This article was originally published in Arab News on 22 November 2021.
The Saudi Communications and Information Technology Commission published an open consultation on its draft Digital Content Platforms Regulations on Nov. 10, 2021. This was designed to regulate platform providers and operators in alignment with existing laws on service provision, content moderation, consumer protection, competition and foreign direct investment.
The regulations are the first of their kind across the Middle East and are likely to dictate other countries’ approach, noting Saudi Arabia’s prominent role at the Digital Cooperation Organization and its commitment to providing training on digital regulations in collaboration with the International Telecommunication Union.
Article 4 of the consultation document highlights the scope of the regulations, which includes four types of content platforms The first type includes digital video platforms, including satellite pay TV platforms, IPTV platforms, Video OTT platforms and video sharing platforms
The second type includes digital audio platforms, including audio-on-demand platforms and Internet radio platforms. The third has digital gaming platforms, including online gaming platforms and Esports participation platforms, and the last one includes digital advertising platforms, including online advertising platforms and social media platforms.
Casting the net this wide means the entire digital content industry will be affected. This is evident in Article 5.1, which says that digital content platforms that fall within the scope of the regulations cannot provide any service (free of charge or for a fee) to the public in the Kingdom, prior to meeting regulatory requirements.
The regulatory burden will not be equally shared. Article 5.2 highlights that Satellite Pay TV platforms, IPTV platforms (e.g. Amazon), Video OTT platforms (e.g. Netflix) and Audio-on-demand platforms (e.g. Spotify) face the heaviest burden as they are required to obtain a license prior to offering services. On the other hand, video-sharing platforms (e.g. TikTok) and social media platforms (e.g. Instagram) simply need to notify the CITC of their intentions to offer services, while online gaming platforms (e.g. Nintendo) and online advertising platforms (e.g. Facebook) do not require a license, registration certificate or notification to provide services.
“The draft Digital Content Platforms Regulations introduce a broad set of obligations and compliance requirements.”
Other burdens introduced by the regulations include the provisions in Article 12 on “Procedures for applying for Annual Fees Calculation” and Annex 2 on “Fee Requirements,” which specify that digital content service providers are obliged to pay a fee requirement to the CITC in lieu of services provided in the Kingdom. This includes an application/renewal fee ranging from SR5,000 — SR10,000 ($1,330-$2,660) as well as an annual fee ranging from 0.2 percent — 0.5 percent of “relevant revenues,” which includes revenue from users, revenue from partnerships and third-party retailers and advertising revenue. It remains to be seen if this will deter foreign direct investment, with a possible outcome that platform operators and providers — particularly smaller companies — limit participation in the Saudi market to reduce their tax exposure.
New provisions requiring a local presence, including Article 7.1 which mandates platform operators and providers have a physical presence or an office in addition to an official representative in the Kingdom, will also raise compliance costs.
Other key provisions include Article 6.1 on content moderation and takedown requests; and Article 6.3 on lawful access requirements. These articles are likely to cause compliance difficulties as platform operators are often guided by their community standards and guidelines. Establishing a mechanism for the flagging of harmful content (in consultation with platform operators and providers) may be a more suitable alternative.
In conclusion, the draft Digital Content Platforms Regulations introduce a broad set of obligations and compliance requirements. They usher in a new era of digital regulation in the Kingdom and are timely, noting the expanding Saudi user base for these services, but without business input they may result in a reduction of choice and limit access to innovation. Responding to the CITC’s public consultation by the Nov. 30 deadline is key, noting that the results of the consultation will dictate the future of platform regulation in Saudi Arabia and beyond.