VISION

ON

TELECOMMUNICATIONS, MEDIA AND INTERNET:

THE NEXT STEPS

2

CONTENTS

PART 1 Trend analysis: telecom and the Internet economy (p3)

• Trend analysis: the Internet is driving developments in telecommunications and the audiovisual

sector (p3)

• The boundaries between telecom, media and Internet are blurring: emergence of the Internet

value web (p7)

• The Internet value web as a breeding ground for the Internet economy (p9)

PART 2 Developing the market under the Internet economy and the role of the

government (p11)

• New policy questions in the Internet economy (p11)

• Guideline (p13)

PART 3 Competitiveness, freedom and reliability in the Internet economy (p16)

I. Internal (telecom) market (p16)

II. Neutrality deeper in the Internet value web (p22)

III. Convergence of audiovisual services: regulatory distinction between linear and non-linear

TV viewing is starting to become untenable (p24)

IV. New players and extension of the duty of care in relation to integrity, continuity and

privacy (p26)

V. Definition of duty of care and the implications of ‘profiling’ (p30)

*Front cover: On 24 April, TEN people from different parts of the Internet economy came together (a balanced gathering from the worlds

of science, civil-society organisations and the market directly and indirectly connected with telecom, media and the Internet). An artist

produced this pictorial impression of the discussion.

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PART 1 Trend analysis: Telecom and the Internet economy

This section draws on developments in the market to argue that the Internet is the driving force

behind developments in the telecommunications market and that a vision of the that market

cannot be written without placing telecom in the broader context of the Internet. Whereas years

ago the telecom market could be described in terms of a single copper cable and telephone service,

today it is an environment in which networks (mobile, fixed), devices (smartphone, tablet, TV, PC)

and a multitude of Internet-based and other communication services are amalgamated into a

single economic system, presented here as the Internet value web. This web is the breeding

ground for the Internet economy. Audiovisual services (‘media’) play a major role here and are

therefore also included in this trend analysis.

• Trend analysis: the Internet is driving developments in telecommunications

and the audiovisual sector

• The boundaries between telecom, media and Internet are blurring:

emergence of the Internet value web

• The Internet value web as a breeding ground for the Internet economy

Trend analysis: the Internet is driving developments in telecommunications and the

audiovisual sector

The telecommunications market has long involved far more than simply making telephone calls or

sending text messages. The arrival of the Internet has added many different functionalities. While

at the start of the 2000s the Internet was still in its commercial infancy, it is now a booming

business worth billions. The spurt in growth that the Internet has undergone in recent years in both

breadth and depth is phenomenal. In 1998 there were just 3 million websites; today there are

more than 635 million and their number continues to grow (source: ICANN 2013). Sales in the

apps industry are expected to rise by 60% in 2013, with sales of €95 billion worldwide (source:

TNO 2013). Social networking sites such as Twitter and Facebook have become a part of everyday

life, partly thanks to the development of mobile Internet access, and users now expect them to be

available in a user-friendly way on every device. Apps and social media are only two of the

phenomena to which the Internet has given birth: shopping, banking, video on demand, gaming:

there is now an online application for just about every imaginable economic and social activity.

The Internet is a network of digital transmission networks, accessible and interlinked via a single

Internet Protocol (IP). That sounds complicated, but in reality the Internet is nothing more than an

ingenious digital network built across the telecom networks (the wires and cables in the ground).

In common parlance, the term 'Internet' is generally also taken to include all the players and

services found on the Internet. People talk about the 'Internet economy' in order to identify all the

economic value creation surrounding the Internet, including telecom and e-commerce. The Internet

has become an indispensable vehicle for social and economic activity in the last decade. From the

retail sector to the travel industry, from sole traders to students, everyone feels the impact of the

Internet. That includes the telecommunications sector.

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Investing in the infrastructure…

• Growing Internet use (video applications, use of tablets/smartphones) led to an increase of

42% in data traffic in 2012 through the Amsterdam Internet hub (AMS-IX, one of the largest

Internet hubs in the world). Growth through mobile networks in 2012 was even higher, at

around 60%. This trend is expected to continue in the coming years (source: TNO 2013).

Ever higher demands are being placed on the network, and especially on mobile networks,

as everyone expects everything to be available 'wirelessly'. In Europe, no less than 71% of

wireless data traffic was handled via WiFi in 2012 (source: WIK/AEGIS 2013), and this is

expected to rise to 76% in 2016.

• Market parties are doing everything they can to prepare the networks for the future. This

means they are investing heavily, to the tune of some €2.5 billion per year on average (over

the period 2005-2010; source: Dialogic 2012). Just as the availability of fast fixed and

mobile networks has made it possible to offer new (broadband) services, so the demand for

data resulting from the use of those new services is in turn driving technological innovation:

from 3G to 4G, to 5G in the future (market mobile networks) or from dial-up to ADSL to

VDSL and from DOCSIS 3.0 to 3.1.1.

• As well as driving data use across telecommunications networks, the Internet is also the

driver behind the convergence taking place in the market, making it possible for what were

previously separate markets or links in the value chain to increase their market or expand

their service provision to other links in the value chain. Convergence will be mentioned

several times in this trend analysis, but a first form of convergence is visible in the networks.

Thanks to the Internet, networks are increasingly developing into a generic infrastructure

which can be used to offer any number and variety of services and to which a wide range of

devices can be connected. To put it into specific terms: since the mid-1990s, cable networks

have offered telephony and Internet services alongside television (via a 'triple play

package'). The traditional copper telecom network has also offered television services

alongside telephony and Internet since 2006.

• Over the medium term, this trend will extend into the wireless domain. Consumers want to

be able to connect (Internet) wherever they are and whatever infrastructure they use.

Increasingly, therefore, consumers are purchasing a single telecom package which they can

use for both mobile and fixed communication – a 'quadruple play package’ (source: ACM

2013). To make this possible, providers of telecom services must have access to both fixed

and mobile networks (either through ownership or via (wholesale) contracts). Mobile

operators are thus investing in fixed networks or entering into partnerships with fixed

network operators, and vice versa. Dutch cable operator Ziggo, for example, collaborates

with Vodafone so as to be able to provide wireless services beyond the coverage of its own

WiFi network. Conversely, Vodafone has entered the fibre-optic market so that it can offer

fixed Internet connections via fibre-optic cable.

• The role and importance of hardware (especially 'screens' such as smartphones, tablets and

Connected TV) cannot be ignored here. Before the introduction of the smartphone, telecom

1 For more on the broadband market, see the chapter on the internal (telecom) market in part three.

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providers controlled the services that were available on devices; the rise of the smartphone

and mobile Internet means they have largely lost this control. In the past, the number of

services supported by the hardware was constrained by the support provided by the

network. However, the smartphone provides access to the Internet, which means the

number of services that consumers can access via the mobile network has grown

explosively. The adoption of these services and the concomitant rapid growth in data

consumption has put enormous pressure on the mobile networks. The only way for telecom

operators to manage this is by investing in the infrastructure. For today's consumer, the

service provided by telecom providers is no longer decisive, but merely serves to facilitate

the unprecedented capabilities of his or her screen, and not impede them. The device is the

central component; the network merely instrumental. A comparable development is taking

place in the broadcasting distribution market due to the rise of Connected TV, which offers a

user-friendly way of accessing audiovisual content on the Internet. This could potentially

have a significant influence on the revenues of telecom providers from the provision of

audiovisual services, while at the same time they will be expected to continue investing in

the infrastructure so that consumers are able to make use of the possibilities offered by

Connected TV.

Earnings models on the networks are changing…

• The Internet is a platform for a whole series of new market players that are challenging

many economic sectors. The competition being felt by Dutch retailers from online stores is a

familiar example. The telecom sector has proved to be no exception here: traditional

telecommunication services such as telephony and SMS are now also available via the

Internet2 (referred to as Over the Top (OTT) services), and this is forcing the traditional

telecom players into a rethink. Average sales in SMS services in the Netherlands declined by

36% in 2012, though that income was partially replaced by increased revenues from data

traffic, which rose by 32% (source: TNO 2013). The successful introduction of one single app

from Silicon Valley was largely responsible for this increase: WhatsApp.

• A new market is emerging in which the consumer is offered telephony, messaging and other

‘digital communication services’ by several different providers over the Internet. For the

traditional telecom players, this creates new opportunities (more demand for bandwidth),

but also more competition (at the level of services). The arrival of these new (Internet)

players is leading to a change in the earnings models in the telecom sector. This has been

visible in recent years in the changing tariff structure for mobile telecom bundles. Whereas

initially calls and text messaging accounted for the lion's share of subscription costs, the

biggest component is now the data bundle. This enables telecom providers to maintain

revenue levels so that they can continue to invest in their networks (faster 3G, rollout of 4G,

more mobile antennae) for their customers whilst at the same time keeping shareholders

happy.

