Documents considered by the Committee on 29 March 2017 Contents

5Digital Single Market: Cross-border portability of online content

Committee’s assessment

Legally and politically important

Committee’s decision

Cleared from scrutiny; drawn to the attention of the Business, Energy and Industrial Strategy Committee, the Culture, Media and Sport Committee and the Exiting the European Union Committee

Document details

Proposal for a Regulation on ensuring the cross-border portability of online content services in the internal market

Legal base

114 TFEU; ordinary legislative procedure; QMV

Department

Business, Energy and Industrial Strategy

Document Number

(37394), 15302/15 + ADDs 1–2, COM(15) 627

Summary and Committee’s conclusions

5.1People are increasingly accessing online content services through portable devices (such as tablets and smartphones). As a result, demand for access to content on the move, including cross-border, is rapidly growing.

5.2At present, subscribers to online content may find that their access to such services is effectively blocked when travelling abroad due to copyright or licence restrictions. In December 2015 the Commission proposed a draft Regulation (hereafter ‘the Portability Regulation’) intended to enable EU consumers who have purchased or legitimately subscribed to online content services in their home Member State access to that service when ‘temporarily present’ in another Member State. It is one of a series of legislative proposals aimed at implementing the Commission’s wider Digital Single Market Strategy to increase cross-border e-commerce.

5.3On 29 January the Government notified the Committee that the Maltese Presidency had proposed a compromise text in trilogue negotiations which was likely to form the basis of an agreement. This text tightened the definitions of ‘residence’ and ‘temporary presence’ in order to ensure that portability was a “targeted, temporary service” and clarified the mechanisms by which service providers could verify a user’s Members State of residence, addressing the Government’s concerns. The Committee granted the Government a scrutiny waiver for any future vote on this proposal in the Council of Ministers on the condition that the compromise text did not deviate significantly from that discussed with the Committee, but declined to clear the proposal from scrutiny, on the basis that further information about the implications of Brexit for this issue was necessary.

5.4The Minister of State for Universities, Science, Research and Innovation (Joseph Johnson) now informs the Committee that on 7 February trilogue negotiations concluded with a provisional agreement between the Presidency and European Parliament representatives. The Minister voted for the compromise text, as it did not deviate significantly from the compromise text previously discussed with the Committee. He anticipates that formal agreement will take place in March or April.

5.5The Minister provides some additional information in response to the Committee’s questions about the implications of Brexit for this issue. He reiterates that, post-exit, the Regulation will continue to apply to UK businesses operating in the EU, and provides examples of how different types of firm will continue to be constrained. He does not respond directly to the Committee’s question as to whether UK industry stakeholders believe it will be practical for them to provide portable services outside the EU, stating only that the Government continues to engage with stakeholders.

5.6The Minister states that the Government will seek the best possible deal and will consider all of the available options on portability. Little evidence has been provided, though, to suggest that there are any options for retaining ubiquitous portable content services for UK travellers in the EEA other than through a Free Trade Agreement with the EU27.

5.7We thank the Minister for his summary of the outcome of trilogue negotiations in relation to the Portability Regulation. We note that the compromise text did not change significantly from the version discussed with the Committee and that the conditions of the scrutiny waiver were therefore met. We welcome the Government’s role in delivering this measure from which UK consumers will benefit.

5.8The UK’s imminent exit from the EU means that the significance of the Portability Regulation for UK stakeholders is significantly altered. From the Government’s Explanatory Memorandum and subsequent letters from Ministers, the Committee concludes that:

5.9We now clear the proposal from scrutiny. We draw this report to the attention of the Culture, Media and Sport Committee, the Business, Energy and Industrial Strategy Committee and the Exiting the European Union Committee.

Full details of the documents

Proposal for a Regulation on ensuring the cross-border portability of online content services in the internal market: (37394), 15302/15 + ADDs 1–2, COM(15) 627.

Background

5.10In its most recent chapter on this proposal, in its report of 8 February 2017, the Committee considered the state-of-play in trilogue negotiations concerning the Portability Regulation as well as the implications of Brexit for this issue.10

Trilogue negotiations

5.11On 31 January 2017 the Minister of State for Universities, Science, Research and Innovation (Joseph Johnson) informed the Committee that the Maltese Presidency had produced a compromise text that sought to bring together the Council and Parliamentary texts, which he considered addressed the key issues that had been raised in previous correspondence.

5.12The Minister explained that the key definitions of ‘residence’ and ‘temporary presence’ had been tightened “to ensure that portability is a targeted, temporary service”. He explained: “The Member State of residence is now defined as ‘actual and stable’, and temporary presence has been clarified by using the words ‘limited period of time’”. The Regulation’s recitals clarified that the phrase “limited period of time” meant “for purposes such as leisure, travel, business trips or study”.

