internet lab. – fair share / network fees | 10 May 2023

In this edition, we remind you that the EC exploratory consultation is closing in less than two weeks, we talk about how the fair share idea is spreading like wildfire to other geographies and worryingly slipping into a soon to be voted in plenary EP report on competition policy. We highlight how the EC is outsourcing its homework of reading your contributions to their exploratory consultation, and bring you an overview of the latest stakeholder positions in the network fees debate, and much more.

[EC’S EXPLORATORY CONSULTATION: TIME TO SPEAK UP, NOW!]

In case you missed it: there is less than 2 weeks left to respond to the European Commission’s (EC) exploratory consultation on “the future of the electronic communications sector and its infrastructure” that notably looks into the fair share / network fees, as it closes on 19 May, at midnight Brussels time (CEST).

Look no further help is here: See epicenter.works their consultation submission, along with a simplified guide that helps you answer the EC’s questionnaire, and get up to speed here (in German). Still unsure how to get going, then contact nn@epicenter.works.

On the internet lab’s own (updated) resources page, we share a spreadsheet with stakeholder positions, and infographics on the arguments put forward and the stakeholders involved. Another repository is the one created by Innocenzo Genna (Genna Cabinet).

Need even more inspiration?: Then don’t forget to read the comments submitted by Internet expert Konstantinos Komaitis, PhD. Want to know what a fruit salad has got to do with the consultation questions, then check the consultation response of the Coalition for Creativity (C4C). And if the EC would allow us to insert images in our responses, then Dean Bubley would spark our imagination.

[BAD POLICY IDEAS SPREAD QUICKLY]

Bad policy ideas tend to spread like wildfire, and the ‘fair share’ idea is no exception.

Brazil: The national telecoms agency, Anatel, published a questionnaire on the need for regulatory intervention: deadline 30 June. An effort that is applauded by Telefónica.

Vietnam: The Department of Telecommunications of the Vietnamese Ministry of Information and Communications (MIC) seems sympathetic to the calls from local network operators to include their ‘fair share’ demand in the revision of the Telecommunications Law.

US: Stephanie Joyce, from the Computer & Communications Industry Association (CCIA), observes how the network fee idea is creeping into the US policy arena, for example through the ‘FAIR Contributions Act’. At the same time, the United States Trade Representative (USTR) identifies the push for ‘network usage fees’ in other geographies as a key barrier to digital trade. Read CCIA’s analysis of the report.

South-Korea: A number of experts debunk the claim by Telefónica that South-Korea’s fair share approach is a success, see: Konstantinos Komaitis, PhD here, Rudolf van der Berg here and Michael Nelson here.

OECD: The debate is attracting the attention of the OECD’s Working Party on Communication Infrastructure and Services Policy (CISP). Konstantinos Komaitis, PhD highlights that a draft report is in the pipe, following a recent workshop on ‘Financing Broadband Networks of the Future’. “It is great to see the OECD delving deeper into the issue of infrastructure and not look at it through the political lens the EU is looking at it,” Komaitis writes reflecting on the outline document.

[EC MOVES]

Outsourcing homework: The European Commission has up to €60.000 to spend for someone else to read the contributions to their exploratory consultation. The (lucky?) winner of the contract gets a tight maximum of seven weeks to read through everything and deliver summaries. This is questionable, some consider, seeing the highly technical nature of the subject. No wonder Konstantinos Komaitis, PhD questions this process.

Wait and see?: Pressed by Mathieu Pollet during POLITICO Europe Europe Tech Summit on the question if the next step after the EC’s exploratory consultation is a fully fledged ‘formal’ consultation, DG CNECT’s Kamila Kloc replied that it is too early to tell, as we need to “see what comes out of this consultation in the first place”. Klock reiterated the EC’s commitment to net neutrality: “we don’t think the open internet will be affected.”

At an earlier POLITICO event, DG CNECT’s Roberto Viola told Pollet that net neutrality is not mentioned in the current consultation effort, as the EC believes that “net neutrality rules won’t change,” and “there’s no reason to change them.”