2 By this we mean the 'open Internet', i.e. the 'public lane' on the telecommunications network which operates alongside the 'managed

lane' over which telecom operators offer their own services, such as IPTV or VoIP.

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• No description of the impact of the Internet on the telecom market is complete unless it

includes the growing use of online video. New non-linear audiovisual services such as

Uitzendinggemist.nl (in Dutch), YouTube, Netflix and the recently announced Dutch channel

NLZiet are causing a shift in the commercial landscape. In addition, conventional

broadcasters are increasingly offering their linear content online as well. Services of this kind

are important in the first place in driving up demand for data (in the United States, for

example,Netflix and YouTube together account for over 50% of total data traffic). Video

streaming devours massive amounts of data capacity, and this of course imposes a direct

burden on (investments in) the telecommunications infrastructure. Second, the situation in

the audiovisual media value chain is changing. The relationship between traditional

distributors of broadcasting services (cable operators and, since 2006, KPN) and content

providers/broadcasters is changing, as these players can now also reach consumers directly

via the Internet. All this is yet another example of convergence, here between telecom and

media.

• The growth in new markets on the networks is impressive. The 'app economy' referred to

earlier is expected to grow from €10 billion to €25 billion in 2013 (source: ABI Research

2013). A great deal is also being invested in cloud services and data centres: globally, $86

billion was invested in data centres in 2011; in 2012, that figure rose to $105 billion (22%

increase; Global Census). NFIO is forecasting that investments in the Netherlands will total

approximately €1.2 billion in 2014.

• The earnings models on the network will change further as the commercial importance of the

Internet of Things (IoT) increases. In 2009, 2.5 billion devices – PCs, mobile telephones and

tablets – had access to the Internet. By 2020, this could be 30 billion (source: Gartner

2013). IoT is a phenomenon that is still in its relative infancy: energy companies have their

'intelligent meters', car manufacturers are incorporating ingenious digital dashboards and

even refrigerator manufacturers are experimenting with online applications to increase ease

of use further: the Internet is penetrating more and more electronic hardware. In many

cases, these economic activities will be connected to the telecom network, further driving up

demand for broadband capacity, but especially for security and reliability. The consequence

is that non-telecom players will increasingly approach telecom providers with requests for

more collaboration and/or sharing of expertise.

Users and society…

• The Dutch are major consumers of telecommunications and the Internet. The Netherlands is

among the leading countries in the world (sixth place) in terms of digitisation and Internet use

(source: TNO 2013). This is further substantiated in a letter to the Dutch parliament on

breakthroughs with ICT (‘Doorbraken met ICT’), which states that ‘In 2012, 57 percent of

employees used the Internet, compared with a European average of 45 percent. The

Netherlands and the Dutch are leading the way in the use of digital services. We are leaders in

Europe when it comes to Internet banking and fourth for Internet shopping. In 2012, 93

percent of [Dutch] households possessed a desktop or laptop. No fewer than 95 percent of

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Dutch young people using the Internet had a social network account in 2012.’3 To these figures

can be added: 84% of Dutch households now watch digital television (via a Triple Play

subscription which includes telephone, Internet and television in a single package); 72% of the

Dutch have a smartphone and 46% of them use it to access the Internet or for Internet-related

applications. Moreover, 56% have more than three devices (source: Telecompaper 2013). The

percentage of Internet users is the highest in Europe: 94% in 2012. When it comes to

delivering Internet access, therefore, the Dutch market is saturated. Growth in Internet use

can however still be found among older age groups (65+), an indication of the low-threshold

nature of Internet access (TNO 2013). In the context of the telecom market, demand for digital

products and applications is healthy. Moreover, consumers are critical and wish to know

precisely what they are paying for and why.

These trends will be discussed in more detail in part three; for the moment, the main conclusion is

that the telecommunications market cannot be seen in isolation from the developments in the

Internet domain. A vision of the telecom market is thus not complete unless it also includes

developments in relation to the Internet. The telecom market is an indispensable link in the

functioning of the Internet, but the Internet in turn exerts a transformative influence on the

telecom sector.

The boundaries between telecom, media and Internet are blurring: emergence of the

Internet value web

If the Internet is so important for the telecommunications sector and even the audiovisual world,

how do the three relate to each other? The following diagram illustrates this in a simple,

technology-neutral way. In reality, there are four components which are dependent on each other

and which act as links in the production chain:

1. Online services (websites)

2. Internet connectivity (all technical resources that keep the Internet running)

3. Infrastructure (mobile, fixed or satellite)

4. Hardware (e.g. PC, TV or smartphone).

The traditional telecom services (telephony, SMS) and television services are increasingly

competing with and being replaced by their counterparts on the Internet.

3 Parliamentary papers, session 2012-2013, 32637 No. 70.

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The Internet value web. Source: AnalysysMason (2013)

The different parties in this schematic each have their own background; they come from different

domains which are now becoming interdependent; they are markets in their own right. Many shifts

can be observed between these formerly separate worlds (convergence) as players attempt to

expand into more and more different terrains. For example, telecom players such as KPN and UPC

have used their strong positions (2.3 ISPs and three networks) to enter the fields of online services

(IPTV), hardware (Horizon box) and the content market (joint-venture between Ziggo and HBO).

An opposite movement can be observed among Internet players, which are integrating vertically

with other domains, starting from their position in online services (Google) or hardware

(Samsung). It is important not to see this playing field as a linear production chain, but as a web;

providers are no longer dependent on one route for the provision of a digital product or service. For

example, an online store can host its own website, or can outsource it to a hosting provider or

cloud provider. There are also numerous options for processing payments, such as invoices, iDEAL,

PayPal or credit card payment. Finally, the store can opt to operate only via a website, or through

an app as well, and can then make a further choice as to the platform (e.g. Android, iOS, Windows)

on which it wishes to have a presence.

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The above diagram outlines what we call the Internet value web, and aims to place the telecom

market in the proper context, to show that the playing field has enlarged and how this presents

both opportunities and challenges. It is intended purely to help identify the different relationships,

and is not intended to give the impression of a playing field that is cast in stone. It is a schematic

illustration of a field in which the telecom market is dependent on developments in and on the

Internet – and vice versa, because without the physical infrastructure there is no Internet.

It is also important to note that the different panels in the schematic are markets in their own

right. They have developed from different backgrounds, not least thanks to the intervention (or

lack thereof) by the government. The telecommunications market was state-owned for more than a

century, was later privatised and liberalised but is still subject to ex-ante supervision by a market

regulator, currently the Authority for Consumers & Markets (ACM). Successive governments felt it

was necessary to set rules in advance to ensure that the market functioned properly, because

(parts of) the networks were difficult to replicate. At the same time, the Internet panels in the

diagram (Online services and Internet connectivity) developed without any government

intervention. Since its original development by the US Department of Defense, the Internet as a

system has grown entirely in the private domain. Things such as the issuing of domain names or

routing are part of an ingenious system of private players that additionally, unlike most telecom

providers, move freely across national borders. The panel entitled 'Devices‘, finally, is a goods

market in the real world, which is influenced by government trade policy measures such as

customs tariffs, safety standards and technical standards.

The Internet value web as a breeding ground for the Internet economy

The Internet value web as a whole acts as a lever for renewal in the Dutch economy. The Internet

has generated a multiplicity of economic activity and a whole gamut of new businesses. The

European Commission estimates that for every job lost, 2.1 new Internet jobs are added (source:

European Commission 2013). Even more economic value creation is forecast for the future. The

Internet economy (the collective name for all Internet-related economic value creation, including

telecom and e-commerce) generated sales of €30 billion in 2011 and provided employment to

roughly 110,000 people in the Netherlands (source: BCG 2011). The same study forecasts that the

market will grow to between €41 billion and €47 billion by 2015, which will mean that between

5.9% and 6.8% of Dutch GDP stems from the Internet economy (source: BCG 2011). There are

thus great opportunities for innovation and economic growth for the Netherlands in the digital

economy, as the letter to parliament on breakthroughs with ICT (‘Doorbraken met ICT’) mentioned

earlier makes clear4. The source of these opportunities is the Internet value web, in which the

telecom infrastructure plays a central role. After all, no network means no Internet. Following on

from that letter, we will look in detail at how the government can contribute to strengthening what

is in reality the breeding ground for the Internet economy.

4 Parliamentary papers, session 2012-2013, 32637 No. 70.

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To conclude, a brief outline of the distant future. The big question is how – and how quickly – the

Internet value web will develop in the coming years. A distillation of discussions with experts in the

field is given below5:

• Promising developments are anticipated in the field of audiovisual services, which as time

passes will be tailored more and more to the individual viewer and presented on different

screens. Watching television will enter a new phase.

• It is generally expected that digital products will be increasingly tailored to the individual.

There will be increasing scope for the user to tailor digital content to his or her own needs.

This personalised offering of digital audiovisual and other services will however entail the

use of people’s personal details. While the development of Big Data offers major economic

opportunities, therefore, it also raises questions about the protection of privacy and

personal details, and how providers use them.

