Big tech slams European Commission as capex consultation begins

• The European Commission has unveiled a range of actions that affect the telecom sector
• One of the actions is the initiation of the consultation into big tech’s potential contribution to telco capex budgets
• The big tech companies have lambasted the process and labelled it an ‘internet tax’
• The commission has also proposed ways to speed up gigabit broadband network rollouts
• But some are concerned the move will stifle network competition

Europe’s digital infrastructure landscape is beginning to resemble a battlefield, following the initiation of a range of actions by the European Commission, the most contentious of which is the long-awaited analysis of whether the so-called big tech players, such as Meta and Google, should contribute to the cost of building and maintaining telco network infrastructure – that particular consultation has been met with fierce opposition from the big tech companies.

The “exploratory consultation” seeks views from all stakeholders on “the potential need for all players benefitting from the digital transformation to fairly contribute to the investments in connectivity infrastructure,” noted the commission. 

The topic of whether companies that generate massive revenues from running their commercial traffic over telco networks should contribute to the cost of the supporting infrastructure has long been brewing but was really sparked into life last year when the CEOs of 16 leading European telcos signed a statement calling on the commission to take action in order to protect the viability and expansion of Europe’s communications networking infrastructure.

The commission noted that 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,” it added in the document.

That last statement has drawn ire from those opposing such capital contributions. 

Reuters reported that tech players are labelling the move as an ‘internet tax’ that goes against EU’s network neutrality rules, which are focused on the equal treatment of data traffic transmitted across networks. 

Meta issued a statement noting that it “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. By not recognising that value flows both ways between telecoms companies and content-hosting platforms, this consultation is based on a false premise.”

The Computer & Communications Industry Association (CCIA Europe) also slammed the consultation, stating that the commission appears to be accepting “the false ‘fair share’ premise pushed by big telcos”. 

“The questions are seemingly designed to justify this idea that popular streaming and cloud services should be mandated by the EU to subsidise telecom operators. Yet apart from the biggest telecom operators campaigning for EU network fees, all other relevant stakeholders – from civil society to regulators and academia – have already firmly rejected that idea,” the association added. 

It also urged the commission to consider warnings about “the detrimental impact of network fees on consumers and net neutrality” and to pay attention to the assessment made by the Body of European Telecom Regulators (BEREC) which found “no evidence” that a mechanism for third parties to contribute to network costs is “justified given the current state of the market” – see No need for big tech to cough up capex fees to telcos, finds regulators' group BEREC.

SVP and head of CCIA Europe, Christian Borggreen, likened the appeal by the major European telcos for contribution towards network costs to “old wine in new bottles”.

On the opposing front, the European Telecommunications Network Operators’ Association (ETNO) and mobile industry association the GSMA, unsurprisingly, applauded the commission’s consultation. ETNO described the move as “a positive and urgent step towards addressing major imbalances in the internet ecosystem to the benefit of European end-users”.

GSMA’s chief regulatory officer, John Giusti, also commended the consultation, suggesting that the region’s “future economic success and social development will hinge on sustained investment in advanced communications networks”. 

He also called for “an honest discussion” regarding the role that tech companies should play when it comes to infrastructure investment. “We believe it is only fair that the companies generating the largest amounts of traffic on Europe’s networks should contribute to the required infrastructure investment. That burden should not fall entirely on the backs of European consumers and businesses,” argued Giusti.

The commission will accept comments within the consultation by 19 May 2023 and based on the outcome, it will “consider the most appropriate actions for the future of the electronic communications sector”.

Gigabit future

In addition to the controversial topic of exploring who should pay for network infrastructure costs, the commission has proposed a new regulation, dubbed the ‘Gigabit Infrastructure Act’, to address the challenge of “slow and costly deployment of the underlying physical infrastructure sustaining advanced gigabit networks”. It pledges to cut red tape, costs and the administrative burden associated with the deployment of gigabit-capable broadband networks, alongside improving the coordination of civil works between network operators to deploy physical assets, such as ducts and masts, and to “ensure that the relevant actors obtain access to it”.

Last but not least, the commission has published a draft document called ‘Gigabit Recommendation’, which offers guidance to national regulators on conditions for “accessing the networks of those operators who have significant market power”. According to the commission, it wants to achieve “an adequate regulatory environment, incentivise the switch-off of legacy technologies without undue delay, i.e. within two to three years, and foster fast gigabit network deployment, for example by promoting pricing flexibility for access to regulated networks, while enabling sustainable competition”.

That all sounds very positive for the whole industry, but there are those who believe the Gigabit Recommendation will provide greater power to the large incumbents and squeeze out smaller, alternative players, thus reducing competition in the digital infrastructure market in Europe.

Italian lawyer Innocenzo Genna, who is based in Brussels and an expert in European regulation and policies related to the internet, telecom and technology, believes the recommendation will put an end to competition in telecom. In a blog published on Thursday, he stated that if the proposed recommendation is adopted in its current state and with its current wording, “national regulators will in fact be discouraged from adopting pro-competitive measures.” He added that the commission’s current approach appears to be focused on strengthening the major European Tier 1 operators, such as Orange, Deutsche Telekom and Telefónica. Let’s not forget that the European commissioner driving this digital agenda is Thierry Breton, who used to be the CEO of France Telecom (now Orange). 

So the ‘fair share’ investment debate is not the only contentious part of the commission’s plans, which focus on reaching all households in EU markets with gigabit-capable networks, and all populated areas having access to networks “of at least 5G performance”, by 2030 – an ambitious goal that ETNO has previously claimed might fail – see Europe at risk of missing 2030 gigabit target – ETNO.

- Yanitsa Boyadzhieva, Deputy Editor, TelecomTV