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Europe’s Internet ecosystem: A 72bn boost to GDP and 840k new jobs are within reach if gaps in network costs are tackled, Digital Platforms & Services

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Brussels, 2 May 2022 – Today, tech giants are not contributing their fair share to the deployment of telecom networks, while generating network-related costs of tens of billions of euros. This weakens Europe’s ability to quickly achieve connectivity goals. Addressing this issue through policy actions could unlock socio-economic benefits for Europe, including €72 billion in GDP growth, 840,000 additional jobs in 2025 and reductions in CO₂ emissions.

The results were published today in the reportThe European Internet ecosystem: socio-economic benefits of a fairer balance between tech giants and telcos”, prepared by the international consulting firm Axon Partners Group Consulting for the leading telecommunications association ETNO.

The problem: is everyone contributing their fair share?

Europe aims to achieve gigabit connectivity and 5G for all by 2030. The report shows that European telecom operators have invested more than 500 billion euros in fixed and mobile networks over the past 10 last years. On the contrary, the 6 tech giants generated more than 55% of the traffic of all telecom networks, but they made “little or no financial contribution to the development of national networks”.

The report finds that European telecom operators are currently unable to recoup these costs due to asymmetric bargaining power favoring big tech as well as the lack of a regulatory level playing field: essentially, Internet traffic is unbalanced. The report also mentions recently released data by consultancy Frontier Economics, which estimates that traffic generated by tech giants alone could drive network costs of at least €15 billion, if incremental costs are considered, or at minus 36 billion euros, if we consider the total costs.

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The consequences: slower deployment of 5G/FTTH, sub-optimal quality of service, more CO₂

The report shows that this imbalance has consequences. Firstly, it contributes to financially weakening European telecom operators, which harms their ability to accelerate the deployment of gigabit: for example, the total market capitalization of the top 8 European telecom operators is 0.24 billion euros, against 7 .11 billion for the top 6 tech giants. Second, service quality and innovation could be improved with more investment. Finally, in the absence of significant contributions from tech giants, the transition to greener networks is slower, with impacts on CO₂ emissions.

A fairer ecosystem: GDP growth of 72 billion euros with positive social and environmental impacts

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Axon believes that taking as a benchmark an illustrative €20 billion annual contribution to the network costs of tech giants, the European internet ecosystem could unlock significant opportunities. Up to €72 billion could be added to GDP and 840,000 jobs created in 2025. Likewise, the sector’s energy consumption could be reduced by 28% and the carbon footprint would decrease by up to 94%.

Possible Solutions: Regulatory Action to Address Imbalanced Intellectual Property Markets

Urgent and targeted regulatory action is needed to address serious imbalances in internet traffic markets and unlock socio-economic opportunities for citizens and businesses. This should be done within the framework of the principles of the open internet in Europe, while ensuring that all consumers continue to fully benefit from the access and quality of the constantly evolving network.

According to the report, the solutions could be based on the introduction of a clear obligation to negotiate with Internet service providers. This would help ensure fairness in trade negotiations with big tech companies, which currently enjoy disproportionate bargaining power. The measures would be in line with the spirit of the new Digital Markets Act, while potentially building on the principles of existing EU frameworks such as: the Electronic Communications Code, the Cost Reduction Directive broadband and dispute resolution mechanisms (eg ADR in the Copyright Directive or in the EU approach to essential patents).

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Comments from ETNO and Axon

Lise Fuhr, CEO of ETNO, said: “The EU has been determined to tackle power imbalances in the online and technological space. With today’s report, we want to launch an open dialogue with policymakers, consumers and technology companies on how to address specific imbalances in internet traffic markets. It’s not about a technical question: it’s about our ability to put Europe ahead of the global race for 5G and FTTH.”.

Alfons Oliver, partner of Axon, said:the The European Commission has recently recognized the need to develop adequate frameworks for technology companies to contribute fairly to the development of telecommunications infrastructure. Now is the time for EU lawmakers to deliver on this, unlocking the significant benefits this will bring to European society.”.

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The report is available at this link.

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