• The growing digital offering is expected to make the role of 'gatekeepers' or 'platform

functions' more important. These include intermediaries who select information for a user

and help them choose from the available offerings. The selection of this information may be

based on commercial motives. Given the enormous array of products, services and content

available, it becomes a major challenge for the user to find the information they looking for

'impartially‘, while the challenge for providers is to be readily visible and findable for the

user and to secure a prominent place on the selection menu of relevant intermediaries.

There will also be intermediaries who possess an item of software or hardware on which

third parties can build: a platform. Those third parties are then largely dependent on the

intermediary for the functioning of their own software or hardware, giving the intermediary

a certain position of power. Examples of these kinds of intermediary and their platforms are

search engines, social networks, operating systems, app stores, hardware manufacturers

and electronic programme guides.

• Digitisation will penetrate further and more deeply into the economy. The Internet of

Things has already been mentioned, but the possibilities of the Internet for many economic

sectors are far from exhausted. Sectors of civil society such as education and the care

sector are also rapidly embracing the digital revolution (it is no coincidence that e-

education and e-health are part of the ICT breakthrough projects).

• Finally, experts point out that trust is perhaps the most important condition for the

continued development and even the continued existence of the Internet. Users must be

able to rely on security and continuity. Reference can also be made in this regard to the

influence of geopolitics on the Internet. It is already the case that the influence of less

democratic states is leading to the emergence of more and more national 'Internets’, which

are putting pressure on the openness of the Internet.

5 In the summer of 2013, the Dutch Ministry of Economic Affairs held talks with more than 70 experts from the fields of telecom, Internet

and media (including business leaders, academics and representatives of civil-society organisations) on the future of the Internet

economy. This is a free interpretation of the outcomes of those discussions.

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PART 2 Developing the market under the Internet

economy and the role of the government

The telecom, media and Internet value web functions as a breeding ground for the further

development of the Internet economy and hence for economic growth in the Netherlands. It is

important that these markets function well. The Digital Agenda (2011) cites competitiveness,

freedom and reliability as essential pillars supporting the proper functioning of the telecom market.

These objectives are just as important in the broader market. This section therefore looks at the

challenges for the future in the wider context of the Internet value web, starting from these

objectives. The government faces a challenge in making the regulations more sector-neutral,

because the present distinction between traditional telecom and/or media players and other

(Internet) players will become unsustainable in the future. The government intends to address this

challenge by: 1. seeking to create a level playing field for the market, preferably with lighter-touch

regulation; 2. doing this as far as possible in or in collaboration with Europe; and 3. acting as a

network partner.

• New policy questions in the Internet economy

• Guideline

New policy questions in the Internet economy

The Digital Agenda stood – and still stands – for 'superfast networks and services', an 'open and

free Internet' and 'digital trust’6. The Dutch government still considers these objectives important,

as they are based on a number of assumptions that the government takes into account when

defining its role in the digital (telecom) market. These assumptions come down to the following:

• Competitiveness: a healthy market is characterised by a dynamic of continual investment

and innovation. Such a market contributes to economic growth. The government can and

does contribute to this by placing incentives for competition in the market. This is also the

rationale behind the European competition policy.

• Freedom: it is important that users are able to choose, free of improper influence from

governments, businesses or other interest groups, in the Netherlands or elsewhere. This is

important in order to protect civil freedoms, but also for the sake of the (free) market.

• Reliability: integrity (accuracy of information, no security infringements), continuity (no

failures or breakdowns) and protection of privacy are necessary now and in the future to

ensure confidence and trust in this market. Without justified trust, the development of the

market will be impeded.

The Dutch government still regards competitiveness, freedom and reliability as conditions for the

proper functioning of the market. Unless these conditions are assured, economic growth will

stagnate. This sometimes makes it necessary to strike a balance and even to make choices

between these objectives. The intention in this document is to weigh these conditions in the

existing policy against the broader context of the Internet value web, to set them against

6 Parliamentary papers, session 2010-2011, 29515 No. 331.

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developments in the medium to long term and so to arrive at a policy agenda for the future.

Naturally, actions are already being taken on the path to that future, but this document firsts set

out a vision and direction for government policy in relation to telecommunications, media and the

Internet.

(Re)weighing the principles of competitiveness, freedom and reliability against the broader context

of the Internet value web is not new. As the Internet has developed further, so the public debate

has also grown in recent years to encompass the full breadth of the Internet economy; for

example, the law on neutrality now guarantees an open and free Internet. In addition, the debate

surrounding the legislation on cookies was and is essentially about reliability, not just of the

networks, but also of online services. The ‘must-carry’ obligation laid down in the Dutch Media Act

(Mediawet) relates to all package providers, regardless of the technology they use (broadcast or

Internet) to offer their programmes. In this way, the 'Internet’ is already incorporated in policy and

regulation on an ad hoc basis.

It is now time for a more considered, broader and more structural approach to new issues arising

in the Internet value web. Those new issues are consistently linked to one and the same dilemma:

how can the government unite the 'old' and 'new' worlds? Time and again, this comes down to the

fact that obligations have traditionally rested on certain players (telecom, broadcasters), while

other types of players have to date had to carry these obligations only on an ad hoc basis (e.g. the

cookie issue). The biggest policy challenge for the future will therefore be to intervene in a sector-

neutral way where government intervention is needed, whilst endeavouring to select the best

intervention point for any measures to be taken, and considering their impact on the Internet value

web as a whole and all its players. As the distinction between Internet, telecom and media players

becomes ever more difficult to define, a reappraisal of the government's role, scope and methods

is needed. This is also important in order to maintain a level playing field for the various players in

the market. And that is no simple task: as discussed in Part 1, the Internet value web comprises

several domains, each of which has arisen from its own background. These market segments each

have a different history with the government. For example, the core components of the Internet

have branched out independently and spread across national jurisdictions. Not only that, many are

convinced that the success of the Internet lies precisely in the absence of government interference.

This is in contrast to the 'networks‘ component, which traces its origins to a state monopoly and

which continues to be heavily regulated even after privatisation and liberalisation. What it will come

down to is combining the best of both worlds. It is important here constantly to return to the

question of what the goal of regulation is, and to ask critically whether and how achievement of

this goal can best be assured in the new, converging environment.

The desire to create a modern regulatory framework is operationalised using a number of issues

drawn from practice and on the basis of discussions with various market players. The following five

questions constitute the policy agenda for the medium term and will supplement the 2011 Digital

Agenda:

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1. European Internal (telecom) Market: Internet players are competing directly with

traditional telecommunications and television services; earnings models are changing. Does

the European regulatory framework for the telecom sector take sufficient account of the

convergence in the market?

2. Neutrality deeper in the Internet value web: freedom also includes 'neutrality'. Net-

neutrality is now anchored in law, but neutrality issues are increasingly rearing their heads

as we progress in the Internet value web. Does this mean that the law should be extended

further, or actually that it should not?

3. Convergence of audiovisual services: the arrival of the Internet and Connected TV is

blurring the distinction between linear ('traditional' TV) and non-linear (on demand via the

Internet) viewing for the user. This begs the question of whether the regulation of linear

viewing needs to be reformed or whether non-linear programming should be incorporated

in the existing frameworks.

4. New players and extension of the duty of care in relation to integrity, continuity and

privacy: should the existing duty of care (as laid down in the Dutch Telecommunications

Act (Telecommunicatiewet)) be extended to include 'new' parties such as hosting providers,

Internet exchanges, cloud providers or hardware and software suppliers?

5. Duty of care for the future: in addition to the question of who should be covered by the

formal duty of care, the definition of what that duty of care entails for companies is also

likely to lead to new discussions. The expectation is that the trend towards more

personalised programming (through the use of Big Data or otherwise) will sharpen the

debate about e-privacy in the medium term.

Guideline

While it is true that, reasoning from the basis of the conditions for economic growth

(competitiveness, freedom and reliability), a number of new policy issues were raised, these

remain meaningless if it is not clear how they should be addressed and which choices need to be

made. The government believes that the rules need to be modernised and that the main question

is when and how this should be done. The government wishes to establish a guideline for the

transition to modernisation, partly in order to increase the predictability of government policy. That

predictability is important for the investment climate in the Netherlands: businesses report that

they take legal certainty and predictability into account in their decisions as to whether or not to

invest in the Netherlands. There are three principles here:

1. Aiming for a level playing field, with an explicit preference for lighter-touch

regulation

It is important that comparable services and players are treated equally by the law. The key is to

do this after a reappraisal of the usefulness of and need for the present regulations in a converging

market. In the first place, the market is in many cases still in such a state of flux that imposing

regulations too soon could stifle budding innovation. This applies among other things for the

audiovisual (media) world, where the development towards on-demand or Connected TV (more

personalised television programming where and when the viewer wishes, with an increased number

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of channels through which that content can be viewed) is still in full swing. In the second place, the

convergence of the market offers a good opportunity to consider whether some legislation may

have become superfluous in the new (technological) context, or needs to be adapted in some other

way. The preference is for fewer rules where possible. A disadvantage of rolling out regulation to

other parties is that it throws up entrance barriers to the telecom/Internet market; that is not good

for innovation and competition in the market and will do nothing to make the Netherlands a more

attractive place for businesses to establish.

