Regulatory Policy for Broadband: A Response to the 'ETNO Report’s' Proposal for Intervention in Europe’s Internet Ecosystem

53 Pages Posted: 11 Nov 2022

See all articles by Volker Stocker

Volker Stocker

Technische Universität Berlin (TU Berlin); Weizenbaum Institute for the Networked Society

William Lehr

Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL)

Date Written: October 16, 2022

Abstract

Achieving the EU’s ambitious 2030 connectivity targets enshrined in the proposed Path to the Digital Decade program will require significant additional investment, and most of that investment will be provided by a complex array of for-profit enterprises funded by private investment capital. There will also be a need for public subsidies to address digital divides and ensure adequate access to network services, including last-mile broadband access, for users where private provisioning of such services is uneconomic. Addressing those challenges will require focused regulatory interventions to provide targeted subsidies. Additionally, regulatory oversight will be needed to ensure efficient operation of EU digital infrastructure without any abuse of market power among the diverse players engaged at diverse points of the value chain.

In May 2022, Axon Partners Group Consulting published a report commissioned by the European Telecommunications Network Operators’ Association (ETNO) (hereafter: “ETNO Report”). The ETNO Report proposes (among other measures) the introduction of a new interconnection regime to ensure “a fairer balance between tech giants and telecom operators”, thus advocating for a strong change in the direction of regulatory policy in the EU. The ETNO Report embraces the EU’s 2030 connectivity targets but argues that those goals and the benefits they promise will be put at risk if a subset of large, primarily U.S. OTTs fail to contribute significant funds to pay for Internet Service Provider (ISP) investments. In building its argument, the ETNO Report utilizes a “stick/carrot” logic, suggesting that failure to act as it recommends will doom the connectivity targets.

This paper offers a response to the ETNO Report. We explain how the ETNO Report oversimplifies (or mischaracterizes) the environments for infrastructure investment, interconnection, and content delivery. We show how the ETNO Report’s “stick/carrot” narrative fails fundamentally at multiple levels, thus creating noise rather than meaningfully contributing to important policy issues confronting policymakers in the EU (and indeed globally). Even though changes in industry structure and bargaining positions have and will continue to occur, including (new) issues with regard to interconnection, the ETNO Report neither provides useful evidence nor does it make a coherent or compelling case for the swift introduction of the proposed interconnection regulation. In short, the ETNO Report and the recommendations it advocates are unhelpful in informing regulatory policy related to provisioning the infrastructure needed for businesses and citizens in the EU to fully participate in the digital economy.

The regulatory frameworks the EU adopts may provide a template and guidance for the rest of the world – to both those who choose to follow and those who choose another path. In view of this responsibility for the EU and beyond, the importance of the topic under consideration, the EU should not hastily follow the overly simplistic policy change recommended by the ETNO Report. It is widely unfounded on evidence and more likely to harm progress if adopted.


(The authors gratefully acknowledge the financial support of Meta Platforms Inc. in preparing this paper. All views expressed herein are the authors’ own and do not necessarily reflect the views of Meta Platforms Inc. or any other institution. All errors are the authors’.)

Keywords: Broadband, regulatory policy, EU Digital Decade, 5G, Fiber, Interconnection, Clouds, CDNs

JEL Classification: L10, L38, L50, L86, L96

Suggested Citation

Stocker, Volker and Stocker, Volker and Lehr, William, Regulatory Policy for Broadband: A Response to the 'ETNO Report’s' Proposal for Intervention in Europe’s Internet Ecosystem (October 16, 2022). Available at SSRN: https://ssrn.com/abstract=4263096 or http://dx.doi.org/10.2139/ssrn.4263096

Volker Stocker (Contact Author)

Technische Universität Berlin (TU Berlin) ( email )

Straße des 17
Juni 135
Berlin, 10623
Germany

Weizenbaum Institute for the Networked Society

Berlin
Germany

William Lehr

Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL) ( email )

Stata Center
Cambridge, MA 02142
United States

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