internet lab. – fair share / network fees | 6 March 2023
In this special edition, we focus on the EC’s consultation – see our brand new resources page promoted below – and the initial reactions to it, and reflect on some of the discussions at the MWC 2023.
[EC’S EXPLORATORY (OR IS IT EXPLANATORY?) CONSULTATION]
On 23 February, EU Commissioner Thierry Breton announced the launch of the much anticipated public consultation on “the future of the electronic communications sector and its infrastructure” that notably looks into the fair share / network fees debate – deadline: 19 May, midnight Brussels time (CEST).
This is a so-called ‘exploratory’ consultation, and not an ‘explanatory’ consultation, as the EC’s Digital EU twitter account dubbed it. Or is it? We cannot blame the Commission services for getting confused: Contexte journalist Guénaël P. spotted that one of Commissioner Breton’s tweet’s might be giving the answer away as regards who he thinks should pay for the telecoms infrastructure. For the EU-geeks: Christian Borggreen, from the Computer & Communications Industry Association, put out a helpful Twitter thread clarifying the concept of ‘exploratory’ consultations.
In his speech (video), Commissioner Breton tried to emphasise the open nature of the Commission’s effort. “This reflection is not ‘against’ anyone in particular,” he stated, as he reiterated the EU’s objective: “to encourage and target the investments necessary for the digitalisation of our continent and in this context to identify – if necessary – a contribution mechanism that can ensure a rapid and wider deployment of very high capacity networks.”
EC Executive Vice-President Margrethe Vestager took it to Twitter to share her perspective. In her tweet, she stressed that: “It is clear: there is no going back on hashtag#NetNeutrality + no decision has been taken about a proposal #OTTfairshare”. The ‘#OTTfairshare’ hashtag at least is a proper reflection of the issue at stake, as the debate is broader than just Big Telcos vs. Big Tech.
Euractiv reports that the EC is set to present its efforts in the telecom arena to the Council’s Working Party on Telecommunications and Information Society meeting on 7 March, pointing out that: “although it might be too early for countries to take a strong stance on it, it might provide interesting indications of the different views.”
EU Commissioner Breton considers time is the biggest enemy with the 2024 EU elections around the corner but told reporters that he will be reading everything. The remaining 11-weeks of the consultation process thus provides a critical window for stakeholders to share their thoughts around this debate before the genie is out of the bottle. We need to make sure this time is the last time. However, as DER STANDARD editor Andreas Proschofsky put it on Twitter: “there is no idea that is too stupid not to be rehashed every few years.”
[UNSURE ON HOW TO PARTICIPATE – HELP IS AVAILABLE]
Thomas Lohninger told netzpolitik.org that epicenter.works will be offering assistance to individuals and organisations in filling out the questionnaire. Do you or your organisation care about the Internet, want to respond to the consultation, but are unsure how: then contact nn@epicenter.works.
[INTERNET LAB. RESOURCES]
🔥📢 Check out the internet lab resources page prepared in light of the EC consultation and the general debate on a fair share / network fees. On this page, we provide:
📌 1 spreadsheet with stakeholder positions
📌 2 infographics on:
💬 the arguments put forward
🗣️ the stakeholders involved
[STAKEHOLDERS’ INITIAL CONSULTATION THOUGHTS]
Network Fee Opponents:
National policymakers:
The Netherlands: “It will penalise the consumers”, Dutch Minister of Economic Affairs and Climate Policy Micky Adriaansens, told Foo Yun Chee from Reuters, based on evidence from a report the Dutch government commissioned from Oxera Consulting LLP. Before jumping the gun “we should analyse the problem first and what the normal market reaction is to these challenges,” the Minister Adriaansens stressed.
The Dutch government, while cautioning for a major impact on European consumers and businesses, criticises the fact that “the large telecom companies omitted crucial information resulting in a misrepresentation of facts.”
Oxera concludes that “promoting investment by network operators is not an economically sound reason for instituting a levy,” and considers “there are more effective ways of achieving such a goal.”
The Ministry regards “the Oxera report as an important contribution to shift towards a consumer centered debate that is more based on evidence and objective and independent analysis, and less on partial interests of specific groups and opportunist arguments.”