2. In or in collaboration with Europe where possible

Given the fact that the Internet economy is intrinsically an international market, with international

players that are sometimes located outside the Dutch jurisdiction, assuring competitiveness,

freedom and reliability will involve looking more rather than less towards Europe. This preferred

route is also important in achieving a level playing field in this converging market. The government

therefore intends to focus more on strengthened European cooperation and less on developing

Dutch rules to achieve certain objectives. This does not however mean that the Netherlands will

automatically accept every Commission proposal: the government line on subsidiarity and

proportionality7 remains intact. The government line on 'low-regulation implementation, unless'‘8

also remains in force. This means that implementation of European regulation is only supplemented

with national rules of the national circumstances demand this. This principle is of particular

importance for the investment climate: Dutch businesses benefit from being treated as equally as

possible to their competitors in other member states. The government also wishes to use the Dutch

presidency of the European Commission (first half of 2016) to (continue) working on the

development of a modernised policy framework for the telecom, media and Internet market.

3. As network partner

The Internet has changed the world, and particularly the world of electronic communications:

markets, services and devices are growing apace and becoming interwoven. This highly complex

market is throwing up ever more new questions in relation to existing public interests, which

increasingly demand a different method of working from in the past. Increasingly, issues cannot be

solved by tightening up existing (national) legislation, but prove to be a 'network problem': in order

to achieve a societal effect, effective cooperation both in the market and between the market,

users and government is essential, both within and outside the Netherlands. There are already

examples aplenty of this in this market; for example, the major providers have made agreements

on regional roaming in the event of a major breakdown; botnets are combated via Abuse HUB; and

of course the international market itself is 'operated' as a network. The playing field is wider than

the telecom sector and wider than the Dutch media players. This calls for a more generic and

therefore less 'market regulator'-focused approach. Making policy in this way also fits in better with

the decentralised nature of the Internet and the appropriate decision-making process in which

7 Parliamentary papers, session 2012-2013, 21 112 No. 1650.

8 Parliamentary papers, session 2012-2013, 29 362 No. 224.

15

decisions are taken bottom-up. The way forward is to seek solutions together, with emphatic scope

and opportunity being given to allow both market and citizen to take their own initiatives and

responsibilities. My primary focus is on network governance. Participating in a network of national

and international players and entering into public-private partnerships is essential for achieving

Internet security, e-privacy and efficient markets. The starting point is therefore the dialogue and

cooperation between government and market/society. In addition, the government will act to set

frameworks and standards where necessary. The law lays down the principles and main lines and

serves as a sanction where needed. Precisely what network governance involves is illustrated in

Box 1 (multi stakeholder model). This is a very far-reaching model of network governance, in

which the government cooperates in the midst of a multitude of parties on the (technical)

governance of the Internet. The intention of setting up a roundtable fits in with this approach, in a

bid to establish a continual dialogue between government, market and society and to move the

Internet economy to the next level together.

The update to the policy agenda must

therefore take account not only of the

functioning of the Internet value web,

but also of the changing relationship

between market, government, semi-

public institutions, civil-society

organisations and of course users.

Precisely what the above guidelines

for government action will mean in

practice is discussed in Part 3.

Box 1 Multi-stakeholder model drives the Internet Openness is an essential characteristic of the Internet and one of the leading principles underpinning its architecture. The way in which the Internet has arisen is unique, namely as the product of collaborative efforts by research institutes, businesses, civil society and standardisation institutes, which work together on an equal footing to find solutions: the multi-stakeholder process. This has led to effective forms of self-organisation and self-regulation, and this model has enabled the Internet to grow into a single global, shared and accessible infrastructure which is also a breeding ground for the international Internet economy.

The Internet is for everyone and belongs to everyone, but the freedom and openness that we now enjoy is not automatic. Internationally, there are countries which favour strong government control and which demand far-reaching powers to control the Internet. Along with the majority of Western countries, the Netherlands fights for the multi-stakeholder model: it prevents excessive government intervention or regulation, but also avoids domination by particular parties or sectors, so that further innovation and growth of the Internet is not impeded. The Netherlands continues to defend this model in numerous international organisations, such as the ITU (International Telecommunications Union, the Internet Governance Forum (IGF), the forthcoming WSIS 2015 (World Summit on Information Society) and ICANN (Internet Corporation for Assigned Names and Numbering). A free and open Internet is of course the starting point for the Freedom Online Coalition, which the Netherlands founded in 2011 together with the US. Finally, the Dutch government believes that Internet freedom should also be a central theme at the Cyberspace Conference which the Netherlands will host in 2015.

16

Competitiveness: A healthy market is characterised by a dynamic of continual investment

and innovation. The government contributes to this by introducing incentives for competition

where necessary. It is also the rationale behind the European competition policy.

PART 3 Competitiveness, freedom and reliability in the Internet

economy

In this section competitiveness, freedom and reliability are weighed against the fall spectrum of the

Internet value web: telecom, media and Internet are therefore regarded as forming part of the

same economic system. This produces five new policy issues which are discussed on the basis of

the guideline from Part 2.

▪ The section on competitiveness will look at:

I. Maintaining the dynamic of investments and innovation in an European internal

digital (telecom) market

▪ The section on freedom will look at:

II. Neutrality deeper in the Internet value web

III. Convergence of audiovisual services

▪ The section on reliability will look at:

IV. New players and extension of the duty of care in relation to integrity, continuity

and privacy

V. Defining duty of care and the implications of ‘profiling’

I. Internal (telecom) market

Market developments: the Netherlands is in a good starting position, but that is no reason to rest

on our laurels. International developments make more European cooperation essential.

European telecommunications policy is aimed at stimulating competition between and on networks

in order to foster innovation and growth in this market. This is the most important objective

underlying the European regulatory frameworks which, since the first directives in the 1990s, have

virtually left the national telecommunications markets to their own devices. The aim was not so

much to create a unified European telecom market, but rather to break up state monopolies and

introduce market forces by imposing ex ante obligations on the former state monopolies. The

feeling was that the envisaged European market would emerge on its own. That has not happened;

the European market still consists of 28 individual markets, corresponding with the number of

member states, and the fragmentation which the European Commission wished to avoid is still a

reality.

17

The trend analysis (Part 1) described how the Internet has led to quantitative changes in the

investment climate and the earnings models for telecom providers. Here, the more qualitative

characteristics are added to this picture.

Infrastructure…

•••• The Netherlands stands out very favourably among the collection of 28 European markets by

having more than one (2-3) fixed telecom networks in addition to two specific television

networks (satellite and Digitenne) and 3-4 larger mobile network providers.

•••• On top of that, the broadband market in the Netherlands is especially dynamic compared to its

European neighbours: Internet coverage, both fixed and mobile (HSPA) is virtually 100% in the

Netherlands. According to Point Topic, the coverage of technology and infrastructure offering

speeds of more than 30 Mbps (FTTH, FTTP, Docsis 3.0 and VDSL) in the Netherlands is 98%.

This puts the Netherlands at the top of the European tree; by way of comparison, the figure in

France is 24% and for Europe as a whole 54%. In addition, the Netherlands is moving

relatively quickly within the EU in rolling out fibre-optic cable (available to around 21% of

Dutch households as at mid-2013). The speed and capacity of the fixed networks has steadily

increased over the years thanks to the move from analogue to digital technologies, the

continual improvement of those technologies (ADSL2(+), VDSL(2), DOCSIS 3.x) and the

introduction of fibre-optic networks. Given the rapid growth in data traffic of more than 40%

per year, this can without reservation be described as a top performance.

•••• The reason for this dynamic in the Netherlands can be traced in part to the convergence in the

networks: technological developments within the networks and the emergence of the Internet

as a universal distribution platform means it is now possible to offer more different services

over networks, causing the traditional dividing lines between networks to disappear. The

traditional copper telecom network now offers Internet and television services alongside

telephony. Similarly, cable networks now offer telephony and Internet alongside television. This

has given rise to robust infrastructure competition between KPN and the cable companies,

which in turn has fuelled high investments in Dutch networks averaging around 2.5 billion

euros per year over the period 2005-2010 (source: Dialogic 2012). In order to be able to keep

pace with cable companies over the longer term, KPN is investing in upgrading its copper

networks (pairbonding, VDSL2, phantom mode) and installing fibre-optic networks. The cable

companies, too, will continue upgrading their networks (DOCSIS 3.1 and further).

