EU Still Pondering Telecom Tax On ‘Big Tech,’ Despite Little Real Evidence Supporting The Idea

Broadband

from the net-neutrality-redux dept

As the EU contemplates its digital policy trajectory for the next decade, the idea that “big tech” should pay “big telecom” for no coherent reason has also managed to unsurprisingly surface. The rhetoric, that “big tech” gets a “free ride” on the Internet and should therefore give telecom giants billions of dollars, directly mirrors the policy con telecom giants have been running in the U.S. since 2003 or so.

It basically always involves claiming that Big Tech “freeloads off of the Internet” and should be forced to pay telecom giants billions of dollars simply for the honor of having their traffic touch ISP networks. To justify this mindless cash grab, telecom executives routinely try to pretend that streaming video imposes an unfair strain on their networks that they should be additionally compensated for.

It’s basically net neutrality redux, with entrenched telecom monopolies trying to leverage their gatekeeper power to force other companies to pay even more money for broadband service that’s already routinely too expensive thanks to regional monopolization.

Spanish ISP Telefonica, for example, recently penned a piece in the European press trying to claim that streaming demand was driving them to poverty, thus justifying the need for the EU to impose a new telecom tax on all streaming providers and large tech companies if we want telecom networks to function:

Telecom companies are shouldering alone the needed investment to address this increasing traffic demand, financing expansion of network capacity and coverage exclusively from revenues coming from broadband connectivity and other services provided to end-customers. OTTs (Over-The-Top) platforms, who do not compensate network operators for the cost of delivering the traffic to end customers through the operators’ networks, have a business model where profits increase by delivering more traffic, thus further reinforcing Internet traffic growth pattern and mounting pressure on network investments.

The problem? The claim isn’t true. At any level.

For one, whether it’s the U.S. or the EU, nobody gets a free ride from telecom companies. Telecom monopolies have effectively gutted competition in countless global markets, driving up costs for customers and businesses alike. They’re also hilariously and incompetently slathered with subsidies to “bridge the digital divide,” only to then be busted routinely for subsidy fraud.

At the same time, the Big Tech companies being accused of getting a “free ride” not only pay telecoms for bandwidth, but they routinely deploy their own content delivery networks, transit networks, undersea cables, and billions in additional infrastructure, all intended to improve performance and help handle the load.

As for the claim that streaming meaningfully taxes well-built telecom networks, that’s simply not true either. Telecom expert Rudolf van der Berg, for example, wrote a good piece dissecting telecoms’ claims and found them, well, lacking:

Telecom operators spend their capital investment on infrastructure – like cell towers, fibre optic cables, routers, modems, and data centres – in order to connect people to broadband networks and extend 5G coverage. Furthermore, 70-80% of their capital investment goes to assets that will last for 30 years at least. The remainder is for equipment that is upgraded every five to 10 years for better and faster services. ETNO’s demands for “fair share” payments basically mean they want CAPs to cover 60-70% of their total network costs, while at the same time already charging consumers for those very same networks.

Ever since the net neutrality debate began, telecoms have been trying to claim poverty and insisting they’re just somehow owed billions of additional dollars beyond the significant revenues and taxpayer subsidies they already collect. Their supporting evidence for this is routinely a platter of reasonable sounding, pseudo-economic gibberish that doesn’t hold up to the slightest scrutiny.

Apparently that doesn’t matter, as South Korea has implemented such a regulatory model (resulting in one South Korean ISP suing Netflix because Squid Game was too popular), and the EU continues to seriously explore it. If the EU is successful, I guarantee you’ll see a renewed push here in the States, with captured regulators like the FCC’s Brendan Carr leading the charge.

Bridging the digital divide and shoring up telecom subsidization should start with a close examination of decades of rampant telecom subsidy fraud where regional telecom monopolies routinely collect billions of dollars for networks they always mysteriously half complete. I’ve found that anybody not proposing that as a meaningful starting place for reform generally isn’t worth taking seriously.

Filed Under: big tech, broadband, digital divide, eu, high speed internet, net neutrality, subsidies, tax on big tech, telecom