Original Article: https://www.politico.eu/article/telecom-netflix-tiktok-youtube-fair-share-why-telcos-are-going-at-war-with-big-tech/
Big telecom operators want data-hungry internet services — such as TikTok, Netflix or Google's YouTube — to pay some of the cost of delivering content, and they're relying on the European Commission to help them.
European operators say it's unfair that they spend tens of billions of euros every year on infrastructure to keep up with growing traffic while a handful of large content providers get the audience and some of the revenue. They say this isn't sustainable as traffic surges — and it means they will struggle to make the investments needed for the EU's digital target of connecting 45 million Europeans to gigabit broadband and 5G by 2030.
The Commission has made sympathetic sounds, signing a Declaration on Digital Rights and Principles for the Digital Decade that suggests that the entire industry makes "make a fair and proportionate contribution to the costs of public goods, services and infrastructures."
Big Tech — or at least Big Content — firms say that traffic growth is not getting out of control and that they are already contributing to infrastructure. Forcing them to pay a fee would allow telecom operators to charge both customers and content providers for the same service.
Internal Market Commissioner Thierry Breton kicked off the fight Thursday, launching a 12-week consultation for all stakeholders to have their say in the future of connectivity, including the “fair contribution by all digital players.”
“The telecom operator business will evolve,” Breton said, moving from “connectivity providers to infrastructure as a service provider,” while the industry is having “low return on investment” and is facing “rising raw material and energy costs.”
“Our biggest enemy is time,” Breton acknowledged, hitting at the upcoming 2024 European elections. “We will continue to use the time given to us to go as fast as possible,” he said, adding that “the Spanish presidency is already well-informed and very interested.”
The terminology of this potential compensation is controversial; telecom operators came up with the term “fair share,” and content providers prefer the phrase “network fees.” It could also be called a “senders-pay initiative.” Here’s what you need to know to understand what is shaping up to be a long, heated fight.
The consultation will close on May 19. “We will look at the results from many different angles,” a Commission official told reporters, adding that it cannot be excluded that they will find their way into the initiative on virtual worlds, expected at the end of May.
While it's still unclear what to expect from future services like the so-called metaverse and other emerging technologies, they will probably vastly increase the amount of data circulating on networks.
“All options are on the table,” Breton stressed at Thursday's press conference.
"It is currently very difficult for telecom operators to keep the high levels of investment needed while generating adequate returns," said Maarit Palovirta, senior regulatory affairs director at the European Telecommunications Network Operators' Association (ETNO), which has been calling for compensation from tech firms.
It isn't clear which of several options the Commission could choose for any infrastructure payments. One option is a framework for telecom companies to negotiate individually with firms that generate heavy traffic. That might allow regulators to jump in and solve any disputes.
In any case, the Commission will have to set thresholds determining which companies would be covered by any rules. European telecom firms would like to see something similar to the Digital Markets Act, targeting large platforms.
"Reports indicate that only the largest tech giants constitute a problem, both in terms of their negotiating power and of traffic loads," Palovirta said.
In the first half of 2022, Google, Netflix, Facebook, Microsoft, Apple and Amazon generated nearly half of internet traffic, according to a report by the Canadian application and network intelligence company Sandvine.
One winner of such an arrangement would be a faster rollout of 5G masts and fiber, something Europe needs.
"Europe is still very far from full 5G and fiber coverage and a reasonable contribution from tech giants would be a crucial help," Palovirta said. ETNO's latest projection shows that the EU will get to only 90 percent of very high-capacity network coverage by the end of the decade.
The tech giants don't see the need. They say they are serving customer demand. European telecom regulators largely agree and say they see no evidence of unfair "free-riding" on telecoms networks.
"Telcos’ own customers are requesting internet data, and they’ve already paid telecom operators for receiving it. Why would European consumers have to pay telcos a second time in the form of more expensive cloud and streaming services?" Christian Borggreen, the head of Big Tech lobby group CCIA Europe, told POLITICO.
There could also be collateral damage to European culture.
"If content companies have to pay additional fees to incumbent telcos on top of what we already invest in content delivery, we will have less investment available for content," said Giulia Iop, EU policy manager at broadcaster Sky, on behalf of the VOD Coalition, a coalition of streaming platforms including Netflix, Paramount and Warner Bros. Discovery.
Tech firms argue that they already do their "fair share" by spending around "€22 billion per year on internet infrastructure for Europe" via subsea cables, content-delivery networks and data centers, Borggreen said. "Telecom operators and other internet service providers in Europe actually save €1 billion annually thanks to tech’s infrastructure investments," he said.
ETNO estimates that telecoms investment peaked at €56.3 billion in 2021. A study commissioned by Deutsche Telekom, Orange, Telefónica and Vodafone put a value of at least €15 billion a year on network costs caused by tech giants.
More investment will be climate-friendly, the telecoms industry argues. A contribution of €20 billion a year would allow the industry to switch off older network equipment and move over to energy-efficient kit, reducing its carbon footprint by up to 94 percent.
Network fees could also provide an incentive for content to become more data-efficient — integrating better compression codecs, for instance — or implementing and encouraging better practices for their users like disabling autoplay for videos by default or refraining from sending very high-definition content to screens suited to a low definition.
Fair share opponents say the fee also infringes on net neutrality, a concept enshrined in European law that ensures all traffic should be treated equally no matter its source. In essence, they say, it unfairly discriminates against some online services.
Another risk is that tech firms will choose to offer degraded services — lower-quality video — that take up less space on the network. The ultimate loser could be the consumer.