18

Figure 1. Broadband: retail connections per type (source: ACM 2013)

Broadband: retail connections per type

Aantal aansluitingen = number of connections Glasvezel = Fibre-optic Kabel = Cable Totaal = Total

• Meanwhile, there has been considerable consolidation on the mobile networks, with the number

of providers reducing from five to three. This number increased again to four following the

auction in 2012, with Tele2 entering the market as a new player. The coverage of LTE is now

more than 60%, and the expectation is that LTE (4G) will have been rolled out across the

whole of the Netherlands by the end of 2014.

Earnings models on the networks are changing…

• A commercial shift is taking place on the networks. As indicated in the trend analysis, the

emergence of over-the-top (OTT) services is confronting telecom providers with new

challenges. This will be particularly noticeable if audiovisual services prove to be a great

commercial success and if the Internet of Things also gets properly underway.

• One constant in this narrative is that the commercial and competitive relations for services on

the networks are changing rapidly and that the key is increasingly effective access to (local

loop) networks, both for competing (with network owners) providers of digital communication

services and for specialist services. Telecom providers will thus have to rethink their earnings

models – and are doing so. One option is to project themselves more as a platform offering

bundled services. The market for triple play bundles (telephony, Internet and television) and

quadruple play (telephony, Internet and television plus mobile) is gaining ground (see figure

19

3). Users increasingly want to be able to communicate and have access to services anywhere

and at any time. The expectation is that the traditional telecom services as well as television

will increasingly be taken over by providers of Internet services. The networks of the telecom

providers remain crucial because they are the access portals to the Internet and the specialist

services.

Figure 3. Subscriptions with bundled services (source: ACM 2013)

Aantal abonnementen met gebundelde diensten = Subscriptions with bundled services Breedband en vaste telefonie = Broadband and fixed telephony Breedband en televisie = Broadband and television Televisie en vaste telefonie = TV and fixed telephony Totaal gebundelde abonnementen = Total bundled subscriptions [Verder, punten in getallen dienen verwijderd te worden]

•••• In mid-2013, Dutch tariffs for subscriptions involving a combination of broadband Internet and

television services (dual play) were among the lowest in the international benchmark. If fixed

telephony is also purchased (triple play), the Dutch tariffs are higher, comparable with those in

other countries (TNO 2013).

International position of the Netherlands and Europe and the Brussels regulatory framework…

• As stated in the Digital Agenda, the Netherlands is in an excellent starting position, but that is

no reason to rest on our laurels. The European Commission is concerned that Europe is falling

behind the US and Asia. The Commission observes that the days when Europe set international

standards such as GSM and European companies such as Nokia and Ericsson were market

leaders are gone9. The European Commission sees the lack of investment in broadband in

Europe as the reason for this. Broadband is regarded as the catalyst for the development of

services: only 4% of the EU currently has access to 4G, compared with more than 90% in the

US10. These are sobering figures. However, it is important to analyse carefully the reasons for

9 http://esharp.eu/big-debates/the-digital-agenda/133-taking-leadership-in-the-digital-economy/

10 idem

20

these differences between Europe and other parts of the world. For example, research has

shown that the coverage of superfast broadband and the level of investment are higher in the

US, but that the costs of basic broadband are also higher and the average speed of the

network actually slower (source: WIK/TNO 2013). BEREC, the Body of European Regulators for

Electronic Communications, also notes that Europe’s shortfall relative to other parts of the

world is a complex matter. For example, BEREC points to the much greater rollout of 3G in

Europe, as a result of which the transition to 4G is much more gradual. In the US, providers

are in reality leaping from 2G to 4G. BEREC also observes that the four largest players in

Europe have a market share of more than 60%, and that the two biggest European players

together have more subscribers than the two biggest American providers11.

• In any event, it is certain that the differing interpretation of European regulations leads to

different conditions for access to the European telecom market, which naturally does nothing to

foster the competitive position of Europe as a whole. The Netherlands therefore fully supports

the objective underlying the new package of measures for the telecom market as put forward

by Commissioner Kroes, which marks a major step forwards in addressing the fragmentation of

the European telecom market. More harmonisation in market regulation and the issuing of

frequencies could make it easier for telecom providers to operate across the entire European

continent. It is very important to ensure net-neutrality in the new European Regulation,

because that protects the rights of the European citizen to an open and free Internet and

fosters innovation on and via the Internet12.

• At the same time, there are a number of caveats concerning the measures proposed by the

European Commission. The Commission sets the bar for competition on and between networks

too low by suggesting that having two competing networks is sufficient to remove market

regulation in time and at the same time by demanding a major role for itself in setting the

rules. The growing influence of the European Commission on market regulation is at odds with

the independence of regulators. There is a danger of market regulation being used to achieve

short-term ends. Political independence is essential in ensuring that market regulation is based

on expertise and being able to offer market parties adequate legal certainty.

• There is another way. BEREC, the Body of European Regulators for Electronic Communications,

could play a much more prominent role in ensuring consistency and harmonisation of

regulation. BEREC would need to take over this role from the Commission and develop a

European line for all market regulation issues and the European consumer package (including

the forthcoming European law on net neutrality). the draft rulings of regulators would have to

be tested against these general principles.

• The European route described in the guideline is not only a task of the Commission or other

member states; the Netherlands itself will have to demonstrate discipline in all areas and

develop national legislation only in exceptional cases. That may seem logical, but it has

consequences. In due course this will also apply for consumer protection, an area where the

11 BEREC views on the proposal for a Regulation ‘laying down measures to complete the European single market for electronic

communications and to achieve a Connected Continent’ (17 October 2013, BoR (13) 142).

http://berec.europa.eu/eng/document_register/subject_matter/berec/opinions/?doc=2922

12 For a detailed description of the Dutch standpoint on the new Regulation for a Connected Continent, see: Parliamentary papers, session

2012-2013, 22112 No. 1720.

21

Netherlands has to date supplemented the European regulations on various points. The

Netherlands endorses the drive for harmonisation of consumer rights at European level. The

consumer package currently being proposed by Brussels can therefore – in broad terms –

count on the support of the Netherlands.

Dutch long-term vision on the completion of the European internal (telecom) market

The foregoing outlines the Dutch input for the negotiations on the package of measures currently

on the table, but this brief is intended as a vision, as a look to the future. It can therefore focus on

aspects which have been omitted from the package, such as how to deal with regulations given

that the boundaries between telecom, media and Internet are blurring. An important piece of

regulation is the ex ante market regulation of the telecom networks. This is the first piece of

regulation that the Netherlands would like to evaluate for its usefulness, need and effectiveness set

against the broader context of the Internet value web. This desire can only be realised in

partnership with the member states, the European Parliament and the European Commission.

Following text therefore outlines the Dutch agenda in Europe for the medium to long term, for

example during the Dutch Presidency of the European Union in the first half of 2016. This agenda

of course fits alongside the continuing Dutch encouragement to Brussels to clear the way for

European services, among other things by modernising the regulations on copyright.

Evaluation of the European ex ante market regulation

Europe’s ex ante regulation of the telecom market is intended to foster competition on and

between infrastructures. It does this by imposing access obligations in advance on those with

'significant market power'. In the Dutch market, that has to date been KPN. The starting point is

that, given the high costs of installing infrastructure, competition will not get off the ground

without prior intervention. The Commission suggests that this regulation be temporary in nature:

one day the competition will have become so fierce that access regulation is no longer necessary,

and if there are two installed networks that situation has virtually been achieved. The Netherlands

is on the record as being unconvinced by this standpoint that ‘two is enough’, and therefore argues

for the maintaining of the access regulation, including in a market where there are two competing

networks. A market with two players can in some cases work well for a short time, but sustained

and robust competition requires more than two players. Competition is moreover becoming

increasingly important because the networks are increasingly becoming the access portals to the

Internet economy (see trend analysis and market analysis earlier in this document). Without robust

competition at network level, innovation both within the networks (including convergence of fixed

and mobile) and on the networks (new services and possibly the development of a pan-European

offering) will be impeded. Effective competition, if necessary supported by access regulation, is

thus relevant for the development of the Internet value web as a whole. The Netherlands therefore

believes that an evaluation of the present ex ante market regulation should look very specifically at

the importance of access to (local loop) networks.

Attention should also be devoted in this regard to configuring access to high-grade telecom

services for non-telecom providers such as the media, care or education sectors. It is not always

easy in practice to build bridges between these two (and more) worlds, which means that

22

Freedom: The aim is to create an Internet economy that is free of improper influence from

governments, businesses or other interest groups. This is important in order to protect civil

freedoms, but also for the sake of the (free) market.

intelligent applications sometimes fail to get off the ground. Non-telecom parties – particularly

those that are further removed from the technology, such as the education or care sectors – are

still not entirely clear about exactly what they want to achieve on the network and precisely what

demands the telecom provider needs to meet. Moreover, they often operate in a very fragmented

way, making it difficult for telecom providers to construct a good, commercially viable offer. In

anticipation of steps at European level, the Ministry of Economic Affairs wishes in any event to

attempt to improve communication between these parties, and will set up a number of dialogues

for this purpose, initially between the energy sector and the telecom sector.

