The latest call for caution on “Fair Share” came from Italy. Long a supporter of subsidizing Telecom Italia, the country’s right-wing government appears to have switched sides. Undersecretary for Innovation Alessio Butti argued in a letter to the European Commission that charging content providers risked creating “a vicious cycle of higher prices, lower demand, less choice and less usage to the detriment of all market players and consumers.” Brussels should reconsider the proposal, Butti said, calling it “premature” and in need of “reliable data.”
It’s an explosive debate that goes to the heart of how the internet is financed and run. At stake, many say, is net neutrality, the principle by which all internet traffic, from big and small companies alike, is treated equally. A European move to tax US content creators also could harm transatlantic tech relations.
Europe’s telecommunications operators have long held that some big Internet companies (providers of services like cloud computing, streaming, videoconferencing, gaming) are driving a surge in Internet traffic and hogging their networks. A 2022 report by ETNO, Europe’s telecommunications operators lobby, claimed that more than half of the global data traffic originates from the servers of six US firms: Amazon, Apple, Google, Meta, Microsoft, and Netflix.
Current EU policy aims to offer every European access to 5G-like connectivity by 2030. To achieve that ambitious target, European telecommunications providers have been calling for large tech companies to fill the “investment gap.” On October 2, CEOs of 20 telecoms groups, including BT, Deutsche Telekom, Orange, Vodafone, Telefónica, and Telecom Italia wrote an open letter claiming that future investments being “under serious pressure” and calling for “regulatory action.”
This message has found receptive ears in Brussels, particularly with European Commissioner Thierry Breton, who was formerly CEO of France’s incumbent operator Orange. In a recent LinkedIn post, Breton wrote that “much more” is needed to handle the scale of digitalization and that a “Telecoms Act” — which he described as a “new industrial approach to leverage the strength of the single market” — is “in the making.”
Content providers counter that the telecommunications companies’ idea of taxing the free flow of data is fundamentally flawed. Tech companies have spent billions to build the internet’s backbone, from undersea data cables to data centers. Their content drives customer demand for internet access, not the other way around. And a fair share tax would raise telephone bills – while not ensuring investment into the network and improved service.
A fierce battle has erupted over the competing claims. The European Commission released a study on the investment and funding needs to meet the 2030 target, which it used to support the telecommunications providers’ side of the argument — the need to fill the “investment gap.” Technology group CCIA countered that the numbers fail to support the telecommunications companies’ narrative.
The Commission study is actually ambiguous. It concludes that the investment requirements “have reduced as deployments have progressed” in both Europe’s fiber-optic and 5G networks. The total investment requirement is now about €148 billion and can be further reduced to €120 billion by using hybrid cable and wireless solutions to cover the least dense areas. That’s billions less than what the operators claim is necessary. As Italy’s Butti said: “Frankly, we do not see this investment gap. I am very curious to understand how you can prove it.”
Opposition is mounting elsewhere, too. Europe’s telecommunications regulators, BEREC, have expressed skepticism. The US administration responded to a recent Commission consultation on the matter, detailing concerns and urging caution.
The Commission itself may be having second thoughts. It had planned to publish the results of the consultation over the summer but has since delayed multiple times. With Rome joining the majority of EU capitals opposed to fair share and laws becoming harder to pass as European parties gear up for the June 2024 elections, Europe’s bruising “fair share” debate might just go out with a whimper.
Otto Lanzavecchia is an Italian journalist for Formiche.net and Decode39. He focuses on international affairs, tech and society, energy, and climate change.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.