5.13The Minister said that the compromise text had also addressed concerns about how service providers were permitted to verify a user’s Member State of residence. He said that the Parliament’s preference for the verification requirements to be specified in the form of a closed list (as opposed to the ‘semi-open’ list preferred by the Council) had been retained, but that a number of its requirements had been modified in line with the Council text. For example, the compromise text allowed IP address checks to be periodical rather than random, and also included an opt-out clause, “which allows verification to be bypassed if agreed by both the rightsholder and the service provider”.

5.14The Minister considered that the text represented “a sensible middle ground between the Council and Parliament texts” and said that he thought it likely that this text would form the basis of an agreement at a forthcoming meeting and requested that the Committee clear the Regulation from scrutiny “in order that it can be adopted in trilogue in early February”. The Committee chose not to do so, because it wished to seek further clarification on a number of Brexit-related points (see below); instead, it retained the file under scrutiny and granted the Government a scrutiny waiver on any future vote in Council on the understanding that the final legal text did not differ substantially from the Presidency’s compromise text.

Brexit implications

5.15In an earlier letter to the Committee (27 September 2016), the Minister of State for Energy and Intellectual Property (Baroness Neville Rolfe), responded to the Committee’s questions regarding the implications of Brexit for portable content services post-exit. She observed that:

The Minister’s letter of 16 March 2017

5.16The Minister thanks the Committee for the waiver provided in support of the compromise text and states that the Regulation has been agreed in principle by the Council, the Parliament and the Commission. He assures the Committee that “the final agreed text did not deviate in substance from the text I recently shared with you”, and adds that the Government expects formal agreement at a Council meeting in either March or April. He attaches the final version of the text and adds that, once the Regulation has been agreed, it will apply from nine months following the day of its publication.

5.17The Committee sought further clarification in relation to a number of Brexit-related points, to which the Minister responds.

5.18Given the Government’s assessment that it could not ensure that UK consumers would benefit from portable content through domestic legislation, the Committee sought clarification on whether it would seek the inclusion of portability arrangements in a comprehensive Free Trade Agreement with the EU. The Minister does not engage with the question, stating only that:

“In regards to the possibility of the inclusion of portability arrangements in a comprehensive Free Trade Agreement or other bilateral arrangement with the EU. [sic.] As part of our exit negotiations we will be seeking the best possible deal which delivers for British consumers and business. The Government will consider all options that are available to us, including those on portability.”

5.19In light of the Government’s earlier assessment that UK businesses operating in the EU would continue to be bound by the Regulation post-exit, the Committee asked under what circumstances and how the offerings provided by British content creators and service providers would continue to be affected by the Regulation. The Minister responds:

“Simply put, any pay-to-access content service operated from the UK, and any British content provided on it, will be bound by the Regulation’s requirements if that service is accessible within the EU. For example, a content producer whose content is licensed to Netflix in Italy could expect that content to be subject to portability requirements for Italian residents. UK-based service providers which operate within the EU will be obliged to provide portable services to customers in any Member State within which they operate, according to the Regulation.”

5.20The Government had previously expressed the view that, post-exit, rights holders and service providers could “adopt commercial practices that allow for portability, even where it is not provided for in legislation”, but the Committee questioned the feasibility of this on the basis that, to date, consumers have overwhelmingly not been offered portable services because of issues around cross-border copyright licensing, and that the provisions in the Regulation which were specifically designed to circumvent these difficulties would not apply to UK businesses post-Brexit. The Committee had therefore asked the Government whether, during its stakeholder consultations concerning Brexit, it had asked any UK-based content creators or service providers how practical it would be for them to continue to deliver portable content in the absence of the Regulation and whether they intended to do so. The Minister does not answer the question directly, merely observing that:

“On the practicality of service providers providing portability to UK consumers in the absence of the Regulation’s legal fiction, my officials have been in close contact with service providers throughout the negotiation process, working to ensure a final Regulation that suits their needs as well as providing a valuable service to consumers. My officials will continue to work closely with those impacted by this measure as negotiations on the UK’s exit from the EU progress.”

Previous Committee Reports

Thirty-first report HC 71-xxix (2016–17), chapter 2 (8 February 2017); Sixth Report HC 71-vi (2016–17), chapter 3 (13 July 2016); First Report HC 71-i (2016–17), chapter 1(19 May 2016); Twenty-ninth Report HC 342-xxviii (2015–16), chapter 1 (20 April 2016); Twenty-fifth Report HC 342-xxiv (2015–16), chapter 2 (9 March 2016); Eighteenth Report 342-xvii (2015–16), chapter 3 (13 January 2016).


10 The detail of the draft Regulation, the Government’s position on it and correspondence with the Committee can be found in the Committee’s previous reports on this subject, which are listed at the end of this chapter.




31 March 2017