Getty Images | Alan Schein
The Biden administration urged Europe to reject the telecom industry’s plan to make Big Tech companies pay for ISP network expansions and upgrades. In comments submitted to the European Commission last week, the US Department of Commerce’s National Telecommunications and Information Administration (NTIA) said mandating payments from online platforms to ISPs would “distort competition” and undermine net neutrality .
“Mandatory direct payments to EU telecom operators with no assurance of spending could strengthen the dominant market position of the largest operators,” the US entry said. “It could give operators a new bottleneck for customers, increase costs for end users and change incentives for CAPs/LTGs [content and application providers and large traffic generators] to make efficient decisions regarding network investments and interconnection. It is difficult to understand how a system of mandatory payments imposed on only a subset of content providers could be enforced without undermining net neutrality.”
European broadband providers said in their comments that they should be able to charge new fees to online companies that account for more than 5 percent of a telco’s average peak traffic. Telco lobby groups claimed that Europe “needs a fair contribution based on a framework that allows for balanced negotiations between telcos and major traffic generators that benefit most from telecom investments, while creating a high cost burden with their traffic and exercising disproportionate power in markets .”
European ISPs advocated direct payments from technology companies rather than having technology companies pay into a government-run fund that would distribute money to ISPs. Tech companies’ payments to ISPs “should be based on commercial negotiations anchored in a framework that requires the parties to negotiate,” with the backstop of a neutral third party to resolve disputes, the telco lobby groups said.
The US government’s application urges Europe “to promote affordable broadband access, protect users’ access to online content and avoid discriminatory measures that distort competition,” the NTIA said in a press release yesterday. In summary, the NTIA said the proposal “could give telecom operators a new bottleneck that could be used to increase control over their customers, increase costs for consumers and small businesses, and create disruptions in the Internet ecosystem.”
US: Tech companies are already investing heavily
The Biden administration pointed out that technology companies are already investing a lot of money in networks:
Internet services rely on a diverse global infrastructure that extends far beyond end-user access networks. CAPs/LTGs build and operate networks, including major international fiber and submarine cable systems, that deliver popular services and applications. They develop or acquire content, operate data centers, and assume other commitments that add to the total cost of the ecosystem.
The US warned of “substantial risks in a mandatory mechanism of direct payments from CAPs/LTGs to telecom networks, especially if there are no mandatory, enforceable obligations about how such payments are spent. Enforcing mandatory payments to a subset of traffic generators could be discriminatory and equal opportunities deteriorate.” access to the internet, endangering the principle of internet openness/net neutrality.”
The NTIA explained that the US approach to financing network construction “involves private investment, a national Universal Service Fund, and significant government funding from general credit.” The US said these “publicly responsible financing mechanisms”, as opposed to compulsory payments from one group of companies to another, are essential to “avoiding discriminatory measures that distort competition”.
The US also warned that mandatory payments would be “unsustainable” if more countries adopted them.
“We urge caution should the EU consider new financing mechanisms that could disrupt the current internet ecosystem, which has successfully adapted to changing technological and market conditions over time,” the NTIA said. “Internet traffic is global, which raises questions about a country’s ability to collect revenue from foreign content providers; if many countries went down this path, it would likely be unsustainable.”
EU group warns of price hikes, impact on small ISPs
In addition to criticism from Meta, Google and Netflix, the fee proposal drew criticism from the Body of European Regulators for Electronic Communications (BEREC). The group of regulators from European countries said it found no evidence of “piggybacking” by tech companies or evidence that ISPs’ costs are not being fully recovered.
“Introducing a mandatory financial contribution from large CAPs to ISPs could distort competition between market players,” the group said. “Smaller ISPs are likely to be at a competitive disadvantage compared to large ISPs, mainly due to their smaller number of end users and lower bargaining power. Large CAPs typically offer commercial content delivery networks (CDN) and cloud services. Thus, they could pass on higher costs to their customers. This would then not only affect, for example, smaller CAPs, but also business users, especially SMEs [small and medium-sized enterprises].”
BEREC also said there is a danger that customers of content providers, including small and medium-sized businesses, “will be negatively impacted if increased costs are passed on through higher content subscription fees or the quality of service is reduced.”
