On Tuesday 7th August 2012, the Competition Tribunal of South Africa (“the Tribunal”) imposed as fine the equivalent of N8 795 930 000.00 (eight billion, seven hundred and ninety five million, nine hundred and thirty thousand naira) in the amount of R449 000 000.00 (four hundred and forty nine million rand) on Telkom SA Ltd. (“Telkom”) for abusing its dominant position in the Public Switched Telecommunications Services (“PSTS”).
This matter was commenced at the Tribunal by the Competition Commission of South Africa (“the Commission”) pursuant to a complaint which had alleged that in the period of 1999 to December 2004 (“the relevant period”), Telkom had engaged in particular anti-competitive conducts which had resulted in a substantial lessening and prevention of competition in the Value Added Service Network (“VANS”) market. The infringing conduct was argued to be in violation of sections 8(b), 8(c) and 8(d)(i) of the Competition Act of the Republic of South Africa (“the Act”).
In this article, I summarise the main findings of the Tribunal and conclude by attempting to relate it with the present situation of the Communications sector in Nigeria.
Introduction and factual background
Telkom had enjoyed a monopoly over PSTS and facilities services until 2005 when the South Africa Telecommunications Act of 1996 was amended to introduce VANS as a new license category. While Telkom enjoyed exclusivity over PSTS and the provision of infrastructure, Telkom’s downstream division: Telvans faced stiff competition from several VANS operators.
The Commission had alleged that during the relevant period Telkom leveraged its upstream monopoly over PSTS services and the facilities market (on which VANS was dependent) to the benefit of only Telvans, its own downstream subsidiary in the VANS market.
Telkom’s conduct according to the Commission had resulted in a substantial lessening of competition by causing harm to both competitors and consumer’s alike and impeded competition and innovation in the dynamic VANS market.
Relevant markets
The Commission identified the following relevant national markets; (i) A market for local access and transmission fixed leased line infrastructure; (ii) A market for managed data network services including the provision of Wide Area Network (“WAN”) and Virtual Private Network (“VPN”); (iii) A market for whole sale internet connectivity; and (iv) A market for retail internet access for corporate customers.
While identified markets (iii) and (iv) specifically related to internet services which were regarded as value added services, the Tribunal proceeded to assess Telkom’s conduct in market (i) in relation to VANS providers across markets (ii), (iii) and (iv).
The anti-competitive conduct
The Commission alleged that Telkom abused its dominant position by;
I. Refusing to supply essential facilities to certain VANS providers unless they acceded to certain contractual conditions. To achieve this purpose Telkom redefined section 40(2) of the Telecommunications Act.
Failure to agree to these conditions would be met by freezing (refusal to provide additional links to meet the expansion needs) the network of the relevant VANS provider, which Telkom did in fact freeze networks of various VANS providers on numerous occasions. This conduct was in breach of sections 8(b) and 8(c) of the Act.
II. Refusing to lease the access facilities to VANS providers directly and insisting that VANS providers act as agents to their customers in leasing access facilities from it. To achieve this aim, VANS provider were required to enter agency agreements with their own customers in order to obtain and manage facilities from Telkom.
This administrative burden was not required from the customers of Televans. This conduct was alleged to be in contravention of sections 8(c) and 8(d)(i) of the Act.
III. Refusing to supply Satellite Data Network (“SDN”) with a high capacity link in contravention of sections 8(b) and 8(c).
IV. The Commission also alleged that Telkom’s conduct in the pricing of access facilities or circuits, contravened sections 8(a) and 9(1) of the Act.
The Decision
After dispensing with challenges brought on procedural grounds, the Tribunal proceeded to resolve the issues by first addressing the major defence canvassed by Telkom in order to justify its conducts.
Telkom in its argument had contended that VANS providers were restricted by the Telecommunications Act from sub-letting or ceding control over the facilities obtained from Telkom and its insistence on the agency agreements were simply an attempt to comply with this restriction. Furthermore Telkom had argued (by redefining section 40(2) of the Telecommunications Act) that VANs providers who were also provider of VPN services were not authorised by their licenses to do as VPN constituted PSTS which only Telkom was authorised to provide.
In relation to conduct III, Telkom argued that it enjoyed exclusivity over international gateways and that AT & T’s request for a larger capacity link would in essence bypass Telkom’s network and undermine its exclusivity.
The Tribunal in addressing the first issue referred to the case of Telkom v Internet Solutions where the Independent Communications Authority of South Africa (“ICASA”) the regulator for the South African communications sector held that Internet Solutions was providing a legitimate VANS. The Tribunal also referred to Telkom SA Ltd. V AT & T Global where ICASA had held that a VPN is not a PTN but a managed data network service (“MDNS”) which falls into the definition of VANS in section 40(2) of the Telecommunications Act. ICASA also found that AT & T was not providing PSTS nor was it subletting facilities leased from Telkom.
The Tribunal concluded that since these rulings are yet to be overturned, it stands.
Non-pricing conducts
Section 8(b)
This section provides that it is prohibited for a dominant firm to refuse to give a competitor access to an essential facility when it is not economically feasibible to do so. The main thrust of Telkom’s defence on this claim was that VANS were acting illegally by carrying on a service not authorised by law. (Recall earlier rulings by ICASA).
The Tribunal held further that even for the sake of argument that the illegality question was yet to be decided, Telkom itself had relied on it inconsistently and selectively – by electing to freeze rather than disconnect the network of offending VANS, freezing some and not others- thereby demonstrating that its refusal to supply was not a matter of law but rather a matter of commercial strategy.
The Tribunal further held that the requirement by Telkom that its competitors accede to conditions of supply that were not contained in legislation or regulation and which adversely impacted on their businesses did amount to a constructive refusal to supply.
The Tribunal finally concluded that Telkom had in fact breached section 8(b) of the Act.
Section 8(d)(i)
This section provides that it is prohibited for a dominant firm to require or induce a supplier or customer to not deal with a competitor unless that firm can show technological, efficiency or other pro-competitive gains which outweigh the anticompetitive effect. The conduct complained of here was that Telkom insisted that leased lines be registered in the names of the customers of the VANS providers and could only be obtained from Telkom through an agency agreement.
Telkom failed to raise any technological, efficiency or pro-competitive gains to satisfy the exemption requirement under this section. The main plank of its defence was that VANS providers were acting illegally and infringing on Telkom’s exclusivity. According to the Tribunal this issue had already been decided against Telkom (Recall earlier rulings by ICASA) and even Telkom’s own regulatory department noted that the alleged illegality claim could be challenged on the basis of its legality.
On this claim, the Tribunal also held Telkom to have infringed section 8(d)(i) of the Act.
Pricing conducts
Sections 8(a) Excessive pricing
Section 8(a) provides that it is prohibited for a dominant firm to charge an excessive price to the detriment of consumers. To sustain a section 8(a) infringement, the Tribunal relied on Mittal Steel v Harmony which held that “the economic value of the good or service” must be established.
However the Tribunal was unable to make a finding of this conduct as the Commission had failed to establish the economic value of the good or services in its pleadings.
Section 9(1) Price discrimination
This section provides that:
An action by a dominant firm, as the seller of goods or services is prohibited price discrimination, if-
a) It is likely to have the effect of substantially preventing or lessening competition;
b) It relates to the sale, in equivalent transactions, of goods or services of like grade and quality to different purchasers; and
c) it involves discriminating between those purchasers in terms of –
i. the price charged for the goods or services;
ii. any discount, allowance, rebate or credit given or allowed in relation to the supply of goods and services;
iii. the provision of services in respect of the goods or services; or
iv. payment for services provided in respect of goods or services.
To this, Telkom contended that it was not offering “equivalent service” in relation to its own valued added services and that offered by other VANS providers and that its sales of access line to its own customers was bundled with other services and therefore could not be compared on the basis of equivalence.
The Tribunal proceeded to compare the equivalence of bundled services to which Telkom failed to provide cost information which was necessary to perform a cost price analysis. The Tribunal finally concluded that Telkom’s bundling claim was not a credible one and proceeded to establish the requirement of “equivalent transactions” (for the purpose of price discrimination) by making a finding on the type of harm caused.
However due to the inability of the Commission’s pleading to make a clear showing of whether the alleged price discriminatory conduct caused harm to the consumers or the VANS operators, the Tribunal was unable to find a contravention of section 9(1).
In all, the Tribunal came to a conclusion that Telkom had contravened sections 8(b) and 8(d)(i) of the Competition Act, for which it was fined R449 000 000.00 (four hundred and forty nine million rand).
The situation in Nigeria’s communications sector
Abuse of a dominant position in Nigeria’s communications sector is primarily governed by section 92(4) of the Nigerian Communications Act (“NCA”) and Part V of the Competition Practice Regulations 2007 (“CPR”). To prove an abuse of a dominant position by a communications licensee, it will be necessary to first determine whether the licensee in question occupies a dominant position in the relevant market.
In March 2010, the Nigerian Communications Commission (“NCC”) exercised its power under section 92 (1) NCA for the purpose of determining whether a licensee holds a dominant position in 2 markets namely; the Mobile Telephone Services market; and the International Internet Connectivity (“ICC”) market (including related international leased data line connectivity markets).
NCC concluded its investigation by stating that no licensee held a position of market dominance in the Mobile Telephone Services market (collectively or individually). With respect to the market for ICC, NCC concluded that NITEL, the pre-liberalization dominant operator no longer held a dominant position, however NCC also noted that work in dominance investigation would significantly improve if the industry had access to more accurate, detailed and timely data on the workings of the relevant markets.
It is however noted that since the commencement of the NCA, there is yet to be decision by either NCC or a court of competent jurisdiction on an allegation of anti-competitive conduct engaged by a dominant licensee. The absence of such decision does not necessarily imply that competition in the communications sector has achieved maturity, neither does it imply the absence of an anti-competitive conduct.
As NCC rightly responded to complaints raised by stakeholders during its dominance investigations, where market forces fail to quickly resolve anti-competitive conduct(s) of a dominant licensee, timely, direct and targeted remedies are available under the telecommunications framework which can in most cases be implemented without a finding of dominance.
Tuesday, August 14, 2012
Tuesday, June 19, 2012
IN THE MATTER OF A BILL FOR AN ACT TO AMEND THE COPYRIGHT ACT CAP C28 LAWS OF THE FEDERATION OF NIGERIA 2004 TO PROVIDE FOR BETTER PROTECTION OF COPYRIGHT IN THE DIGITAL ENVIRONMENT
1. Executive Summary
1.1 According to Harvard Law Professor, Lawrence Lessig “The fear is that cyberspace will become a place where copyright can be defeated.” Copyright and related rights embrace a wide spectrum of human endeavour and activity. Most of the creative content that underlies that functionality of the internet is subject to Copyright. Under the Copyright Act C28 Laws of the Federation of Nigeria 2004, Copyright protection extends to all literary works, musical works, artistic works, cinematograph films, sound recordings and broadcast. This protection includes diverse forms of human creativity, such as writings, both fiction and non-fiction, including scientific and technical texts and computer programs; musical recordings; audiovisual works; works of fine art, including drawings and paintings; and photographs.
