On May 25, 2023, the National Telecommunications and Information Administration (NTIA) announced that, on behalf of the U.S. government, it filed responses to the European Commission’s public consultation on The Future of the Electronic Communications Sector and Its Infrastructure. The consultation explores the issue of how to best promote connectivity and ensure reliable broadband access throughout the EU, as well as the kinds of infrastructure and investments needed to support the evolving telecommunications landscape. Among other things, the consultation seeks feedback on whether content and application providers (also referred to as Over-The-Top (OTT) services in the U.S.) should make mandated “fair share” payments to telecom operators to subsidize current and future connectivity needs. NTIA’s filing comes amid an ongoing debate surrounding the future of the U.S. Universal Service Fund (USF) and whether and how to expand its contribution base.
The European Commission sought input on the “fair share” proposal (also referred to as “telco tax” by opponents of the proposal) to address what it characterized as the “paradox between increasing volumes of data on the infrastructures and alleged decreasing returns and appetite to invest in network infrastructure.” European telecommunications operators have argued that the costs of supporting 5G and high-speed broadband to carry these increasing volumes of data are becoming unsustainable and that the tech companies which originate this internet traffic should pay their fair share in infrastructure costs. Conversely, tech companies and many net neutrality supporters have argued that consumers are the driving force behind this traffic growth and that imposing mandatory payments would distort the broadband services market in favor of the largest incumbent telecommunications operators while also undermining the goals of net neutrality. Moreover, the tech companies point to their own significant investments in proprietary infrastructure to reduce the demand on incumbent networks and improve the end-user experience. NTIA’s filing squarely opposes direct mandatory payments to telecom operators, marking the first time the Administration has stated a position within this debate.
In its filing, NTIA emphasized that the U.S. shares the goal of promoting reliable, fast, and secure connectivity and recognizes that network providers must be able to recoup their costs and a reasonable return on investment. NTIA explained that the U.S. approach to connectivity needs relies on a combination of private investments, USF programs, and significant one-time congressional appropriations (mostly recently through the 2021 Infrastructure Investment and Jobs Act, which we discussed here and here).
With regard to the European Commission proposal to mandate direct “fair share” payments, NTIA argues that there are substantial risks associated with the proposed regime of direct payments from content and application providers to telecom networks, especially without enforceable obligations on how such payments are spent. These risks include giving telecom operators a new bottleneck over customers that could lead to increased user costs, degrading equal access to the internet in violation of the principles of net neutrality, and distorting tech companies’ incentives to make efficient decisions.
Unlike the proposed direct payment model, NTIA explained that, “[p]ublicly accountable funding mechanisms can better ensure that resources are devoted to key policy objectives, such as improving access and strengthening network security, while avoiding discriminatory measures that distort competition.” NTIA cautioned the EU against any new funding mechanisms that could disrupt the current global internet ecosystem, observing that if many countries began collecting revenues from foreign content providers the system would likely become unsustainable. NTIA’s full response to the consultation is available here. The European Commission is expected to post all the filings it received in response to the consultation in the coming weeks.