Germany: During a debate in the German Bundestag, State Secretary Stefan Schnorr expressed the scepticism of the German Federal Ministry of Digital and Transport (BMDV) on network fees. He observed the ‘slightly tendentious’ nature of the questionnaire, as it fails to inquire if such a ‘compulsory levy’ is necessary in the first place. In the view of the BMDV, that is not the case, seeing that there is no market failure justifying such a regulatory intervention in Germany, or elsewhere in Europe, according to State Secretary Schnorr. “Even if we would have preferred more open-ended questions from the Commission,” the German government intends to participate. Moreover, telcos’ arguments do not hold water, according to him. Prior to the State Secretary’s intervention, Ben Brake, BMDV’s Director Digital and Data Policy, remarked that EU Commissioner Breton’s tweets reinforce the ‘window dressing’ feeling around the consultation.
EURACTIV’s Luca Bertuzzi observes that: “this critical position comes from the German liberals, who are part of Breton’s own political group, Renew. Still, it is not necessarily the line that prevails in the coalition government, given Deutsche Telekom’s enormous influence.” State Secretary Schnorr did admit during the debate that there was no coordinated position yet, but pointed out that he was not aware of any diverging opinions from the views of the BMDV in other departments.
EU Policymakers: “The questionnaire shows that the Commission prefers to indulge in reality distortion rather than making evidence-based decisions,” German MEP Tiemo Wölken (Socialists and Democrats Group in the European Parliament) observed in light of the loud civil society criticism and the fact that he sees no one, apart from Big Telcos and Commissioner Breton, calling for this. He lamented Commissioner Breton’s mere ‘lip service’ to net neutrality, dogging the real concerns and questioned the Commissioner’s claims on wanting broad involvement, finding it absurd that many stakeholders “are excluded in the consultation by tendentious questions.”
German MEP Patrick Breyer (European Pirates – The Greens/EFA in the European Parliament) cautions that “access fees could make internet access to essential services expensive or slow”. He encourages everyone to defend net neutrality in the consultation, pointing to questions 54 and 60 in particular.
Telcos: Nicolas Guillaume, President of the French alt-net NASCA group, made it clear in a FRENCHWEB.FR op-ed that they are not siding with the big incumbents calling for a ‘fair share’. No need to change the Internet’s current model, as it works well. He recalls that the deployment of fibre optics in French rural areas is mainly thanks to public funds, and observes how the positive returns on these new generation networks are now attracting private investors. “This [‘fair share’] mechanism will in fact benefit no one, at least not those who innovate, invent and undertake within our territories,” Guillaume concludes.
The French Association des Services Internet Communautaires (ASIC) ‘categorically’ opposes a ‘digital toll’. Their observation is that the French telecoms market is competitive and favourable for consumers. “There is currently no imbalance justifying legislative intervention in the regulation of paid peering, nor any reason to question the balance found at the European level in 2015 on net neutrality,” the organisation concludes.
Consumers: Susanne Blohm from the Federation of German Consumer Organisations (vzbv) confirmed their participation in the consultation to netzpolitik.org. “The topic of net neutrality is dealt with briefly on the sidelines and all other consumer issues are not addressed at all,” she regretted, while reminding that “without consumers, we need neither Big Tech nor telcos”.
Experts: “Frankly, it is rather upsetting to see how the European Commission has handled this issue, from the lack of transparency throughout the process leading up to [the consultation] launch to the way it has pitted Big Tech against Big Telcos, when it should encourage them to collaborate,” was one of the initial reactions by Internet expert Konstantinos Komaitis, PhD.
“The wording and overtly leading way the questions are phrased give a crystal-clear view of where [Mr Breton] wants to go,” he writes in a follow-up blog post, co-authored with his colleague Paul Hofheinz at The Lisbon Council. Komaitis and Hofheinz conclude that: “If the plan goes through, the burden will fall directly on consumers in the form of fewer choices, less innovation, lower quality of services and ultimately higher prices for goods they consume liberally at competitive prices today.”
Civil society: Internet Society considers that this discussion is not the ‘balanced and productive debate’ that the Big Telcos are portraying, and deplore the Commission “backing large telecom operators’ requests for new regulation – despite the overwhelming opposing voices and the risks to the Internet”. Their message: “The proposal from telecom operators will harm the Internet and its users. It must be stopped immediately.”
For Thomas Lohninger from the Austrian NGO epicenter.works this consultation on the ‘#UnfairShare’ is simply “not an attempt of fact finding, but justifying demands by Big Telcos.”
Jesper Lund from the Danish NGO IT-Politisk Forening (IT-Pol) disagrees with EC Executive Vice-President Margrethe Vestager on the net neutrality principle being safe: a “very one-sided” claim that is “not helpful if this is meant to be an open consultation for all stakeholders.”
Startups: Allied For Startups recalls the looming danger for net neutrality, and the importance of this principle, which for them “lays the foundation for equal opportunities for innovation, global competition and economic growth”.