1.2 Digital technology provides an effective means for the transmission and (re)use of these works subject to Copyright protection in a packet-switched network. These digital technologies also provide an avenue of the Copyright infringement of these works. Given the capabilities and characteristics of digital network technologies and the rate at which the internet is fast becoming an ubiquitous phenomenon, it is essential that statutory provisions are enacted to accommodate recent changes in these technological development in order to ensure that digital technology does not undermine the basic principle underlying the protection of Copyright and related rights.
1.3 The internet on its own has become one of the biggest threat to the creation of Copyright content because of its vast potential to make unlimited number of copies, almost instantaneously, without degrading the quality and transmitting these works to locations around the world in a matter of minutes. This disruption of technology has altered traditional markets selling everything virtually Copyrightable. In the music industry, for example, the emergence of “killer apps” such as peer-to-peer technologies (for file sharing) has unfortunately enabled the exploitation of music recordings on a monumental scale absent the required authorization of the rights holders. This exploitation has further been exacerbated by the simultaneous broad commercialization of CD burners and portable MP3 players, adapted to the most commonly used file format.
1.4 Unfortunately, these challenges are currently facing the Copyright industry at a time when the share of Copyright in the Nigerian economy is reaching unprecedented levels. In 2010, UNESCO declared that Nollywood, Nigeria’s homegrown movie industry has the largest production of films in the world, with the UNDP/UNCTAD 2010 Report valuing the industry at N522 billion (USD2.75bn). This significance has further reinforced the necessity for Copyright industries to seek out technical and legislative solutions to protect Copyright from digital piracy.
1.5 It is therefore critical to amend existing frameworks to respond to the challenges posed by new digital technologies in the appropriate manner, and to do so quickly and responsibly, because these technologies and markets is an evolution in continuous progress. This will ensure the continued furtherance of the fundamental guiding principles of Copyright and related rights, which remain constant whatever may be the state of technological development: giving incentives to creators to continue to create and disseminate new creative works; recognizing the importance of their contributions, by giving them reasonable control over the exploitation of these works and allowing them to profit from them; providing the appropriate balance for the public interest, particularly education, research and access to information; and thereby ultimately benefiting the Nigerian economy as a whole, by promoting the development of culture, science, and innovation.
1.6 Recently, the Nigerian Copyright Commission (“the Commission”) made available to the public, the proposed draft bill for an Act to amend the Copyright Act CAP C28 Laws of the Federation of Nigeria 2004 to provide for better protection of Copyright in the digital environment, the Commission also invited comments from the public in respect of the proposal.
1.7 The respondent is currently the Secretary of the ICT Committee of the Section of Business Law (SBL) of the Nigerian Bar Association and a Solicitor in the Information Technology and Telecommunications Practice of Streamsowers & Köhn. In his current capacity he regularly advises an international Mobile Network Operator and other communications’ market operator on matters of regulatory compliance. The respondent has also developed substantial expertise in all areas of information technology & telecommunications law such as intellectual property on the internet, privacy & data protection, cyber crime & cyber security, competition & consumer protection in telecommunications market and domain name dispute resolution amongst many others.
1.8 Respondent comments frequently on IT/Telecoms regulatory matters in the “matters e-Rising” and business law column of the Nation Newspaper Thursday’s edition and Business day Thursdays editions respectively. Respondent is a member of the Nigerian Bar Association, Chartered Institute of Arbitrators (CIArb) UK and BCS (The Chartered Institute for IT) and an alumnus of the WIPO Worldwide Academy in Geneva.
1.9 Respondent’s memorandum is in respect of only; Section 18A-Takedown of Infringing content and Section 18B- Graduated procedure for suspension of accounts of repeated infringers of the proposed Bill
1.10 The summary of Respondent’s conclusions are that; the Bill should provide safe harbor provisions, expand the definition of Internet service providers to include Online service providers and that graduated responses may likely be challenged on the basis of its legitimacy and should as a matter of serious concern provide stricter controls for due process.
2. Section 18A- Takedown of Infringing content
2.1 This section provides;
1) An internet service provider shall, take down or disable access to infringing content or links to such content, hosted on its systems or networks, promptly upon receiving notice of infringement from an owner of copyright or otherwise becoming aware of the infringing activity or of facts or circumstances from which infringing activity is apparent; and
a) Notify the owner of copyright promptly that the content or link has been removed or access to it has been disabled;
b) In the case of removal of content without prior notice to the owner of copyright, the Internet service provider shall attempt, with reasonable effort, to locate the relevant owner of copyright and notify him of the removal of the content or link
2) The Internet service provider may resume access to or restore removed content or a link, if he receives a written counter notice from the subscriber which he has forwarded to the owner of copyright immediately upon receipt; and did not receive, within 10 days, a notice from the owner of copyright, indicating that no authorization has been granted for the subscriber to make the content available.
3) The Internet service provider shall not be liable to any person for an claim based on the service provider’s good faith disabling of access to, or removal of, link or content claimed in a qualifying notice to be infringing or based on facts or circumstances from which infringing activity is apparent, regardless of whether the content or activity is ultimately determined to be infringing.
4) A notice required under this section to be given shall contain such information and particulars as the Commission may prescribe by regulations.
5) For the purpose of this section, the term “Internet service provider” shall mean an entity offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of a material of the user’s choosing, without modification to the content of the material as sent or received.
2.2 This section seeks to enact the general duty of an internet service provider (ISP) to take down a content alleged to be infringing a Copyright. The notice and takedown procedures regulate an ISP’s obligation to react appropriately when informed about irregularities on websites made available through them. Typically under such procedures, a complaint by notice informs an ISP that it is granting access to an illegal content (notice) and requests that the content in question be removed (takedown). These procedures establish a “red-flag” test whether ISPs have knowledge of subscribers’ illegal activity and thus are subject to secondary liability for Copyright infringement. The standard to which they are held is “becoming aware of the infringing activity or of facts or circumstances from which infringing activity is apparent.” Once the ISP receives proper notification of the infringement, the “red-flag” test is presumed to have been satisfied.
2.3 Also by this provision, an ISP will not be held liable to its subscribers because of the removal or access-blocking when it is done in good faith because it has received a proper notice or knows on its own that the material is infringing. Note that the liability provided by this section covers only the taking down or disabling access to infringing content or links to such content. It does not sanction the large scale removal of a subscriber’s material, particularly material that does not infringe, unless that is necessary to disable access to, or remove, the allegedly-infringing material. For an ISP to benefit from that provision, the ISP must take reasonable steps (not extraordinary effort) to notify the subscriber of any takedown, and if the subscriber contests the takedown, must restore the material within 10 days if notice that the subscriber was authorized to make the content available is received from the copyright holder.
2.4 Nevertheless, both copyright holders and ISPs may have incentives to use the system; for copyright holders, notice and takedown provides a faster and cheaper solution to enforcing their rights outside the court room arena, while from the ISPs’ perspective, a prompt response to the notification reduces liability for infringement. Notice and takedown procedure is not mandatory and litigating claims of Copyright infringement in the court will always be the best option.
2.5 The need for safe harbor provisions
As earlier stated, the notice and takedown procedure provides a “red-flag” test whether ISPs have knowledge of users’ illegal activity, hence it is possible for claims of vicarious or secondary liability for Copyright infringement to be instituted against ISP who have failed or refused to take down a content alleged to be infringing. The possibility of such an occurrence makes it necessary for the Bill to provide safe harbor provisions. Safe habor provisions usually exist in copyright statutes for ISPs to limit their exposure to secondary liability for copyright infringement when they are involved in the following categories of conduct;
2.5.1 Mere conduit:
A provision limiting the liability of ISPs for Copyright infringement when they act as mere conduits will be engaged only where the ISP does not initiate the transmission, does not select the recipients of the information and does not modify the content of the information.
2.5.2 Caching:
This provision is engaged in the case of temporary storage of information performed by ISPs for the purpose of efficiently transmitting the information to other recipients of the services. In such cases liability will not exist for ISPs on the condition that they do not modify the content, the ISP complies with the condition of access to the information, the ISP complies with the rules regarding the updating the information, specified in a manner acceptable to industry standards and acts expeditiously to remove content alleged to be infringing. This provision may also provide for the possibility of a court or administrative authority to require ISPs to terminate or act proactively to prevent infringements.
2.5.3 Hosting:
An ISP that stores information at the request of its users will escape liability provided that, the provider does not have actual knowledge of illegal activity and the recipient of the service is not acting under the control of the ISP. Once an ISP becomes aware of any facts or circumstance indicating an illegal activity, the ISP must act expeditiously to remove or disable access to the information. This provision may also provide the possibility of a court or administrative authority to require ISPs to terminate or prevent an infringement by establishing procedures for the removal of content.
2.5.4 Case laws on this type of copyright liability usually suggest some form of notice based standard. As earlier stated, the standard here is “becoming aware of the infringing activity or of facts or circumstances from which infringing activity is apparent.”
2.6 The Bill defines “Internet service provider” too narrowly
Much of the legal literature on this subject have tended to draw a distinction between ISPs providing access to the internet (which the Bill contemplates) and Online service provider (OSPs) which also include ISPs, email service providers, social network service providers (facebook, You Tube, etc), various online forums and bulletin boards and even “good old” Google and Wikipedia. The implication of this definition is that only traditional ISPs granting access to the internet would come within the meaning of “Internet service provider” under the Bill while other OSPs capable of making Copyright content available online, would escape responsibility under the Bill.
3. Section 18B- Graduated procedure for suspension of accounts of repeated infringers.
3.1 This section provides:
1) An Internet service provider shall adopt and reasonably implement a policy that provides for termination, in appropriate circumstances, of the account with that Internet service provider of a repeat infringer.
2) In subsection (1), repeat infringer means a person who repeatedly infringes the copyright in a work by using 1 or more of the Internet services of the Internet service provider to do a restricted act without the consent of the owner of copyright.
3) A policy of termination referred to in subsection 1 shall require the Internet service provider, upon receiving a notification from an owner of copyright or his authorized agent that a particular account has been used for repeated infringement, to:
a) promptly send a warning to the subscriber whose IP address has been identified, explaining that this conduct is an infringement of copyright and a breach of the terms of the policy and informing the subscriber of the potential consequences;
b) after the first such notification, promptly send a second warning to the subscriber clearly stating that another notification will lead to suspension of the account and requiring the subscriber to confirm receipt of the second warning; and
c) after the third such notification relating to the same account, if no challenge is pending pursuant to subsection (4) below, promptly suspend the account for a period of at least one month.
