• DIGITAL SME responded to a European Commission consultation on the future of connectivity

• SMEs would likely not benefit from network fees which might distort competition and net neutrality

• An EU Connectivity Fund would be a preferable option, if deemed necessary

In February 2023, the European Commission announced a Connectivity Package to accelerate the roll out of high-capacity networks across Europe and a public consultation to inform the so-called ‘fair share’ initiative. The latter could pave the way for large internet traffic generators to make direct financial contributions to connectivity infrastructure.

DIGITAL SME supports the EU’s Digital Decade targets which highlight the essential role of high-capacity network infrastructure for SMEs, as they contribute to affordable and quality bandwidth and internet connection.

However, there have not been sufficient evidence that suggest these targets could be reached through network fees. Direct transfers of money between powerful private companies will not necessarily lead to more affordable conditions for SMEs to access high-capacity connectivity networks.

On the contrary, such mechanism could distort competition in the telecommunication sector. Firstly, networks fees would provide telecom operators with steady financial streams and disincentivise them from competing by putting forth innovative products and services for SMEs.

Secondly, network fees could lead telecom operators to favour and prioritise large traffic generators in terms of capacity, and disadvantage SMEs that are trying to compete in the same markets as existing large traffic generators.

Moreover, multiple actors have raised concerns over the potential interference that network fees could cause to the concept of net neutrality. For example, in South Korea the introduction of a network fees model led to increased prices for companies and SMEs.

Finally, network fees could also lead to discriminatory practices between different types of connectivity traffic. For example, Deutsche Telekom refused to handle the increased traffic that German universities required during the COVID-19 pandemic to continue their education operation.

Therefore, DIGITAL SME believes that direct transfers of money from Big Tech companies to telecom providers would not solve any of the challenges that the connectivity sector faces.

If the explanatory consultation or if a future impact assessment provides concrete evidence that current public and private investments are not sufficient for the deployment of next generation networks, then any kind of contributions from very large online platforms should rather be redirected towards an EU-wide Connectivity Fund.

The Connectivity Fund would then manage resources in accordance with the Member States to implement the roll out of 5G networks and fibre across Europe. This would ensure the availability of high-speed connectivity in Europe’s rural and urban areas. At the same time, the Connectivity Fund ought to be used to make internet access more affordable for SME entrepreneurs.

To strengthen Europe’s internet ecosystem, connectivity goals must serve Europe’s SMEs and create favourable conditions for digital innovators. Measures that endanger competition in the connectivity sector and net neutrality might not necessarily lead to investments in high-capacity networks. Adequate contribution of very large online platforms to an EU-wide Fund could ensure that Europe embarks on its journey towards global tech leadership.