EU seeks input on making tech companies pay for ISPs’ network upgrades

EU opens proceeding that could mandate direct payments from content providers.

The European Union government is seeking public input on a controversial proposal to make online platforms pay for telecom companies' broadband network upgrades and expansions. If it goes forward, tech companies like Google and Netflix and possibly many others could have to make payments toward the financing of broadband network deployment.

The European Commission's exploratory consultation released today said there "seems to be a paradox between increasing volumes of data on the infrastructures and alleged decreasing returns and appetite to invest in network infrastructure." Large telecom companies have been seeking payments from web companies, the consultation notes:

Some electronic communications operators, notably the incumbents, call for the need to establish rules to oblige those content and application providers ("CAPs") or digital players in general who generate enormous volumes of traffic to contribute to the electronic communications network deployment costs. In their view, such contribution would be "fair" as those CAPs and digital players would take advantage of the high-quality networks but would not bear the cost of their roll-out.

 

The tech companies that would have to start paying "argue that any payments for accessing networks to deliver content or for the amount of traffic transmitted would not only be unjustified, as the traffic is requested by end-users and costs are not necessarily traffic-sensitive (notably in fixed networks), but would also endanger the way the Internet works and likely breach net neutrality rules," the document notes.

Meanwhile, "other stakeholders caution against rushed regulatory intervention," the EC said. The consultation is seeking public input for 12 weeks. The questionnaire asks whether there should be "a mandatory mechanism of direct payments from [tech companies] to contribute to finance network deployment," and if so, whether the fees should be charged to all online content providers or only the largest traffic generators.

Telcos: Big Tech should “contribute fairly to network costs”

The EC isn't only seeking opinions. It wants data from providers on network-upgrade costs, the prices paid for network peering and transit services, and more figures.

"[T]he exploratory consultation is part of an open dialogue with all stakeholders about the potential need for all players benefitting from the digital transformation to fairly contribute to the investments in connectivity infrastructure. This is a complex issue which requires a comprehensive analysis of the underlying facts and figures, before deciding on the need for further action. The Commission is strongly committed to protecting a neutral and open Internet," the EC said.

Forcing tech companies to make new payments would achieve a longtime goal for the telco industry. As Reuters wrote today, companies such as Deutsche Telekom, Orange, Telefonica, and Telecom Italia "have lobbied for leading technology companies to contribute" to network costs for "more than two decades."

A letter from the CEOs of 13 large European telecom companies in 2021 said that network investment "can only be sustainable if such big tech platforms also contribute fairly to network costs." In the US, a Republican member of the Federal Communications Commission argues that Big Tech gets a "free ride" on networks built by ISPs.

But websites and other online service providers already pay for their own Internet access and, in some cases, have built extensive network infrastructure to carry Internet traffic part of the way to broadband users. Web companies that generate the content requested by Internet users also pay fees to Internet transit providers and content delivery network operators.

Tech lobby slams “false ‘fair share’ premise”

The EC consultation was criticized by a lobby group that represents tech companies such as Amazon, Apple, eBay, Google, Meta, and Twitter. The questionnaire on network fees "appears to accept the false 'fair share' premise pushed by big telcos," the Computer & Communications Industry Association (CCIA) said.

"The questions are seemingly designed to justify this idea that popular streaming and cloud services should be mandated by the EU to subsidize telecom operators," the CCIA said. The group also complained that most of the questions in the consultation "can only be answered by tech firms and telcos, thus excluding most stakeholders."

CCIA Europe Head Christian Borggreen suggested new fees would be passed to Internet users. "Europeans already pay telecom operators for Internet access, they should not have to pay telcos a second time through pricier streaming and cloud services. Putting a fee on Internet traffic would hurt European consumers and undermine the open Internet by treating data differently," he said.

The CCIA urged EC regulators to heed warnings in an October 2022 report issued by the Body of European Regulators for Electronic Communications (BEREC). The report found there is "no evidence of 'free-riding'" and that connectivity costs "are typically covered and paid for by ISPs' customers."

"The 'sending party network pays' (SPNP) model would provide ISPs the ability to exploit the termination monopoly and it is conceivable that such a significant change could be of significant harm to the Internet ecosystem," the BEREC report said.

Facebook and Instagram owner Meta is opposed to the proposed payments. "By not recognizing that value flows both ways between telecoms companies and content-hosting platforms, this consultation is based on a false premise," Meta told Reuters.

Telefonica CEO José María Álvarez-Pallete López told Reuters that payments from tech companies "would not be like a tax—we would charge them like they were customers. Why do some customers pay and others not? It's correcting an anomaly."

Fifty-four members of the European Parliament protested the idea of requiring payments from online service providers to Internet service providers in a July 2022 letter. "Large telecom companies have tried for decades to require compensation from content providers for providing access to customers, despite the fact that the telecom companies are already being paid by their own customers to provide access," they wrote.

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