It is also important that these frameworks are as free from regulation as possible. Although the

present regulatory framework provides for customisation, it also leads to highly detailed micro-

regulation and to lengthy legal procedures. As a result, market players have too little regulatory

certainty. This leads to uncertainty in the market, which in turn impacts on the investments in

networks, which are often earned back only over the long term. Moreover, the implementation

costs are high, both for the regulator and for the market. The Netherlands therefore believes that

the evaluation should devote specific attention to simplification, regulatory certainty and offering

scope for small players and challengers. This should be accompanied by an investigation of

whether elements from the system that was used in the earlier regulations (1998-2002) could offer

benefits. Under what was known as Open Network Provision, access obligations automatically

applied once a party achieved a certain market share. The Netherlands advocates a study to

explore whether the present market could benefit from a return to the application of automatic

standardised European access obligations for parties with a substantial share of the connections to

electronic communication networks. These access obligations would be intended to enable

alternative providers to combine their own network with access to local loop networks and thus

enable them to place their own independent offering in the market. This could also provide

incentives for continued investment in Next Generation networks. These standardised access

obligations could then for example apply for those components of the networks that are not

replicable (local loops).

II. Neutrality deeper in the Internet value web

The Netherlands has played a pioneering role in Europe in the field of net neutrality. It was the first

country in Europe to establish net neutrality in law in support of a free and open Internet, and

continues to staunchly support an open and free Internet, including in the negotiations en route to

European legislation on net neutrality. In the view of the Netherlands, the Internet remains an

open space in which users are free to consult or consume the information and services of their

23

choice, whilst at the same time making it easy for businesses to reach a wider public in a simple

manner.

The expectation is that comparable neutrality issues – which in essence are about (non-

)discrimination and access – will become more common in the future with regard to ‘gatekeepers’ –

for example, intermediaries that select information for users and help them choose from the

available offerings. They include search engines, social networks and electronic programme guides,

but also manufacturers of televisions and smartphones. These gatekeepers are in a position to

determine which information the user is able find reasonably or very easily, and which are more

difficult or impossible to find. The commercial interests of these gatekeepers often play a role in

the selection and presentation of information. Given the continuing growth in the supply of

information and content, filtering it provides a useful function for users. At the same time, this

filtering and selection process means that some information or content does not reach the user,

and this can influence the plurality, diversity and (possibly) impartiality of the information to which

users can gain access. In addition, it is essential for businesses that they can be readily found in a

world where the volume of information, and therefore the choices open to users, is only increasing.

The Dutch government believes it is important to make clear to users that information is filtered

and that they have the ability to turn that filter off, or even to influence it. In addition to

gatekeepers who filter this information, there are also gatekeepers who possess hardware or

software on which third parties can build or on which those third parties are dependent for the

development or delivery of their service. Examples are operating systems, software platforms or

digital passes. In reality, these are software and hardware commodities or semi-manufactures, the

essential building blocks for the development of digital products and services for third parties.

The dependence of third parties on these ‘assets’ and the way in which gatekeepers decide which

information they display, means gatekeepers are in a certain position of power. It is important to

prevent abuse of this power or to combat it through general competition law. Given that these

gatekeepers are often large multinationals, the European Commission is the appropriate authority

to act against abuse of power, and it is therefore desirable that the European Commission develop

a vision on generic competition policy in these markets. The Dutch government is willing to make

an active contribution to this, and with this in mind, a study will be carried out in 2014 to

determine what the essential digital commodities are for today and coming years. The results will

then be shared with the European Commission. As in the area of net neutrality, the aim of the

Dutch government here is to play a pioneering role and identify potential problems at an early

stage so that they can be addressed. A key principle is that users must have freedom of choice

concerning the information they are able to consult. At the same time, innovation must not be

unnecessarily impeded by imposing rules before the commercial landscape has had an opportunity

to crystallise. The general competition law offers a suitable framework for this.

24

III. Convergence of audiovisual services: regulatory distinction

between linear and non-linear TV viewing is starting to become

untenable

As discussed in the trend analysis, on-demand and deferred video and TV viewing is on the rise.

Examples in the Netherlands include the Uitzendinggemist.nl and YouTube websites and the

introduction of Netflix. Increasingly intelligent hardware and the new possibilities it offers (e.g.

timeshifting or a Connected TV which puts together a personalised ‘TV evening’ for the consumer)

are blurring the distinction between linear and non-linear viewing. At present, around 60% of new

televisions purchased in the Netherlands are smart or connected TVs; 50% of Dutch households

already own such a television with the ability to connect to the Internet, and 35% are actually

connected. This puts the Netherlands among the top five countries in the world in terms of the

number of IP-connected products sold. Sales of smartphones, tablets and notebooks are also still

increasing; it is estimated that there will be approximately 3 million connected devices in Dutch

households by the end of this year. The economic crisis thus appears to have had less impact on

the average Dutch citizen when it comes to the purchase of new, innovative products that are

capable of connecting to the Internet (source: GFK, Trends in Digitale Media, 2013).

Providers are responding to this by revamping and enlarging the service offering, by forging

strategic alliances with each other and with content providers and/or by developing new platforms

to bring their content to the end-user. As stated earlier, the value chain is becoming ever more

complex and consequently difficult to oversee. At the same time, the access thresholds have been

lowered enormously; it is easier than ever before to reach consumers directly. However (quickly)

the market develops, the ways in which content reaches the consumer – cable, copper networks,

ether, satellite, linear or non-linear – will no longer be important in the future, because consumers

do not perceive any difference between them. Consumers also see no difference between linear,

direct viewing a sports contest and watching that same contest in its entirety at a later time

through on-demand viewing. This does not alter the fact that the nature of the programme (a live

sports broadcast versus highlights) can carry a different advertising regime, for example (with the

distinction between linear and non-linear no longer being relevant). Given the importance of a level

playing field, it is important for providers that the rules are the same for all of them, regardless of

the distribution method chosen. It is also important for other companies which do business on the

Internet and which are commercial consumers of services that the situation (rapidly) becomes clear

in this regard; positions are already being taken, and large, global players (Apple, Google, Netflix,

Amazon) are emphatically making themselves heard.

The present rules as set out in the Audiovisual Media Services Directive are based on the

technological distinction between linear and non-linear viewing, with fewer rules applying for non-

linear viewing in areas such as advertising or protection of minors. There are historical reasons for

this distinction, for example the fact that the ‘linear’ viewer (or listener) has less control over the

available programmes and programming. The non-linear world has developed recently within the

autonomous Internet and outside the linear frameworks. Users have more influence over what,

25

when and how they consume content. Non-linear media use is increasing enormously, especially

among the young, while the boundary between linear and non-linear viewing is becoming

increasingly blurred. For example, viewers can pause linear television broadcasts and resume

watching later, or fast-forward through commercials. Although still relatively small, deferred13

viewing for up to a week post-broadcast currently accounts for 4.7% of total viewing density. The

number of media streams consumed daily is also increasing14 (source: Stichting KijkOnderzoek,

figures for October 2013). The amount of advertising in and around non-linear services is also

growing.

As per the guideline described earlier, the government is grasping the opportunity to review

whether the present rules on linear services are still necessary and useful, and whether there are

ways of reducing the number of those rules. As stated in the government response to the European

Green Paper on the convergence of audiovisual services15, the Netherlands sees convergence as an

opportunity to give careful consideration to a coherent regulatory framework and to reduce the

regulation of linear services. The position of content providers will also be considered as part of this

exercise, including those that are funded from the public purse. On the one hand, the aim is to

ensure that programmes continue to be accessible and easy to find, and on the other to prevent

distortion of competition with commercial providers. The Netherlands is prepared to take the lead

in the European debate on these matters. At national level, the government will review the need

and scope for introducing more cohesion in the relevant regulatory framework.

A development which is taking place in a number of countries, including the US, is ‘cord cutting’:

the increased media content offered over the Internet is leading to a growing trend among US

consumers to take out an ‘Internet-only’ subscription and cancel their relatively expensive –

compared with the Netherlands – television subscriptions. By contrast, the trend in the Netherlands

is increasingly towards ‘all-in-one’ packages, for example because they are easier or cheaper. As

long as consumers are free to make this choice, there is no problem. The increase in and

consumption of many new OTT services (free or otherwise) could however lead to a decline in the

importance of and consumer demand for an extensive TV package in the Netherlands, too. Some

(broadcasting) network providers do not yet offer their customers the ability to take out an

‘Internet-only’ subscription, and in reality force their customers to take out both an Internet and TV

subscription. This form of mandatory linkage limits users’ freedom of choice. The government

wishes to work in partnership with the market to explore whether this linkage could be eliminated,

taking into account the technological impediments which may play a role in the background.

13 Deferred viewing as referred to here does not include on-demand viewing of films, series and documentaries via providers such as

Netflix, Pathe Thuis, Ximon and Ziggo On Demand. This means that the total non-linear viewing behaviour could be higher than reported

here.