Open Internet: The European Commission published the second report on the implementation of the Open Internet Regulation, which: “confirm[s] that the Regulation continues to guarantee the essential balance between the protection of end-users’ rights and the support of a competitive environment in the EU’s Digital Single Market.” The report suggests that “as the development of technology continues and innovative services emerge (…) greater legal clarity in the interpretation of certain notions and definitions included in the Regulation could be beneficial to both innovators and end-users.” Is this a sign of more tinkering to come to the current working model?

Metaverse delays: The European Commission’s non-binding initiative on virtual worlds keeps on being pushed back. Currently, it is scheduled for the College of Commissioners’ meeting of 21 June.

[EP MOVES]

ECON Committee: On 25 April, the European Parliament’s Economic and Monetary Affairs (ECON) Committee adopted its ‘Competition policy – annual report 2022’, by Rapporteur MEP René Repasi (S&D, DE). Unsurprisingly, big telcos are trying to find every hook possible to obtain language that could help reinforce their calls for a fair share. This latest EP report (not published yet) is no exception: language in support of network fees has slipped into the amendments to the report, which is set to be voted by all MEPs at the 31 May plenary session.

Following a push from Shadow Rapporteur MEP Stéphanie Yon-Courtin (Renew, FR), and despite opposition of MEP Repasi, the ECON report:

“calls for the establishment of a policy framework where large traffic generators fairly contribute to the adequate funding of telecom networks, and where telecom providers receive a fair compensation for the delivery of traffic to end-customers.”

This is worrying, because a lot of MEPs who have not followed this debate could end-up voting in favour of language that would actually hurt competition and users. Internet expert Konstantinos Komaitis, PhD highlights how it is highly problematic that these competition concerns linked to network fees have actually been completely disregarded in the first place by the ECON committee, whilst being responsible for competition policy.

Gigabit Infrastructure Act (GIA): According to Euractiv, GIA ITRE Committee Rapporteur MEP Alin Mituța (Renew, RO) will be reluctant to mix the GIA with the network fees debate, as he wants to get things wrapped-up by the end of the EP’s mandate. He aims to publish his draft Report by 14 June, for consideration on 28 June. The goal is to adopt the Report in the ITRE Committee in mid-September, and to secure a trilogue mandate without a plenary vote.

At a glance: Stefano De Luca, from the European Parliamentary Research Service, produced a two-page note on the network fees debate, aimed to inform MEPs and their offices.

Metaverse: MEP Pablo Arias Echeverría (EPP, ES) will lead the EP IMCO Committee own-initiative report on virtual worlds.

MWC Barcelona: Sarah Wheaton, from POLITICO Europe, reports that various MEPs received ‘leadership passes’ – with a value of about €2.416 – from GSMA Europe, one of the key organisations calling for network fees, to attend the 2023 Mobile World Congress in Barcelona earlier this year.

[STAKEHOLDERS – MEMBER STATES & REGULATORS]

Poland: The D9+, an informal group representing the most digitally advanced EU Member States, meets this week on Wednesday and Thursday (10-11 May) in Poznań, Poland. According to POLITICO Europe, the Polish government wants to find some middle-ground in the ‘fair share’ debate. Their suggestion: setting-up a European ‘solidarity broadband fund’. Content providers would contribute through levies to this fund, money that would then be earmarked for rolling-out next-generation networks.

“What we have on the table are two very extreme proposals. One is to do nothing; the second is to have a direct transfer from the tech companies. I think neither of these options solves the problems,” Polish digital minister Janusz Cieszynski told Mathieu Pollet. Cieszyński sees the fund as a “win-win” without a direct “profit transfer”. Pollet’s take for now: “A common position on the topic seems very unlikely, given how divisive the issue has been across the bloc.”

Austria: DER STANDARD reported that Austrian State Secretary Florian Tursky (ÖVP) pushed back against the network fees idea (see our ‘Hot Item’ on Twitter & LinkedIn). He considers that this could negatively impact consumers and jeopardise net neutrality. Tursky’s opposition is supported by Die Grünen Österreich / Süleyman Zorba.

Denmark: In an information note to The Danish Parliament – Folketinget, the Danish Government warns for the possible negative impact of network fees on market dynamics and consumers. Their conclusion: no need for such measures in Denmark (see our ‘Hot Item’ on Twitter & LinkedIn). See the Danish government’s full contribution to the EC questionnaire.

