For the past five years, Google and the German telecommunications regulator, the Federal Network Agency (Bundesnetzagentur – BNetzA), have been arguing whether Google’s email service Gmail qualifies as a telecommunications services as defined by the German Telecommunications Act (Telekommunikationsgesetz – TKG). BNetzA eventually ordered Google to notify the service (i.e., it considered it to be regulated), and now, the Administrative Court of Cologne upheld this view in a judgment of November 11, 2015, which was published only last week.

The judgment is the first time a German court dealt with the legal qualification of over-the-top (OTT) communications services. Although the court’s reasoning is disputable, and Google has the option to appeal the judgment up to the Federal Administrative Court, the decision nevertheless comes at a time when OTT services are generally attracting increased attention from regulators and policy makers, and where “traditional” telcos are lobbying hard in favor of a “level playing field” regulation for the likes of Skype, WhatsApp, or Gmail. And in particular, the case demonstrates that despite an EU-wide harmonization of telecommunications law, Member State law still allows for deviating classifications of specific services as being regulated or not. This requires providers of pan-European or even global OTT services to carefully evaluate the applicable regulatory framework not just on the EU level, but, in fact, Member State by Member State.

  1. What did the German court decide?

In 2010, BNetzA first approached Google regarding the notification requirement set forth in Sec. 6 TKG, because BNetzA considered Gmail to be a telecommunications service within the meaning of Sec. 3 No. 24 TKG. In 2012, after two years of exchanging views on the regulatory qualification of Gmail, BNetzA then issued this request by way of a formal decision. Google filed an objection against BNetzA’s order which was rejected in late 2014. In early 2015, Google then filed an action against BNetzA with the Administrative Court of Cologne. The court thus had to decide whether BNetzA’s request for a notification was justified, i.e., whether Gmail does indeed qualify as a regulated telecommunications service within the meaning of the TKG. In doing so, the court upheld BNetzA’s position with the following reasoning:

  • Pursuant to the statutory definition in Sec. 3, No. 24 TKG, a “telecommunications service” is defined as a service that is (a) usually provided against remuneration and (b) mainly consists in the conveyance of signals over telecommunications networks. In the court’s opinion, Gmail meets both criteria, and thus triggers the notification requirement for commercial telecommunications services as stipulated in Sec. 6 TKG.
  • On the remuneration criterion, the court held that because Google provides Gmail as a “commercial” service, the service must be considered to be provided “against numeration”. This is not very convincing. In fact, it mixes up two separate issues: (Only) whether a service is provided against remuneration is crucial for the qualification as a regulated service, whereas the “commercial” provision of a telecommunications service (i.e., a service which was already categorized as being regulated because it is provided against numeration) then only triggers certain specific regulatory obligations (such as the notification requirement). However, the court only deals with the second question of Gmail being a “commercial” service, but not at all with the actual remuneration criterion.
  • On the second element of the statutory definition, the conveyance of signals over telecommunications networks, the court took a functional approach:
    • From a user perspective, the only purpose for using Gmail was to convey messages from sender to recipient. From Google’s perspective (in the view of the court), the service must thus provide this function in order to meet the user’s demand.
    • The court also found its understanding to be in line with the legislator’s intentions: The notification obligation shall allow BNetzA to monitor commercially provided telecommunications services in order to make sure that all requirements regarding consumer and data protection as well as public safety are met.
    • Since email and other OTT communications services increasingly replace conventional telecommunications services, the court further referred to the regulatory objectives of ensuring fair competition and safeguarding technological neutrality (Sec. 1 TKG) in order to justify its qualification of Gmail as a regulated service.
    • Finally, the court found that even though Google itself did not provide the actual signal transmission between the servers that are involved in email delivery, this transmission via the open Internet must still be attributed to Google because the transmission was triggered by Gmail users hitting the “send” button and facilitated by Google’s email servers. In this respect, the court referred to the CJEU judgment of April 30, 2014 in case C-475/12, where the European court had ruled that the ownership of the infrastructure used to transmit signals was irrelevant for the classification of a service as being regulated, as long as the provider of that service is responsible for this transmission vis-à-vis the end users.
  1. Is this already a final verdict?

