Portability Regulation finalised: businesses must implement before April 2018

The Regulation on cross-border portability of online content services across the EU (the Portability Regulation) was published in the Official Journal of the European Union on 30 June 2017 and must be implemented by businesses by 20 March 2018 – ahead of the GDPR (which you will probably know by now must be implemented by 25 May 2018).

The Portability Regulation allows consumers who have paid for an online content service (such as films, sports broadcasts, music, e-books and games) in their home Member State, to access and use that service (and the content on it) when they are travelling outside their home country within the EU.

The key features are that:

• the Regulation applies to paid-for portable online content services (note that this is sufficiently wide to cover the portable version of services which are traditionally accessed via a set top box);
• providers of these services must allow their subscribers to access and use the service while “temporarily resident” (e.g. on business trips, holidays etc) in another EU Member State, without additional charge;
• the Regulation makes this work via a neat legal fiction which deems that the provision of the service takes place solely in the subscriber’s home Member State – this avoids online content service providers having to renegotiate their rights deals to provide the content in other Member States;
• free portable online content services have an option to choose to be subject to the Regulation, so that these services can be accessed and used by users while outside their Member State of residence; and
• businesses cannot contract out of the Portability Regulation – any clause attempting to do so is void.

The Portability Regulations brings certain legal and operational challenges:

Legal issues: the most significant legal issues are the following:

• “temporarily present” is defined only as “being present in a Member State other than the Member State of residence for a limited period of time”. Recital 1 of the Regulation makes clear that this is intended to cover “purposes such as leisure, travel, business trips or learning mobility”. No further guidance is given as what constitutes a “limited period of time”, which means businesses will have to interpret and judge this themselves. This potentially runs the dual risks of infringing rightsholders’ copyright if the interpretation is too wide, or infringing the Portability Regulation if the interpretation is too narrow;
• Brexit – depending on the nature of Brexit it may be that the Portability Regulation is unworkable once the UK leaves the EU, owing to a lack of reciprocity, meaning that businesses will have to either: (i) negotiate the rights into their licence agreements to enable them to continue providing portability functionality post Brexit; or (ii) cease the portability functionality upon a Brexit or risk infringing the rights of their licensors;
• terms and conditions of the service will need to be updated; and
• certain steps must be taken to advise consumers of any potential drop in quality when in other Member States, otherwise the service provider may be in breach of the quality rights implied by the Consumer Rights Act (for UK based services).

Business issues: In general, the biggest challenges for businesses exist at an operational level, for example:

• service providers must verify the Member State of residence of the subscriber using no more than 2 of the stipulated means of verification and means which are reasonable, proportionate and effective. Many businesses will not be set up to do this at the moment. Service providers must verify residence upon concluding a new or renewed contract. However, verification will also have to be undertaken for all existing customers by 21 May 2018. The potential difficulties of obtaining verification from existing customers means that service providers should consider obtaining verification sooner rather than later. In practice, the business will also have a continuing obligation to do so, to ascertain when a subscriber is no longer “temporarily present” in another Member State; and

• the Portability Regulation does not impose any quality requirements on the delivery of an online content service. However, in practice a business will not want to provide a poor quality service because this will have a negative impact on the brand and the user’s experience. Therefore businesses now have to consider how they can provide a “TV like” experience in 28 Member States.