Germany: The German Monopolies Commission considers that the idea of network fees should be rejected following their analysis of the fair share question (see our ‘Hot Item’ on Twitter & LinkedIn). The body does not consider a regulatory intervention justified, because:

• online service providers are not abusing their increased bargaining power in a harmful way in the peering and transit markets;
• network fees could distort competition instead of improving the market; and,
• there are sufficient financial resources available for fixed and mobile network expansion.

The German NRA, the Bundesnetzagentur, has criticised the idea of network fees in a closed-door meeting, organised in late March by the German Federal Ministry of Digital and Transport, according to POLITICO Europe. “In a way, you would be putting the ax to the central element of the internet system,” an agency official stated. The BNetzA representative highlighted the obvious unintended consequences, negative consumer impact, net neutrality violation, and the fact that it remains questionable that a fair share would actually lead to more network investments.

Following the German-Dutch intergovernmental consultations on 27 March, the countries identify in a joint statement their engagement to further cooperate on the digital economy, and in particular to “work together on EU connectivity to ensure an evidence-based discussion on the issue of network fees, focusing on a clear, fact-based problem definition first before any instruments can be considered.”

EU State-of-play: Having lost count of the push back against network fees, Konstantinos Komaitis, PhD does the math: we are at seven countries that are openly sceptical about the fair share, namely Austria, Belgium, Denmark, Estonia, Finland, Germany, and the Netherlands.

[STAKEHOLDERS – CIVIL SOCIETY & EXPERTS]

Strange bedfellows: A broad coalition, ranging from civil society, consumer groups, European and international entertainment, competitive telecom and mobile to sports leagues, issued a clear warning signal cautioning against the introduction of network fees.

Their message was accompanied by a statement of support co-signed by several MEPs and MPs: MEPs Patrick Breyer (Greens/EFA, DE), Tiemo Wölken (S&D, DE), Karen Melchior (Renew, DK), Cristian Terheş (ECR, RO), Cornelia Ernst (The Left, DE), and Austrian MP Süleyman Zorba (Grüne).

Both positions can be found here. If you haven’t seen it yet: check out epicenter.works fantastic meme for the occasion. Euractiv covered the initiative (see our ‘Hot Item’ on Twitter & LinkedIn).

PK: “‘Fair share’ is not about fairness or connecting the unconnected. It’s about lining the well-lined pockets of broadband providers and their investors,” John Bergmayer, from Public Knowledge, writes. He cautions that the EU debate is a threat to net neutrality everywhere, and offers a great refresher on why net neutrality matters.

Internet experts: “Europe has a choice to make; let’s hope it makes the right one, even at the eleventh hour,” write Konstantinos Komaitis, PhD and Thomas Lohninger (epicenter.works) in a joint contribution on Tech Policy Press. They criticise the EC questionnaire for being “unwelcoming and unattractive” for everyday Internet users who are not network and engineering experts. In their view, this not only creates a “democratic deficit” but goes against the idea of inclusiveness embedded in the EC ‘better regulation’ guidelines.

Open Future Foundation: “The implementation of a direct compensation mechanism will not resolve any of the complex challenges confronting open digital ecosystems but rather create new ones by undermining the principle of net neutrality,” writes Zuzanna Warso, as she explores ‘the limits of the fair share debate’. Instead, this policy brief argues “that targets for digital transformation should be tackled through taxation and subsequent public support for investment into sustainable infrastructure that fosters interoperability rather than mandatory direct transfers of money between powerful private actors.”

ISOC: Carl Gahnberg, from the Internet Society, cautions against the potentially irreversible damages resulting from the network fees debate in a POLITICO Europe op-ed (see our ‘Hot Item’ on Twitter & LinkedIn). He warns that this “threaten[s] to fragment the Internet, undermine net neutrality and leave European users bearing the costs.” For Gahnberg it is clear: “undermining the Internet’s fundamental principles cannot be accepted as collateral damage, and Europe should reject such policies before causing any irreversible damage. The EU has the power to lead the world here — it just needs to choose the right path.”

