The other day a friend of mine pointed me to a post written by the Director of EU Affairs for Telefonica. The post is entitled “You have not seen this movie before: fair share is not a remake”. The title is quite catchy, yet predictable and not surprising. Telefonica is one of the big telecommunication actors in Europe that are pushing hard for the fair share debate. Frankly, I was about to push this to the end of my “to-read” list pile, but the subtitle really caught my attention.
“The fair share contribution of large content platforms to network sustainability could be the catalyst for the transformation of telecoms operators in Europe from telcos to techcos towards achieving Europe's most critical goals.”
I find it very interesting that the transformation of the telecommunications industry towards a more technology-oriented, Internet-adapted sector is dependent on the funding that is produced by the technology companies. I also find it rather fascinating that after decades of trying to push telecommunication companies towards accepting that the Internet is here to stay, we are now in a place where telcos want to become “techcos”. (By the way “techcos” sounds to me like a snackable treat but, hey, I should not the one to pass judgement on inventing names – I am pretty terrible at it).
So, I started reading it. And, here’s what I realized: it is true that the fair share debate is not a remake; but it is definitely a sequel. And, just like any sequel, it is tired and not very innovative.
Before going into the details of the post, one point that I think deserves attention: for the past year, European telcos have been inside their own echo-chamber, reusing, rehashing and repeating the same arguments. In the post, any arguments presented are referenced back to arguments made by Telefonica. There is not an attempt to point to any outside sources that could justify any of the claims that are being made. Personally, this rubs me the wrong way, especially considering that the arguments about why the fair share is bad policy for Europe are coming from so many different sources. You can find them here and here and here and here and here and here and hereand here ….
So, let’s see what the article says:
“A range of stakeholders try indeed to portray fair share as a debate held and closed ten years ago in Dubai during the ITU WCIT Summit. Needless to bring it back because nothing in the fundamentals of how the Internet works has changed during the last decade and we need to preserve it this way to keep it as the generative engine for openness, innovation, and prosperity it has always been.
Good enough as an argument except for the reality that Internet development during the last decade has taken us nowhere near to 2012 with an incredibly unbalanced digital ecosystem. A few numbers of almighty tech giants recap most of the value, riding on unprecedented levels of concentration, self-preferencing practices and business models based on the massive collection of data from end users for profiling and advertising purposes.”
No matter how much telcos try to spin it, the fact is that the debate is fundamentally the same. Back in 2013, EU telcos suggested that “that the revised ITRs should acknowledge the challenges of the new Internet economy and the principles that fair compensation is received for carried traffic and operators’ revenues should not be disconnected from the investment needs caused by rapid Internet traffic growth.” Fair share and fair compensation are practically the same thing.
At the same time, I agree with the author about the concentration and consolidation that the market has been experiencing. There is no doubt that a few players are dominant in the services they provide and that user data is often being abused and exploited. What I disagree with is the idea that fair share contributions will fix this concentration and abuse of power (and I have not seen any convincing argument from telcos suggesting otherwise). The European Union has passed two landmark pieces of legislation to deal with these issues: the General Data Protection Regulation (GDPR) and the Digital Markets Act are both designed to deal with the abuse of user data and issues competition. For sure they are not perfect and they cannot address all the issues. But, they are getting there because there are people who are testing their limits and are willing to work with European institutions to make them better. So, how exactly would paying off big telcos help advance any of these two statutes? If the problem is concentration and abuse of power, why are telcos focusing on an irrelevant policy objective instead of working with other stakeholders to strengthen the existing statutes?
More importantly, as I have suggested elsewhere, a lot has changed in the Internet in the past decade but also nothing has changed. What has changed is the actors participating and an ecosystem that is growing increasingly more complex. This complexity has meant that more innovation and investment had to take place in order to ensure that the Internet continues to be resilient, affordable and efficient. Content Delivery Networks (CDNs), data centers and cloud infrastructure are only a few of the examples on innovation and investment that have taken place due to the changing nature of the Internet ecosystem.
What has not changed, however, is the underlying principles, norms and ethos of the Internet. As Vint Cerf has accurately written: “The Internet was designed to allow computers of all kinds to exchange traffic with each other over an unbounded collection of inter-connected networks. The direction of the traffic was irrelevant. The point was to allow traffic to flow in either direction so the network had to support both. Not all networks of the Internet are commercial services. Many are community based, non-profit or government operated. For those that are for-profit, their typical business model is to charge a flat fee for connection to the Internet regardless of the direction of traffic flow. The cost for implementing the service is a function of capacity, not the amount of traffic sent. The connection fee is commonly higher for higher speed capacity. There is no charge for the amount of traffic sent or received, only for the capacity, because the cost is the same whether the capacity is used or not.” This idea is relevant for the Internet today, it was applicable in 2013 and even before that.
“All while telecom operators in particular in Europe struggle against very dire financial and regulatory conditions in a decade long downward trend on revenues, return on capital expenditure and stock market value that threatens their future viability.”
This is not the first time I have heard telcos say that their financial situation is 'dire'. I am really not sure what telcos mean by 'dire' and how 'dire is actually dire'. There are others who may have more accurate data, but here's what Telefonica was stating in November 2022:
"Telefónica increases revenues across all markets and earns 706 million euros in the first quarter". And here are some other interesting data that point to billions of euros in revenue. 10 billion euros for only the third quarter of 2022 does not sound dire to me. As I have mentioned before, if the idea is to make EU telcos as big as big tech then this is a different conversation all together. But, in the end, it is just a bad policy objective.
To me though, he whole essence of the post is condensed in the next few sentences.
“Fair share comes anew also in a very different policy landscape. With a European Commission that is moving from naive into geopolitical including clear aspirations on strategic autonomy and recognizing the need to develop its own capabilities in the digital space, where the gap with the US and China is profound and growing.
In this context fair share appears as a fresh multipurpose tool that could help to address a number of the most critical policy goals of the EU.”
Frankly, I am pretty tired of this fearmongering and this ill-defined and abstract idea of digital sovereignty that is based on the idea that Europe can do it alone. This is hyperbole because, in fact, Europe cannot do it alone. No one can and, if this is the policy direction that Europe wants to take, then we all need to be prepared for a fragmented European Internet.
I never considered Europe as naïve and I am surprised to read that telcos did so up until now. For the past decades, Europe has been strategic in ensuring that non-European companies entered the single market and complied with it rules. It has managed to create the conditions for European users to get connected and, to do so, in an affordable manner. It has also paved the path for all the regulatory activity we have seen in the past few years. Calling Europe naïve negates all these efforts.
It is true that the geopolitical environment is very much different today. It is true that countries have the tendency to look inwards and to bounce back to protectionism as an easy solution. But, in the long term, none of this is going to ensure a globally competitive Europe; none of this is going to ensure a European Union where users enjoy affordable and reliable access to the Internet. The European Commission knows that; EU telcos know that.
One final point: I am surprised to see that none of the significant consumer protection issues are not addressed in this blog. They are not addressed as part of the European Commission’s recent questionnaire. And, it is disappointing. I am a European consumer; I am a European user. And, frankly, I start to get significantly concerned with what sort of an Internet experience I will be having in Europe should the fair share plan proceed.