Pinsent Masons advises Ebbsfleet Development Corporation on critical land acquisition for garden city project
Out-Law Analysis | 04 Apr 2017 | 12:19 pm | 7 min. read
Connected and autonomous vehicles of the future will rely on strong and stable telecoms networks to allow data to flow between in-car systems and other networks and devices, such as smartphones.
In building those vehicles, manufacturers therefore must understand how telecoms regulations might apply to them, and manage relationships with telecoms providers. The past year has seen some significant developments in the industry in this respect.
Collaboration and partnerships
Both manufacturers and telecoms service providers are busy developing a wide range of products, from entertainment to navigation systems, many of which are already available and which present significant opportunities to develop new revenue streams. The efforts reflect the fact that a wide range of new technology is needed to enable new services for the connected car services.
While manufacturers are conducting their own research and development programmes, there is an acknowledgement that, to access the technology they need, they also need to work with many new suppliers from sectors they have not traditionally worked with before. The most significant of the new relationships car manufacturers are likely to have is with telecoms providers.
Industry has recognised the importance of such collaboration. In September last year, two new industry bodies were set up to bring together expertise from across the automotive and telecoms sectors and focus on issues relevant to the development of connected cars.
The 5G Automotive Association (5GAA) and the European Automotive and Telecom Alliance (EATA) signed a memorandum of understanding, reflecting their commitment to collaboration on issues such as automated driving, road safety and traffic efficiency; and the digitalisation of transport and logistics.
Major car brands such as Audi, BMW, Renault and Jaguar Land Rover, and automotive suppliers, together with telecoms companies such as Ericsson, Nokia, Vodafone and Orange, are among the businesses participating in the partnership.
The tie-up may be the beginning of a more consistent approach to telecoms in the connected car space. Up until now, many businesses looking to enjoy a future in the connected cars market have bolstered their own expertise and offerings either by acquiring other businesses in the market, or by entering into individual collaborations.
For example, Intel has announced a $15.3 billion deal to buy Israeli technology business Mobileye, which develops technology that helps advanced driver assistance systems to 'see', while last November Samsung Electronics announced that it had agreed to buy in-vehicle technology supplier Harman International Industries in an $8bn deal. Orange, Ericsson and PSA Group along with Qualcomm, have also worked together to carry out connected-vehicle field trials in France using 5G technology.
Managing new relationships
Connected car manufacturers entering into new relationships with telecoms providers must address a number of technical issues to ensure systems in their vehicles are compatible with the mobile network they rely upon. The particular challenge is that, unlike a mobile phone, it may not be possible or cost-effective to upgrade an in-built telecoms system later in the car’s life to take advantage of advances in the technology or service.
One way manufacturers can address this is to enable connections between in-car systems and users' smartphones. However, that potentially creates a complex set of arrangements and contracts between the smartphone service provider, the smartphone owner, and the vehicle manufacturer.
As they develop more connected services, manufacturers will also need to manage a number of legal issues. These start with the different ways they may procure services from telecoms providers, whether that is through licensing models, joint ventures or other types of contracts.
At the moment these tend to be service contracts but are likely to develop into more complex arrangements as the range of services car manufacturers wish to provide increases. The challenge is that these arrangements are likely to be very different to those car makers have traditionally had with their suppliers, so they will need to ensure these agreements are clear and enforceable.
Manufacturers need to understand telecoms regulations
In developing connected cars, manufacturers could themselves become subject to obligations under telecoms regulations. Special rules on consumer contracts, as well as rules on lawful interception of communications, 'know your customer' obligations, automated regulatory reporting duties, and a requirement to set up a local entity in each country where they are providing telecom services could all apply to manufacturers for the first time.
In Europe, connected car manufacturers might be also classed as providers of electronic communication services. Legislation in this area is extensive but has not been designed to deal with the particular services which will be provided by connected cars, so there is a lack of clarity about the exact obligations and requirements manufacturers would face.
However, broadly, such a classification could bring additional burdens on notification, data protection and retention, as well as certain limitations on end-user contract terms, and obligations to collect end-user data for the purpose of making it available to security authorities, potentially through specific interfaces that allow automatic and direct access to the data.
The latter obligation would trigger practical issues where manufacturers do not have a direct relationship with the customers. They would, for example, need to implement a process with their car dealerships to collect the required data. Reforms to the EU's e-Privacy laws were proposed by the European Commission in January this year and should be watched carefully by businesses in the connected cars market.