14 Recent figures from the Dutch television audience measurement service SKO show that in the month of October 2013, the number of

(complete) streams of some popular programmes exceeded 150,000.

15 Tweede Kamer (Dutch House of Representatives), session 2012-2013, 22 112, No. 1659.

26

IV. New players and extension of the duty of care in relation to

integrity, continuity and privacy

The rapid rise of the Internet and its scalability have thrown the thinking about integrity, continuity

and privacy into sharp relief and increased the understanding of them. Consumers today have very

high expectations of the Internet: Everything (net neutrality) must be available on all devices

(tablet, computer, mobile telephone), everywhere (including in rural areas) and at all times

(without disruptions) and must be protected (integrity and guaranteed privacy). Dependence on

the Internet is already so great that the consequences if things go wrong are considerable; for

example a fire in one of Vodafone’s key servers caused the payments system (debit cards) in a

part of the country to shut down. Although the number of major network disruptions has been

limited in recent years, alertness is called for16. The dependence on networks will only increase in

the future, and intensive use of smartphones and tablets will greatly increase the pressure in the

airwaves. Even critical business processes are sometimes based on wireless Internet connections,

with the assumption that they will always work. The telecommunications infrastructure is one of

the vital infrastructures on the list of vital sectors. Vital infrastructure has been defined as a

collection of ‘products, services and the underlying processes which, if they break down, can give

rise to social disruption. This may be because of a large number of victims and extensive economic

damage, or where repair will take a very long time and there are no real alternatives available,

whereas those products and services are essential'17. It is important that telecommunications

infrastructure in a broad sense, and therefore also the Internet, is recognised as being of crucial

importance. The difficulty is that the dependence on products, services and underlying processes

constantly has to be redefined because the market is developing continually.18 This discussion

recurs regularly when regulations are renewed; this is discussed further below.

The integrity of networks and services will also become increasingly important in the coming years.

Networks and services make intensive use of all manner of components and devices, without it

always being clear whether the levels of security are up to date. This can lead among other things

to abuse of data, large-scale distribution of malware or the creation of botnets, and dents the

confidence of buyers and end users. Both the market and the government will have to meet the

16 Radiocommunications Agency press release, 27 June 2013.

17 Parliamentary papers, session 2004-2005, 26643 No. 75.

18 A project will be launched in 2014 under the auspices of the NCSS2.0 in which the government will work together with vital players to

map out which ICT-dependent systems, services and processes should be classed as vital. This is linked to a programme that sets (basic)

standards for the security of those systems, services and processes.

Reliability: integrity (accuracy of information, no security infringements), continuity (no

breakdowns or dropout) and protection of privacy are necessary now and in the future to ensure

confidence in this market. Without justified confidence, there will be no growth.

27

expectations of these buyers and end users as well as possible. However, those buyers and users

will also have to take steps themselves. This demands increased awareness and a perspective for

action. A great deal has been invested in recent years in awareness-raising programmes aimed at

various target groups; campaigns in the Netherlands include Digibewust, Postbus51 Veilig and the

AlertOnline campaign in November 2013. While these campaigns have led to a considerable shift

lack in recent years from 'aware' to 'unaware', a further transition will now have to be made from

‘aware’ to ‘competent’19. The Dutch government will therefore continue its efforts to raise the

awareness of service buyers and end users (particularly individual users, SMEs and the self-

employed) regarding safe Internet use by informing them about how to use the Internet safely and

do business online securely, and offering them the practical tools they need to put awareness this

into practice. In terms of awareness-raising and provision of information, the Digiveilig programme

supports both the National Cyber Security Strategy20 and the vision on e-privacy.

The importance of investing in reliability is clear. Reliability contributes to justified trust in the

Internet and online services, and is one of the conditions for innovation and growth in the Internet

economy21. A recent study on the economic aspects of cybersecurity carried out by the Netherlands

Bureau for Economic Policy Analysis (CPB) makes clear that there are market imperfections in

relation to reliability (information asymmetry regarding software, ‘first-mover disadvantage’) which

legitimise government action22. The government’s role in this regard is discussed further below.

Legislation and network governance focused on network reliability

Digital communication network and service providers are and will continue to be very important in

offering that reliability. It is for this reason that the Dutch Telecommunications Act includes a duty

of care. This is a broad obligation imposed on providers that fall within the scope of the Act to

ensure integrity, continuity and privacy23. The Act makes providers accountable for their

responsibilities and stipulates that they must take appropriate technical and organisational

measures to safeguard integrity, continuity and protection of privacy. Given the speed of

technological developments and the diversity of measures, the Act does not describe those

measures in further detail; in the first instance, that is left to the market.

This does not mean that the government regards reliability as unimportant. On the contrary, the

policy on reliability is clearly determined by the outcomes of public-private partnership, in which

the initiative has sometimes been taken by the government and sometimes by the market. The

primary aim is to find incentives which will enable the envisaged reliability to be achieved in

tandem with the prevailing business models. The principal way of approaching this is through

network governance and facilitating market initiatives, and where necessary through legislation

and regulation. As an example, in the wake of the fire in a Vodafone server referred to earlier,

mobile providers made agreements on the deployment of regional roaming services if a calamity

19 National Cyber Security Strategy 2, 28 October 2013, TNS NIPO.

20 Parliamentary papers, session 2012-2013, 26643, No. 291.

21 Groeien door veiligheid, Ernst & Young, commissioned by the Ministry of Economic Affairs (2011).

22 CPB study on Economic aspects of Cybersecurity (August 2013).

23 Chapter 11.3 and 11.a1.

28

with comprable impact should re-occur. In the first instance, these agreements cover voice

telephony and SMS. Research currently being carried out and scheduled for completion early next

year will hopefully show to what extent such collective solutions are also needed to deal with the

rise of M2M communication, or whether there are alternatives in the form of individual networks or

use of WiFi networks with national coverage. One caveat is that purchasers and users will also have

to take their own measures. Given the chain-dependency, consideration will also have to be given

to whether other service providers also need to be accountable for their duty of care as regards

continuity, partly in the light of the proposed EU Directive on Network and Information Security

(see below).

An example in the area of integrity is Abuse HUB. The Abuse Information Exchange (Abuse HUB)

was set up in August 2012 with financial help from the Ministry of Economic Affairs and under the

banner Internet Safety Platform (Platform Internet Veiligheid). The aim of Abuse HUB is to

centralise data in order to improve the supply of information to its members concerning botnets

and other forms of Internet abuse in the Netherlands. Those members are service providers who

provide basic facilities for the Internet, such as ISPs, TLD operators and hosting providers. It is

important to bring in other parties, such as mobile operators, while a comprehensive approach to

botnets also requires collaboration from investigative agencies. The DDoS attacks on Dutch banks

in the summer of 2013 have also led to a strengthening of the cooperation with banks and the

National Cyber Security Centre (NCSC). The collaboration and active participation within and

beyond the chain will be developed further over the coming months via the Internet Safety

Platform. Whether Abuse HUB has actually contributed to a ‘clean Internet’ will become apparent

from a measurement to be carried out in 2014.

Rolling out network governance reliability further in the chain: Internet standards

As argued earlier, the discussion of reliability does not end with the networks. Reliability is

important for the entire Internet value chain, including the reliability of the Internet itself

(interpreted here as the reliability of the Internet infrastructure). The reliability of the Internet is

largely determined by the architecture and the protocols used for handling Internet traffic. There

are numerous protocols and standards that can be applied both to enable the quantity of data

traffic to be managed and to ensure its integrity. Standards are developed internationally based on

a multi-stakeholder approach. The adoption rate is generally low but growing steadily. There are

currently too few incentives to apply standards, and there is too little scope to enforce their

application. Problems such as ‘first-mover disadvantage’ or information asymmetry as referred to

in the CPB study are often the root cause of this. The advantages of standards are not always

recognised due to ignorance. The Netherlands has always been a strong advocate of Internet

standards at international level, such as IPV6 and DNSSEC, and numerous initiatives have been

rolled out to achieve wider application, such as Taskforce voor IPv6. However, the time is ripe to

look at and apply the relevant standards in combination rather than in isolation. The Ministry of

Economic Affairs will work in partnership with the Dutch Standardisation Board and Forum (Bureau

Forum Standaardisatie) to set up a public-private platform with the brief of increasing the

application of standards such as IPV6, DNSSEC and DKIM. The central question is how these

parties can work together to ensure that the Dutch Internet remains up-to-date in terms of

standards and does not fall behind. Joint action creates greater urgency and contributes to wider

29

dissemination of knowledge. Participants in the Platform include SURFnet, SIDN, RIPE, ISOC, NLnet

labs and the government. Given the positive external effects of the wide use of standards, the

possibility of making application of standards more enforceable is also being explored.

Expanding scope of legislation further in the chain: duty of care

Network governance is the model used for addressing a wide range of reliability issues effectively.

