Europe is in the midst of an intense debate over whether content and application providers should contribute to telecoms infrastructure costs. Though the operators’ proposal has found a sympathetic ear, opposing voices have grown louder
The ‘fair share’ debate is alive in Europe, with the idea that tech companies should contribute to telecoms network costs receiving support from some national governments and high-ranking EU officials. Having gathered views from both sides, the EC is planning a public consultation on the matter early next year.
Many large telcos believe that the burden of deploying Europe’s digital infrastructure should be more evenly distributed among those that generate traffic – and costs. As the sector continues to experience low returns, it is argued that a financial contribution from tech firms would have both economic and environmental benefits.
Some smaller operators and access seekers such as MVNOs are concerned by the possible implications of fair share, considering that it could create a competitive distortion that puts them at a disadvantage. BEREC is also yet to be convinced by the argument, stating that such a charging model has the potential to harm Europe’s internet ecosystem.
The EC is currently preparing a public consultation for early 2023
Europe’s policymakers, telecoms industry and content and application providers (CAPs) have been emboiled in a debate over the concept of 'fair share’ – a telco-led notion that those firms driving the majority of data traffic (and operators’ costs) should make a direct contribution to network investment that helps deliver their content. Former European Commissioner Neelie Kroes shot down the idea in her so-called ‘adapt or die’ speech from 2014, in which she urged operators to work with the “digital demand” that tech firms generate, questioning whether anyone would be willing to pay for better broadband services if there were no Facebook, Spotify or YouTube. However, the issue has since resurfaced and served as the centrepiece of several recent events and conferences in Brussels, triggering lively, and at times heated, discussion among attendees.
Against the backdrop of a challenging economic environment and a desire to fulfil the bloc’s ambitious Digital Decade targets, the introduction of fair share has secured the support of the French, Italian and Spanish Governments, as well as some high-ranking policymakers in Brussels. An architect of the proposed European Declaration on Digital Rights and Principles, Commissioner Thierry Breton has stated that it is necessary to “reorganise the fair remuneration” of telecoms networks. Meanwhile, Executive Vice President Margarethe Vestager considers that there are “players who generate a lot of traffic” (e.g. Google, Netflix and Meta) that are not “enabling investments in the rollout of connectivity”, signalling that this situation requires remedying.
The forthcoming Connectivity Infrastructure Act – which will include revisions of the 2014 Broadband Cost Reduction Directive and state aid guidelines – was intended to house the EU’s fair share proposals, although a public consultation on those has now been pushed back to early 2023, with the EC recently having held meetings with the region’s telco leaders in order to develop an evidence base and line of argument. While getting the debate to this point alone reflects a successful advocacy effort by the telecoms sector, opposing views have crystallised and are gaining traction, particularly since the release of BEREC’s preliminary assessment.
The largest EU operators want support for network capex, but smaller rivals have reservations
Commissioner Breton’s sentiments broadly mirror those of many large telcos, which believe that the burden of maintaining and upgrading Europe’s digital infrastructure (particularly in light of rising prices for energy and labour) should be more evenly distributed among those that generate traffic – and costs. According to ETNO, an annual contribution of €20bn to telecoms network investment by tech firms could result in a €72bn boost to the EU economy, while also having positive implications for employment and carbon emissions. The GSMA has bemoaned the relatively low return on capital achieved by the telecoms sector over recent years and considers that all European operators investing in gigabit networks should be able to rely on a “fair and proportionate contribution” to their costs by big tech.
Orange has been one of the most vocal proponents of fair share, highlighting the €60bn investment it has made in European infrastructure over the last 10 years amid a period of exponential growth in data consumption. Orange considers that the stark difference in the level of traffic today and a decade ago demonstrates why those driving incremental capex should contribute more to telecoms network costs. Deutsche Telekom has stated that a sizeable imbalance in traffic between tech and telecoms means that the former benefits while the latter pays the bill – and has urged repairs to the current system. That said, not all European operators have backed the calls of the region’s major telcos. Some small and medium-sized operators have expressed concerns that a financial contribution to the telecoms sector from tech companies could distort competition in the market, putting them at a disadvantage.
Tech firms have rejected the idea, arguing it would represent a reward for failure
Tech firms, meanwhile, maintain that fair share would see the telecoms industry being paid “at both ends of the cable” – i.e. twice – and that operators’ proposal has only been (re)made because they have failed to monetise their own customers. Notably, BEREC has landed a fairly significant blow to the “direct compensation” idea in just 15 bullet points. While the group recognises consistent data usage growth in Europe and the concentration of traffic among certain large CAPs, its preliminary assessment is that the transition to a ‘sending party network pays’ charging regime could harm the region’s internet ecosystem. BEREC also identified no evidence that CAPs 'free-ride’ on telecoms infrastructure, stressing that a mutually-dependent relationship exists – and even suggesting that operators are using CAPs’ content to increase revenues.
