In a frontal assault on net neutrality, the European Commission wants to force websites and apps to pay fees to broadband companies like Telefonica, Orange and Deutsche Telekom, and it just closed its call for comments on the proposal.
Network fees like this have never existed in the EU. They violate the EU's net neutrality law, and, if put in place, would be a radical departure from how the internet has operated and flourished over the last 30 years.
While reporting solid profits and telling their investors everything is going great, European internet service providers (ISPs) have seemingly convinced the European Commission that the normal rise in online traffic is overwhelming and that, without the government requiring online companies to pay them, they’ll be unable to roll out 5G and fiber fast enough to meet EU goals.
In fact, the largest ISPs appear to want to have websites and apps collectively pay them €36-40 bln a year, according to a 2022 study funded by their lobbying group, ETNO.
There’s a ton of reasons why this would be terrible public policy (see my explainer here for a comprehensive rundown), but I want to focus in this post on exactly how it violates net neutrality.
Network fees violate net neutrality and would severely distort online competition and user choice.
Network fees violate net neutrality.
Net neutrality requires broadband providers to connect their customers to all apps and sites, without favoring some apps over others. Thus, net neutrality prohibits an ISP from charging websites to be available to the ISP’s subscribers. That’s because apps and sites that do not pay a network fee would either be blocked or load very slowly.
In the US, the 2010 and 2015 Open Internet Orders explicitly prohibited these fees, and the 2015 Order made clear that ISPs cannot circumvent Open Internet protections at interconnection points where data enters their network. That point of interconnection is often where broadband companies try to charge websites, applications and service providers like CDNs and transit networks. California’s net neutrality law includes the same protections.
Europe’s largest telecoms and the Commission claim that network fees won’t violate Europe’s Open Internet Regulation, but that’s not possible.
Network fees violate the Open Internet Regulation.
The proposal to charge network fees to some apps but not others violates two key provisions of the Open Internet Regulation: Art. 3(3) and Art. 3(1).
Net neutrality seeks to ensure that we, not the companies we pay to get online, get to decide what we do online. Users determine what apps and services are successful, not ISPs.
Art. 3(3), subparagraph 1 of the Open Internet Regulation ensures ISPs cannot interfere with our choices by prohibiting ISPs from discriminating among applications, content, and services.
In 2020 and 2021, the European Court of Justice held that this rule prohibits ISPs from treating applications differently either technically or economically. That means an ISP may not slow down Netflix or put its own video service in a fast lane; that would be technical discrimination. An ISPs may not charge a different price for the data used by WhatsApp than for the data used by the ISP’s own messaging app, either; that would be economic discrimination.
The network fee proposal seeks to charge selected content providers but not others. This treats content providers that have to pay differently from those that are exempted. This kind of economic discrimination directly violates Art. 3(3), subparagraph 1.
In addition, any network fee - whether it applies to all apps or only some - violates Art. 3(1) of the Open Internet Regulation.
Art. 3(1) protects Europeans’ right to use their internet service to access the applications of their choice. The rule protects Europeans’ ability to access all of the content available on the Internet, not just the apps and sites that have paid their ISPs.
Apps and sites that do not pay the required fee would not be accessible to an ISP’s subscribers, preventing its subscribers from accessing the content, applications, and services of their choice. This violates Art. 3(1).
Selective network fees present serious competition problems.
By charging only some companies and not their competitors, selective network fees would operate as a “tax” on the most popular businesses in a wide range of markets. This would distort competition in many markets that are currently highly competitive. Netflix would be forced to pay, while Disney+, TRT İzle, myCanal, and Tubi can compete at a much lower cost. No matter which video service users prefer, those exempted from the tax will have a competitive advantage solely because of their lower costs.
This makes no sense. Packets are packets: streaming video from a less popular provider burdens the network just as much as video from a popular service, and the users of all of those services have already compensated their ISP for carrying that data.
Additionally, online services compete for people’s attention across categories and even against offline services.
That is, Twitch, a streaming video service, competes for online attention with TikTok, a social network, as well as with tens of thousands of other options including online games, podcasts, puzzle sites, community forums and more.
And online services compete against offline services: online video lets people get rid of cable TV; online calling helps people lower their phone bill.
People looking for entertainment, diversion, or personal connection have lots of choices, and selectively charging some services, but not others, distorts competition across all of those markets.
Network fees are even more egregious because many large ISPs offer cable TV services and run their own online video, music, and cloud services that compete with the services they want to tax.
ISP-owned online services like Telefonica’s Movistar Música, Deutsche Telekom's MagentaTV, and Orange Cloud will all gain a huge advantage over competitors paying fees. In fact, they’ll even get an extra boost because their parent company will be on the receiving end of these payments.
Thus, popular services like Netflix would be forced to pay fees directly to their ISP-owned competitors.
Despite what the Commission and large telecoms claim, forcing websites and apps to pay to ISPs is a blatant violation of net neutrality and the EU's Open Internet Regulation.
By discriminating against certain content providers, distorting competition, and interfering with our choices, it undermines the principles that have allowed the internet to thrive for the past three decades.
Conveniently, it also subsidizes the largest ISPs’ own online services and cable TV offerings.
Europeans deserve better.
Barbara van Schewick is one of the world’s leading experts on net neutrality, a professor at Stanford Law School, and the director of Stanford Law School’s Center for Internet and Society.
- You can read a more detailed legal analysis here, along with a comprehensive analysis of the network fee proposal.