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Is It Time for the Big Six to Start Paying for Europe’s New Network Infrastructure?

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Renata Thiebaut

The European Commission recently released Gigabit Infrastructure Act Proposal (GIA) draft has stirred up controversy regarding the involvement of the Big Six technology companies in co-funding Europe’s advanced network expansions.

The draft, should it be approved by the European Parliament and Council, will replace the 2014 Broadband Cost Reduction Directive, with updated rules for a ‘faster, cheaper and simpler’ rollout of gigabit networks by reducing costs and streamlining procedures across Europe.

While the benefit of network upgrading to overall economic growth is unquestionable, a debate has arisen as to discuss an ideal investment scheme to include the Big Six Tech companies. The increasing demand for high-quality video streaming applications has certainly put a strain on internet infrastructure and could potentially increase the price of products and services to end-users.

Today, Google, Facebook, Netflix, Apple, Amazon, and Microsoft account for a significant portion of internet traffic. Estimates suggest that they alone are responsible for 55% of all internet data traffic. Although these companies are headquartered in the United States, they rely on telecom infrastructure and would benefit from digital infrastructure improvements in Europe.

For instance, the network requirements for streaming videos are significantly more expensive than for lower traffic volume and social necessity applications, such as those used for work, school, and healthcare. There are concerns that the Big Six would levy the costs on consumers as increased fees for their services, which can include higher subscription fees, data usage surcharges, the implementation of data caps, or limited data transfer speeds, mostly known as throttling policies. Another main concern is the limited growth of telecom companies, which affects their bargaining power: the Big Six’s market capitalization is 30 times larger than that of the eight largest European telecommunications companies put together, which would create a market imbalance.

Thierry Breton, European Commission’s Commissioner for Internal Market of the European Union, has recently said at the Mobile World Congress (MWC) that happened in Spain at the end of February, “For me, the real challenge is to make sure that by 2030 our fellow citizens and business on our streets across the EU – including here in Barcelona – have access to fast, reliable and data-intense Gigabit connectivity”.

He defended a consultation on whether Big Tech would contribute to investments in Europe’s telecoms infrastructure by stating that it is not about putting Big Telecoms’ interests above tech companies but rather finding an ideal financing model to guarantee the success of the broadband modernization and expansions across Europe.

One of the main arguments in favour of sharing the costs with the Big Six is that the final stretch of network infrastructure to reach the end user is the costliest, and internet companies have traditionally played a limited role in funding network expansions. A fair cost-sharing for data transport could decrease rather than increase the prices to end-users.

In addition to their core responsibilities, network operators also assume other tasks such as planning, building, and maintaining the physical infrastructure of the network, diagnosing, and fixing connection problems, along with complying with relevant regulations and security standards.

The European Telecommunications Network Operators’ Association (ETNO) has supported the consultations, referring to it as a “positive and urgent step towards addressing major imbalances in the Internet ecosystem to the benefit of European end-users”.

However, in Germany, the following social actors have positioned themselves against the plan to have the Big Six share the costs: digital rights groups and consumer groups, netzpolitik.org, party political spokespersons for digital, Federal Ministry of Transport and Digital Affairs. The European telecoms regulator, Berec, has also opposed it. They argue that there is a risk that the big tech firms will negotiate with telecom firms to give them traffic preferential treatment, which will undermine the principle of net neutrality.

The Dutch government, the first EU government to criticize Breton, recently warned against imposing an internet toll on tech companies, saying that such a move may breach net neutrality rules and lead to price hikes for Europeans.

It is unlike that the Big Six will agree to the financing, since some of them have already voiced against the cost-sharing possibilities: “Meta invests tens of billions of dollars in our apps and platforms every year to facilitate the hosting of content, creating enormous value across the digital ecosystem”, the company’s spokesperson said, according to Reuters.

Netflix’s co-CEO, Greg Peters, defended that the growing demand for the internet did not cause growing traffic costs. “I know there are some here today that are concerned that this consumer demand leads to unsustainable internet traffic growth. These concerns are not new,” he spoke to the audience at the MWC event.

Now, there remains a sufficient amount of time to define the next steps. The European Commission has submitted a draft Recommendation to the Body of European Regulators (BEREC) for a two-month consultation period, from 23 February 2023, which ended on 19 May 2023. Various groups, particularly smaller telecom companies, alt-nets, and other related players, will express their views and address the eventual network deployment challenges during the consultation. Based on the outcomes, the Commission will consider the most appropriate actions to move forward.

The non-participation of the Big Six as investment providers is significant rhetoric. A potential solution is to impose a fee for the utilization of network infrastructure, similar to how telecom companies are obligated to pay fees for the usage of the radio frequency spectrum. In any case, legislators should ensure that prices remain fair and reasonable for end-users by establishing price control mechanisms to cap surcharges as well as implement incentives as forms of tax breaks and other financial rewards that can have incentive effects for climate protection.

Juan Montero Rodil, Telefónica’s Chief Public Policy, Competition & Regulatory Officer stated that “Telecom operator’s investment level is substantial, but it is not sufficient to meet the EU’s digital and connectivity targets”.

Larger investments would have a multiplier effect on the European economy with a boost of 72 billion euros, impacting overall innovation, job creation, and tackling climate protection and emission reduction from the replacement of copper to fibre optic cables.

Acknowledging the significance of multi-stakeholder efforts toward digitalization is imperative. Therefore, it is reasonable to further discuss a better approach to a financing scheme that involves the Big Six as a way to guarantee their access to the fastest standard broadband, and at the same time, comply with the General Data Protection Regulation (GDPR) and promote their advocacy for social responsibility across Europe.