Tech & content: VAUNET, the umbrella organisation for commercial audiovisual media in Germany, rebutted Commissioner Breton’s claim of streaming services being bandwidth-hungry, pointing the finger to some telcos ‘hunger for money’, and “that appetite could also affect culturally and democratically desired services.” They recalled the recent statement by their board member Heiko Zysk (ProSiebenSat.1 Media SE) at an event by German EPP Group MEP Sabine Verheyen: “Network fees don’t just affect Big Tech, they threaten media pluralism in Europe. Any Euro spent on network fees will not be spent on creativity.”
“We are happy to see there are no pre-drawn conclusions on a potential gap in the connectivity market,” Siada El Ramly from DOT Europe said, taking a more positive outlook.
‘What we hear from big telecom CEOs is just old wine in new bottles,” Christian Borggreen, from the Computer & Communications Industry Association, reacted while welcoming the consultation effort. “Nothing has changed since this idea was last rejected by Europe a decade ago. In fact, network fees already failed in the only country that has tested it. We encourage the Commission to be transparent in its evidence-gathering and analysis, and ultimately to reject this misguided idea once and for all,” Borggreen concludes.
The ‘In-Betweeners’: BREKO Bundesverband Breitbandkommunikation e.V., considers that Big Tech’s contributions could “further strengthen the dynamics in fibre optic expansion”, but such effort should meet three essential conditions:
- No market distortion: alt-nets should be able to benefit from such ‘fair share’ contributions on the same terms;
- Used for network investments: the contributions should exclusively go to FTTB/H rollout; and,
- It should not negatively impact net neutrality.
‘Fair Share’ Cheerleaders: The consultation effort was of course welcomed by GSMA and ETNO. The latter even “commend[ed] the Commission’s leadership in initiating an honest discussion.” French Renew MEPs Valérie Hayer and Stéphanie Yon-Courtin also spoke out to welcome the Commission’s initiative. “We asked for it, it’s done,” MEP Yon-Courtin tweeted, adding her expectation that “this fair contribution will allow access to a quality network across Europe.”
[MOBILE WORLD CONGRESS (MWC) 2023]
EU Commissioner Breton: On Monday 27 February, Commissioner Breton took the stage alongside GSMA’s Director General, and the CEOs of Telefónica and Orange – which was still known as France Télécom during Breton’s stint as CEO from 2002 to 2005.
During a keynote panel on the ‘Vision of an Open Future’ (a last minute rebranding from a ‘Fair Future’ as highlighted by POLITICO’s Mathieu Pollet), the Commissioner stressed in his speech that he does not see this debate as a “binary choice” between Big Telco and Big Tech. “It is not about whether one vested interest should prevail over another. It is about achieving the giant leap for connectivity ahead of us,” he stated, as he stressed the need for regulation to keep up. The Commissioner is convinced that “the networks of today are simply not up to date with the massive transformation taking place.”
Cross-border consolidation and spectrum are the two issues Commissioner Breton identified as holding back Europe’s potential. “It is time that we have a serious discussion about the possible existing obstacles to cross-border consolidation of electronic communications providers in the EU as well as the benefits of an integrated radio spectrum market,” he said.
Orange: “We’re not asking to change Europe’s net neutrality principle, nor are we asking for a new tax mechanism,” CEO Christel Heydemann claimed. Internet expert Konstantinos Komaitis, PhD interprets this as: “we are asking something that looks, feels and smells like that…we just don’t call it as such.” Heydemann called on policymakers to tackle the imbalance telcos face in dealing “with a very difficult equation between regulation and investment.”
Only one day after EU Commissioner Breton pointed in his MWC23 speech to telcos moving “from being mere connectivity providers to becoming network-as-a-service providers”, Orange sent an email to shareholders, obtained by Euractiv, on its ambition to “re-create itself as a global competitor on all the value chain of the digital transformation: digital integration, cybersecurity, data, Artificial Intelligence, data centres, cloud.”
Meta & Netflix: At MWC23, the Big Tech platforms caught in the crosshairs of this debate took a swing back at some of the telcos’ claims. Meta’s Markus Reinisch notably highlighted how the debate fails to represent the tech sector’s full contribution, including the billions spent on building the Internet’s value. From his perspective, the debate is skewed by portraying tech companies as users of resources, rather than as the contributors they are.
Netflix co-CEO Greg Peters referred to EU Commissioner Breton’s point that it should not be a ‘binary choice’ between Big Telcos and entertainment companies, as he recollected having had this debate once already a decade ago.