4) A subscriber receiving a warning shall have the ability to bring a challenge to the notice on the grounds of mistake or misidentification as follows:
a) Within 10 days from the date of the warning from the Internet service provider, the subscriber shall send a signed counter-notice to the Internet service provider, providing full contact details and the factual basis of his or his belief that his or her account has been misidentified as being used for copyright infringement, or that the use of the copyright content was not infringing.
b) If the basis for the challenge cannot be resolved by the Internet service provider within 5 days in the case of a challenge regarding an alleged account misidentification, or by the Internet service provider and the owner of copyright within 10 days in the case of a challenge regarding alleged lawful use of the copyright content, the counter-notice shall be referred to the Commission who may appoint an independent adjudicator to determine the validity of the challenge.
c) Any warning successfully challenged by the user shall not count towards the suspension process set out in subsection (3) and any contact details of the subscriber in relation to this warning will not be retained or used for any purpose by the owner of copyright.
5) The Internet service provider shall retain for a period of at least 6 months data sufficient to enable it to comply with the provisions of this section, including data indicating which subscriber account is using which Internet Protocol (IP) address at a given time.
6) If the Internet service provider fails to comply with subsection (2) of this section, the complaining owner of copyright shall be entitled to a court order requiring the Internet service provider to promptly comply with that subsection; and the court may, in making the order, make such consequential orders as it may deem fit in the circumstances.
7) An Internet service provider acting in good faith in suspending the account of a subscriber, relying on the information contained in a notification referred to in subsection (3) of this section, shall not be liable to any person for any claim based solely on that suspension.
3.2 This section seeks to enact the general duty of ISPs to adopt and implement a graduated response scheme. A graduated response scheme popularly referred to as the “three strikes Internet disconnection policy” or simply “three strikes” allows copyright holders to monitor internet subscribers and identify alleged copyright infringers. After contacting the ISPs of the alleged infringer, the ISP would then warn the subscriber (identified as the infringer); the alleged infringing subscriber would eventually be disconnected from accessing the internet after receiving three repeated warnings from the ISP.
3.2 In practice, the three strikes would require copyright holders to monitor network traffic and data content of internet subscribers using deep packet inspection tools in order to identify possible cases of copyright infringement, for example, via the surveillance of forums, blogs or by posing as file sharers in peer-to-peer (p2p) environment to identify file sharers who allegedly exchange copyright material. After identifying subscribers alleged to be engaged in copyright violation by collecting their Internet Protocol addresses (IP addresses), copyright holders would send the IP addresses of the subscriber to the relevant ISP who would warn the subscriber to whose account the IP addressed has been traced to, about his/her potential engagement in copyright infringement. Being warned by the ISP a certain number of times would automatically result in the ISP's termination or suspension of the subscriber’s Internet connection.
3.3 The graduated scheme under this section raises the fundamental questions of legitimacy; Is the termination of internet account reasonably proportionate to the offence of Copyright infringement?
3.3.1 Proportionality of the graduated response scheme
One of the core principles of proportionality in Nigerian criminal jurisprudence is that the “punishment should fit the crime.” Nigeria unlike other legal systems does not provide punitive damages but however under the present Copyright Act, damage can either be compensatory or restitutive. The proportionality of been disconnected from accessing the internet is underscored by the fact there seems to be uniformity in agreement that the internet is important in our daily lives. In this age of information explosion, it is not surprising to hear claims that accessing the internet should be a fundamental right. In the celebrated Australian case of Roadshow Films Pty v iiNet Limited, Cowdroy J rightly observed; “one does not need to consider access to the internet to be a human right to appreciate its central role in almost all aspects of modern life.”
3.3.2 Disconnection from the internet on the basis of Copyright infringement is very problematic in that it will in most cases affect all members of a house hold or the entire staff of the corporate entity, not just the subscriber named in internet service contract. To fully comprehend the enormity presented by this question, we must first understand the basic working of the internet and how IP addresses are assigned.
3.3.3 The internet and assignment of IP address
Computers connected to the internet communicate with each other by means of a common language, or protocol, called the Internet Protocol (“IP”). Data sent by means of the IP is broken up into small “packets”. Computers sending and receiving data are allocated IP addresses, which enable packets to be exchanged (in much the same way that postal addresses enable mail to be exchanged). Such IP addresses are sold in blocks to ISPs, and ISPs allocate IP addresses to their subscribers. The identity of the ISP to whom a particular block of IP addresses has been sold is publicly available information. Where a subscriber’s computer is directly connected to the internet (through a modem), the ISP will assign a public IP address to that computer. However, many computers are not directly connected to the internet, but are instead connected to a “router” – a device which can “route” data between a private network of computers. Where a subscriber’s computer is connected to a router, the router will be directly connected to the internet (through a modem), and the ISP will assign a public IP address to the router. Where multiple computers are connected to a router, all of those computers will be able to access the internet – but only the public IP address assigned to the router will be visible to other computers on the internet. As such, a public IP address does not necessarily correspond to a specific person or computer (Problem 1). ISPs usually allocate “dynamic” IP addresses to all of its residential or non-corporate subscribers – this means that the IP address by which a subscriber’s computer or router connects to the internet will change over time. Systems are normally instituted by ISPs enable it to identify the subscriber account to which a particular IP address has been allocated at a particular time, but not necessarily the specific person or computer using that IP address which may be several (Problem 2).
3.3.4 The problems highlighted is relevant to the extent that an allegation that an IP address was used for committing Copyright infringement is not always indicative that the person traced to the IP address was the person engaged in the Copyright infringement at the relevant time. Even though the Bill provides in this section that the subscriber identified by the IP address can challenge the disconnection on the basis of mistake and or misidentification, but the onus of proof has now unfortunately shifted from the Copyright holder to the subscriber. Since most households or corporate subscribers do not keep logs of all internet access by people on the internal network, it is unclear how the subscriber could reasonably be expected to prove that s/he was not responsible for an infringement that apparently came from her/his IP address. It is also worth mentioning that the Bill does not address how internet access is to be denied to a particular member of a corporate entity or household.
3.3.5 The monitoring of network traffic and data content is likely to trigger many cases of false positives. Copyright infringement is not a straight ‘yes’ or ‘no’ question. Often courts will be called in to examine a very significant quantity of technical and legal detail over dozens of pages in order to determine whether there is an infringement and the fact that the independent adjudicator may not be legally trained and is not bound by the rules of evidence is likely to have a strong chilling effect on socially beneficial but unlicensed uses. These types of uses covered by the statutory defence of fair dealing, will require the user of Copyright materials to make a judgement about whether their otherwise infringing conduct is permissible under the law.
3.3.5 The EU Telecoms Reform Package expressly requires that any graduated response measure “may only be imposed if they are appropriate, proportionate and necessary within a democratic society.” This requirement of proportionality seeks to ensure that a graduated response scheme is, on the whole reasonably justified method of addressing Copyright infringement.
3.3.6 The severity of disconnection in each particular case should be guided by a consideration of the extent or serious nature of the infringement. Piracy the large scale infringement of Copyright for commercial gain is the clearest case. This type of infringement is already criminalized and subject to penalties under the present Copyright Act. Graduated response scheme under the Bill seems to be targeted at individual infringement that is not intended for commercial gain, at users who download infringing copies of copyright works for personal use. In my view, the severe penalty for termination is hard to justify under this circumstance. The problem is further highlighted due to the fact that there is little empirical evidence to suggest that graduated response scheme is likely to reduce Copyright infringement online.
3.3.7 As a matter of serious concern and to safeguard the rights of internet users, the Bill must; provide that the independent adjudicator must as a minimum understand the nature and the extent of the right granted under the present Copyright Act, and must provide a right to appeal the decision of the independent adjudicator (appointed by the Commission) to the Federal High Court.
4. Conclusion
4.1 The summary of my conclusions are that; the Bill should provide safe harbour provisions, expand the definition of Internet service providers to include Online service providers and that graduated responses may likely be challenged on the basis of its legitimacy and should as a matter of serious concern provide stricter controls for due process.
4.2 It is now twenty nine (29) years since the internet launched operationally, twenty four (24) years since the present Nigerian Copyright Act was enacted and fifteen (15) years since the internet access service was commercialized in Nigeria. The draft bill for an Act to amend the Copyright Act CAP C28 Laws of the Federation of Nigeria 2004 to provide for better protection of Copyright in the digital environment has long been overdue and if enacted will be a wonderful milestone achieved by the Commission.
1.1 According to Harvard Law Professor, Lawrence Lessig “The fear is that cyberspace will become a place where copyright can be defeated.” Copyright and related rights embrace a wide spectrum of human endeavour and activity. Most of the creative content that underlies that functionality of the internet is subject to Copyright. Under the Copyright Act C28 Laws of the Federation of Nigeria 2004, Copyright protection extends to all literary works, musical works, artistic works, cinematograph films, sound recordings and broadcast. This protection includes diverse forms of human creativity, such as writings, both fiction and non-fiction, including scientific and technical texts and computer programs; musical recordings; audiovisual works; works of fine art, including drawings and paintings; and photographs.
1.2 Digital technology provides an effective means for the transmission and (re)use of these works subject to Copyright protection in a packet-switched network. These digital technologies also provide an avenue of the Copyright infringement of these works. Given the capabilities and characteristics of digital network technologies and the rate at which the internet is fast becoming an ubiquitous phenomenon, it is essential that statutory provisions are enacted to accommodate recent changes in these technological development in order to ensure that digital technology does not undermine the basic principle underlying the protection of Copyright and related rights.
1.3 The internet on its own has become one of the biggest threat to the creation of Copyright content because of its vast potential to make unlimited number of copies, almost instantaneously, without degrading the quality and transmitting these works to locations around the world in a matter of minutes. This disruption of technology has altered traditional markets selling everything virtually Copyrightable. In the music industry, for example, the emergence of “killer apps” such as peer-to-peer technologies (for file sharing) has unfortunately enabled the exploitation of music recordings on a monumental scale absent the required authorization of the rights holders. This exploitation has further been exacerbated by the simultaneous broad commercialization of CD burners and portable MP3 players, adapted to the most commonly used file format.
1.4 Unfortunately, these challenges are currently facing the Copyright industry at a time when the share of Copyright in the Nigerian economy is reaching unprecedented levels. In 2010, UNESCO declared that Nollywood, Nigeria’s homegrown movie industry has the largest production of films in the world, with the UNDP/UNCTAD 2010 Report valuing the industry at N522 billion (USD2.75bn). This significance has further reinforced the necessity for Copyright industries to seek out technical and legislative solutions to protect Copyright from digital piracy.
1.5 It is therefore critical to amend existing frameworks to respond to the challenges posed by new digital technologies in the appropriate manner, and to do so quickly and responsibly, because these technologies and markets is an evolution in continuous progress. This will ensure the continued furtherance of the fundamental guiding principles of Copyright and related rights, which remain constant whatever may be the state of technological development: giving incentives to creators to continue to create and disseminate new creative works; recognizing the importance of their contributions, by giving them reasonable control over the exploitation of these works and allowing them to profit from them; providing the appropriate balance for the public interest, particularly education, research and access to information; and thereby ultimately benefiting the Nigerian economy as a whole, by promoting the development of culture, science, and innovation.
