Commission launches consultation on “fair share” initiative

Should online service providers have to pay for the traffic generated by their users? To answer this question, the European Commission has launched a public consultation on 23 February 2023, which addresses key issues for the telecommunications sector and the digital economy. Known as “fair share”, the consultation is held to decide whether the European Commission should force large online providers to compensate internet service providers for the use of their network.

The “fair share” initiative explained

The proposal follows a long-standing demand from network operators that companies benefitting from the use of digital infrastructure should help pay for it. According to a study commissioned by the European Telecommunications Network Operators’ Association (“ETNO”), the services of the six major online providers (Alphabet, Apple, Amazon, Meta, Microsoft, and Netflix) together account for more than half of the world’s total data traffic. Telecom operators are therefore calling for content providers that generate large volumes of traffic to be obliged to contribute to investments in network infrastructure. In their view, this is the only way to afford the investment needed to develop modern networks, the costs of which the European Commission estimates at around € 174 billion by 2030.

The “fair share” initiative is part of a comprehensive package of measures aimed at developing telecommunications infrastructure that has been put forward by EU Internal Market Commissioner Thierry Breton. Along with the initiative, he also presented the Gigabit Infrastructure Act, a piece of legislation intended to cut red tape and speed up network expansion. In addition, the European Commission recently revised the guidelines on State aid for broadband networks. The “fair share” initiative now focuses on private sector contributions to the financing of the network infrastructure.

“Fair share” as a key source of contention

The initiative is politically divisive and is also controversial within the European institutions and Member States. Network operators point to the huge shortfall in investments and the increase in data traffic generated by the use of online services. According to press reports, however, several member states have warned against hasty decisions in a non-paper dated 19 July 2022. Besides Germany, the document was signed by the Netherlands, Denmark, Estonia, Finland, Ireland and Sweden. They argue that any changes might affect the relationship between telecom operators, digital platforms, and users.

Open questions and possible answers

The consultation aims to provide answers to outstanding questions – in particular, which online service providers should pay the compensation and how such compensation could be collected.

• One option would be to make all online service providers pay, or only service providers from specific sectors, or – as the European Commission has suggested –require only large traffic generators to pay. Large traffic generators could be determined by a threshold value that is based on the percentage of data traffic generated during peak hours. The Commission may also rely on familiar concepts from Union law, such as “gatekeeper” under the Digital Markets Act or “very large online platforms” under the Digital Services Act.

• For the collection and distribution of contributions, the European Commission is considering two options: On the one hand, payment could take the form of a digital levy that is paid into a national or European fund to co-finance certain investments. On the other hand, online service providers could be required to make direct payments to network operators, with the payments being negotiated and managed between the parties. In the latter case, according to the European Commission, it would be necessary to ensure that small network operators are not discriminated against and that the payments are explicitly used for investment. For example, they could be linked to certain economic or environmental requirements. 

The consultation will remain open to comments from stakeholders until 19 May 2023. The results will be decisive for the further action to be taken by the European Commission. EU Internal Market Commissioner Thierry Breton plans to finalise the initiative by the end of his term in office in July 2024.