[STAKEHOLDERS – TECH/CONTENT]

Cloudflare: “We believe regulatory intervention that forces content and application providers into paid peering agreements would have the effect of relegating all other traffic to a slow, congested lane,” Cloudflare’s Petra Arts and Mike Conlow argue, as they consider that “contrary to its intent, these proposals would give the biggest technology companies preferred access to the largest European ISPs.” They express the fear that “this intervention will do nothing to meet Europe’s Digital Decade goals, and instead will make the Internet experience worse for consumers and small businesses.”

Netflix: The cooperation with ISPs is a “give-and-take model” Netflix explained in late June 2022 to the Cabinet of EU Commission President von der Leyen, according to a readout POLITICO Europe obtained through a freedom of information (FoI) request. “Netflix would provide technical infrastructures and hardware for the ISPs free of charge, whereas the ISPs would enable content and data (paid by ISP consumers) to be widely distributed,” they explained to the Cabinet. The platform further highlighted how it worked on “delivering better quality on less bandwidth” in the context of the pandemic.

Amazon: Through its FoI request, POLITICO Europe further obtained a readout from a meeting Amazon had with von der Leyen’s Cabinet in late October 2022. On the fair share debate, the company notably stressed its investment efforts and cautioned that: “tracing Amazon traffic would require intrusive deep packet inspection.” In the US, EU telecom players seem comfortable with exploiting user data, Rudolf van der Berg observes.

‘Nonsense’ says META: “We know that some European telecom operators have justified network fee proposals by speculating about capacity constraints caused by metaverse adoption – but this is nonsense,” META’s Kevin Salvadori and Bruno Cendon bluntly write. Meta’s perspective is that “the development of the metaverse will not require telecom operators to grow capital expenditures for greater network investment.” Their message is thus clear: “imposing an arbitrary network fee on companies that bring investment and innovation to the digital ecosystem is not a sustainable solution.” While Karl Bode agrees with META’s perspective on Techdirt, Brian Williamson, from Communications Chambers, observes that “the word nonsense is not often heard in telecoms policy debate.”

Startups: The EU start-up organisation Allied For Startups wants to remind everyone that: “network fees are not only incompatible with a free and open Internet, but it is also likely that the effect of the levy will trickle down into every aspect of the Internet, discouraging growth, investment, and competition.”

Startup Poland, partnering with Startup Hungary , released a report on the ‘Open and Free Internet – In the Eyes of Startups’. They ran a survey to assess the potential impact of changes to the principle of net neutrality on startups in Central and Eastern European Member States. 146 respondents from 6 countries, Bulgaria, Croatia, Hungary, Lithuania, Poland, and Romania, participated. Amongst the outcomes is the fact that: “almost all startups (97%) confirmed that network fees would make it harder to develop unicorns.”

CCIA: The Computer & Communications Industry Association continues to be a loud and vocal opponent of network fees.

Maria Teresa Stecher highlights how the impact on cloud services will hit more than just the big players, contrary to what is claimed by the fair share supporters. An example: “The French Doctolib healthcare service, for instance, is hosted on a popular cloud platform. But their traffic would be identified as originating from that ‘Big Tech’ firm, so network fees would be passed on to Doctolib, and ultimately its users in the healthcare sector.” Next to European start-ups, SMEs, gaming companies, and broadcasters, who are neglected in the consultation process, would be others falling prey to the trickle down effect of network fees.

Christian Borggreen deplores the fact that the use of terms like ‘large traffic generators’ in the EC questionnaire seem to imply that cloud and CDN services would be problematic. “In reality – by helping minimise traffic volumes, improve performance for telco customers, and protect websites and applications – clouds and CDNs are actually part of the solution,” he states.

[STAKEHOLDERS – TELCOS]

Overrated: “Without the telcos, without the network, there is no Netflix, there is no Google,” Orange’s Michaël Trabbia told CNBC, identifying telcos as the “entry point to the digital world”. Susanne Blohm, from the Verbraucherzentrale Bundesverband, set the record straight: “without consumers there is no need for either telcos nor big tech.”

