Commission to make online platforms contribute to digital infrastructure

European Commissioner in charge of internal market Thierry Breton attends a hearing in the European Parliament in Brussels, Belgium, 21 April 2022. [OLIVIER HOSLET/EPA]

The European Commission is set to present a legislative initiative to make content-heavy platforms contribute to the cost of telecom networks before the end of the year.

Internal market commissioner Thierry Breton made the announcement in an interview with French media Les Echos on Tuesday (2 March), adding that the Commission has been working on an initiative for one year, and it will be presented before the end of 2022.

The initiative aims to address a long-standing complaint of telecom operators accusing online platforms of consuming vast amounts of data without paying for the cost of that capacity. The polemic resurfaced this week as trade association ETNO published a study conducted by Axon to substantiate their demand.

“The rules in place for twenty years are running out of steam, and operators no longer have the right return on their investments. It is necessary to reorganise the fair remuneration of the networks,” Breton said in the interview.

Make content platforms pay for digital infrastructures, telecom CEOs say

The CEOs of Telefónica, Deutsche Telekom, Vodafone and Orange have called on the European Commission in an open letter to make large content providers contribute to the infrastructural investments.

The telecoms’ call

According to ETNO’s study, a small number of internet companies formed by Alphabet, Apple, Meta, Microsoft and Netflix count for more than 56% of the world’s data traffic. A second study, still sponsored by telecom companies, estimates that such platforms might generate costs ranging between €36-40 billion per year for telecom companies.

For the telecom companies, Big Tech can impose such costs because of their entrenched market position, which makes negotiating fair commercial terms impossible. That is why they have been calling for a legislative intervention, which in their view, is in line with the Commission’s agenda of tackling power imbalances in the online space.

The operators argue that this situation is draining their resources when investments in digital networks are needed more than ever to complete the rollout of 5G and other high-capacity networks.

A reference to the need to make a fair and proportionate contribution to the costs of public goods, services and infrastructure was already included in the declaration on European digital rights and principles published earlier this year.

European Commission puts forth EU’s values and principles for the digital age

The European Commission presented on Wednesday (26 January) a draft declaration on digital rights and principles which will complement the digital targets Europe aims to reach by 2030.

Platforms’ reactions

The tech giants have not remained passive before the telecom companies’ lobbying effort. A commissioned study published in 2018 pointed out that online service providers have been increasingly contributing to internet infrastructure, such as hyper-scale data centres.

Google and Facebook have been increasingly investing in deploying submarine cables as telecom operators could not keep up with the explosion in the global data demand the two companies contributed to creating. Making tech companies pay extra for using telecom-owned networks might further incentive them to establish their own internet infrastructure.

Platforms highlight that they contribute to creating the demand for telecom services, for which consumers are effectively paying. Charging the content providers would equal nothing short of double-dipping, the argument goes.

“This would be equivalent to energy companies trying to collect fees from appliance makers for the energy use of washing machines, while consumers are already being charged for the actual amount of energy used to do their laundry,” said Christian Borggreen, vice president of the tech trade association CCIA.

The open questions

Several open questions remain. It is still unclear what kind of legislative initiative the European Commission is preparing. In addition, the EU executive will have to address some fundamental issues in its proposal, such as how to square this ‘fair contribution’ with the platforms’ different business models.

On-demand platforms such as Netflix consume much more data than Google, but the search engine has a more profitable business model thanks to its advertising services.

The ETNO’s study proposes to limit such contributions to a few large internet companies based on either the ‘gatekeepers’ notion of the Digital Markets Act or the ‘very large online platforms’ of the Digital Services Act.

However, such a targeted approach might not be easy to conciliate with the principle of net neutrality, which would require every online player contribute to the cost of the internet infrastructure based on their network usage. Such a solution would likely be unworkable due to red tape.

The telecom operators are proposing a regulated mechanism for direct agreements, following the example of the Copyright Directive that provides a precedent in forcing platforms to pay a share of the service they provide.

However, what is a ‘proportionate compensation’ is doomed to be a point of contention in such direct agreements. The telecoms ask for a dispute resolution mechanism, a long-standing demand from publishers in the copyright context.

It is also unclear how the Commission will ensure that the increased revenues would be invested in infrastructure, benefitting consumers rather than increasing the operators’ profit margins.

[Edited by Alice Taylor]

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