To best respond to these new obligations, manufacturers could seek agreements with the telecom service providers they use to procure connectivity so that such operators have to help, to the extent possible, satisfy any regulatory requirements the law imposes on manufacturers in this context.
Regulators need to start to look at the specific implications of connected vehicles and work to develop streamlined and convergent telecoms regulation in this area. This will be difficult, given the pace of development in a whole range of emerging technologies, particularly in the context of increased wireless connectivity envisaged in the age of the 'internet of things' (IoT).
It is therefore essential for manufacturers to engage in early dialogue with regulators to ensure they understand the technological developments and the need for clarity and certainty about how they are to be regulated.
Another issue that will need to be addressed is that of spectrum availability. Spectrum is allotted to different uses, such as for TV broadcasting, radio services and mobile data services. Some spectrum will need to be set aside for connected vehicles in future. This is not expected to be a barrier to the development of connected vehicles in the near term, but it is likely that regulatory changes will be needed to help facilitate the increase in network traffic.
In the UK, UK telecoms regulator Ofcom has started to look towards the future of '5G' connectivity and has already identified spectrum it thinks will be ripe for services that will rely on 5G, including connected cars.
In France, manufacturers need to obtain a licence to use spectrum or to contract with a telecom operator to use its licence, unless manufacturers use free frequencies. However, free frequencies are very limited, and do not offer any protection against signal jamming. So it is likely that measures will be needed to make more spectrum available. This includes the liberalisation of the use of 'white space', such as is already happening in the UK, which harnesses the potential of unused gaps in the radio spectrum.
New responsibilities and liabilities
As well as the need to meet the requirements of telecoms legislation and of data regulation, the increased role of telecoms in connected cars brings new questions of liability.
It is possible to envisage a scenario where an autonomous vehicle crashes as a result of the interruption of data to the car where the reason for that interruption was a defect in the mobile network operator’s system. It may be unclear where any claim for liability could be directed.
In this context, however, the UK government has confirmed plans to ensure that every driverless vehicle is insured and that insurers initially cover the cost of claims before having the right to pursue the cost of those claims from vehicle manufacturers. This 'single insurer model' avoids leaving it to the consumer to pursue claims against the manufacturer or the telecoms provider, or any other supplier whose fault an accident was, directly.
The forthcoming change in UK law will make it important for manufacturers to have robust contracts in place with telecoms providers and other technology suppliers to ensure that they can recoup any costs of claims stemming from accidents involving their vehicles that are not their fault.
The allocation of responsibility and any resulting sanctions will vary in different jurisdictions, however.
Under current German telecoms laws, the liability of a mobile network operator is limited to €12,500 per end-user and to an aggregate sum of €10m in cases where there is damage incurred by multiple end-users. This makes sense for mobile telephone services, since it is unlikely that much damage can be caused by an outage that affects a simple telephone conversation. However, that provision may not be adequate for the much greater damage that could potentially be caused by a failure of connectivity in a car.
MEPs have called for the EU to adopt similar laws on insurance and liability for robots, which includes driverless cars, as those that are planned in the UK.
The challenges of managing different regulatory regimes
Divergences in national telecoms regulatory regimes, even within the EU, might complicate compliance for connected car manufacturers. They will have to study the applicable regulation in each country its vehicles are to be sold in. In addition, manufacturers will need to check that they are compliant with telecoms rules in each country in which their vehicles may travel to or be sold into in the second-hand market.
Some countries require telecoms service providers to be situated in the country, so a car manufacturer who was providing these services would, under certain circumstances, need to establish a separate entity in order to provide connectivity in that local market. As a result, manufacturers will need a clear understanding of which components of a connected car are governed by which elements of telecoms regulations, bearing in mind this may vary in different jurisdictions.
They will also need to ensure that any agreements with service providers or with customers meet the requirements of the telecoms legislation in the relevant country and that the service providers undertake to deliver any support needed in order to fulfil local telecom law regulatory requirements that the manufacturer may be subject to.
Tony Fielding is an expert in telecoms regulation at Pinsent Masons, the law firm behind Out-Law.com.
Pinsent Masons advises Ebbsfleet Development Corporation on critical land acquisition for garden city project