Case C-1/14, KPN Group Belgium and Mobistar – telecom objections to financing Belgium’s digitally excluded [judgment 2015, ECLI:EU:C:2015:378]

The poor are most likely to be on the wrong side of the digital divide, at least according to a Belgian government report of 2010. Consequently, Belgium decided to bridge that divide by setting up a fund to facilitate access to the internet by the poor at rates they could afford – the fund being paid for by telecoms companies whose annual turnover exceeded 50 million euro. But the telecoms companies KPN Group Belgium and Mobistar refuse to pay. They say that Belgian law is unconstitutional and cannot be justified on the basis that the EU’s Universal Service Directive 2002/22/EC allows Member States the ability to introduce social tariffs for universal services.

Facts
The poor are most likely to be on the wrong side of the digital divide, at least according to a Belgian government report of 2010.

In 2012, Belgium introduced legislation setting up a fund to facilitate access to the internet and mobile services. The fund was intended to compensate those telecoms companies which provided universal services at rates the poor could afford, the so-called ‘social tariffs’. The fund was to be financed by any telecoms company with an annual turnover in excess of 50 million euro.

The claimant telecoms companies, KPN Group Belgium and Mobistar, objected to this Belgian legislation. They claimed that this was just a tax which was both discriminatory and contravened EU equality law. And there was no justification for this tax on the basis of the social tariff provisions in the EU’s Universal Service Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services (the USD).

The Belgian State disagreed. It sought to rely on Article 9(3) USD which deals with the ‘affordability of tariffs’, and provides:

Member States may, besides any provision for designated undertakings to provide special tariff options or to comply with price caps or geographical averaging or other similar schemes, ensure that support is provided to consumers identified as having low incomes or special social needs.

According to the Belgian State, it was necessary to read Article 9(3) with Article 32 on ‘Additional mandatory services’, for that Article provides:

Member States may decide to make additional services, apart from services within the universal service obligations as defined in Chapter II, publicly available in its own territory but, in such circumstances, no compensation mechanism involving specific undertakings may be imposed.

And the combination of these two provisions meant that Member States could give support to consumers for services other than those included in Articles 4 to 7 of the Directive, and such support could cover mobile services.

Such a simplistic argument was rejected by the telecoms companies. They submitted that the relevant provision was not Article 9(3) USD but rather Article 9(2) USD, which provides:

Member States may, in the light of national conditions, require that designated undertakings provide tariff options or packages to consumers which depart from those provided under normal commercial conditions, in particular to ensure that those on low incomes or with special social needs are not prevented from accessing or using the publicly available telephone service.

Thus, special tariffs forming part of a universal service could only be imposed for those services that fell within Articles 4-7 of the USD. And as a result of Articles 4(3), 5(1)(b), 6(1) and 6(3) and 7, the Directive did not permit social tariffs to be introduced for subscriptions to broadband internet and mobile phones.

Their views were fortified by reading Article 9(2) together with Article 32, which allows the imposition of special tariffs for ‘additional services’. For whereas Member States could indeed deem mobile services and internet subscriptions to be ‘additional services’, the provisions of the Directive did not entitle them to pass the concomitant unreasonable burden off as a compensatory measure to be borne by that particular sector of industry.

The telecoms companies went further: even if their argument in relation to Article 9(2) was wrong, then they submitted that there was still no force in the Belgian State’s point about Article 9(3) USD because that provision does not deal with social tariffs – the provision only envisages ‘support’ being given to people in the form of extending the time frames for customers to pay off the bills they had run up.

The telecoms companies also launched a separate attack on the Belgian legislation. They claimed that the Belgian State had introduced this tax in ways that were unconstitutional. That is to say, since the statutory measures were retroactive in effect they offended against the constitutional principle of legal certainty, and the measures were also discriminatory in so far as other tax-payers were not subject to retroactive taxes. In that context, they recalled that Article 20 of the EU’s Charter of Fundamental Rights states that: ‘Everyone is equal before the law’.

However, the telecoms companies’ claims about taxation were contested not just by the state but by Belgium’s national incumbent, Belgacom, which had been given leave to join in the litigation. Belgacom reminded the Belgian Supreme Court that, as the national incumbent, it had been the company which had borne a disproportionate degree of the burden associated with providing the social element of the universal service, and it had done so without any form of compensation.

Belgacom added that the claimant telecoms companies’ submissions about the allegedly retroactive effect of the provisions lacked credibility and a proper legal basis. This was because the retroactive effect of the measure was necessary for realising a policy which had been developed, adopted and implemented in the general interest. And since the policy differed little from earlier ones which had prevailed in Belgium’s telecoms sector, it could have been no surprise for the claimant companies to be obliged to contribute to this particular fund at the point when their annual turnover exceeded 50 million euro.

After hearing these submissions, the Belgian Constitutional Court recalled that an earlier version of the Belgian legislation had already been the subject of a CJEU reference. As a result of the subsequent rulings in Case C-222/08, and Case C-389/08, there had been an annulment of the Belgian legislation that had not only introduced a mechanism for financing social tariffs for the telephone but had also recognised that Belgacom, as the national incumbent, had borne the unreasonable burden of providing a universal service.

However, when it came to interpreting the wording of the USD, the Belgian Constitutional Court noted that it was under an obligation to refer since there was doubt as to the correct interpretation of Articles 9(2) and 9(3) USD particularly on whether the social tariff provisions applied to just fixed line telephony or could be understood as applying to subscriptions for internet and mobile services.

Questions Referred
My unofficial translation of the Questions asked by the Belgian Constitutional Court reads:

1. Is Directive 2002/22/EC […] on universal service and users’ rights relating to electronic communications networks and electronic communications services (Universal Service Directive), and Articles 9 and 32 in particular, to be interpreted as meaning that both the social tariff for universal services and the compensation mechanism provided for under Article 13(1)(b) apply not only to electronic communications by means of a telephone connection at a fixed location via a public communications network but also to electronic communications via mobile communications services and/or internet subscriptions?

2. Is Article 9(3) of the Universal Service Directive to be interpreted as allowing Member States to add special tariff options to the universal service for services other than those defined in Article 9(2)?

3. If the answer to the first and the second questions is in the negative, then are the relevant provisions of the Universal Service Directive compatible with the principle of equality enshrined inter alia in Article 20 of the Charter of Fundamental Rights of the European Union?