The EU’s proposal to make platforms contribute to developing digital infrastructure may seem reasonable and easy to help telco operators, but it would create more problems than it solves.

Last May, Commissioner Breton proposed making platforms contribute to developing digital infrastructure, such as 5G networks, which received mixed reactions. Some voices in the telecom industry argue that content providers and streaming platforms are not paying their ‘fair share’ for using the networks that transmit their content. They point to the high traffic generated by streaming services, which strains their infrastructure and resources.

However, this is not true. Implementing these fair share rules would result in higher consumer costs, as companies like Netflix, Disney, Sky – NowTV, and the Italian Mediaset Play would be required to pay for broadband networks.

The battle for ‘fair share’ contributions has revealed a massive problem in European’s connectivity market: Telco providers are expected to build out Europe’s data highways but lack the capital to do it quickly. The lack of money puts European economies at a competitive disadvantage, and something needs to be done. Unfortunately, Commissioner Breton and his allies in some legacy telco companies see the culprit in a growing group of digital content providers.

Implementing these fair share rules would result in higher consumer costs, as companies like Netflix, Disney, Sky – NowTV, and the Italian Mediaset Play would be required to pay for broadband networks.

The argument that content providers do not want to pay their fair share for network use does not hold up to scrutiny. This is because internet service providers, which in many member states own the infrastructure, are not allowed to block services or traffic except for security reasons, thanks to regulation 2015/2120, the so-called Open Internet Regulation.

Applying the fair share idea to streaming services would go against this provision, as it would require some providers to pay for network use, giving them a different treatment over others.

Telecom providers charge consumers for network access and data; hence they are already compensated for using their infrastructure. Instead of imposing unfair fees on content providers, the EU could work with member states to reduce the cost of spectrum licenses, which are the fees that telecom companies pay to access the radio frequency spectrum necessary for transmitting wireless signals.

These fees can be exorbitantly expensive in many member states. Some might still remember Germany auctioning off the 3G/UMTS spectrum for a total of €50 billion in 2000. That’s €620 per German resident telco companies had less to build the needed data infrastructure. Lowering, or even fully scrapping, these fees would give telecom providers more capital, allowing them to invest in infrastructure and improve their services.

Right now, spectrum is usually only ’given away’ for two decades. Proper ownership and functioning secondary markets for spectrum across the entire EU would also bring more dynamism into our connectivity market. Despite the rhetoric that the end of intra-EU roaming led us to a single market for connectivity, Europe is still far away from a harmonised telco market. Creating a competitive European connectivity and telco market might bring higher returns than Breton’s attempt to tax predominantly US-based content platforms. This, in turn, would benefit consumers by increasing competition, driving down prices, and improving the quality of telecom services.

The battle for ‘fair share’ contributions has revealed a massive problem in European’s connectivity market: Telco providers are expected to build out Europe’s data highways but lack the capital to do it quickly

Whilst the EU’s proposal to make platforms contribute to developing digital infrastructure may seem reasonable and easy to help telco operators, it would create more problems than it solves. Some member states’ hunger for revenues has massively crippled the EU’s connectivity and available capital for significant network infrastructure investments. Consumers still pay the bill for spectrum auctions through sky-high prices for mobile phone plans in Germany and other countries such as the United Kingdom. On the other hand, member states in the Baltics are merely charged between €5 and €35 per citizen, leaving the network providers with the necessary cash to build out infrastructure.

The telecom industry’s financial difficulties are better addressed by reducing the cost of spectrum licenses rather than imposing unfair fees on content providers. A new approach to spectrum would benefit consumers by increasing competition, driving down prices, and improving the quality of telecom services.

Originally published here