1.6 Recently, the Nigerian Copyright Commission (“the Commission”) made available to the public, the proposed draft bill for an Act to amend the Copyright Act CAP C28 Laws of the Federation of Nigeria 2004 to provide for better protection of Copyright in the digital environment, the Commission also invited comments from the public in respect of the proposal.
1.7 The respondent is currently the Secretary of the ICT Committee of the Section of Business Law (SBL) of the Nigerian Bar Association and a Solicitor in the Information Technology and Telecommunications Practice of Streamsowers & Köhn. In his current capacity he regularly advises an international Mobile Network Operator and other communications’ market operator on matters of regulatory compliance. The respondent has also developed substantial expertise in all areas of information technology & telecommunications law such as intellectual property on the internet, privacy & data protection, cyber crime & cyber security, competition & consumer protection in telecommunications market and domain name dispute resolution amongst many others.
1.8 Respondent comments frequently on IT/Telecoms regulatory matters in the “matters e-Rising” and business law column of the Nation Newspaper Thursday’s edition and Business day Thursdays editions respectively. Respondent is a member of the Nigerian Bar Association, Chartered Institute of Arbitrators (CIArb) UK and BCS (The Chartered Institute for IT) and an alumnus of the WIPO Worldwide Academy in Geneva.
1.9 Respondent’s memorandum is in respect of only; Section 18A-Takedown of Infringing content and Section 18B- Graduated procedure for suspension of accounts of repeated infringers of the proposed Bill
1.10 The summary of Respondent’s conclusions are that; the Bill should provide safe harbor provisions, expand the definition of Internet service providers to include Online service providers and that graduated responses may likely be challenged on the basis of its legitimacy and should as a matter of serious concern provide stricter controls for due process.
2. Section 18A- Takedown of Infringing content
2.1 This section provides;
1) An internet service provider shall, take down or disable access to infringing content or links to such content, hosted on its systems or networks, promptly upon receiving notice of infringement from an owner of copyright or otherwise becoming aware of the infringing activity or of facts or circumstances from which infringing activity is apparent; and
a) Notify the owner of copyright promptly that the content or link has been removed or access to it has been disabled;
b) In the case of removal of content without prior notice to the owner of copyright, the Internet service provider shall attempt, with reasonable effort, to locate the relevant owner of copyright and notify him of the removal of the content or link
2) The Internet service provider may resume access to or restore removed content or a link, if he receives a written counter notice from the subscriber which he has forwarded to the owner of copyright immediately upon receipt; and did not receive, within 10 days, a notice from the owner of copyright, indicating that no authorization has been granted for the subscriber to make the content available.
3) The Internet service provider shall not be liable to any person for an claim based on the service provider’s good faith disabling of access to, or removal of, link or content claimed in a qualifying notice to be infringing or based on facts or circumstances from which infringing activity is apparent, regardless of whether the content or activity is ultimately determined to be infringing.
4) A notice required under this section to be given shall contain such information and particulars as the Commission may prescribe by regulations.
5) For the purpose of this section, the term “Internet service provider” shall mean an entity offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of a material of the user’s choosing, without modification to the content of the material as sent or received.
2.2 This section seeks to enact the general duty of an internet service provider (ISP) to take down a content alleged to be infringing a Copyright. The notice and takedown procedures regulate an ISP’s obligation to react appropriately when informed about irregularities on websites made available through them. Typically under such procedures, a complaint by notice informs an ISP that it is granting access to an illegal content (notice) and requests that the content in question be removed (takedown). These procedures establish a “red-flag” test whether ISPs have knowledge of subscribers’ illegal activity and thus are subject to secondary liability for Copyright infringement. The standard to which they are held is “becoming aware of the infringing activity or of facts or circumstances from which infringing activity is apparent.” Once the ISP receives proper notification of the infringement, the “red-flag” test is presumed to have been satisfied.
2.3 Also by this provision, an ISP will not be held liable to its subscribers because of the removal or access-blocking when it is done in good faith because it has received a proper notice or knows on its own that the material is infringing. Note that the liability provided by this section covers only the taking down or disabling access to infringing content or links to such content. It does not sanction the large scale removal of a subscriber’s material, particularly material that does not infringe, unless that is necessary to disable access to, or remove, the allegedly-infringing material. For an ISP to benefit from that provision, the ISP must take reasonable steps (not extraordinary effort) to notify the subscriber of any takedown, and if the subscriber contests the takedown, must restore the material within 10 days if notice that the subscriber was authorized to make the content available is received from the copyright holder.
2.4 Nevertheless, both copyright holders and ISPs may have incentives to use the system; for copyright holders, notice and takedown provides a faster and cheaper solution to enforcing their rights outside the court room arena, while from the ISPs’ perspective, a prompt response to the notification reduces liability for infringement. Notice and takedown procedure is not mandatory and litigating claims of Copyright infringement in the court will always be the best option.
2.5 The need for safe harbor provisions
As earlier stated, the notice and takedown procedure provides a “red-flag” test whether ISPs have knowledge of users’ illegal activity, hence it is possible for claims of vicarious or secondary liability for Copyright infringement to be instituted against ISP who have failed or refused to take down a content alleged to be infringing. The possibility of such an occurrence makes it necessary for the Bill to provide safe harbor provisions. Safe habor provisions usually exist in copyright statutes for ISPs to limit their exposure to secondary liability for copyright infringement when they are involved in the following categories of conduct;
2.5.1 Mere conduit:
A provision limiting the liability of ISPs for Copyright infringement when they act as mere conduits will be engaged only where the ISP does not initiate the transmission, does not select the recipients of the information and does not modify the content of the information.
2.5.2 Caching:
This provision is engaged in the case of temporary storage of information performed by ISPs for the purpose of efficiently transmitting the information to other recipients of the services. In such cases liability will not exist for ISPs on the condition that they do not modify the content, the ISP complies with the condition of access to the information, the ISP complies with the rules regarding the updating the information, specified in a manner acceptable to industry standards and acts expeditiously to remove content alleged to be infringing. This provision may also provide for the possibility of a court or administrative authority to require ISPs to terminate or act proactively to prevent infringements.
2.5.3 Hosting:
An ISP that stores information at the request of its users will escape liability provided that, the provider does not have actual knowledge of illegal activity and the recipient of the service is not acting under the control of the ISP. Once an ISP becomes aware of any facts or circumstance indicating an illegal activity, the ISP must act expeditiously to remove or disable access to the information. This provision may also provide the possibility of a court or administrative authority to require ISPs to terminate or prevent an infringement by establishing procedures for the removal of content.
2.5.4 Case laws on this type of copyright liability usually suggest some form of notice based standard. As earlier stated, the standard here is “becoming aware of the infringing activity or of facts or circumstances from which infringing activity is apparent.”
2.6 The Bill defines “Internet service provider” too narrowly
Much of the legal literature on this subject have tended to draw a distinction between ISPs providing access to the internet (which the Bill contemplates) and Online service provider (OSPs) which also include ISPs, email service providers, social network service providers (facebook, You Tube, etc), various online forums and bulletin boards and even “good old” Google and Wikipedia. The implication of this definition is that only traditional ISPs granting access to the internet would come within the meaning of “Internet service provider” under the Bill while other OSPs capable of making Copyright content available online, would escape responsibility under the Bill.
3. Section 18B- Graduated procedure for suspension of accounts of repeated infringers.
3.1 This section provides:
1) An Internet service provider shall adopt and reasonably implement a policy that provides for termination, in appropriate circumstances, of the account with that Internet service provider of a repeat infringer.
2) In subsection (1), repeat infringer means a person who repeatedly infringes the copyright in a work by using 1 or more of the Internet services of the Internet service provider to do a restricted act without the consent of the owner of copyright.
3) A policy of termination referred to in subsection 1 shall require the Internet service provider, upon receiving a notification from an owner of copyright or his authorized agent that a particular account has been used for repeated infringement, to:
a) promptly send a warning to the subscriber whose IP address has been identified, explaining that this conduct is an infringement of copyright and a breach of the terms of the policy and informing the subscriber of the potential consequences;
b) after the first such notification, promptly send a second warning to the subscriber clearly stating that another notification will lead to suspension of the account and requiring the subscriber to confirm receipt of the second warning; and
c) after the third such notification relating to the same account, if no challenge is pending pursuant to subsection (4) below, promptly suspend the account for a period of at least one month.
4) A subscriber receiving a warning shall have the ability to bring a challenge to the notice on the grounds of mistake or misidentification as follows:
a) Within 10 days from the date of the warning from the Internet service provider, the subscriber shall send a signed counter-notice to the Internet service provider, providing full contact details and the factual basis of his or his belief that his or her account has been misidentified as being used for copyright infringement, or that the use of the copyright content was not infringing.
b) If the basis for the challenge cannot be resolved by the Internet service provider within 5 days in the case of a challenge regarding an alleged account misidentification, or by the Internet service provider and the owner of copyright within 10 days in the case of a challenge regarding alleged lawful use of the copyright content, the counter-notice shall be referred to the Commission who may appoint an independent adjudicator to determine the validity of the challenge.
c) Any warning successfully challenged by the user shall not count towards the suspension process set out in subsection (3) and any contact details of the subscriber in relation to this warning will not be retained or used for any purpose by the owner of copyright.
5) The Internet service provider shall retain for a period of at least 6 months data sufficient to enable it to comply with the provisions of this section, including data indicating which subscriber account is using which Internet Protocol (IP) address at a given time.
6) If the Internet service provider fails to comply with subsection (2) of this section, the complaining owner of copyright shall be entitled to a court order requiring the Internet service provider to promptly comply with that subsection; and the court may, in making the order, make such consequential orders as it may deem fit in the circumstances.
7) An Internet service provider acting in good faith in suspending the account of a subscriber, relying on the information contained in a notification referred to in subsection (3) of this section, shall not be liable to any person for any claim based solely on that suspension.
3.2 This section seeks to enact the general duty of ISPs to adopt and implement a graduated response scheme. A graduated response scheme popularly referred to as the “three strikes Internet disconnection policy” or simply “three strikes” allows copyright holders to monitor internet subscribers and identify alleged copyright infringers. After contacting the ISPs of the alleged infringer, the ISP would then warn the subscriber (identified as the infringer); the alleged infringing subscriber would eventually be disconnected from accessing the internet after receiving three repeated warnings from the ISP.
3.2 In practice, the three strikes would require copyright holders to monitor network traffic and data content of internet subscribers using deep packet inspection tools in order to identify possible cases of copyright infringement, for example, via the surveillance of forums, blogs or by posing as file sharers in peer-to-peer (p2p) environment to identify file sharers who allegedly exchange copyright material. After identifying subscribers alleged to be engaged in copyright violation by collecting their Internet Protocol addresses (IP addresses), copyright holders would send the IP addresses of the subscriber to the relevant ISP who would warn the subscriber to whose account the IP addressed has been traced to, about his/her potential engagement in copyright infringement. Being warned by the ISP a certain number of times would automatically result in the ISP's termination or suspension of the subscriber’s Internet connection.
3.3 The graduated scheme under this section raises the fundamental questions of legitimacy; Is the termination of internet account reasonably proportionate to the offence of Copyright infringement?
