Out-Law Analysis | 02 Dec 2020 | 9:39 am | 7 min. read
In building those vehicles, manufacturers therefore must understand how telecoms regulations might apply to them, and manage relationships with telecoms providers. They must also be aware of how and when '5G' technology is being deployed.
Both manufacturers and telecoms service providers are busy developing a wide range of products, from those focused on in-car entertainment to sensors and cameras for manoeuvring and navigation systems too. Many of the products are already available and offer up potential 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.
While manufacturers are conducting their own research and development programmes, there is an acknowledgement that, to access the technology, they also need to start working with many existing and established suppliers from sectors they have not traditionally worked with before. The most significant new relationship car manufacturers are likely to have is with telecoms providers.
The industry has recognised the importance of such collaboration. With the roll out of the 5G network set to play a pivotal role in the future of the automotive industry, industry bodies such as the 5G Automotive Association (5GAA) and the European Automotive and Telecom Alliance (EATA), backed by major car brands, such as Audi, BMW, Daimler, Mini and Rolls Royce, and telecoms companies, including Ericsson, Nokia, Vodafone and Orange, have collaborated on issues such as automated driving, road safety, traffic efficiency, standardisation and the digitalisation of transport and logistics.
Recently 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.
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.
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
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.
In developing connected cars, manufacturers could themselves become subject to obligations under telecoms regulations. Not only this, but there are divergences in national telecoms regulatory regimes, even within the EU, as well as restrictions and delays imposed as a result of Covid-19, which could further complicate compliance for connected manufacturers. As well as understanding the applicable regulation in each country their vehicles are to be sold in, 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 on the second-hand market.
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.
In Europe, connected car manufacturers are also caught by data protection rules. The European Data Protection Board (EDPB) consulted on draft guidelines on processing personal data in the context of connected vehicles and mobility related applications in the early part of 2020. The draft guidelines highlight the data protection risks relating to connected vehicles and acknowledge that most data associated with connected vehicles may be considered as personal data, like geolocation data and biometric data, for example. On this basis, the data processed by connected vehicles must be processed in accordance with the General Data Protection Regulations (GDPR), including data protection principles of data minimisation and purpose limitation.
The technology used with connected vehicles must be configured to respect the privacy of individuals. Data controllers must ensure that they comply with the obligations of data protection by design as a general practice. If car manufacturers do not take into account privacy by design when developing a new connected vehicle, they will most likely not be permitted to place it on the market in the EU.
As the EDPB also acknowledges, the security of the personal data processed in the context of connected vehicles must be a core priority for all data controllers. Robust technical and security measures, including encrypting communication channels and local storage by means of state-of-the-art algorithms, making access to personal data subject to reliable user authentication techniques, implementing technical measures that enable manufacturers to rapidly patch security vulnerabilities, and setting up alarm systems in case of attack are some security measures that car manufacturers and technology companies can implement.
It is likely that regulatory changes will be needed to help facilitate the increase in network traffic
To best respond to these new obligations, manufacturers could seek agreements with the telecom service providers they use to procure connectivity so that those operators have to help satisfy any regulatory requirements the law imposes on manufacturers in this context.
Regulators need to continuously work with car manufacturers and telecoms providers to understand 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 IoT.
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. Spectrum has also become extremely important to car manufacturers because of the wireless technology in vehicles, such as navigation services, emergency calling and road side assistance, door unlocking, stolen vehicle tracking and crash notifications to name a few use cases.
Interference-free access to spectrum will need to be set aside for these valuable services to work safely and as expected by consumers of connected vehicles. 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.
Further to the deal that EU countries and lawmakers struck in 2018 to open up spectrum for 5G services for a period of 20 years, coupled with Ofcom's auctions in 2018 of spectrum to be used for 5G, network operators, namely O2, Vodafone, EE and Three in the UK, have made some progress towards building out 5G networks.
However, such progress has been delayed by the postponement of the UK's second 5G auction amidst the Covid-19 crisis. Ofcom has said that bidding in the auction is now expected to take place in January 2021. This delay, along with the UK government's recent decision to remove all Huawei equipment from 5G networks by the end of 2027, has cast a shadow of uncertainty over what lies ahead for the 5G evolution. There is also uncertainty about the extent to which the UK will be delayed in enjoying the full benefits of 5G installations and the overall cost associated with the delay in deployment.
Despite the UK's 5G ambitions being slowed down, 5G still represents a transformative force for connected vehicles and its evolution.
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.
Reform to product liability rules is anticipated to account for new technologies and their impact on traditional liability models
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, the Automated and Electric Vehicles Act 2018 has brought automated vehicle insurance in line with longstanding motor insurance practice, ensuring that motorists are covered both when they are driving, and when the driver has legitimately handed control to the vehicle. As such, insurers will generally 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.
This new piece of legislation makes it particularly 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. In practice, it could take some time before the true impact and effectiveness of this legislation is realised.
Even in the EU, the allocation of responsibility and any resulting sanctions will vary depending on the jurisdiction. Reform to product liability rules is anticipated to account for new technologies and their impact on traditional liability models.
Co-written by Remi Bresson Auba of Pinsent Masons.
02 Dec 2020
02 Dec 2020