The European online space has been subjected to intensive legal reforms in recent years, and the policy and regulatory debates regarding the role and obligations of tech companies in Europe are far from over. Recent statements made by EU officials expressing their view on how to better promote investment in infrastructure and incentivize the roll-out of high-speed electronic communications networks suggest a change in one of the most relevant paradigms connected to the European idea of open Internet access. More specifically, Commissioner Breton expressed his concern that telecoms operators weren’t getting “the right return on investment” from maintaining their networks, and it was time “to reorganize the fair remuneration of the networks.” Moreover, the European Commission is expected to present a legislative initiative that would oblige Big Tech companies (particularly those engaging in the distribution of content) to “contribute” to the costs of telecom companies that provide access to the Internet (Internet Service Providers, “ISPs”).
This expected legislative initiative echoes a long-standing call from major European telecommunication companies. In a recent letter from February 2022, the CEOs of Telefónica, Deutsche Telekom, Vodafone and Orange claim that “network operators are in no position to negotiate fair terms with these giant platforms due to their strong market positions, asymmetric bargaining power and the lack of a level regulatory playing field”. They call upon legislators to establish a framework which guarantees that all market players benefiting from the digital transformation “make a fair and proportionate contribution to the costs of public goods, services and infrastructures”. While this very last sentence proclaims a principle that would be hard to disagree with (and is in fact taken from documents elaborated by the Commission itself), telecom companies understand that it necessarily requires obligations for certain online service providers, in order for them to make dedicated financial contributions to telecommunications network operators.
The demand to force content and application providers to pay a fee was supported by a technical and economic report, commissioned by telecom companies and elaborated by the firm AXON in 2022. However, experts, civil society organizations and (of course!) tech companies have been questioning the necessity of such new rules. They cite a diversity of arguments, including the absence of a consideration of actual incremental costs of Internet traffic, the need to avoid disincentivizing the use of traffic-intensive though innovative applications, the creation of market entry barriers for smaller businesses, or the promotion of non-transparent and non-competitive deals among big digital players. Meanwhile, large online content and service providers are also investing in infrastructure that may help reducing traffic costs. Some of these arguments have been endorsed by the Body of European Regulators for Electronic Communications (BEREC) in its reports. The OECD has also provided a very balanced approach to the market developments and policy challenges in the field of Internet traffic exchange, including in times of health crisis. Moreover, telecom companies’ position and arguments were also dismissed in 2014 by then-Commissioner Neelie Kroes.
The Open Internet in Europe
This post will focus on the legal angle and human rights implications of this debate. In 2015, Regulation 2015/2120 was adopted. The objective of the Regulation is to lay down 2 measures concerning open internet access, universal service and users’ rights relating to electronic communications networks and services, and on roaming on public mobile communications networks within the Union. It is commonly known as the Open Internet Regulation. Provisions contained in this legal instrument cannot be described in detail. However, it incorporates and protects some very important aspects connected to the principle of net neutrality (NN) in Europe. NN can be formulated as the need that Internet operators treat Internet content, services, and applications equally.
The Open Internet Regulation clearly establishes the general principle that all traffic must be treated equally without discrimination, restriction or interference, and irrespective of the sender and receiver, the content accessed or distributed, the applications or services used or provided, or the terminal equipment used (Article 3.3). Only reasonable traffic management measures would be acceptable inasmuch as they are transparent, non-discriminatory and proportionate, not based on “commercial considerations but on objectively different technical quality of service requirements of specific categories of traffic”, “do not monitor the specific content” and are not maintained for longer than necessary (Article 3.3). This means that any practices which go beyond these reasonable traffic management measures, by “blocking, slowing down, altering, restricting, interfering with, degrading, or discriminating between specific content, applications or services, or specific categories of content, applications, or services” (Recital 11) are prohibited.
The regulation also contemplates a few specific exceptions. ISPs and other providers can, however, “offer services other than internet access services which are optimized for specific content, applications or services, or a combination thereof, where the optimization is necessary in order to meet requirements of the content, applications or services for a specific level of quality”, provided that “the network capacity is sufficient to provide them in addition to any internet access services provided”, are not ”usable or offered as a replacement for internet access services”, and are not “to the detriment of the availability or general quality of internet access services for end-user” (Article 3.5). These specific or qualified services separated from general internet access services, also called fast lanes were criticized during the process of adoption of the Regulation and presented as a vaguely defined, compromised solution to satisfy the interests of telecom companies. In any case, and seven years later, Europe still remains as one of the regions of the world where NN is still protected to a substantial extent.
Net neutrality in danger
To compel providers of content, services, and applications to negotiate financial contributions with ISPs in exchange for using their infrastructure to reach end users would violate the current provisions of the Open Internet Regulation and, more broadly, be incompatible with the concept of NN itself.