3.3.1 Proportionality of the graduated response scheme
One of the core principles of proportionality in Nigerian criminal jurisprudence is that the “punishment should fit the crime.” Nigeria unlike other legal systems does not provide punitive damages but however under the present Copyright Act, damage can either be compensatory or restitutive. The proportionality of been disconnected from accessing the internet is underscored by the fact there seems to be uniformity in agreement that the internet is important in our daily lives. In this age of information explosion, it is not surprising to hear claims that accessing the internet should be a fundamental right. In the celebrated Australian case of Roadshow Films Pty v iiNet Limited, Cowdroy J rightly observed; “one does not need to consider access to the internet to be a human right to appreciate its central role in almost all aspects of modern life.”
3.3.2 Disconnection from the internet on the basis of Copyright infringement is very problematic in that it will in most cases affect all members of a house hold or the entire staff of the corporate entity, not just the subscriber named in internet service contract. To fully comprehend the enormity presented by this question, we must first understand the basic working of the internet and how IP addresses are assigned.
3.3.3 The internet and assignment of IP address
Computers connected to the internet communicate with each other by means of a common language, or protocol, called the Internet Protocol (“IP”). Data sent by means of the IP is broken up into small “packets”. Computers sending and receiving data are allocated IP addresses, which enable packets to be exchanged (in much the same way that postal addresses enable mail to be exchanged). Such IP addresses are sold in blocks to ISPs, and ISPs allocate IP addresses to their subscribers. The identity of the ISP to whom a particular block of IP addresses has been sold is publicly available information. Where a subscriber’s computer is directly connected to the internet (through a modem), the ISP will assign a public IP address to that computer. However, many computers are not directly connected to the internet, but are instead connected to a “router” – a device which can “route” data between a private network of computers. Where a subscriber’s computer is connected to a router, the router will be directly connected to the internet (through a modem), and the ISP will assign a public IP address to the router. Where multiple computers are connected to a router, all of those computers will be able to access the internet – but only the public IP address assigned to the router will be visible to other computers on the internet. As such, a public IP address does not necessarily correspond to a specific person or computer (Problem 1). ISPs usually allocate “dynamic” IP addresses to all of its residential or non-corporate subscribers – this means that the IP address by which a subscriber’s computer or router connects to the internet will change over time. Systems are normally instituted by ISPs enable it to identify the subscriber account to which a particular IP address has been allocated at a particular time, but not necessarily the specific person or computer using that IP address which may be several (Problem 2).
3.3.4 The problems highlighted is relevant to the extent that an allegation that an IP address was used for committing Copyright infringement is not always indicative that the person traced to the IP address was the person engaged in the Copyright infringement at the relevant time. Even though the Bill provides in this section that the subscriber identified by the IP address can challenge the disconnection on the basis of mistake and or misidentification, but the onus of proof has now unfortunately shifted from the Copyright holder to the subscriber. Since most households or corporate subscribers do not keep logs of all internet access by people on the internal network, it is unclear how the subscriber could reasonably be expected to prove that s/he was not responsible for an infringement that apparently came from her/his IP address. It is also worth mentioning that the Bill does not address how internet access is to be denied to a particular member of a corporate entity or household.
3.3.5 The monitoring of network traffic and data content is likely to trigger many cases of false positives. Copyright infringement is not a straight ‘yes’ or ‘no’ question. Often courts will be called in to examine a very significant quantity of technical and legal detail over dozens of pages in order to determine whether there is an infringement and the fact that the independent adjudicator may not be legally trained and is not bound by the rules of evidence is likely to have a strong chilling effect on socially beneficial but unlicensed uses. These types of uses covered by the statutory defence of fair dealing, will require the user of Copyright materials to make a judgement about whether their otherwise infringing conduct is permissible under the law.
3.3.5 The EU Telecoms Reform Package expressly requires that any graduated response measure “may only be imposed if they are appropriate, proportionate and necessary within a democratic society.” This requirement of proportionality seeks to ensure that a graduated response scheme is, on the whole reasonably justified method of addressing Copyright infringement.
3.3.6 The severity of disconnection in each particular case should be guided by a consideration of the extent or serious nature of the infringement. Piracy the large scale infringement of Copyright for commercial gain is the clearest case. This type of infringement is already criminalized and subject to penalties under the present Copyright Act. Graduated response scheme under the Bill seems to be targeted at individual infringement that is not intended for commercial gain, at users who download infringing copies of copyright works for personal use. In my view, the severe penalty for termination is hard to justify under this circumstance. The problem is further highlighted due to the fact that there is little empirical evidence to suggest that graduated response scheme is likely to reduce Copyright infringement online.
3.3.7 As a matter of serious concern and to safeguard the rights of internet users, the Bill must; provide that the independent adjudicator must as a minimum understand the nature and the extent of the right granted under the present Copyright Act, and must provide a right to appeal the decision of the independent adjudicator (appointed by the Commission) to the Federal High Court.
4. Conclusion
4.1 The summary of my conclusions are that; the Bill should provide safe harbour provisions, expand the definition of Internet service providers to include Online service providers and that graduated responses may likely be challenged on the basis of its legitimacy and should as a matter of serious concern provide stricter controls for due process.
4.2 It is now twenty nine (29) years since the internet launched operationally, twenty four (24) years since the present Nigerian Copyright Act was enacted and fifteen (15) years since the internet access service was commercialized in Nigeria. The draft bill for an Act to amend the Copyright Act CAP C28 Laws of the Federation of Nigeria 2004 to provide for better protection of Copyright in the digital environment has long been overdue and if enacted will be a wonderful milestone achieved by the Commission.
Tuesday, May 8, 2012
Tying: Are Mobile Network Operators really committing a competition offence?
Tying (or bundling) of telecommunications services is a feature desired by many telecommunications users. In Nigeria for instance, a telecommunications user may decide to purchase a black berry device bundled with a SIM card for mobile telecommunications service and data plan even though these services are distinct products. A typical tying arrangement occurs where a service provider sells one product or service over which it has market power (the “tying product”) on the condition that the purchaser purchase a second product or service (the “tied product”). A tying arrangement is expressly prohibited under the Nigerian Communications Act 2003 (NCA).
In this article, I examine whether particular practices of mobile network operators (MNOs) constitutes tying arrangement under the NCA.
Tying arrangement allows a service provider with market power in the tying product to obtain a competitive advantage in the market for the tied product. Tying will usually work where the demand for the two products (or services) are complimentary, such that end-users use them together (as in the example above) and not where the demands of the two products are independent such that the end user is unlikely to consume them together. Traditional tying arrangements require; (a) two separate product/service markets (See Eastman Kodak Co. v. Image Technical Services, 504 U.S. 451 (1992)); (b) the defendant’s sufficient market power over the tying product; (c) unlawful forcing; and (d) a not insubstantial amount of commerce in the tied product affected by the tie.
In vertically integrated markets such as the Nigerian Telecommunications market, tying can reduce competitors’ sales by capturing customers who would otherwise have purchased product A rather than products A and B together, thereby reducing the portion of the market for the tied product the service provider must compete for. If there are fixed costs in the production of the tied product, then the service provider may be able to reduce its competitors’ sales to the point where remaining in the market (or entering the market) is no longer viable. If the service provider succeeds in this form of elimination then it is said to have successfully “leveraged” its dominant position in the market for the tying product into the market for the tied product.
Tying in Nigeria’s Telecommunications market
Several MNOs operating in Nigeria are involved in one form of tying arrangement or another. For example, several MNOs tie the sale of tablet computers to core telecommunications services, one in particular ties its telecommunications service to an android running handset (named after a weird dressing American pop star) locked to its mobile network. In the case of another which ties the Huawei S7 tablet to its telecommunications services, its website says that the offer is open to only users purchasing SIM card or already having SIM card for use on its network. This implies that users will be locked-in the telecommunications service of this particular MNO for as long as they use its SIM card to make calls with the device.
Applicable legal standard for tying in Nigeria’s telecommunications market
Tying is expressly prohibited under § 91 (4) of the NCA. As a general rule this section provides that:
A licensee shall not, at any time or in any circumstance, make it a condition for the provision or supply of a product or service in a communications market that the person acquiring such product or service in the communications market is also required or not to acquire any other product or service either from itself or from another person.
A licensee as defined under § 157 of the NCA means a person who either holds an individual licence or undertakes activities which are subject to a class licence granted under this Act. No doubt MNOs hold individual licenses.
Section 12 (2) of the Competitions Practice Regulations 2007 (CPR) further provides that all tying arrangements are prohibited without the requirement of assessing their practical effects. Pursuant to this provision, all tying arrangements are outrightly illegal and should be condemned without elaborate investigation into its anti-competitive effect. This is a departure from traditional analysis of competition offences which requires the determination of the relevant market and the assessment of the competitive (or efficiency) effect of the offending practice consistent with sections 6 and 15 of the CPR where; (a) the definition of the relevant market or markets in accordance with the methodology under Part IV (of the CPR); (b) impact of the conduct on existing competitors in the identified markets; (c) impact of the conduct on market entry; (d) impact of the conduct on consumers; and (e) degree of interference with competition that injures competitors or consumers are taken into consideration.
As Part IV of the CPR mentions only § 92 (1), (2) and (3) of the NCA (in the same way § 12 (2) of the CPR mentions only § 91 (3) and (4) of the NCA), it is assumed that Part IV contemplates its application to only these provisions (as would § 12 (2) of the CPR). This interpretation is consistent with the Expressio unius est exclusio alterius (the express mention of one thing excludes all others) rule of statutory interpretation.
It is worth mentioning that the standard applied under § 12 (2) is similar to the per se standard applied in competition cases in the United States (US). Under the per se standard, certain arrangements are prohibited outright, such that no evidence of actual anti-competitive effects is required for the finding of illegality. The US Supreme Court in determining whether the appellant’s tying practice constituted unreasonable restraint of trade in Northern Pacific R. Co. v. United States-356 US (1958) held that “there are certain agreements or practices which, because of their pernicious effect on competition and lack of any redeeming virtue, are conclusively presumed to be unreasonable, and therefore illegal, without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.” The per se rule applies to an arrangement or practice that “facially appears to be one that would always or almost always tend to restrict competition and decrease output, and in what portion of the market, or instead one designed to increase economic efficiency and render markets more, rather than less, competitive.” (See Broadcast Music, Inc. v. CBS, Inc, 441 U.S 1, 19-20 (1979)).
Tying arrangements are analysed under the per se standard in U.S. The per se standard is appropriate only if courts, having had sufficient experience with a practice, can determine with confidence that the practice is anticompetitive in almost all circumstances when applying the rule of reason. (See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S. Ct. 2705, 2713 (2007)).
It is also worth mentioning that it is unknown whether the Nigerian Communications Commission (NCC) has authorized MNOs to engage in these tying practices in accordance § 93 (1) of the NCA which provides:
(1) A licensee may apply to the Commission prior to engaging into any conduct which may be construed to have the purpose or effect of substantially lessening competition in any aspect of the Nigerian communications industry, for authorisation for the conduct.
