EU telco ministers side with big tech on fair contribution

The majority of European lawmakers appear to be unconvinced by the idea of charging content companies for the traffic they generate.

Nick Wood

June 5, 2023

3 Min Read
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The majority of European lawmakers appear to be unconvinced by the idea of charging content companies for the traffic they generate.

According to a Reuters report on Saturday, EU telecoms ministers met last Thursday to discuss the matter with internal market commissioner Thierry Breton. Sources cited by the newswire claim that 18 of them rejected a proposal to levy a network fee on so-called CAPs (content and application providers), or demanded further investigation into it.

This news isn’t wholly surprising, given it comes not long after Germany’s digital minister, Volker Wissing, told local news outletWelt that he could see no justification for introducing fair contribution. His Netherlands-based counterpart shared a similar position in February.

Nonetheless, that so many telco ministers are singing from the same hymn sheet is an unwelcome development for telcos and industry groups ETNO and the GSMA. They have all stepped up their lobbying during the EU’s consultation, called “the future of the electronic communications sector and its infrastructure.” It closed in late May and includes a section on fair contribution.

Justifying their position, the 18 telco ministers allegedly cited a lack of analysis on the effects of fair contribution, the apparent absence of an investment shortfall, and the risk of CAPs recouping network fees through higher prices.

This is the argument put forward by the likes of Amazon, Apple, Google, Meta, Netflix and so-on, who accuse telcos of wanting to charge subscribers twice for the same content. They also point out that they do contribute to infrastructure, spending billions of dollars on data centres, content delivery networks, and investing in cable systems to ensure their services are reliable and responsive.

The telco ministers’ collective concerns echo those of BEREC. Last October, the pan-European telco regulatory group shared its preliminary view that it could see no justification for fair contribution. It weighed in again in May (PDF), reiterating its reservations regarding the impact on end users, net neutrality, and competition.

“The introduction of a mandatory financial contribution from large CAPs to ISPs may distort competition between market actors,” BEREC warned. “Smaller ISPs are likely to be at a competitive disadvantage compared to large ISPs, in particular because of their smaller number of end-users and their lower bargaining power.”

BEREC also suggested that fair contribution could jeopardise the Internet’s role as a platform for innovation.

“A contribution may reduce the incentives for CAPs to develop content and applications and may reduce the quality of existing services. Should that lead to less innovation, there would be a welfare loss for the economy and society, and there might be a risk that innovative applications are either developed outside the EU or not provided within the EU,” BEREC said.

If telcos fail in their bid to charge big tech for carrying their traffic – and it is shaping up to be the more probable outcome – then they will have to pursue other avenues. That other avenue could quite conceivably be a renewed effort to pressure the EU into being more favourable towards in-market consolidation. Reason being, mergers and acquisitions are typically pitched by operators as a means of generating synergies that they then pledge to reinvest in infrastructure.

With competition commissioner Margrethe Vestager recently clarifying the EU’s stance on regulating M&As, there are signs that the tide may be turning in favour – albeit slightly – towards consolidation.

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About the Author(s)

Nick Wood

Nick is a freelancer who has covered the global telecoms industry for more than 15 years. Areas of expertise include operator strategies; M&As; and emerging technologies, among others. As a freelancer, Nick has contributed news and features for many well-known industry publications. Before that, he wrote daily news and regular features as deputy editor of Total Telecom. He has a first-class honours degree in journalism from the University of Westminster.

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