Some large European telecommunication companies would like some sizeable American internet companies to chip in to modernise their digital networks. When people talk about other people’s money, they call it sharing and fair. To get even more sympathy, they use climate goals as the excuse. They expect the European Commission to support their noble cause. But should it?
With the internet, telecoms lost the job of connecting people but gained another, perhaps less shiny one- pushing the internet’s bits and bytes around as fast and inexpensively as possible. Telecoms became a utility, not unlike highways, railroads, electricity or water providers, and they did a fine job.
Over the last 30 years, my home internet speed has increased by a factor of ten thousand and is almost as fast as I would ever need. That happened without any EU regulation telling the industry what to do.
Now telecoms say that those that use a lot of electricity or water, have many trucks on the road, or carry valuable cargo, should be made to fund the infrastructure — beyond paying the electricity and water bills, beyond paying the road tolls. Why? Because they are really doing well.
There is no fair reason that Google, Facebook, Apple or Amazon should be made to pay for their traffic in any other way than any internet service provider should.
It has to be made clear that big tech does pay to be connected to the internet — just like you and me. Much more, actually, since their connection speed is much higher. But less per megabit because of the economies of scale. The principle is the same. If I set up my server to offer an internet service, I would be paying someone to have it connected to the internet, as does big tech.
Five dangers for fair cost sharing
First, what big tech would have to pay to the telecoms would, in the end, have to be covered by some revenues of the big tech — which they would extract from the users. European users would be finding some services that they now enjoy for free to be available per pay, or there would be more aggressive advertising. There is no such thing as free lunch.
Second, telecoms’ windfall revenues would be getting would make them even less competitive. Capital would be transferred from an efficient industry with high added value (the internet companies) to the less efficient industry of the telecoms. The ecosystem as a whole would be less efficient. That the big tech is American and telcos are European could make the scheme look patriotic but does not make it fair.
Third, it would distort the market and competition. Telecoms are not the only providers of internet infrastructure but would be the only ones receiving handouts from the big tech. Would cable operators get the free money? Would Elon Musk’s Starlink?
Fourth, it would destroy the principle of net neutrality that Europe fought so hard for. Big tech will be forced to pay for the infrastructure, and in exchange, they would rightly expect that their traffic is treated better than others. This would mean the end of internet neutrality — to treat all traffic equally. There would be considerable tech traffic and everyone else’s.
And finally, the extra burden on internet services would slow down the innovation in the internet services and put in question any developments of bandwidth-intensive services. If we had this “solution” 15 years ago, the internet would be very different if the service providers had to pay for their own infrastructure.
We already had a system where information service providers would have to pay for the infrastructure. If one wanted to start a telephone business, he would have to lay cables to the homes. If one wished to build a radio station, she would have to make antennas on hilltops. In that setting, we could count the information services with the fingers of one or two hands. While now, on each mobile device, there are hundreds. Because infrastructure is separated from services.
Should the service providers feel that the infrastructure is not good enough for them, they can, and are, investing in their infrastructure and infrastructure companies. But putting a special tax on them would be like adding a tax on those businesses that use water or electricity in remarkably creative ways.
The European Union has been, for decades now, jealous of American success with the internet economy and now and then, it believes it could make itself competitive by taxing others. Everybody knows this will not make Europe competitive; frankly, it just looks like envy.
In summary
The internet is an excellent engine for creativity and innovation.
As a network with relatively inexpensive access and primarily free or advertising-supported services, it contributes significantly to equality of information and knowledge access and thereby to equal opportunity between rich and poor, nationally and globally. All this was achieved before the politicians thought they knew better, dared to pick winners, or recognised the internet as a general-purpose milk cow or a source of support for local champions that are not.
Politics should take a hands-off approach and let the various stakeholders, big tech, small tech, service providers, infrastructure providers, telcos etc., work out the relations among themselves. This has worked out in the past and will work in the future.
The Internet is not broken, and it does not need fixing.
Originally published at https://www.euractiv.com on October 4, 2022.
