Fair Share of Network Costs and Regulatory Myopia: Learning from Net Neutrality Mistakes

Abstract

To boost the roll-out of the next generation telecommunications infrastructure, EU policy makers have advanced a proposal mandating some large online platforms to compensate network operators with a usage fee. Framed as a matter of large market players paying their fair share of contribution to telecommunications networks, the proposal would represent another unnecessary and harmful regulatory intervention. Indeed, the paper aims to demonstrate that the fair share debate is the poison fruit of a previous intrusive government initiative, that is, the net neutrality regulation. Furthermore, like net neutrality anti-discrimination rules, a fair share Big Tech tax would be a solution that wouldn’t work for a problem that doesn’t exist. Moreover, the debate on fair share reflects the general EU industrial policy approach to the digital transformation, which essentially revolves around the unsound belief that innovation could be delivered through regulation and by subsidizing legacy homegrown companies via the transfer of rents from successful global players. Instead of continuing to interfere in market dynamics and private negotiations without any solid evidence of market failures, the EU should learn from past mistakes and acknowledge the limited scope for regulation in these dynamic markets.

Keywords: Regulation; Telecommunications; Fair share; Network costs; Net neutrality; Broadband providers; Content and application providers

JEL Classification: L50; L52; L86; L96