Legislation plays a role in the background, as a legal blessing when arrangements are working well

in the market or as a sanction when they are not. As stated earlier, the Telecommunications Act

governs the accountability of market players as regards integrity, continuity and privacy. That is a

good thing, because it makes those concerned publicly aware of their responsibility and means

they can be held accountable for it. It is important that obligations only affect market players that

fall within the scope of the Telecommunications Act and others covered by the definition of ‘public

providers of digital communication’. Here again, therefore, there is an imbalance between

traditional and ‘new’ players. The security breach at the Diginotar certificate authority, for

example, made clear the dependence on service delivery (including from central government and

vital sectors) of the use of certificates. It prompted the development of a notification duty for

security breaches as well as moves to regulate digitally signed certificates. The question now on

the table is to what extent there is a task the government in regulating these certificates. However,

this discussion is of course much wider: should Internet players such as web hosting providers,

Internet hubs (see also Box 2), e-commerce platforms, Internet payment systems, social networks,

search engines, cloud services or other gatekeepers which the market may produce also be

covered by these measures? Here again, the Dutch government advocates a European approach. A

common high level of network and information

security requires a level playing field at European

level. The new EU Directive on Network and

Information Security not only extends the duty of

notification and care from the telecom directives

to include vital sectors that are connected to the

Internet, such as the energy sector, banks, etc,

but also to include a number of the key Internet

services from the value chain referred to earlier.

To what extent these parties will actually have to

be challenged on their responsibility depends on

their role in the value chain. The European

Parliament believes that Internet services should

play a limited role and does not regard it as

proportionate to impose a duty of care and

notification on the services listed in the Directive. Rather, the Parliament believes this should be

limited to the vital sectors. In the absence of solid substantiation by the Commission, in principle

this echoes the Dutch standpoint24. The question, however, is for which roles in the value chain

legislation is needed, and of course what is then proportionate. For the moment, this is a problem

24 Parliamentary papers, session 2012-2013, 22112 No. 1587.

Box 2 AMS-IX

The Amsterdam Internet Exchange (AMS-IX) is

the biggest Internet hub in Europe and the

second largest in the world. Many national and

international providers are connected to the

AMS- IX, handling large volumes of data traffic.

AMS-IX thus plays a key role in the continuity

of Internet traffic. The risk of dropout is not

great, and its impact would seem to be limited

at the moment – though this is determined by

the number and size of the backup connections

of the users of AMS-IX and by the scope for

handling the traffic via other IXs elsewhere in

the world. Given the increased

interconnectedness at international level, this

latter aspect will be examined more closely in

early 2014.

30

that all negotiators in Brussels are wrestling with. Over the coming months, the Netherlands will

initially discuss this potential extension with the market players themselves. The outcomes will be

incorporated in the negotiations on the EU Directive.

As part of this exercise, the question of how the regulations can be made simpler and

(administratively) lighter for operators can also be addressed. There are for example many

notification duties which impinge on continuity, integrity and data leakage, and notification duties

have been announced and are in preparation in relation to security breaches. Where possible,

streamlining of the notification duties has already taken place. The integrity of the measures

announced will also be critically reviewed, as will the scope for concentration to create a single

point of contact in order to minimise the amount of red tape for the industry.

V. A duty of care for the future

Apart from the question of who is covered by the duty of care, technological and market

developments will lead to discussion about how the content of the duty of care of providers should

be defined, especially with regard to privacy. ‘Paying’ for free services by giving personal details is

already a familiar phenomenon, but developments in the market - see also the trend analysis - are

moving towards even more personalised content (‘profiling’) based on even more analysis of even

more personal data (Big Data). This is an area that is developing rapidly, and the economic growth

potential of the sector is considerable.

The government vision on e-privacy25 – to some extent the precursor of this (broader) vision -

made clear that a balance needs to be struck between the importance of proper protection of

personal details (condition: reliability) and the innovative capacity of the Internet economy

(condition: competitiveness). As already stated in the previous section, a lack of digital trust on the

part of end users will harm economic opportunities. The preconditions for raising this digital trust to

a higher level are giving end-users control over their personal details, transparency regarding how

those details are processed and responsibility on the part of providers. These conditions are even

more relevant as the amount of data increases (Big Data). This also emerged from the debate in

the Dutch Lower House on 10 September 2013, when an undertaking was given to inform the

House further on how the issue of privacy will be dealt with in the context of Big Data. A first

reflection is given below, which will be followed in the spring of 2014 by further considerations in

relation to the phenomenon of profiling.

Big Data can be described as the entire body of available information (in various forms, both

structured and unstructured) which can be analysed within a specific context and which leads to

new applications and services. It explicitly contains not only personal details, but a multitude of

different types of information (from meteorological data to sensor measurements in oil refineries).

The rise of ICT and the Internet means that the quantity of available data is only increasing:

- It is predicted that, by 2020, there will be 30 billion devices with Internet connection;

25 Parliamentary papers, session 2012-2013, 32761 No. 49.

31

- The amount of medical information available doubles every five years;

- Google and the National Library of the Netherlands are working together to scan 160,000

books and place them online.

ICT thus ensures that Big Data is available, accessible and able to be shared, analysed, enriched

and applied. Intelligent data analysis is therefore becoming essential in ensuring that (work)

processes run more effectively and more efficiently. A number of large companies such as Shell

(seismology), Tata Steel (research), Rijk Zwaan (vegetable breeding) and banks (customer

contacts) are already actively exploring Big Data. Analysing data thus creates major opportunities,

both commercial and social, because analysis of such diverse types of information on such a large

scale was impossible in the past. Moreover, as people make more and more use of the Internet,

the amount of available data is increasing there, too, and with it the opportunities to link data

collected in different contexts. If Big Data is placed within the context of the Internet (and its ever-

growing use by consumers), this can raise privacy-related questions, which in turn can put

pressure on digital trust and confidence.

Major attention is currently being given to the amount of information that companies collect about

Internet users for things such as marketing purposes. There appears to be an imbalance between

the control that the Internet user can exert over the release of his or her personal details and the

degree to which businesses can process and commercialise those details. Processing data left

online using complex algorithms can determine which news reports or search results are

considered interesting for a given Internet user, which status updates are displayed or which

content is the most suitable – all without the Internet user being aware that a preselection has

been made. Some techniques are making it ever easier for companies to separate individuals into

categories, without this 'online individual' having to be linked to a natural person. This

categorisation is sometimes described as 'profiling'. Internet users should be able to exert more

control over their online profiles if they so wish. A topic such as e-privacy is difficult to control

using the traditional levers of government action through legislation; it is important first to engage

in dialogue with the relevant market players (network governance). Consequently, the ICT Big

Data breakthrough project, which is focused on exploiting the economic and social opportunities of

Big Data, will also need to devote attention to any privacy issues.

The law is of course still relevant, including in the dialogue with the industry. Whenever personal

details are processed, the Personal Data Protection Act (Wet Bescherming Persoonsgegevens, or

Wbp) applies. Here again, the accountability of those concerned needs to be defined. For example,

a key principle in the law is that personal details must not be processed for a purpose that is

irreconcilable with the purpose for which they were collected, and more data may not be collected

than is strictly necessary for the ultimate purpose. The Dutch Data Protection Authority (CBP)

established a series of 'guidelines ‘ in early 2013 showing how the CBP applies the security

standards set out in the Wbp. Section 13 of the Wbp sets out a duty of care which requires that

companies and public authorities that process personal details must take 'appropriate technological

and organisational measures' to secure those personal details. Steps must be taken to ensure that

personal details and personal data entered by users on websites and online forms cannot be

misused by being transmitted via the Internet unencrypted and unsecured. The

32

Telecommunications Act is also important in this context. It contains a number of provisions

concerning the confidential nature of communication, such as the use of traffic and location data

and the destruction of those data. The provision on cookies also sets the conditions for storing and

reading data from a peripheral device. The principle is that the user decides whether his or her

data can be used, and if so, for what purpose. This means that personal data can only be used with

the permission of the user, who must have been properly informed in advance.

Finally, it is important to continue the dialogue on online privacy across national borders, including

at European level. For example, efforts are under way to improve the position of the end user in

the drafting of the forthcoming Regulation on data protection. This regulation will replace the

outdated EU Directive 95/46/EC, which was implemented in the Netherlands in the Personal Data

Protection Act (Wbp). It is particularly relevant in relation to Big Data and privacy that the

Regulation seeks to regulate the use and processing of personal data and the consent of end users

in this regard. A more meaningful information duty will also be needed, requiring companies to

inform end users in a clear, easily accessible and understandable way about the processing of

personal details. The Regulation also aims for a degree of data minimisation by stipulating that only

the data needed for the stated purpose may be collected. The negotiations on this Regulation are

still taking place. The Dutch government advocates a strong Regulation, which is technology-

neutral and which will provide a robust framework for the longer term26. The principles

underpinning this are a level European playing field and limiting the amount of red tape.

26 Parliamentary papers, session 2012-2013, 22112 No. 1372.