Even if NCC authorised the tying practices of MNOs, such authorisation must be in the national interest (See § 93 (2) of the NCA). In my view, for a tying arrangement to meet the threshold of national interest, it must also be pro-competitive.
Conclusion
However I also note that traditional cases of tying from the U.S seems to indicate that a tying arrangement will usually be condemned under the per se standard if the plaintiff can show both market power in the tying product and a “not insubstantial” amount of commerce affected in the tied product market (See Times-Picayune Pub. Co. v. United States, 345 U.S. 594, 73 S.Ct. 872 (1953)), but this does not seem to be the case in Nigeria’s telecommunications market where the relevant statutes does not require the consideration of elaborate arguments favouring pro-competitiveness and expressly condemns this practice without taking these arguments into account.
Tying is as anti-competitive as it is pro-competitive. Tying can harm consumers in circumstances where a service provider with monopoly power in one market acquires another monopoly power in a secondary market or continues to perpetuate its monopoly in the market for the tying product; and is pro-competitive especially in cases where technological tying results in innovations, even if the innovative products makes the complementary products of competitors incompatible.
As case law in this area of practice is still developing in Nigeria, it would be interesting to see how this debate finally concludes.
In this article, I examine whether particular practices of mobile network operators (MNOs) constitutes tying arrangement under the NCA.
Tying arrangement allows a service provider with market power in the tying product to obtain a competitive advantage in the market for the tied product. Tying will usually work where the demand for the two products (or services) are complimentary, such that end-users use them together (as in the example above) and not where the demands of the two products are independent such that the end user is unlikely to consume them together. Traditional tying arrangements require; (a) two separate product/service markets (See Eastman Kodak Co. v. Image Technical Services, 504 U.S. 451 (1992)); (b) the defendant’s sufficient market power over the tying product; (c) unlawful forcing; and (d) a not insubstantial amount of commerce in the tied product affected by the tie.
In vertically integrated markets such as the Nigerian Telecommunications market, tying can reduce competitors’ sales by capturing customers who would otherwise have purchased product A rather than products A and B together, thereby reducing the portion of the market for the tied product the service provider must compete for. If there are fixed costs in the production of the tied product, then the service provider may be able to reduce its competitors’ sales to the point where remaining in the market (or entering the market) is no longer viable. If the service provider succeeds in this form of elimination then it is said to have successfully “leveraged” its dominant position in the market for the tying product into the market for the tied product.
Tying in Nigeria’s Telecommunications market
Several MNOs operating in Nigeria are involved in one form of tying arrangement or another. For example, several MNOs tie the sale of tablet computers to core telecommunications services, one in particular ties its telecommunications service to an android running handset (named after a weird dressing American pop star) locked to its mobile network. In the case of another which ties the Huawei S7 tablet to its telecommunications services, its website says that the offer is open to only users purchasing SIM card or already having SIM card for use on its network. This implies that users will be locked-in the telecommunications service of this particular MNO for as long as they use its SIM card to make calls with the device.
Applicable legal standard for tying in Nigeria’s telecommunications market
Tying is expressly prohibited under § 91 (4) of the NCA. As a general rule this section provides that:
A licensee shall not, at any time or in any circumstance, make it a condition for the provision or supply of a product or service in a communications market that the person acquiring such product or service in the communications market is also required or not to acquire any other product or service either from itself or from another person.
A licensee as defined under § 157 of the NCA means a person who either holds an individual licence or undertakes activities which are subject to a class licence granted under this Act. No doubt MNOs hold individual licenses.
Section 12 (2) of the Competitions Practice Regulations 2007 (CPR) further provides that all tying arrangements are prohibited without the requirement of assessing their practical effects. Pursuant to this provision, all tying arrangements are outrightly illegal and should be condemned without elaborate investigation into its anti-competitive effect. This is a departure from traditional analysis of competition offences which requires the determination of the relevant market and the assessment of the competitive (or efficiency) effect of the offending practice consistent with sections 6 and 15 of the CPR where; (a) the definition of the relevant market or markets in accordance with the methodology under Part IV (of the CPR); (b) impact of the conduct on existing competitors in the identified markets; (c) impact of the conduct on market entry; (d) impact of the conduct on consumers; and (e) degree of interference with competition that injures competitors or consumers are taken into consideration.
As Part IV of the CPR mentions only § 92 (1), (2) and (3) of the NCA (in the same way § 12 (2) of the CPR mentions only § 91 (3) and (4) of the NCA), it is assumed that Part IV contemplates its application to only these provisions (as would § 12 (2) of the CPR). This interpretation is consistent with the Expressio unius est exclusio alterius (the express mention of one thing excludes all others) rule of statutory interpretation.
It is worth mentioning that the standard applied under § 12 (2) is similar to the per se standard applied in competition cases in the United States (US). Under the per se standard, certain arrangements are prohibited outright, such that no evidence of actual anti-competitive effects is required for the finding of illegality. The US Supreme Court in determining whether the appellant’s tying practice constituted unreasonable restraint of trade in Northern Pacific R. Co. v. United States-356 US (1958) held that “there are certain agreements or practices which, because of their pernicious effect on competition and lack of any redeeming virtue, are conclusively presumed to be unreasonable, and therefore illegal, without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.” The per se rule applies to an arrangement or practice that “facially appears to be one that would always or almost always tend to restrict competition and decrease output, and in what portion of the market, or instead one designed to increase economic efficiency and render markets more, rather than less, competitive.” (See Broadcast Music, Inc. v. CBS, Inc, 441 U.S 1, 19-20 (1979)).
Tying arrangements are analysed under the per se standard in U.S. The per se standard is appropriate only if courts, having had sufficient experience with a practice, can determine with confidence that the practice is anticompetitive in almost all circumstances when applying the rule of reason. (See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S. Ct. 2705, 2713 (2007)).
It is also worth mentioning that it is unknown whether the Nigerian Communications Commission (NCC) has authorized MNOs to engage in these tying practices in accordance § 93 (1) of the NCA which provides:
(1) A licensee may apply to the Commission prior to engaging into any conduct which may be construed to have the purpose or effect of substantially lessening competition in any aspect of the Nigerian communications industry, for authorisation for the conduct.
Even if NCC authorised the tying practices of MNOs, such authorisation must be in the national interest (See § 93 (2) of the NCA). In my view, for a tying arrangement to meet the threshold of national interest, it must also be pro-competitive.
Conclusion
However I also note that traditional cases of tying from the U.S seems to indicate that a tying arrangement will usually be condemned under the per se standard if the plaintiff can show both market power in the tying product and a “not insubstantial” amount of commerce affected in the tied product market (See Times-Picayune Pub. Co. v. United States, 345 U.S. 594, 73 S.Ct. 872 (1953)), but this does not seem to be the case in Nigeria’s telecommunications market where the relevant statutes does not require the consideration of elaborate arguments favouring pro-competitiveness and expressly condemns this practice without taking these arguments into account.
Tying is as anti-competitive as it is pro-competitive. Tying can harm consumers in circumstances where a service provider with monopoly power in one market acquires another monopoly power in a secondary market or continues to perpetuate its monopoly in the market for the tying product; and is pro-competitive especially in cases where technological tying results in innovations, even if the innovative products makes the complementary products of competitors incompatible.
As case law in this area of practice is still developing in Nigeria, it would be interesting to see how this debate finally concludes.
Thursday, April 12, 2012
Antitrust Concerns of Subscriber Win-back Strategies in Mobile Number Portability
With the 2011 appointment of the consortium of US-based Telcordia Technologies, Saab Grintek and Interconnect Clearinghouse Nigeria (ICN) by the Nigerian Communications Commission (NCC) as the Mobile Number Portability Service Provider, it is expected that mobile number portability (MNP) will go live on the networks of all mobile network operators (MNO) sometime in the middle of 2012. This is coming against the background of the MNP Business Rules & Port Order Processes recently published by NCC on the 10th April 2012.
Subscriber win-back strategies refer to an incumbent service provider’s scheme aimed at winning back a subscriber who intends to switch or has already switched to a competing service provider. These actions are usually carried out through targeted marketing and selective price discount. In this article, I examine the antitrust concern of these strategies in the context of the recently published Nigeria’s MNP framework.
Introduction
The Nigerian Communications Act 2003 (NCA) commenced on 8th July, 2003 repealing the Nigerian Communications Commission Act of 1992. Under § 1 (c) and (e) respectively, NCA has the stated objectives to “promote the provision of modern, universal, efficient, reliable, affordable and easily accessible communications services and the widest range thereof throughout Nigeria” and “ensure fair competition in all sectors of the Nigerian communications industry....” NCA contemplates the removal of legal and regulatory barriers to entry so as to enable free market entry, encourage technological innovation & rapid deployment of telecommunications services while ensuring that a firm’s prowess in satisfying consumer demand will determine its success or failure in the marketplace.
MNP and win-back strategies
MNP is the ability of a mobile telephone service provider to change his/her service provider while still retaining his/her mobile telephone number. The ability of subscribers to retain their telephone numbers when changing service providers will give subscribers flexibility in the quality, price, and variety of telecommunications services they can choose to purchase. Number portability promotes competition between telecommunications service providers by, among other things, allowing the consumers to respond to price and service changes without changing their telephone numbers, in other words a customer is less likely to switch carriers if he cannot retain his/her telephone number, see Cellular Telecomms. & Internet Ass’n v. FCC, 330 F.3d 502, 513 (D.C. Cir. 2003) (“CTIA”). The resulting competition will benefit all users of telecommunications services. Indeed, competition will foster lower local telephone prices and, consequently, stimulate demand for telecommunications services and increase economic growth.
Win-back strategies refer to an incumbent service provider’s strategies aimed at retaining or regaining a subscriber who intends to switch or has already switched to another competing service provider. Generally, win-back strategies will take the form of targeted marketing and selective price discounts offered to these subscribers. A standard feature of win-back strategies is that it is targeted at only a portion of competing service providers’ customers who were once customers of the incumbent service provider. Nicita (2009) argues that win-back strategies are a form of selective price discrimination towards a competitor’s customers.
A price discrimination is said to exist when two similar products having the same marginal production cost are sold at different prices (Armstrong, 2006). In the context of the MNP process, this price discrimination would usually take the form of selective price cuts where the incumbent service provider decides to charge a (lower) tariff to a group of subscribers to induce them not to switch to a competing MNO. In extreme cases, the group could actually be a single subscriber.
Antitrust concerns of win-back strategies
The primary antitrust concern presented by selective price cuts is usually foreclosure. Most antitrust authorities are uniform in the view that price discrimination can be exploited by a dominant firm with significant market power to “exclude” competitors or reduce competitors incentive to compete effectively (Armstrong, supra). While foreclosure may not necessarily be the primary motivation for engaging in the conduct (profit maximization through price discrimination usually is), however this strategy would have the resultant effect of excluding unaffiliated competitors in the relevant market.
