Despite finding support for fair share, operators are yet to convincingly outline how their proposals can be implemented without undermining the open internet. Showing how that can be achieved in practice is a prerequisite to advancing the debate
Operators maintain that the introduction of fair share would be (and should be) consistent with the principle of net neutrality – i.e. the equal treatment of online content and services. EU regulation does not expressly prohibit telcos charging tech firms for carrying traffic, which could give hope that commercial agreements could be struck.
If fair share is indeed consistent with Europe’s open internet rules, reconciling the two issues appears possible in theory. Amid calls for a market-led approach, one potential mechanism could be direct, commercially-agreed payments from tech firms to telcos, although this could require an arbitration process where negotiations break down.
The next step would need to be to develop a practical means of implementing fair share, one which telcos have yet to set out in detail. In response to the EC’s forthcoming consultation, the onus is on operators to present compelling, justifiable policy actions, including how contributions to network costs should be calculated and applied.
The EC has pledged not to change the Open Internet Access Regulation
A common position being taken by operators and some policymakers is that the introduction of fair share would be (and indeed should be) consistent with the principle of net neutrality – i.e. the idea that traffic should not be blocked or throttled, or priority given to certain services. Content and application providers (CAPs) strongly contest this assertion, arguing that the practice of charging some online service providers directly for traffic movements, but not others, is by its very definition discriminatory. According to Commissioners Breton and Vestager, the EC is committed to protecting a neutral and open internet. The issue of large CAPs’ financial contribution to telecoms networks does not need to be approached from the perspective of net neutrality, rather it is about ensuring all market actors benefiting from Europe’s digitisation support the delivery of public goods, services and infrastructure across the region. Compatibility with net neutrality has, however, become one of the most contentious points in the whole fair share debate.
In the EU, net neutrality rules are set out in the bloc’s Open Internet Access Regulation, which were adopted in November 2015. This legal instrument establishes (under Article 3.3) the principle that telcos “treat all traffic equally, when providing internet access services, without discrimination, restriction or interference, and irrespective of the sender and receiver, the content accessed or distributed, the applications or services used or provided, or the terminal equipment used”. The regulation does allow operators to implement reasonable traffic management practices, although these must be transparent, non-discriminatory and proportionate, and not be based on commercial considerations. As such, the framework enshrines in EU law provisions to safeguard the open internet and end users’ right to access and distribute online information and content, and use and provide the applications and services of their choice.
In the UK, net neutrality rules are effectively the same as in the EU, with the Open Internet Access Regulation becoming part of national law at the end of the Brexit transition period. As part of its October 2022 consultation on net neutrality, Ofcom states that under the current framework, there is no express prohibition on operators charging CAPs for carrying their traffic. However, operators are effectively unable to impose charges on CAPs since there is no legal or regulatory obligation on CAPs to negotiate and, in practical terms, CAPs do not need to for their traffic to be carried. Proponents of fair share may therefore see the possibility of determining commercial agreements for traffic movement as evidence that the concept can coexist with net neutrality principles. Nevertheless, with concerns that fair share could undermine end user rights and/or prices, telcos still need to meaningfully demonstrate how their proposals could be delivered in practice.
Squaring the circle between fair share and net neutrality appears possible in theory
Given the opposing arguments, the question is therefore whether – and how – fair share could be implemented while upholding net neutrality principles. In Telefónica’s view, the two issues are a “well-matched couple” and it is difficult to imagine an operator blocking any content or application. While the telecoms sector remains supportive of net neutrality, the digital ecosystem has drastically changed over the past 20 years, with the threat to an open internet stemming from traffic-generating ‘gatekeeper’ companies (rather than operators). As such, the request for a fair contribution should not be confused or conflated with the risk of undermining net neutrality. Telefónica sees telco networks as a two-sided market, to which only users help to economically sustain. It therefore suggests a rebalancing of the internet model is required to shift the investment to the parties that have accumulated so much value from it.
If fair share is considered consistent with (or at least not in violation of) open internet rules, squaring this particular circle appears possible in theory. However, the next step – and challenge – is devising a practical means of implementing the concept. At the recent FT-ETNO event in Brussels, former Vodafone CEO Vittorio Colao urged the tech and telecoms sectors to collaborate on a solution to the network investment challenge, emphasising that a market-led agreement is in the interest of all parties (positioning himself perhaps as the independent arbiter). Telefónica is also hopeful that fair share could be achieved via negotiation instead of legislation. One potential mechanism could therefore be direct, commercially-agreed payments from tech firms to telcos, although this would require CAPs to be encouraged to the negotiating table and an arbitration process where talks break down. In contrast, compensation could be imposed as a top-down remedy by regulators, which would have to determine companies’ contributions based on their impacts on network traffic. This is a more intrusive tool, while the issue of how wide to cast the net remains unresolved. Alternatively, a tax could be collected by governments and then distributed to operators, but this may be uneven in its application, challenging to administer and/or subject to litigation.
The onus is on the telecoms sector to show how it could work in practice
Despite garnering support from across the region, operators have yet to unveil potential mechanisms for reconciling the two issues. As a result, the ‘how’ is currently a major sticking point, with no clear and convincing proposal developed for how tech companies could contribute to telecoms network costs. To advance the fair share debate further, telcos will need to present something concrete and justifiable, which includes consideration of the scale of potential CAP contributions, as well as how these are calculated, applied and might adjust as digital markets and traffic levels evolve over time. The responsibility of a handful of internet players for the majority of traffic generation is a useful starting point for conferring liability, although a clear link may need to be established between tech services and network costs or capacity used. Once the EC issues its consultation, responding with reasoned and technically implementable policy actions will be central to helping turn the fair share vision into reality and lobbying into legislation.