Telefónica’s perspective: The operator makes it clear that it eyes direct payments from platforms. It opposes the idea of what it dubs “labyrinthine solutions” like a fund. “The creation and implementation of a fund would be a waste of time and resources that the European Union does not have at its disposal,” it argues, adding that, in their view, the “causal link between the traffic delivered to a particular network and the payments made is lost with the creation of a fund.” Instead, Telefónica calls for a ‘minimum intervention’ through “a quick, efficient and straightforward solution based on the obligation of negotiation between the parties.” Konstantinos Komaitis, PhD debunks the arguments put forward, and recalls that: “there is no structural problem in the Internet model, unless you look at it under the telecoms prism.”

In another blog post, the operator tries to portray their calls for a ‘fair share’ as to the benefit of European citizens. A perspective that appears to be at odds with the views shared by Cláudio Teixeira, from BEUC – The European Consumer Organisation, on our podcast.

An Italian perspective: Vittorio Colao, former Vodafone CEO and previously Italy’s minister for technological innovation and digital transition, shared his perspective on the fair share debate in an Financial Times op-ed. Colao warns for aggressive lobbying from all sides and possible litigation as the final outcome. Instead, he pleads for what he describes as “a balanced approach which addresses the legitimate funding requirements of the telecoms companies without unfairly punishing content providers.” Colao believes that “a market solution with safeguards is surely better than straight regulation or, worse, inaction.” What is this so-called ‘market solution’? Getting the services that are being requested the most by consumers to bilaterally negotiate traffic payments with telcos, with antitrust authorities on stand-by to intervene if no agreement can be reached. Next to this, Colao calls on to stop “policies which distort fairness for established networks and squeeze them for spectrum renewals”. More specifically, he wants the EU to “allow more in-market consolidation in the telecoms industry, reduce the support governments give to low-investment operators, and stop facilitating the assignment of frequencies to new entrants.”

[FURTHER READING]

• European Commission – See the EC’s tender for a study on the Member States’ transposition and implementation of European Electronic Communications Code (EECC) – deadline: 12 June 2023.
• Rudolf van der Berg (Stratix) – Check his presentation: ‘Why You Need to Respond to the EU’s Questionnaire on Internet Connectivity (or risk the end of INEX – the Internet Neutral Exchange)’ and his rebuttals of some of the figures put out by the French Federation of Telecoms (FFTélécoms) and ETNO.
• Analysys Mason – ‘Full-fibre networks in Europe: state of play and future evolution’: In this analysis – sponsored by Meta, David Abecassis and colleagues, notably highlight that “new applications are very unlikely to overwhelm network capacity for decades,” and that “once deployment is complete, maintenance and upgrade costs will be sustainably reduced.” See also, Analysys Mason’s perspective on how opportunities for network operators emerge as subsidy schemes enable rural broadband expansion.
• Dean Bubley – Debunks the fallacy that Internet access is a “two-sided market”. (See Rudolf van der Berg his reflection on Telefónica’s ‘market sides’ perspective, one that they keep on pushing) This fallacy resurfaces in some of the submissions to Ofcom’s net neutrality consultation. Dean read the consultations replies, so you wouldn’t have too: see his brief summary.
• Iain Morris (Light Reading) – Reflects on how the ‘traffic surge is a red herring in the “fair share” debate’ and how the “cakeist EC” thinks it can have both fair share and net neutrality.
• Konstantinos Komaitis, PhD – Shared his thoughts on network fees whilst preparing a lecture on the topic.
• Brian Williamson (Communications Chambers) – Tries to answer the question: ‘Who’s investing now?’ – Read Dean Bubley his reflection on this.
• Body of European Regulators for Electronic Communications (BEREC) – The body put out its Opinion on the draft Gigabit Recommendation – See this legal analysis conducted by Jones Day for ecta (european competitive telecommunications association), and MEP Dita Charanzová (Renew, CZ) her (for now unanswered) priority Parliamentary question on the topic.
• epicenter.works – The Thomas Lohninger speech in response to the keynote of Executive Vice President of the European Commission Margrethe Vestager at the 20th anniversary of European Digital Rights is a must read. Lohninger stressed that: “we need the Commission to not just act impartial[ly], but also to avoid the appearance of being captured by one particular industry.”
• Euractiv – Launched a ‘special report’, sponsored by Vodafone, to explore “the health of Europe’s telecom sector”. In a first article of this series, Innocenzo Genna (Genna Cabinet) observes that the telecom operators failed to embrace many opportunities to move into new and innovative areas.

