Net neutrality: Top EU court plunges dagger into controversial 'zero rating' practice

Europe’s top court has struck what could be a mortal blow to the practice of zero rating—where mobile operators exempt data associated with specific services, such as Spotify or Facebook, from counting toward users’ overall data caps.

In a Thursday ruling, the Court of Justice of the European Union (CJEU) ruled against the German providers Vodafone and Telekom, saying their “zero tariff” options broke the EU’s net-neutrality law—legislation designed to ensure that operators treat Internet traffic equally, without favoring certain online providers owing to commercial considerations.

This is not the first time the court has weighed in on the topic, but the ruling is its most definitive repudiation of the practice of zero rating.

Gray area

Rewind to 2015: Not long after the U.S.’s Federal Communications Commission (FCC) introduced net neutrality on the other side of the Atlantic, the EU passed its own net-neutrality law. However, the European version was in some ways weaker; crucially, it did not explicitly ban zero rating, which was illegal in the U.S., even though many saw the practice as being contrary to the principle of net neutrality.

The following year, the EU’s telecom regulators issued guidelines that said zero rating would be allowed as long as operators slowed down all services, including the zero-rated services, when customers hit their data cap.

In 2020, in a case involving the operator Telenor Hungary, the Court of Justice confirmed the regulators’ interpretation of the law; it said the carrier could not be allowed to block or slow down traffic because it wasn’t covered by a zero-rating deal. All traffic needed to be treated as equal.

However, that ruling did not kill off the practice of zero rating. Operators such as Telekom (still the largest shareholder in T-Mobile US, its American spinoff) and Vodafone continue to offer add-ons that let customers listen to music services, stream video, or use social media without it counting toward their data caps.

In the joined cases that resulted in Thursday’s judgment, German regulators and consumer advocates targeted the carriers over the way they still differentiate between zero-rated and other traffic.

Breaking the rules

In the Vodafone case, the issue was the way Vodafone starts counting a zero-rated service’s data consumption against the overall data cap when the customer is in another EU country; the same legislative package that introduced net neutrality in the EU also outlawed retail roaming surcharges for people traveling within the union. Vodafone also does the same thing when customers use their phone as a hotspot for other devices.

Telekom, meanwhile, offers a “StreamOn” service that exempts its commercial partners’ services from customers’ overall data volumes. It does slow down speeds for everything once the customer reaches the general cap—but, while that may appear to be in line with the CJEU’s 2020 ruling, it seems it still breaks the fundamental rules.

“By today’s judgments, the Court of Justice notes that a ‘zero tariff’ option, such as those at issue in the main proceedings, draws a distinction within Internet traffic, on the basis of commercial considerations, by not counting towards the basic package traffic to partner applications,” the Court of Justice said in a statement. “Such a commercial practice is contrary to the general obligation of equal treatment of traffic, without discrimination or interference, as required by the regulation on open Internet access.

“Since those limitations on bandwidth, tethering or on use when roaming apply only on account of the activation of the ‘zero tariff’ option, which is contrary to the regulation on open Internet access, they are also incompatible with EU law,” it added.

Germany’s Federal Network Agency, which was involved in the case, said Thursday afternoon that the CJEU’s ruling had gone even beyond what it had ordered, and it expected that Telekom’s StreamOn services “cannot be maintained in their current form.”

The Federation of German Consumer Organizations, which was also involved in the case, had not responded to a request for comment at the time of writing—nor had Telekom.

“Following today’s rulings from the European Court of Justice, Vodafone Germany is carefully reviewing the decisions and will update its current offering as required, in accordance with the rulings,” said the operator.

Over in the U.S., the FCC’s zero-rating ban became moot in 2017 when, under the Trump administration, the agency abandoned probes of AT&T and Verizon over the practice; it went on to scrap the U.S.’s net neutrality rules altogether, later that year.

President Biden’s pro-competition executive order in July paved the way for the FCC to restore the net-neutrality rule book, but the commission still has a seat that needs to be filled, and still has no new, permanent chair following the departure of the Trump-era Ajit Pai—a situation that will, until it is resolved, allow Republican commissioners to keep blocking the change.

This article was updated on Sept. 2 to include Vodafone’s statement and that of the German Federal Network Agency.