Ghosts of Digital Policy: A Network Fees Christmas Carol

Brussels’ corridors of power lay shrouded in December fog, thick and grey. The Big Telcos, channelling Scrooge, shuffled through halls in feigned distress. To policymakers, they spun woeful tales. Yet in warm boardrooms, their financial forecasts gleamed like festive hearths. Their narrative shifted like mist, from dire to prosperous. But unlike Scrooge, no redemption loomed for these masters of doublespeak on this Christmas Eve 2024.

As the clock ticks towards 2025, Europe’s digital connectivity future hangs in the balance. Executive Vice-President Henna Virkkunen finds herself at a pivotal moment, poised to unveil the Digital Networks Act. Like Scrooge awaiting his ghostly visitors, she faces a choice that will shape the continent’s connected destiny. Yet this tale’s ending remains unwritten. The European Parliament and Council of the European Union stand ready to wield their influence, whilst regulators gather crucial evidence on the ground. Amid conflicting narratives, the true nature of Europe’s digital DNA emerges, awaiting its final form.

As night falls on Christmas Eve, three spectral figures loom over EU policymakers. These ethereal visitors embody a pivotal decision: protect entrenched telco interests or champion consumer rights and progress. The ghostly trio – Network Fees Past, White Paper Present, and Digital Futures Unwritten – stand ready to guide them through a transformative journey, shaping the course of Europe’s digital landscape.

The Ghost of Network Fees Past

A spectre haunted policymakers, illuminating years of dour discussions. They peered through the haze, witnessing telco giants’ persistent plea. This demand, though repackaged, remained unchanged. ‘Sending party network pays’ morphed into ‘fair share’, then ‘cost-sharing’, and finally ‘network fees’.

The apparition’s eyes gleamed, unveiling the newest gilt wrapping: a deceptively simple ‘dispute resolution mechanism’. This clever ploy aimed to smuggle in previously rejected ideas through a seemingly more innocuous concept.

This mechanism serves but one purpose: acting as a tool for direct compensation. Stanford Professor Barbara van Schewick’s warning rings true: they want to get “paid twice” for doing the same job, delivering data their customers requested.

‘Look closer,’ whispered the spirit, revealing how these network fees would fracture the Internet’s foundation. Through the gloom, two decades of warnings were issued in repeated song and dance consultations by consumer groups, regulators, academics, start-ups, digital rights organisations and think tanks across Europe. Yet, like a winter frost that refuses to retreat, the planted seed endures. “The problem with bad ideas, like the one on network fees, is that they persist almost as readily as good ideas,” digital policy expert Konstantinos Komaitis, PhD echoed through the mist.

Ghost of the White Paper Present

The second spirit materialised amid swirling papers and mounting voices. It gestured to a scene unfolding before them: the consultation on the European Commission’s February 2024 White Paper. Through the lens of Political Intelligence Brussels’s analysis, they watched the tide of responses that flowed in, revealing overwhelming opposition to (1) intervention in the interconnection market, (2) extending Universal Service Obligations (USOs) to digital services, and (3) broadening the scope of the European Electronic Communications Code (EECC) to cover cloud services.

‘Count them,’ commanded the spirit, pointing to those favouring intervention. The numbers left no room for doubt: “12 out of 14 companies supporting a regulatory intervention are major telecom operators in national markets,” Political Intelligence’s report highlighted.

The scene shifted to Executive Vice-President Virkkunen’s office: von der Leyen’s mission letter and her written answers to the European Parliament lay on the desk. The spirit’s gaze fell upon Virkkunen’s careful words to the EP: a commitment to “study attentively” the “very rich number of contributions” and to “engage with all the stakeholders.”

The evidence before her and other policy makers already paints a clear picture: that of the voices of many different stakeholders representing a wide array of interests standing up against the unfounded claims of a few incumbent telcos.

Ghost of Digital Futures Yet Unwritten

The final spirit emerged, drawing wisdom from both the Draghi report and the internet lab’s Telecom Time Capsules Perspectives report: Europe prospers through innovation and competition, not unwarranted regulatory interventions.

Before them stretched two paths. One led toward consumer interests and vibrant market dynamics, and the other regressed to ensuring a status quo for big telcos. The spirit’s presence made clear: the Commission, Parliament, and Council’s choices would permanently affect Europe’s digital future and could even shake up the Internet ecosystem at the global level.

The message hung in the crisp night air: network fees were but a distraction, a dead-end that no amount of gift wrapping could turn into a valid destination. The spirit’s final revelation showed what tomorrow demanded: forward-thinking policies rooted in consumer needs, not recycled debates on legacy business models that want policy makers to retrace their steps.

From Imaginary Tales to Expert Views

As the spirits’ warnings echoed into the winter night, let’s recall that other voices already arose to voice similar messages:

Direct Compensation aka Network Fees: A Resounding No

• Body of European Regulators for Electronic Communications (BEREC): No evidence exists of free riding.
• BEUC – The European Consumer Organisation: Network fees in any form and whatever their branding must be rejected.
• Verbraucherzentrale Bundesverband (VZBV, German consumer organisation): A “data toll” means double costs for consumers if content providers pass on network fees.
• German Monopolies Commission: Strongly rejected the idea of mandated direct payments, as it would “fundamentally change the Internet ecosystem” – a warning reinforcing their 2023 policy paper.
• United stakeholder voices: “The new Commission should firmly reject proposals of the past, regardless of how they are reframed,” writes a coalition of civil society, tech industry and network operators.

Dispute Resolution: A Solution in Need of a Problem

• Council of the European Union: The 6 December Council conclusions on the White Paper observe a functioning IP interconnection market, with NRAs ready to handle disputes.
• BEREC: No market failure exists. The Internet ecosystem adapts well to changing conditions, including traffic increases. Most stakeholders favour monitoring and case-by-case assessments over regulation.
• German Monopolies Commission: No evidence of a problem needing “regulatory resolution,” pointing to well-functioning IP interconnection market dynamics and balanced bargaining powers between players.
• VZBV: A dispute resolution mechanism would introduce a “data toll” through the back door.

The Path Forward: Time for a Pro-Consumer, Pro-Competition & Pro-Innovation Agenda

• Council: Member States stressed the importance of net neutrality and a functioning Internet ecosystem, the need for contractual freedom to be upheld, and keeping regulatory intervention at a minimum.
• BEUC and BEREC: Warned against compromising core regulatory objectives, like competition, the internal market, and end-user rights, in pursuit of connectivity targets. For BEUC, these targets are not an end in themselves, especially not to justify going against or trading off these other regulatory objectives.
• United stakeholder voices: A broad coalition, from start-ups, digital rights, consumers, and network operators to Big Tech, stated their opposition to (backdoor) network fees while calling for “a pro-competition, positive innovation, and consumer centric approach.”
• The Lisbon Council (think tank): Komaitis urges Virkkunen to move on from the White Paper’s “myopic and borderline dangerous” vision towards a more positive digital transformation agenda for Europe.

A Christmas Wish for Europe’s Digital Future

Let’s hope policy makers choose the right path and avoid 2025 becoming the year when regulatory intervention “challenges the principle of net neutrality,” as BEUC fears.

May we end with a Christmas wish (almost) everyone can support, one a group of civil society organisations put forward in a recent open letter to Virkkunen: “it is time for Europe to use its global leadership to promote an open Internet for everyone.”

2025 is nearly here: let’s put an end to the “Humbug!”

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

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December 12, 2024