There is Nothing Fair About the European Commissions Fair Share Proposal

In a fight between the big tech companies and the internet provider giants, it can be very tempting to not care who wins and loses. However, in the case of the ISPs’ “fair share” proposals, ISP victory would mean undermining one of the very foundations of the internet—net neutrality.

After the European Commission held a public consultation on whether they should adopt what they call a “fair share” proposal, they unfortunately voted to move forward with this dangerous plan. This proposal is nothing but a network usage fees regime, which would force certain companies to pay internet service providers (ISPs) for their ability to deliver content to consumers. This idea not only hurts consumers, but also breaks a status quo that facilitated and continues to facilitate the rapid spread of the global internet. Accordingly,  we filed comments that called for the European Commission to abandon this completely unfair idea altogether.

The ISP Argument for “Fair Share”

The misguided idea behind the consultation is that large ISPs are suffering mightily because the companies that create and/or deliver information and content online, called content and applications providers (CAPs), are freeriding off the ISPs physical infrastructure networks. The CAPs you may be most familiar with go by another acronym — FAANG (Facebook, Amazon, Apple, Netflix, and Google) — but also encompasses companies who provide many other services.

The ISPs claim they incur costs for delivering this content and that as CAPs push more and more content, those costs increase. They also claim that the increase in internet traffic that has led to increasing costs are in fact caused by the CAPs. Taken together, because the CAPs both cause the traffic and don’t pay for the delivery of their services, CAPs should pay ISPs their “fair share” for using the network.

ISPs then claim that the money they receive from this “fair share” will go toward building infrastructure and expanding the reach of their networks.

The ISP Argument Mischaracterizes the Nature of the Internet

The ISP argument completely mischaracterizes the relationship between CAPs and ISPs. As EFF has written about before, CAPs do not freeload and have invested almost $900bn into the physical infrastructure of the internet themselves. Their investments have saved ISPS billions of dollars annually. Furthermore, the costs ISPs incur for delivering traffic have not been drastically rising despite increases in traffic, because their investments in fiber-based infrastructure have allowed them to deliver gigabit and beyond speeds at a lowering operating cost.

Their argument also mischaracterized the nature of the growth of the modern internet. Traffic is not generated by CAPS, but by consumers and end users requesting services (data) from CAPs. If no one used the internet, there would be no traffic—Netflix would not be sending data anywhere. Further, if there was nothing worth doing on the internet, then people would not use the internet and, once again, there would be no traffic. Which is to say, people use the internet because it is worth using and continue to use it at an increasing rate, which means more traffic is demanded and needs to be generated to meet these demands.

To fulfill, and compete to fulfill, increasing consumers demands, CAPs make investments like the aforementioned $900bn to create higher quality content as well as bring the content closer to the consumer via infrastructure that hosts, transports, and delivers their services. Most consumers no longer want to wait minutes for low quality videos and photos to load. CAP’s investments are in part what turned minutes into seconds into milliseconds, and low quality into ever increasing quality both in terms of content and user experience.

The ISPs have greatly benefited from this arrangement as well. Increasing user demand and greater amount of available services means users are willing to pay more for increased internet service. If there was nothing worth doing on the internet, consumers would not pay more for greater service. It is because users want to do more that they pay for more. It is because users’ willingness to pay for more that ISPs are then motivated to make their own investments into their network infrastructure. Setting aside for now the fundamental flaws in many ISP investment strategies, ISPs profit on user demand.

Taken together, consumers pay for greater internet service to get more content, so they can enjoy more content. This increase in demand prompts CAPs to create more content and make further investments into the network. Consumers, seeing more and better content, demand more content which prompts them to be willing to pay for greater internet service from their ISPs as well as once again signaling to CAPs to further improve and invest. ISPs, seeing consumers willing to pay for greater internet service, invest in their networks to provide that greater service. Consumers get a better experience on the internet, CAPs and the digital economy flourish, and ISPs are rewarded handsome profits. This virtuous cycle built the modern internet and continues to drive its growth and expansion today.

There is Nothing Fair About “Fair Share”

What the European Commission is calling “fair share,” therefore, isn’t fair at all. It is blatant double-dipping into a virtuous market cycle that benefited all participants for the last 40 years. More than that, it threatens to break this cycle to the detriment of everyone except the largest ISPs who, by virtue of their size, would receive the lion’s share of the payment. All players in the digital economy from the smallest digital storefront to the largest platforms will have their operating costs increased. Competition in the ISP market will suffer as small and medium-sized ISPs will be forced to pay the largest ISPs for moving their traffic. And as a result of all this, the consumer will suffer a worse and more expensive internet.

The “fair share” proposal also directly threatens the principles of net neutrality in Europe. Currently, European ISPs have an obligation to provide connectivity to virtually everyone and to not degrade service quality based on commercial considerations or who they are transmitting from. What this means for consumers is they are able to decide for themselves what their online experience is without worrying about it being slower, blocked, or more expensive. If under “fair share” ISPs are allowed to charge differential pricing to CAPs for the traffic they transmit, that would directly violate net neutrality principles. Indeed, any price regulation on data transmission or any sort of penalty on CAPs who refuse to pay ISPs would violate net neutrality principles. Without net neutrality, ISPs will have control over consumers’ online experience. Further, CAPs will pass on the cost of the fees onto consumers, meaning higher subscription fees and worse services. Once again, the consumer pays more for less.

At the end of the day, “fair share” is a solution in search of a problem. The real issue is that ISPs feel they should not act as neutral infrastructure between their customers and the services they want, but should squeeze money out of every part of the internet. That’s not a problem. That’s just greed.

The European Commission’s public consultation and ill-advised decision is just one step in a long process. We are prepared to point out the fundamental flaws of “fair share” and fight against it every step of the way. We urge the European Commission to once again reject the adoption of network usage fees in all but name.