No. Google can appeal the decision to the Higher Administrative Court and/or the Federal Administrative Court, so it may take another few years for a final verdict to come down in this matter. And in fact, several aspects of the court’s reasoning seem to provide a sufficient basis for an appeal:

  • BNetzA had classified Gmail as a regulated service against a contrary assessment by the European Commission, and the Administrative Court held onto that classification: BNetzA had sought input from the European Commission, asking for the categorization of email services similar to Gmail within the European regulatory framework in 2014 and before rejecting Google’s objection against BNetzA’s initial decision. The Commission found that the services described by BNetzA could not be qualified as regulated “electronic communications services” (ECS) as defined in the EU Framework Directive (Directive 2002/21/EC, as amended). Accordingly, the German court now deviated from the harmonized ECS definition, and the case might thus well go up to the CJEU during the appeals proceedings, in order to clarify how the German definition of a “telecommunications service” relates to the EU regulatory framework.
  • But even in a purely German law context, the court’s reasoning is weak, especially when it comes to the issue of a “remunerated” as opposed to a “commercial” service (see above). Beyond the fact that the court simply confused these two statutory criteria, it raises the further—and likely more interesting—question whether advertising-financed services and/or services that collect certain user data can be seen as being provided “against remuneration”.
  • Finally, the court’s interpretation of the requirement of a “conveyance of signals” is yet completely unprecedented with respect to email (or other OTT communications) services. In any event, the court’s reasoning seems to be somewhat circular in arguing with a need to efficiently monitor all telecommunications services once they have been notified, in order to justify the notification requirement itself. Many of the court’s arguments in favor of a functional interpretation of the statutory definition also seem to be detached from the actually rather technical term “conveyance of signals”.
  1. What would it mean if the court’s view prevailed?

The Gmail decision is important to OTT communications services as a whole, i.e., not just to the provision of web-based email services, but also for providing VoIP, messaging, conferencing, or unified communications solutions over the Internet. Because if the view of the German court prevails, OTT services could be subject to a wide range of regulatory obligations. And this would generally also apply to services where the provider is not even based in Germany, as long as the service addresses the German market. Just to name a few of these obligations:

  • Notification requirement with BNetzA (ex post after market launch);
  • Number portability / support of customer relocation;
  • Emergency calling;
  • Customer protection provisions, e.g., special transparency and information rights;
  • Public security provisions, e.g., access to customer data for law enforcement agencies; and
  • IT security requirements, e.g., security concept and breach notification obligations.

Many of these obligations, however, are clearly tailored towards traditional telecommunications services and would be hard to comply with for providers of Internet communications services like Gmail. But once a particular service was qualified as a telecommunications service, these obligations apply nonetheless, and OTT providers are facing a risk of regulatory action such as monetary fines and/or an order to stop providing the service to German customers.

  1. What else is happening in the OTT policy discussion?

OTT providers should closely follow the current national and EU-wide policy initiatives to determine the suitable regulatory framework for OTT services. For example, this week the European Commission closed a consultation where it had asked for industry input on whether and how to integrate such new services into the existing telecoms regime. On a national level, BNetzA had also facilitated a public discussion on this topic, e.g., by holding an international regulatory conference this October. As a starting point, these discussions deal with the categorization of OTT services within the existing definitions of a “telecommunications service” (or, respectively, an ECS). This is where the Cologne court’s decision now made an impact of its own. Furthermore, however, the even more important part of the discussion will then be on the merits of a potential OTT regulation, i.e., which elements of existing telecoms regulation can (and shall) be applied to OTT services, and which parts cannot—or, in other words: Will the telcos’ call for “level playing field” regulation be heard?