Putting aside strictly technical and economic arguments, the mentioned type of commercial relationships between ISPs and tech platforms breaks the egalitarian notion that lies at the very basis of the open Internet. A system of this kind would determine the establishment of potentially non-transparent and discriminatory agreements between very powerful actors, possibly depriving consumers from free access in equal conditions to any content, service, or application of their choice. Regulations in this area will essentially establish the general obligation for tech companies to negotiate with telecommunications providers a financial contribution to compensate the alleged costs and burdens supported by the latter, probably in a similar way to the licensing agreements contemplated in article 17 of the Copyright Directive, to mention just one example. This means that the specific conditions and obligations included in such agreements will in principle remain reserved to those negotiating them.
Would it be reasonable to expect that tech companies forced to pay a fee to reach their final users would accept merely being treated the same way as any other service or application using, for free or under less onerous conditions, the same infrastructure? Even in the case that any preferential treatment is legally prohibited, would EU institutions and national regulatory bodies be in the position to monitor and guarantee that such agreements do not entail in practice any associated anti-competitive, discriminatory, or user-detrimental arrangement?
Another very sensitive issue connected to the imposition of the mentioned contribution is the proper, fair, and proportionate determination of the providers that would be required to negotiate with ISPs. Criteria so far are not clear at all. Possibilities include the popularity of certain services, the revenues they generate, or the network capacity they use. Moreover, in case this compulsory contribution ended up becoming applicable to service providers at different layers of the tech stack, concerns arise about the emergence of an ideal scenario for the creation of market entry barriers for new and small providers, the elimination of transparency and overall domination of the most powerful players at each level.
One of the alleged reasons to justify this contribution consists of the fact that some content, applications, and services generate high levels of Internet traffic to be managed and facilitated by ISPs. However, there is no measure for volume of traffic that can be generally considered as “normal” versus an “excessive” or “abusive” usage of the infrastructure. An important question related to this would be whether a “penalization” of traffic intensive applications such as cloud, AI and big data may cause serious damage to the ongoing process of digital transformation in the EU in sectors as important as fintech, healthcare and gaming and creation, as some recent studies have pointed out.
Freedom of expression and pluralism may also be at risk
It has already been mentioned that the implementation of financial contributions by tech companies may reinforce the position of the most powerful actors in the respective markets, particularly in the ISP and the online hosting sectors. This does not only raise issues of possible discrimination or abuse of dominant market positions, but also directly affects the conditions according to which end consumers are granted access to a diversity and plurality of content, services, and applications of their choice.
In other words, if the new regulatory scheme is adopted, and the core idea of NN is thus abandoned, we must expect a shift from an open ecosystem where, at the very least, users have the opportunity to get equal access to the content, services and applications of their choice, to an environment managed on the basis of non-transparent and commercially driven agreements among major players. Although European officials and telecom operators have been particularly obscure with regards to this matter so far, one can wonder what might happen when an ISP and a tech company get stuck in their negotiations or reach agreements that the former does not find as attractive or satisfactory as those reached with other players. In this scenario the exercise of “negotiation strategies” from any of the sides would be detrimental for the final user, not to mention the dramatic consequences of a radical form of pressure consisting of blocking or seriously impairing proper access to a specific online platform until a proper agreement is achieved or when efforts fail.
In addition, ISPs may be in the position of granting differentiated treatment to tech platforms, not only because of commercial interests, but also based on completely opaque, unaccountable, and discriminatory “editorial” or simply political views. These views can directly affect the negotiation processes with certain tech platforms that may be particularly keen to host or facilitate certain types of content (abortion information, for example), or even incentivize the exercise of content monitoring activities by ISPs. In such scenarios, authorities can use different tools, including ownership of ISPs, to use them as censorship proxies and eliminate or restrict certain types of content and services without the need to establish direct legal or regulatory restrictions. The impact on the dissemination of and access to content by users, as well as the lack of minimal and effective controls or remedies deriving from such hypothetical practices represents an unprecedented risk for online speech and a threat to the way the “free Internet” has been understood.
The resurfacing of the debate on NN is taking place in a scenario that presents substantive differences from the one a decade ago, when it first reached policy makers in Europe and the United States. In the course of the last ten years, the power of tech companies has significantly increased, thus also changing the content, applications and services available to end users via ISPs.
This power is already the object of regulatory or co-regulatory interventions, particularly in Europe, to prevent possible harms in important areas of the public interest, including fairness in election processes, minority rights, transparency, or privacy rights. The recently adopted Digital Services Act is a good example of this type of intervention. However, guaranteeing the fair use of networks and reaching a proper balance regarding investments into internet infrastructure requires proportionate and properly informed solutions beyond specific industry interests and pressures. Solutions that entail damaging the idea of the free and open Internet, which stands at the very basis of its success, or endangering the democratic principles of freedom of expression and pluralism are incompatible with the Charter of Fundamental Rights and must be clearly rejected by EU institutions.