[INTERNET LAB – PODCASTS] In our most recent internet lab season 2 podcast episodes, zooming in on what’s wrong with the EC consultation on the future of telecoms, we spoke with:

• Rudolf van der Berg, Stratix – see our podcast page, Twitter thread and LinkedIn update
• Ernesto Falcon, Electronic Frontier Foundation (EFF) – see our podcast page, Twitter thread and LinkedIn update
• MEP Sabine Verheyen, EPP Group in the European Parliament – see our podcast page, Twitter thread and LinkedIn update
• Prof Luca Belli, FGV Brazil – see our podcast page, Twitter thread and LinkedIn update
• Dean Bubley – see our podcast page, Twitter thread and LinkedIn update
• Nicolas Guillaume, Netalis and Nasca Group – see our podcast page, Twitter thread and LinkedIn update [French episode]
• Cláudio Teixeira, BEUC – The European Consumer Organisation – see our podcast page, Twitter thread and LinkedIn update

[BRIEF HIGHLIGHTS]

• EU Regulators Extend Decision on Orange, MasMovil Deal to Sept 4 (Reuters)
• Spain Plans to Push for Telecom Mergers During EU Presidency (Bloomberg)
• Gigabit recommendation – what impact on the telecom sector (EURACTIV)
• Vodafone: New Boss Must Right-Size Unwieldy Telecoms Group (FT)
• Biden FCC nominee withdraws after a bruising lobbying battle (The Washington Post)

[MUSICAL CHAIRS]

• Former Dutch MEP Marietje Schaake (Stanford University), who was a strong proponent of net neutrality, has been appointed as an independent Special Advisor, with a focus on geopolitics and technology, to EU Executive Vice-President Margrethe Vestager.
• Michel Combot, left his role as Director General for the French Federation of Telecoms (FFTélécoms), to join numeum, the French digital ecosystem organisation.

[UPCOMING EVENTS]

[Webinar] 10 May (10h CEST) – SME Connect: ‘How Do Telecoms Network Fees Impact European SMEs, Consumers and Taxpayers?’ – register here. This event will be moderated by former MEP and ex-Polish Minister Dr. Michał Boni (SME Connect Special Advisor for Digitalisation & AI). Following an opening statement from Michael Jäger (Secretary General of Taxpayers Association of Europe; Vice-President of German Taxpayers) and a keynote by MEP Ivan Stefanec (EPP, SK), there will be a debate between:

• Nina Cummins, LL.B, LL.M (Head of Connectivity & Access Policy, EMEA at Meta)
• Tom Smyth (CEO Wireless Connect Ltd)
• Carl Gahnberg (Director of Policy Development and Research, Internet Society)
• Dr. Jakob Greiner (Vice President European Affairs at Deutsche Telekom)
• Lisa Di Feliciantonio (Chief External Relations and Sustainability Officer, FASTWEB)

[CATCH-UP ON PAST EVENTS]

• On 8 May, Startup Poland organised a launch event for their report on an ‘Open and Free Internet – In the Eyes of Startups’. Watch the recording here.
• On 3 May, J. Scott Marcus, from think tank Bruegel – Improving economic policy organised a discussion on network fees with Ilsa Godlovitch, from WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste, and Johan Keetelaar, from Oxera Consulting LLP. Watch the recording here.
• On 30 March, the Body of European Regulators for Electronic Communications (BEREC) held its 11th Stakeholder Forum and of course there was no escaping the network fee debate.
• On 7 March, the Permanent Representation of the Netherlands to the EU organised a debate on network fees. At this event, Oxera Consulting LLP presented the research it did for the Dutch Government. Watch the recording here, or check our tweet or LinkedIn update for key quotes from: Michiel Boots, Ministry of Economic Affairs; Cláudio Teixeira, BEUC – The European Consumer Organisation; Annemarie Sipkes, The Netherlands Authority for Consumers and Markets and the Body of European Regulators for Electronic Communications (BEREC)

Written by Caroline De Cock, LL.M. , Head of Research.

---

May 10, 2023