In a decision handed down by the European Court of Justice on Wednesday 5 June, Microsoft’s Skype Service was declared to be a “telecoms operator” and therefore subject to EU telecoms regulations.
In C-142/18 Skype Communications Sarl v IBPT, the European Court of Justice (ECJ) sided with the Belgian communications regulator, the Belgian Institute of Postal and Telecommunications Service (whose acronym is BIPT or IBPT, depending on the language being Flemmish or French). The decision requires Skype, which until now was viewed simply as an internet-based software company with phone call capabilities, to respect the same rules as any other traditional telecom company.
Skype has long been part of a cohort of software companies, alongside Facebook Messenger and WhatsApp, which provide the means for VoIP (voice over internet protocol) calls. To adjust the regulatory gap which has widened between internet and telecoms companies, the EU has endeavoured to establish a new regulatory framework to be implemented by 2020, notably including the European Electronics Communications Code.
However, change has arrived earlier for Skype. The matter before the court turned on Skype’s “Skype Out” option, a paid-for service which allows calls between actual phone numbers, with third party agreements in place to provide signal. Although Skype argued that they could not be categorized as a telecommunications company because they do not provide the signal themselves, the Court ruled differently.
Does it make a difference for Skype? In light of the ruling, Skype is likely now subject to the same taxes, rates and even communications disclosures (including for example those concerning phone-tapping) as any other telecom service. Further, it would need to provide users with consistent access to emergency calls.
The Belgian claim against Skype was instigated in part due to the loss in revenue that traditional telecommunications companies have suffered, thanks to increased competition from VoiP services such as Skype. Customers increasingly prefer to opt out of the usual telephone option plans and switch to ones with large data plans, rather than minutes or messages. London-based research firm Ovum estimates that the telecoms industry has lost a combined $386 (£305) billion between 2012 and 2018 because of the public preference for internet-based applications.
Given that Skype was launched over 15 years ago, this decision may seem somewhat overdue. Cases like this illustrates that in many respects, European regulation is slow to respond to disruptive entrants in the technology, media and telecoms sectors.
Nevertheless, the regulatory landscape is beginning to shift, and TMT companies will do well to stay informed of the changes. In this particular case, Skype will likely need to adapt not only their regulatory compliance, but their strategic business objectives.
Bigger implications? The decision can be seen as an attempt by the European Union to construe a digital single market, creating a set of uniformly applicable rules to different companies offering very similar services. The recent decision of the EU proposing the European Electronics Communications Code is a factual example of the move towards an integrated regulatory approach covering the telecommunications and digital markets.
In 2014, analyst Emeka Obiodu stated that competing or blocking internet-based services would not slow down their growth, due to wide demand. Yet, it is worth asking if this decision could mean that the trend will start to reverse. Perhaps the next thing to expect is the creation of a set criteria to be satisfied, in order to classify companies as either telecom companies or internet-based providers.