European countries clash over potential Big Tech tax to pay for networks

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France, Italy, and Spain are reportedly pressuring the European Commission to force tech giants like Amazon and Google to subsidise telecoms network rollouts, but other countries have warned against such plans

To tax or not to tax? That is the question that has been under discussion behind closed doors by the European Commission since May, when the regulators said they were considering forcing Big Tech companies to contribute financially to telecoms network rollout costs.

At the time, a recent report from the European Telecommunications Network Operators’ Association (ETNO) had found that the six largest content providers accounted for 55% of network traffic in Europe and suggested that an annual contribution of €20 billion from these players could boost the EU economy by €72 billion a year.

Now, according to reports, the governments of France, Italy, and Spain have sent at joint letter to the European Commission in which they support proposals for some form of contribution, highlighting the pressure the content players place on network capacity.

“This generates specific costs for European telecom operators in terms of capacity, at a time they are already hugely investing in the most costly parts of the networks with 5G and Fiber-To-The-Home,” said the document, seen by Reuters. “We call for a legislative proposal […] ensuring all market players contribute to digital infrastructure costs.”

That such a proposal should be attractive to European government’s should come as little surprise. Throughout the continent, operators have been bemoaning the expensive rollout costs of their 5G and fibre networks, particularly in highly competitive markets where profit margins are slim. As a result, European telcos have been taking drastic measures to reduce their debt and increase cash flow for these rollouts, from spinning off their mobile tower units, like Orange and Vodafone, to implementing rafts of cost cutting measures, like Telefonica and TIM. 

Ultimately, if national governments want their ambitious fibre and 5G rollout targets for the coming decade to be achieved on time, major subsidies from Big Tech would hardly go amiss. 

However, not all European countries have been so quick to lend their backing to the operators’ call for a Big Tech levy. Last month, Germany, Ireland, Sweden, Denmark, Estonia, Finland, and the Netherlands wrote their own joint letter to the European Commission, calling or the regulator to take its time before implementing any targeted tax scheme.   

In the letter, the countries called on the Commission to take part in “open and transparent debate” before making a formal decision, as well as suggesting that they wait for further analysis from joint European regulatory body, BEREC.

These countries are not alone in their misgivings of the implications that such a tax could have on telecoms industry dynamics. Various digital rights groups and non-government organisations (NGOs) have highlighted the potential legal quagmire such a tax would represent with regards to incompatibility with European net neutrality laws. 

“The EU’s net neutrality law allows Europeans to use the bandwidth they buy from their ISPs however they want – whether for Netflix, YouTube, Facebook, or for a small local site or service,” said a group of NGOs in a letter to the European Commission. “Thus, European telecom companies are already compensated by their own internet service customers for transporting this data over their access networks; they simply want to be paid twice for the same service.”

For now, there is no clear indication at to when a decision will be made by the European regulators, though it has been suggested that that upcoming changes to the Connectivity Infrastructure Act could provide scope to introduce such a tax.