The antitrust treatment of price discrimination in the Nigerian Telecommunications market is captured by § 8 (f) of the Competitions Practice Regulations (CPR) 2007 which provides that supplying communications services, at prices below long run average incremental costs or such other cost standard, as is adopted by the Commission is a conduct or practice deemed to result in a substantial lessening of competition. Section 8 (i) i CPR which provides; deliberately reducing the margin of profit available to a competing Licensee that requires wholesale communications services from the Licensee in question, by increasing the prices for the wholesale communications services required by that competing Licensee, or decreasing the prices of communications services in retail markets where they compete, or both would also come into play where the resultant effect of price discrimination would injure competition in the long run by marginalizing new entrants and or by raising entry barriers.
The post-Chicagoan school of economic thought argues that such selective price discrimination offered to this category of subscriber would be anti-competitive by suppressing long-term efficient entry into the relevant market (Nicita, supra). In their view, market power translates to short-term competitive advantage by the incumbent, thus whenever a new entrant or an existing competitor cannot replicate the discount policies adopted by incumbent’s foreclosure tactics which raises the rivals cost up to the point of eliminating entry or reducing the incentive to compete effectively. Such anti-competitive conduct should immediately be sanctioned by antitrust authorities (‘Nicita, supra).
In Case C-62/86, AKZO Chemie BV v. Commission, [1991] E.C.R. I-3359, [1993] 5 C.M.L.R. 215, the European Commission’s decision was largely driven by the predatory nature of AKZO’s pricing strategy, it nevertheless concluded at paragraph 72 that:
Moreover, prices below average total costs, that is to say, fixed costs plus variable costs, but above average variable costs, must be regarded as abusive if they are determined as part of a plan for eliminating a competitor. Such prices can drive from the market undertakings which are perhaps as efficient as the dominant undertaking but which, because of their smaller financial resources, are incapable of withstanding the competition waged against them
Paragraph 27 of the MNP Business Rules & Port Order Processes prohibits win-back for a period of ninety days from the date the porting was completed, however the donor (former) service provider may contact a ported subscriber for (a) recovery of outstanding debts or (b) to discuss products/services other than the ported mobile telecommunications service. However, this win-back rule is still subject to abuse as a donor service provider may offer to discount the outstanding debt due or offer another service (say internet access) at a discount to the recently switched subscriber on the condition that s/he switch back to its network. In the case of (b), this is a very likely possibility, especially if the donor service provider possesses a significant market power in that market. In my view, such market share may be leveraged upon to foreclose competition in the market for mobile telecommunications service and will present another anti-competitive practice- tying/bundling; which is also capable of substantial lessening of competition.
Conclusion
As rapid technological changes continue to shape the Nigerian Telecommunications market, the behaviour of subscribers will continue to be impacted presenting new challenges to NCC. The main focus of this challenge will be to ensure that favourable market conditions exist which thrives on technological innovations, whilst still ensuring the promotion of consumer welfare. Win-back strategies are capable of substantially lessening the competition because, “it affects the extent to which dominant firms may defend themselves against competition rather than act to consolidate or even increase their dominance in the market” (Jones and Sufrin, 2001). Even though, NCC’s restriction to subscriber win-back by service providers is limited to only ninety days, it must take cue from antitrust authorities in North American and European countries, where win-back strategies have come under serious scrutiny. NCC should toe the post-Chicagoan path by recognizing that win-back strategies under certain conditions may have the effect of substantially lessening the competition.
MNP does actually stimulate competition. If implemented properly, MNP will engender competition and lead to a lowering of switching cost, resulting in added value to the existing services already been enjoyed by the Nigerian mobile telecommunications subscribers.
Subscriber win-back strategies refer to an incumbent service provider’s scheme aimed at winning back a subscriber who intends to switch or has already switched to a competing service provider. These actions are usually carried out through targeted marketing and selective price discount. In this article, I examine the antitrust concern of these strategies in the context of the recently published Nigeria’s MNP framework.
Introduction
The Nigerian Communications Act 2003 (NCA) commenced on 8th July, 2003 repealing the Nigerian Communications Commission Act of 1992. Under § 1 (c) and (e) respectively, NCA has the stated objectives to “promote the provision of modern, universal, efficient, reliable, affordable and easily accessible communications services and the widest range thereof throughout Nigeria” and “ensure fair competition in all sectors of the Nigerian communications industry....” NCA contemplates the removal of legal and regulatory barriers to entry so as to enable free market entry, encourage technological innovation & rapid deployment of telecommunications services while ensuring that a firm’s prowess in satisfying consumer demand will determine its success or failure in the marketplace.
MNP and win-back strategies
MNP is the ability of a mobile telephone service provider to change his/her service provider while still retaining his/her mobile telephone number. The ability of subscribers to retain their telephone numbers when changing service providers will give subscribers flexibility in the quality, price, and variety of telecommunications services they can choose to purchase. Number portability promotes competition between telecommunications service providers by, among other things, allowing the consumers to respond to price and service changes without changing their telephone numbers, in other words a customer is less likely to switch carriers if he cannot retain his/her telephone number, see Cellular Telecomms. & Internet Ass’n v. FCC, 330 F.3d 502, 513 (D.C. Cir. 2003) (“CTIA”). The resulting competition will benefit all users of telecommunications services. Indeed, competition will foster lower local telephone prices and, consequently, stimulate demand for telecommunications services and increase economic growth.
Win-back strategies refer to an incumbent service provider’s strategies aimed at retaining or regaining a subscriber who intends to switch or has already switched to another competing service provider. Generally, win-back strategies will take the form of targeted marketing and selective price discounts offered to these subscribers. A standard feature of win-back strategies is that it is targeted at only a portion of competing service providers’ customers who were once customers of the incumbent service provider. Nicita (2009) argues that win-back strategies are a form of selective price discrimination towards a competitor’s customers.
A price discrimination is said to exist when two similar products having the same marginal production cost are sold at different prices (Armstrong, 2006). In the context of the MNP process, this price discrimination would usually take the form of selective price cuts where the incumbent service provider decides to charge a (lower) tariff to a group of subscribers to induce them not to switch to a competing MNO. In extreme cases, the group could actually be a single subscriber.
Antitrust concerns of win-back strategies
The primary antitrust concern presented by selective price cuts is usually foreclosure. Most antitrust authorities are uniform in the view that price discrimination can be exploited by a dominant firm with significant market power to “exclude” competitors or reduce competitors incentive to compete effectively (Armstrong, supra). While foreclosure may not necessarily be the primary motivation for engaging in the conduct (profit maximization through price discrimination usually is), however this strategy would have the resultant effect of excluding unaffiliated competitors in the relevant market.
The antitrust treatment of price discrimination in the Nigerian Telecommunications market is captured by § 8 (f) of the Competitions Practice Regulations (CPR) 2007 which provides that supplying communications services, at prices below long run average incremental costs or such other cost standard, as is adopted by the Commission is a conduct or practice deemed to result in a substantial lessening of competition. Section 8 (i) i CPR which provides; deliberately reducing the margin of profit available to a competing Licensee that requires wholesale communications services from the Licensee in question, by increasing the prices for the wholesale communications services required by that competing Licensee, or decreasing the prices of communications services in retail markets where they compete, or both would also come into play where the resultant effect of price discrimination would injure competition in the long run by marginalizing new entrants and or by raising entry barriers.
The post-Chicagoan school of economic thought argues that such selective price discrimination offered to this category of subscriber would be anti-competitive by suppressing long-term efficient entry into the relevant market (Nicita, supra). In their view, market power translates to short-term competitive advantage by the incumbent, thus whenever a new entrant or an existing competitor cannot replicate the discount policies adopted by incumbent’s foreclosure tactics which raises the rivals cost up to the point of eliminating entry or reducing the incentive to compete effectively. Such anti-competitive conduct should immediately be sanctioned by antitrust authorities (‘Nicita, supra).
In Case C-62/86, AKZO Chemie BV v. Commission, [1991] E.C.R. I-3359, [1993] 5 C.M.L.R. 215, the European Commission’s decision was largely driven by the predatory nature of AKZO’s pricing strategy, it nevertheless concluded at paragraph 72 that:
Moreover, prices below average total costs, that is to say, fixed costs plus variable costs, but above average variable costs, must be regarded as abusive if they are determined as part of a plan for eliminating a competitor. Such prices can drive from the market undertakings which are perhaps as efficient as the dominant undertaking but which, because of their smaller financial resources, are incapable of withstanding the competition waged against them
Paragraph 27 of the MNP Business Rules & Port Order Processes prohibits win-back for a period of ninety days from the date the porting was completed, however the donor (former) service provider may contact a ported subscriber for (a) recovery of outstanding debts or (b) to discuss products/services other than the ported mobile telecommunications service. However, this win-back rule is still subject to abuse as a donor service provider may offer to discount the outstanding debt due or offer another service (say internet access) at a discount to the recently switched subscriber on the condition that s/he switch back to its network. In the case of (b), this is a very likely possibility, especially if the donor service provider possesses a significant market power in that market. In my view, such market share may be leveraged upon to foreclose competition in the market for mobile telecommunications service and will present another anti-competitive practice- tying/bundling; which is also capable of substantial lessening of competition.
Conclusion
As rapid technological changes continue to shape the Nigerian Telecommunications market, the behaviour of subscribers will continue to be impacted presenting new challenges to NCC. The main focus of this challenge will be to ensure that favourable market conditions exist which thrives on technological innovations, whilst still ensuring the promotion of consumer welfare. Win-back strategies are capable of substantially lessening the competition because, “it affects the extent to which dominant firms may defend themselves against competition rather than act to consolidate or even increase their dominance in the market” (Jones and Sufrin, 2001). Even though, NCC’s restriction to subscriber win-back by service providers is limited to only ninety days, it must take cue from antitrust authorities in North American and European countries, where win-back strategies have come under serious scrutiny. NCC should toe the post-Chicagoan path by recognizing that win-back strategies under certain conditions may have the effect of substantially lessening the competition.
MNP does actually stimulate competition. If implemented properly, MNP will engender competition and lead to a lowering of switching cost, resulting in added value to the existing services already been enjoyed by the Nigerian mobile telecommunications subscribers.
Wednesday, January 18, 2012
FOI: PUBLIC INTEREST IN DISCLOSING THE QUALITY OF SERVICE (QoS) REPORT
For many years telecommunications consumers in Nigeria have not had the opportunity to compare QoS levels of the various mobile network operators (MNOs) operating in Nigeria, but however towards the ending of 2012 and in a marked deviation from previous trend, the Nigerian Communications Commission (NCC), the telecommunications sector regulator published the annual QoS report for year 2011. This singular act seems to be hinged on NCC’s power of monitoring and report under § 89 of the Nigerian Communications Act, 2003 (NCA).
In this article, I examine the public interest in disclosing the QoS report pursuant to a freedom of information request under the recently enacted Freedom of Information Act 2011 (FoIA).
