EC’s Digital Networks Act re-lights fair share fuse

• The EC has published its Digital Networks Act
• There are a number of positives for telcos, though not as many as they had hoped
• But it has also reignited the ‘fair share’ payments debate by introducing a ‘voluntary conciliation mechanism’ that some regard as a potential route to the imposition of network fees 
   

The European Union Digital Networks Act (DNA), proposed today by the European Commission in the form of a 343-page document, has sparked new concerns about a “backdoor” approach to the imposition of so-called ‘fair share’ payments by ‘large traffic generators’ (LTGs) such as Netflix, Amazon and Google to the telcos. Henna Virkkunen, the European Commission’s executive vice president for tech-sovereignty, security and democracy, however, noted in her remarks on the DNA that the EC had “concluded that in general the commercial relationships between telcos and content and application providers are the industry standard to exchange traffic, and work well.” 

But… there’s always a but! Virkkunen added: “However, some players litigate before national courts on the issue of interconnection and those legal procedures can take many years to be resolved.” 

So the EC has included in the DNA a process it calls the “voluntary conciliation mechanism” that, Virkkunen stated, “will help parties resolve disputes more easily and ensure efficient, economically sustainable, and reliable end-to-end traffic delivery.” 

While such a process is not a pure ‘fair share’ regime – previous proposals had called for the LTG companies to pay fees to the telcos to help with infrastructure costs – the voluntary conciliation mechanism, mentioned on page 119 of the DNA document, provides an opportunity for telcos to seek commercial compensation from LTG companies. 

The DNA document includes the following clause: “In order to promote effective cooperation between providers of electronic communications networks and other undertakings active in the electronic communications or closely related sectors, it is appropriate to establish a voluntary conciliation procedure to facilitate dialogue on technical and commercial arrangements. Such a procedure provides a structured and neutral forum, supported by national regulatory authorities in cooperation with BEREC [the Body of European Regulators for Electronic Communications] to encourage amicable solutions and reduce the likelihood of protracted disputes and enhance regulatory consistency… BEREC should provide an opinion on individual cases brought forward by the parties in the context of conciliation procedures led by national regulatory authorities.” 

The EC believes this “voluntary conciliation procedure” can “contribute to the more efficient, economically sustainable and reliable delivery of IP traffic, support interoperability and quality of services, and facilitate the deployment of innovative services based on collaboration, while preserving contractual freedom.” 

As you would expect, the proposal has met with fierce opposition from those representing companies that provide their digital services over telecom networks. 

The Computer & Communications Industry Association (CCIA), a lobby group that represents “a broad cross section of computer, communications, and internet industry firms” (including Amazon, Apple, Google and Meta), stated in this announcement that the “so-called ‘voluntary conciliation’ procedure amounts to regulation for regulation’s sake. Cooperation between online service providers and telecom operators is already a market reality, making this new framework redundant. Instead, the mechanism leaves the door open for legislative amendments or rulings by national regulatory authorities (NRAs) that could turn it into a binding IP dispute-resolution system, effectively resurrecting the widely rejected network fees. Such a shift will allow dominant telcos to extract unjustified revenues from popular online services. It harms consumers, undermines net neutrality, and negatively impacts the media and cloud sectors.”

No doubt some in the telco community will welcome the opportunity to press for financial contributions from big tech players. 

And there are a number of other elements in the DNA document that will please many in the telco community, particularly around the longer duration of mobile spectrum licences and making licences renewable by default, and a unified, pan-EU approach to satellite services spectrum authorisation (so that each member country doesn’t need to grant individual authorisation). 

The DNA also proposes an EU-wide numbering scheme for the B2B sector that will make it easier to offer regional services, such as IoT-based applications and connected cars. It also enables digital service providers to offer their services in any EU member state by registering in just one EU jurisdiction. 

But it stops short of the broader harmonisation that major telcos have been seeking – the DNA does not create a borderless digital services market with completely unified rules or a centralised spectrum licence authority – and there’s no indication that major telcos will be able to more easily scale up through M&A activity that reduces the number of competing infrastructure-based providers. 

Vice president Virkkunen outlined what the EC sees as the key positives of the DNA in this set of remarks, while the full document can be accessed here.  

- Ray Le Maistre, Editorial Director, TelecomTV