BEREC’s latest analysis draws many of the same conclusions as in 2017, pointing to an evolving market that functions broadly well without regulation
IP interconnection became the focus of many over the past two years, prompting BEREC to take another look at the ecosystem
On 11 June 2024, the Body of European Regulators for Electronic Communications (BEREC) published its draft report on the IP Interconnection (IP-IC) ecosystem in Europe. The report, which was approved by its Board of Regulators earlier that month, seeks to contribute to the ongoing debate on IP-IC that BEREC states was revitalised in 2021/2022 and has gained momentum since. It builds on BEREC's previous reports on IP-IC within the context of net neutrality published in 2012 and 2017, while also re-evaluating the conclusions reached in the last iteration, considering recent market developments between early 2017 and late 2023, and assessing the current state of IP-IC. At a subsequent public debriefing on the report, Véronique Ney (IRL, Luxembourg) and Christoph Mertens (BNetzA, Germany) – co-chairs of BEREC’s Open Internet Working Group that led its development – stated that they have adopted an evidence-based approach, involving virtual workshops, desk research and a questionnaire. Stakeholders can submit views on the draft report until 26 July, with a final version due for release in December.
CAPs are increasingly investing in infrastructure, bringing benefits in terms of cost, control and reliability
Based on BEREC’s data analysis, the report offers observations on the use of various IP-IC services, including bilateral peering, internet exchange points, transit and on-net content delivery networks (CDNs). BEREC finds that traffic is growing at a stable rate, with the internet very much able to cope with rising data consumption in the same way as in the past. However, the increasing diffusion of ultra-high definition (UHD) video content could further contribute to the growth of data traffic, and an increase in live-streaming content could potentially impact peak traffic levels. In contrast, prices and costs for IP-IC services continue to trend downward, driven by competition and technological progress. The report finds that usage of on-net CDNs and bilateral peering has accelerated since 2017, while content and application providers (CAPs) have also increasingly invested in their own infrastructure, including backbone networks (e.g. submarine cables), CDNs, data centres, hosting and cloud computing. BEREC notes that there is not only an economic rationale for this but also benefits to CAPs in terms of reliability and control by bypassing other providers, which may deliver quality improvements for end users. It adds that there is limited substitutability between transit and peering when low latency and high bandwidth are required, and where vertically integrated Tier 1 providers leverage their termination monopoly to transit.
The ecosystem continues to be driven by competitive forces, developing well without regulatory intervention
The report also shows that some IP-IC disputes have occurred since 2017, often featuring Deutsche Telekom. These cases typically involved CAPs that, due to congested interconnection links, had issues reaching end users of incumbent internet access service (IAS) providers with sufficient latency and bandwidth, which resulted in quality degradation and differentiated treatment. BEREC states that these incumbents have tried to extract additional rents from CAPs for traffic termination by offering uncongested alternative routes with sufficient capacity, in return for payment. When considering whether regulatory intervention is required (noting this is something stakeholders have not called for), BEREC looked at the bargaining situation between CAPs and IAS providers. While this may be influenced by a range of factors, BEREC finds it broadly in balance between the two sides, stating that the IP-IC ecosystem continues to be driven by effective market dynamics and cooperative behaviour among firms, developing well without regulation. Against this backdrop, BEREC therefore concludes that its previous observation that developments in the ecosystem are an "evolution rather than a revolution" still holds true.
BEREC is keen to separate its report from the fair share debate
BEREC states that, although the scope of the report is limited to the IP-IC ecosystem, it is worth noting that there may be some overlap with proposals to regulate payments from large CAPs to IAS providers for the use of their networks – i.e. the ‘fair share’ debate. However, the objective of BEREC’s report is not to replicate that specific – and contentious – debate. While fair share discussions are live in countries such as Brazil and India, they appear to have lost momentum in Europe, particularly as the EC’s digital infrastructure white paper does not state an intention to mandate such financial contributions. A recent ruling by the District Court of Cologne in Germany found in Deutsche Telekom’s favour in a dispute with Meta over IP transit fees, which has been claimed by supporters of fair share as a win. However, with the case focused specifically on the terms of an agreement for private interconnections, it is unclear whether this will help revive the fair share debate in Europe or establish a legal precedent on which to develop policy. When asked about the ruling at the public debriefing, Mertens merely stated that BEREC “took note of the decision”, giving away little insight into the organisation’s views on the matter.