The meaning of Public Interest
According to Webster's New World Dictionary, public interest means “the people’s general welfare and well being; something in which the populace as a whole has a stake.” In the Communications realm this definition will naturally transpose to mean “the Communications consumer’s well being or something in which the Communications consumer as a whole has a stake.”In essence something “in the public interest” is simply something which serves the interests of the public.
Section 25 (1) (c) of the FoIA provides “where the Court makes a finding that the interest of the public in having the record being made available is greater and more vital than the interest being served if the application is denied, in whatever circumstance.” The effect of this provision is that where an interest in non-disclosure competes with public interest in disclosing an information, the court can only compel disclosure where it is of the opinion that the interest of the public is greater served than any interest being protected. In such circumstance, public interest considerations will generally refer to considerations affecting the good order and functioning of community and governmental affairs, for the well-being of citizens. In general, the public interest consideration is one which is common to all members of the community (or a substantial segment of them), and for their benefit.
The nexus between Public Interest and Quality of Service
The QoS report is a document that evidences or reports the measurement of certain indicators by both Communications licensees and NCC in accordance with a defined measurement method, and it is a detailed account of the QoS level of aspects of a service being offered by a Communications licensee and provides a clear indication of what consumers experience when using a particular network or Communications service, in the words of NCC, “these QoS standards [and report] ensures that consumers continue to have access to high quality telecommunications service by setting basic minimum quality levels for all service providers.”
The emphasis placed on making the QoS report available to the public is exemplified in § 2 subparagraph d of the draft Quality of Service Regulations 2011 which provides: “Making information available to help with informed Consumer choice of services and Licensees.” From this provision it is noted that Communications consumers are entitled to receive information concerning QoS to enable them make an informed choice. In particular, it is important for consumers to base their choices of services on objective evidence rather than on personal anecdotes. To be able to make an informed choice, consumers must have access to material information, in essence the Quality of Service Regulations regards QoS measurements (and reports) as material information. The requirement for material information is central and goes to the root of any consumer protection measure.
In the context of Communications services, the QoS report indicates the level of QoS experienced by consumers, it therefore represents information that the average Communications consumer needs in order to make an informed transactional decision, see The Office of Fair Trading v. Purely Creative Limited & 8 Ors [2011] EWHC 106 (Ch), para. 73. In essence it is material information that will guide owners of the over 122 million connected (GSM and CDMA) lines in Nigeria in making an informed choice about the service provider or service they intend to subscribe to.
No doubt there is public interest in protecting Communications consumers. As set out in the National Policy on Telecommunications, NCC is charged with ensuring that public interest is protected in the Communications market. It is submitted that the “public interest” contemplated under the National Policy on Telecommunications would encompass the broad objectives of the NCA which inter alia provides in § 1 (g) that the rights of consumers are protected. In this regard, it is also noted that the requirement for Communications licensees to comply with QoS standards is a consumer protection measure embedded under § 104 of NCA. As rightly well put by NCC, “these QoS standards [and report] ensures that consumers continue to have access to high quality telecommunications service by setting basic minimum quality levels for all service providers.” Thus in circumstances where the QoS report is not available, consumers of mobile telecommunications services are not able to ascertain whether particular service providers have been able to achieve the “minimum quality levels” set by NCC and are thus denied the opportunity to be able to make an informed choice from the use of this information.
Clearly non-disclosure of the QoS report will significantly deprive mobile telecommunications consumers of the opportunity to make a free or informed choice about mobile telecommunications services and would make it virtually impossible to confirm claims of service providers about their QoS standing. A consumer’s right to access information and freedom of choice is reinforced by United Nation General Assembly Resolution 39/248 Guidelines for Consumer Protection adopted on 9 April 1985 in particular § 3 (c) which provides “Access of consumers to adequate information to enable them to make informed choices according to individual wishes and needs.” It is also submitted that the consumer’s right to access information as users of products or services constitute legitimate grounds of public interest to justify the disclosure of the QoS report. See Canal Satélite Digital SL v Adminstración General del Estado, and Distribuidora de Televisión Digital SA (DTS) [2002] ECR I-607, para 34.
In Re Kenmatt Projects Pty Ltd and Queensland Building Services Authority (1996 S0094, 27 September 1996), a building contractor contested access being given to certain files held by the respondent Building Service Authority relating to disputes which have arisen concerning the building contractor’s works. The building contractor argued that the files qualified for exemption under § 45 (1) (c) of the Queensland (Australia) Freedom of Information Act 1992 which exempts from disclosure; information concerning the business, professional, commercial or financial affairs of an agency or another person and which could reasonably be expected to have an adverse effect on those affairs or prejudice the future supply of such information. The Queensland Information Commissioner found that public interest considerations favouring disclosure outweighed any such apprehended adverse effects. In particular the Information Commissioner held at para 48 that:
...there is a significant public interest in members of the public, many of whom are potential homebuyers or home renovators, having access to information about the performance of builders, and their responses to complaints, to enable them to make informed choices about the builder they engage. I believe that it is valuable for consumers to have before them as much information as possible about the performance of builders they might choose to engage.
Conclusion
It is clear that public interest considerations would favour the disclosure of the QoS report, no doubt if awareness of the QoS report were to be made available to the public, service providers would strive to achieve the best results, and consumers would ultimately be the winners. In concluding the words of NCC during the public hearing on the draft Quality of Service Regulations 2006 aptly comes to mind and I quote “The primary purpose for publishing QoS information is to provide [consumers] timely, relevant, accessible, accurate and comparable information that would enable them make informed decisions.”
In this article, I examine the public interest in disclosing the QoS report pursuant to a freedom of information request under the recently enacted Freedom of Information Act 2011 (FoIA).
The meaning of Public Interest
According to Webster's New World Dictionary, public interest means “the people’s general welfare and well being; something in which the populace as a whole has a stake.” In the Communications realm this definition will naturally transpose to mean “the Communications consumer’s well being or something in which the Communications consumer as a whole has a stake.”In essence something “in the public interest” is simply something which serves the interests of the public.
Section 25 (1) (c) of the FoIA provides “where the Court makes a finding that the interest of the public in having the record being made available is greater and more vital than the interest being served if the application is denied, in whatever circumstance.” The effect of this provision is that where an interest in non-disclosure competes with public interest in disclosing an information, the court can only compel disclosure where it is of the opinion that the interest of the public is greater served than any interest being protected. In such circumstance, public interest considerations will generally refer to considerations affecting the good order and functioning of community and governmental affairs, for the well-being of citizens. In general, the public interest consideration is one which is common to all members of the community (or a substantial segment of them), and for their benefit.
The nexus between Public Interest and Quality of Service
The QoS report is a document that evidences or reports the measurement of certain indicators by both Communications licensees and NCC in accordance with a defined measurement method, and it is a detailed account of the QoS level of aspects of a service being offered by a Communications licensee and provides a clear indication of what consumers experience when using a particular network or Communications service, in the words of NCC, “these QoS standards [and report] ensures that consumers continue to have access to high quality telecommunications service by setting basic minimum quality levels for all service providers.”
The emphasis placed on making the QoS report available to the public is exemplified in § 2 subparagraph d of the draft Quality of Service Regulations 2011 which provides: “Making information available to help with informed Consumer choice of services and Licensees.” From this provision it is noted that Communications consumers are entitled to receive information concerning QoS to enable them make an informed choice. In particular, it is important for consumers to base their choices of services on objective evidence rather than on personal anecdotes. To be able to make an informed choice, consumers must have access to material information, in essence the Quality of Service Regulations regards QoS measurements (and reports) as material information. The requirement for material information is central and goes to the root of any consumer protection measure.
In the context of Communications services, the QoS report indicates the level of QoS experienced by consumers, it therefore represents information that the average Communications consumer needs in order to make an informed transactional decision, see The Office of Fair Trading v. Purely Creative Limited & 8 Ors [2011] EWHC 106 (Ch), para. 73. In essence it is material information that will guide owners of the over 122 million connected (GSM and CDMA) lines in Nigeria in making an informed choice about the service provider or service they intend to subscribe to.
No doubt there is public interest in protecting Communications consumers. As set out in the National Policy on Telecommunications, NCC is charged with ensuring that public interest is protected in the Communications market. It is submitted that the “public interest” contemplated under the National Policy on Telecommunications would encompass the broad objectives of the NCA which inter alia provides in § 1 (g) that the rights of consumers are protected. In this regard, it is also noted that the requirement for Communications licensees to comply with QoS standards is a consumer protection measure embedded under § 104 of NCA. As rightly well put by NCC, “these QoS standards [and report] ensures that consumers continue to have access to high quality telecommunications service by setting basic minimum quality levels for all service providers.” Thus in circumstances where the QoS report is not available, consumers of mobile telecommunications services are not able to ascertain whether particular service providers have been able to achieve the “minimum quality levels” set by NCC and are thus denied the opportunity to be able to make an informed choice from the use of this information.
Clearly non-disclosure of the QoS report will significantly deprive mobile telecommunications consumers of the opportunity to make a free or informed choice about mobile telecommunications services and would make it virtually impossible to confirm claims of service providers about their QoS standing. A consumer’s right to access information and freedom of choice is reinforced by United Nation General Assembly Resolution 39/248 Guidelines for Consumer Protection adopted on 9 April 1985 in particular § 3 (c) which provides “Access of consumers to adequate information to enable them to make informed choices according to individual wishes and needs.” It is also submitted that the consumer’s right to access information as users of products or services constitute legitimate grounds of public interest to justify the disclosure of the QoS report. See Canal Satélite Digital SL v Adminstración General del Estado, and Distribuidora de Televisión Digital SA (DTS) [2002] ECR I-607, para 34.
In Re Kenmatt Projects Pty Ltd and Queensland Building Services Authority (1996 S0094, 27 September 1996), a building contractor contested access being given to certain files held by the respondent Building Service Authority relating to disputes which have arisen concerning the building contractor’s works. The building contractor argued that the files qualified for exemption under § 45 (1) (c) of the Queensland (Australia) Freedom of Information Act 1992 which exempts from disclosure; information concerning the business, professional, commercial or financial affairs of an agency or another person and which could reasonably be expected to have an adverse effect on those affairs or prejudice the future supply of such information. The Queensland Information Commissioner found that public interest considerations favouring disclosure outweighed any such apprehended adverse effects. In particular the Information Commissioner held at para 48 that:
...there is a significant public interest in members of the public, many of whom are potential homebuyers or home renovators, having access to information about the performance of builders, and their responses to complaints, to enable them to make informed choices about the builder they engage. I believe that it is valuable for consumers to have before them as much information as possible about the performance of builders they might choose to engage.
Conclusion
It is clear that public interest considerations would favour the disclosure of the QoS report, no doubt if awareness of the QoS report were to be made available to the public, service providers would strive to achieve the best results, and consumers would ultimately be the winners. In concluding the words of NCC during the public hearing on the draft Quality of Service Regulations 2006 aptly comes to mind and I quote “The primary purpose for publishing QoS information is to provide [consumers] timely, relevant, accessible, accurate and comparable information that would enable them make informed decisions.”
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