of 20% of broadcasting time between 7:00 and 23:00 hours, but instead of the twelve minutes per hour currently stipulated, broadcasters can have more freedom to choose when to offer advertising throughout the day. Television companies and OTT providers will also enjoy greater flexibility to use advertising tools such as product placement and sponsorship, in order to keep viewers informed.

In short, in this fully digital environment, comparable digital services are expected to adhere to the same or similar standards. To the extent that it is possible, the Commission will reduce the application scope of current regulations (“comparable standards for comparable digital services”). Moreover, online platforms and OTT service providers are expected to act responsibly by combining selective instruments such as audiovisual or copyright standards or increasing the voluntary efforts of the industry.

Finally, the European Commission considers that “trust is essential: cooperation for cross-border implementation will ensure that OTT service providers fulfill their obligations with respect to the rights of consumers.”

* Attorney. Managing Partner of MEL Lawyers S.L.P. Professor of Journalism and Audiovisual Communication at Universidad Carlos III, Madrid. Professor of Intellectual Property and Advertising Law at the Blanquerna Faculty of Communication, Universitat Ramón Llull, Barcelona. Former advisor to the Telecommunications Market Commission of Spain