“This tax would have an adverse effect, reducing investment in content — hurting the creative community, hurting the attractiveness of higher-priced broadband packages, and ultimately hurting consumers,” Peters emphasised.
He sees broadcasters as next in line to open up their wallets, with the growing shift from linear to streaming (see the reflection of Rudolf van der Berg). “Requiring entertainment companies — both streamers and broadcasters — to pay more on top would mean ISPs effectively charging twice for the same infrastructure,” Peters warns. He also points to the warning by BEUC – The European Consumer Organisation that there is “no suggestion these levies would be passed onto consumers in the form of lower prices or better infrastructure”.
“We could just as easily argue that network operators should compensate entertainment companies for the cost of our content – exactly as happened under the old pay-TV model,” he reminded telcos, while observing Netflix’s lower operating margins than BT and DT. In the past five years, the platform invested over $60 billion in content, roughly 50% of their revenue in that period. For them “it is the part [they] play in creating a virtuous flywheel: better, more varied content, leading to more people willing to pay for better broadband services.” Next to investments in content, Netflix has also spent over $1 billion on their Open Connect CDN, which is offered freely to ISPs.
However, going back to the old pay-TV model is not what Netflix is calling for, said Peters, as he sees a “clear and direct symbiotic relationship between a thriving creative industry and a thriving internet ecosystem”. For him “the better approach is for entertainment companies and operators to focus on what we each do best — creating a rising tide that will lift all boats.”
MEPs: POLITICO’s Mathieu Pollet got initial reactions from MEPs Paul Tang (S&D, Netherlands) and Pilar del Castillo (EPP, Spain). MEP Tang wants to “keep it simple,” with Big Tech contributing into a fund to avoid net neutrality concerns, while MEP del Castillo takes a “wait-and-see” approach for now.
Ericsson: Mikael Bäck does not consider the ‘fair share’ approach to be the “silver bullet”, rather a “component” of what is needed in the long run, he told POLITICO. “Pushing competition in many markets to get a third or even a fourth operator has been good for consumers,” less so for operators, he observes.
UK: Michelle Donelan, Secretary of State for Science, Innovation and Technology, told POLITICO that this is not on radar in the UK, as she recently held a roundtable with telco CEOs. Donelan acknowledged the value of and potential negative impact on the likes of Netflix and others, which are “great job creators and growing entities in the UK”. Reminder: net neutrality is still under threat in the UK, as pointed out by Dr Monica Horten from the Open Rights Group.
[INTERNET LAB – PODCASTS]
In our most recent internet lab podcast episodes we spoke with Internet expert Bill Woodcock, from the Packet Clearing House, who brings in the ‘surveillance’ angle in the fair share / network fees debate – see our podcast page, Twitter thread and LinkedIn update. This marks the last episode of the 1st season of the podcast. Stay tuned for our season 2 announcement, which is starting soon.
[BRIEF HIGHLIGHTS]
- Sending Party Network Pays, or how Big Telco wants its termination monopoly back! – LINX118 presentation by Rudolf van der Berg (Stratix)
- OECD broadband statistics update – Fibre is now the dominant broadband access technology in half of all OECD countries (OECD) [see commentary by Rudolf van der Berg and Konstantinos Komaitis]
- Senders-pay: the state of the debate (EURACTIV podcast with Julia Maxwell, SVP for Viaplay group and member of the EU VOD Coalition, and Alessandro Gropelli, Deputy Director General at ETNO)
- Korean interview with Konstantinos Komaitis, PhD (The Financial News)
- Netflix, Meta and other U.S. internet companies could be forced to pay to reach users in Europe. Here’s why a new net neutrality fight is erupting (Fortune)
- Network Fees and the Creative Sector (infographic by Netopia)
- The European Commission puts an end to competition in telecoms (Innocenzo Genna, Genna Cabinet)
[UPCOMING EVENTS]
- 7 March 2023 – Brussels, Belgium | Dutch Permanent Representation to the EU – The Network Fee: Fixing a Real Problem or Creating One?
- 13-14 March 2023 – Brussels, Belgium | ForumEurope – The European 5G Conference 2023
- 21 March 2023 – Hybrid | ETNO & POLITICO Live – Telecoms Drumbeat for the Future of Connectivity
- 30 March 2023 – Brussels, Belgium | BEREC – 11th Stakeholder Forum (Check the ‘Meet & Greet’ opportunity with the BEREC Working Group Co-Chairs)
- 18 April 2023 – Webinar | Video Shouldn’t Have to Cost the Earth (Mobile Video Council, MOVIC)
Written by Caroline De Cock, LL.M. , Head of Research.
March 6, 2023
