“European digital toll”: our continent doesn’t have time to create new barriers in the global technological race!

A new contribution by digital service providers to network financing is currently being put forward by certain telecoms operators, in the name of a “fair share”. This “fair share”, or should we rather call it the “European digital toll”, would call into question the current Internet financing model, which has already proved its relevance, is largely based on false assumptions and could have dramatic effects on the technological attractiveness of our continent.

Numeum is alerting public authorities to this proposal and its practical implications, so that an informed debate can take place when the European Commission opens its consultation process.

Calling into question the current Internet financing model is more ideological than pragmatic: the “European third way” is proving its relevance every day.

Today, 97.9% of European households have access to at least one of the main broadband technologies, and 99% are covered by 4G, at some of the lowest prices in the world. Our continent is also a land of innovation and investment for digital service providers who come to set up or export here: the number of companies valued at over a billion dollars, the so-called unicorns, has risen from 30 in 2014 to 283 by the end of 2021, with 125 new unicorns created last year alone. Today, there is no doubt that Internet access is one of the driving forces behind the European economy, enabling new services in all sectors, including access to public services.

These positive effects still need to be reinforced, and Numeum will be particularly attentive to the European Commission’s proposals in this area. We believe it is essential to reflect on the best way to enable digital inclusion for all, to improve the quality of Internet access where necessary, and to harmonize our legislation to make the European market a true Digital Single Market for our companies, including the smallest and most innovative. This reflection must be based on facts and precise objectives, and not on an ideological desire to put certain players who are already co-financing the networks back on the hook. The risk here is to call into question a model that has fully demonstrated its relevance.

The idea of a financial contribution from certain digital service providers is based on false assumptions, but could have real side effects, to the detriment of users.

Numeum is concerned to see the resurgence of such a proposal, which is based on biased facts. Numerous stakeholders have also spoken out against such a principle in recent months, including associations in many EU countries, MEPs, audiovisual players and alternative telecoms operators. The network of European electronic communications regulators, BEREC, wrote that “there should be adequate justification for implementing any market intervention measures”.

Introducing a “European digital toll” makes no sense, for at least three reasons:

• Digital service providers already contribute to the financing of telecommunications networksThe current architecture of these networks is based on co-financing agreements between telecoms operators and digital service providers (deployment of submarine cables, construction of cache servers close to users, etc.). In total, these providers invest an average of $17.9 billion annually in Europe. We are therefore not witnessing any “free rider” phenomena, as some operators are trying to show: BEREC stated in its report cited above that “if there had indeed been [these] phenomena, they would have been visible in the financial results of Internet service providers and in warnings about their financial solidity, but BEREC has not identified any of them ”. An additional contribution from digital service providers, as yet vague in scope, would therefore have the main effect of making the same companies pay twice. What’s more, it should be remembered that it is the quality of the digital services on offer that is one of the driving forces behind both fixed and mobile Internet subscriptions. Without these services and the uses that go with them, the Internet would not be as attractive and popular in Europe.
• Growth in usage can be absorbed by networks as they are todayNumeum points out that the digital sector, both large and small, has always been able to demonstrate its responsibility, particularly in response to the European Commission’s call to calibrate the services offered during health confinements to avoid network saturation. This adaptation in times of crisis has been achieved without any binding measures, demonstrating the adaptability of BtoC and BtoB digital service providers. Indeed, it is not in the interest of any of them to risk saturating the networks, at the risk of seeing the quality of their services deteriorate, to the detriment of their users. What’s more, new connection technologies such as 5G , which already covers 65.8% of European households, will make it possible to exchange a much greater quantity of data without clogging up networks, as Arcep reminds us. Finally, it should be remembered that 80 to 90% of infrastructure costs are fixed costsin other words, they do not depend on the level of bandwidth usage. BEREC recently reminded us that “the fixed network access costs depend little on demand”..
• An additional financial contribution could have a dramatic impact on the European innovation ecosystem and the prices paid by users.What criteria would be used if the idea of a financial contribution were to gain ground? Whether it’s sales in the European Union, the number of users or the level of bandwidth usage, all of these carry the serious risk of capture a wide range of players: cloud providers, online video game services, video-sharing platforms, content creators, and more. The entire digital value chain could thus be affected sooner or later. This contribution therefore has the potential to create barriers to entry for smaller companies: it’s just one step towards differentiated treatment of services according to contribution level – in total opposition to the principles of the open Internet enshrined in European law since 2015. This would put a stop to innovation and the development of our innovative startups and scaleups. Finally, there is the danger that such costs will be passed on to end users. In South Korea, the introduction of a similar scheme in 2016 has had dramatic effects: 1 Gb of mobile data is billed there at over 12 euros, 7 times more than the European average (1.85 euros for 1 Gb). Against a backdrop of rising energy prices and inflation, which are taking their toll on individuals and businesses alike, such an argument is simply irresponsible.