EU OTT Content Portability Rules Get Closer to Implementation

European Parliament in May 2017 agreed that service providers must allow subscribers of online content to access paid subscription services from anywhere in Europe. The rule will apply only to paid online video services starting in the first quarter of 2018, but it is optional for free-to-air service providers to adopt the content portability rule. Online services mandated by cross border portability include OTT platforms such as Netflix and HBO, or OTT platforms provided by pay-TV operators such as Viaplay, Sky as well as music streaming services and online gaming services. OTT subscribers in Europe will no longer be cut off from their paid subscription while they are travelling in Europe when the rules is applied. However, subscribers’ state of residence will be verified and the presence in other locations should only be a short period of time in order to prevent abuses of the new rule.

The law clearly continues to support content provider’s territorial licensing restriction.  For example, you must reside in France to take out an Orange subscription, but then you can watch it when you are on holiday in Malta. If you spend too long in Malta, you would need to switch to a locally-based TV platform.

Technology development and adoption of mobile devices is clearly driving the demand to access media content anytime and anywhere. Service providers have been taking the opportunity to provide TV anywhere services to meet this demand, though the content is usually accessible only in the country where the service is subscribed.  Currently, territorial licensing and exclusive licensing limits cross border portability in Europe. Online content such as video or music is licensed by rights holders on a territorial basis, usually on a country-by-country basis. In addition, the contract terms between rights holders and distributors and distributors and end users may also prevent cross border content portability.

Lack of cross border portability can lead to online content piracy as many consumers may resort to illegal downloading of content while on vacation (content that they believe they have paid for at home).  However, it does not immediately solve problems around content that is not available in the country they reside in – although broader content availability and additional legal Pay TV and OTT linguistic packages are more broadly enabled with today’s more flexible licensing and distribution models. End users sometimes use virtual private networks (VPNs) to bypass the territorial restrictions by license agreements resulting in breach of licensing contracts. Providing lawful right to consumers to access content across the borders will prevent such online privacy. 

The demand for cross border accessibility of content is undeniable. In 2016, OTT service provider Netflix banned accessing Netflix content using VPNs. As the content available in different countries where Netflix runs operation is different, many Netflix subscribers try to access content from other countries using VPNs. Netflix’s decision to block VPN proxies was not welcomed by many users. Netflix was not the first service provider banning the VPN use to access online video service. In 2014, Hulu blocked users accessing outside United Sates using VPNs and proxies, but it was not successful because VPN providers managed to bypass the ban. However, OTT service providers do recognize the need of content cross border accessibility. Today, leading international content distributors, such as Amazon and Netflix, have taken care to make available any exclusive content that their rights agreements support streaming internationally.  For example, a US-based Netflix subscriber was able to watch House of Cards in the UK seamlessly. The Amazon application made clear that limited content was available due to travel, but provided some content choices – a step ahead of what was available 18 months ago.

Portability of content while travelling outside of the state of residence obviously benefits consumers but there have been concerns from stakeholders. There can be potential of revenue loss for rights holders when content portability is widely applied. Content licensing agreements will need to be reviewed to allow cross border accessibility of content. Regulation needs to provide clear rules for eligibility of cross border portability and strict monitoring.  Service providers will need to invest more cash to implement cross border portability, such as identification of subscriber location and technical support to provide services to temporary subscribers crossing the border. Service providers will also need to review the content licenses, which probably would result in higher fees to provide the content in multiple countries. Whether service providers are allowed to charge additional fees for subscribers who want to access cross border portability is not known yet. But it is likely that service providers will be able to monetize cross border portability as a value added service for frequent travelers. When there is clear regulation, cross border portability can bring benefits to consumers while protecting the negative impact on stakeholders.