Skype in the EECC: Suffocating a European success story or allowing others?

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Skype represents a remarkable European success story. Founded in Estonia by a Swede and a Dane, it unlocked free and low-cost communications for the entire world. It is a perfect demonstration of what Europe hopes to achieve; a true digital single market player. Today, 500 million Europeans from Poland to Portugal can enjoy how Skype, and other Internet-based messaging services, allow them to send messages, make video and voice calls, translate conversations in real time, and for some, call a traditional telephone line over the Internet.

Revenge of the past on the future?

Both the European Parliament and the Council are currently debating a European Commission proposal that threatens to curtail these benefits: the European Electronic Communications Code (EECC). The outcome of this debate is largely unknown. Will Internet-based services available across Europe be chopped up into different national services? Or will it be recognized that there are no substantive reasons for regulating modern communication apps and services within the telecoms framework because they are, from a consumer perspective, substantially different? Consumers use these apps and services because they are free or low-cost and easy-to-use. On any given day, they can switch between all sorts of communications apps and services. Moreover, these apps are increasingly integrated into other services, from babysitter apps and social networks, to customer support. This environment is very different to the traditional regulated telephone service of the 20th century.

Number-dependency: Much ado about nothing?

Today, Skype is provided for free over the Internet just like other web content, services and applications. It also offers low cost calls to traditional phones. In the proposed EECC, this ‘number-dependency” – the use of telephone numbers – triggers a whole range of telecom-specific regulation. Yet, it is worth mentioning that there are very few network-independent providers which offer Internet telephone calls, and the usage of these features can be considered marginal. Just 3% of Skype customers – approximately 0.5% of European citizens – use the app to call traditional phones.

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Does this justify all the obligations that have been proposed? Let’s look at it from a consumer and public policy perspective. Like other network-independent services, Skype calling – despite the ability to call a network-dependent telephone line – is substantially different from fixed or mobile telephony in terms of connectivity, devices, functionality, contracting, pricing, and means of payment:

  • One requires the Internet, the other does not (Skype cannot be used without access to the Internet. A telephone service requires no Internet access).
  • One provides a phone number, the other usually does not (while Skype offers a separate product feature called Skype Number – providing the user with a phone number on which they can be called – very few users purchase Skype Numbers and make outbound calls to traditional phones).
  • One is sold via long-term contracts, the other is not (Skype does not require a long-term contract; like many other apps, it is pay-as-you-go).
  • One entails a significant financial commitment, the other does not (indicative of the ancillary, supplementary nature of Skype).
  • One comes with expectations about call quality and service levels, the other does not (providers of traditional telephony services run the network that customers use to access the service and, thus, directly control the quality of service. Skype does not).
  • One is simply about making traditional phone calls, the other encompasses much more (including the ability to share documents and content, send instant messages, make a video call, translate the conversation, or interact with a bot).

Many of the sector-specific consumer protections in the EECC are irrelevant to users of a service like Skype. Unlike traditional telephone services for which these consumer protections were developed and applied, consumers can at any time stop using the service, change to a different service, use different services simultaneously, or return to Skype, at no cost and at any time.

Moreover, Skype simply cannot comply with some consumer protection obligations since its quality of service is dependent on Internet access providers’ networks. Emergency calling is not possible in countries that operate more than one emergency calling center as calls cannot be routed properly without a caller’s location, and number portability cannot be provided where there is no phone number to be ported. Other obligations related to switching, billing and usage monitoring disregard the business model logic of low-cost, prepaid, and interchangeable applications like Skype.

Appropriate regulation of services that enable limited connection to phone numbers requires a much more tailored review of provision to ensure that specific public policy objectives are being addressed. Simply applying the full gamut of traditional telecom regulation will dampen innovation because these rules are disproportionate to the capabilities offered by services like Skype Out.

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Who would benefit?

No one is likely to benefit from this; not the 0.5% of Europeans using the Skype calling feature, and not even incumbent telephone companies who continue to clamor for the creation of a “level playing field.” The incumbent telecom providers no longer depend on voice services to bolster their bottom line; rather, they depend on Internet services to drive data subscriptions. And Skype calling is not a substitute for traditional telephony. However, it is likely that some Skype features will disappear if the regulation remains unchanged.

With its beginning in Estonia, Skype was one of the original European digital success stories. MEP Dita Charanzová is encouraging the European Parliament to pare down the proposal to what is needed to protect consumers, ensure innovative services are promoted in Europe, and achieve the Digital Single Market. In just a couple of months, Estonia will take over the Presidency of the Council of the EU, working hand-in-hand with Vice President Ansip, also an Estonian, and the European Parliament to finalise the EECC. We hope that with this digital leadership, European regulation doesn’t end up suffocating this Euro-Estonian success story but helps to build the framework for allowing others.

Cornelia Kutterer
Senior Director EU Government Affairs, Privacy & Digital Policies, Microsoft

Cornelia is responsible for privacy and digital policies in the EU with a focus on strategic campaigns and engagements. She leads a team working on corporate affairs and policy matters, including institutional relations, the Digital Single Market and market regulation, privacy and human rights, energy and accessibility policies. She has long standing experience in Information Society & Internet policies at European level and speaks regularly at regional and international conferences. Previously, Cornelia was Head of Legal Department and Senior Legal Advisor at BEUC, the European Consumer Organisation, driving the policy agenda for consumers’ digital life with a focus on intellectual property, data protection and e-commerce. She has also gained experience in a top 10 law firm in the fields of competition law and regulatory affairs and in a German organisation focusing on the freedom of services and labour law. She started her professional career in the European Parliament as a political advisor to an MEP in 1997. Cornelia is a qualified German lawyer, and holds a master’s degree in information technology and telecommunication laws. She studied law at the Universities of Passau, Porto (Portugal), Hamburg and Strathclyde (UK).